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ENGROSSED SENATE AMENDMENT
TO
ENGROSSED HOUSE
BILL NO. 1058 By: Boles of the House
and
Hall of the Senate
An Act relating to cities and towns; amending 11 O.S.
2011, Sections 17-105, as last amended by Section 1,
Chapter 82, O.S.L. 2017 and 17 -107 (11 O.S. Supp.
2020, Section 17-105), which relate to municipal
finances; modifying minimum municipal income for
which certain audits shall be required; making
certain audits biennial; replacing certain auditing
procedures with procedures prescribed by the State
Auditor and Inspector; modifying time certain audit
report is due; modifying municipal income
requirements; redirecting certain funds; creating the
Special Investigative Unit Auditing Revolving Fund;
providing for revenue and expenditures; provid ing for
codification; repeali ng 11 O.S. 2011, Section 17 -108,
which relates to municipal trust exemptions;
providing an effective date; and declaring an
emergency.
AUTHOR: Remove as principal Senate author Hall and substitute as
principal Senate autho r Taylor. Retain Hall as Senate
coauthor
AMENDMENT NO. 1. Page 1, strike the title, enacting clause and
entire bill and insert
“An Act relating to cities and towns; pr oviding short
title; amending 11 O.S. 2021, Section 17 -105, which
relates to annual aud its of municipalities;
increasing municipal income threshold for required
annual or biennial audits to be conducted; modify ing
manner in which threshold is calculated; m odifying
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statutory references; defining scope of biennial
audit; deleting certain required procedures;
authorizing the use of alternate auditing procedure;
directing development of alternate auditing procedure
in collaboration with certain entities; providing
time limitation for use of alternate auditing
procedure; providing that act shall s unset by
operation of law unless certain conditions have been
met; requiring alternate auditing procedure to meet
certain attestation standards; extending time for
filing of audit; providing for additional extension
of time under certain conditions; including and
excluding income from certain trusts in calculating
municipal income; amending 11 O.S. 2021, Section 17-
107, which relates to the failure to file an audit;
specifying condition under which withholding of
certain gasoline taxes shall cease; requirin g certain
withheld funds to be deposited in certain revolving
fund; creating the Special Investigative Unit
Auditing Revolving Fund; making fund continuing and
nonfiscal; stating sources of revenue; stating
purpose of fund; establishing procedures of
expenditures of monies accruing to the credit of the
fund; repealing 11 O.S. 20 21, Section 17-108, which
relates to municipal trust exemptions; providing for
noncodification; providing for codification;
providing an effective date; and declaring an
emergency.
BE IT ENACTED BY THE PE OPLE OF THE STATE OF OKLAHOMA:
SECTION 1. NEW LAW A new section of law not to be
codified in the Oklahoma Stat utes reads as follows:
This act shall be known and may be cited as the "Municipal Audit
Reform Act of 2022".
SECTION 2. AMENDATORY 11 O.S. 20 21, Section 17-105, is
amended to read as follows:
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Section 17-105. A. The governing bod y of each municipality
with an income of Twenty-five Thousand Dollars ($25,000. 00) Fifty
Thousand Dollars ($50,000.00) or more to its general fund in total
revenue to all funds including component units of which the
municipality is a be neficiary, during a fiscal year shall cause to
be prepared, by an independent licensed public accountant or a
certified public accountant, an annual financial statement audit to
be conducted in accordance with auditing standards generally
accepted in the United States of Amer ica and “Government Auditing
Standards” as issued by the Comptroller General of the United
States. Such audit shall be ordered within thirty (30) days of the
close of each fiscal year. Copies shall be filed with the State
Auditor and Inspector within six (6) months after the close of the
fiscal year in accordance with the provisions of Sections 3022 and
3023 of this act Title 68 of the Oklahoma Statutes and with the
governing body of the municipality.
B. The governing body of each muni cipality with an income of
Twenty-five Thousand Dollars ($25,000. 00) Fifty Thousand Dollars
($50,000.00) or more to its general fund during a fiscal year in
total revenue to all funds including component units of which the
municipality is a beneficiary, and with a population of less than
two thousand five hundred (2,50 0) as of the most recent Federal
Decennial Census, and for whom an annual financial statement audit
is not required by another law, regulation or contract, shall cause
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to be prepared, by an i ndependent licensed public accountant or a
certified public accou ntant, an annual a biennial financial
statement audit in accordance with auditing standards generally
accepted in the United States and Government Auditing Standards as
issued by the Comptrol ler General of the U nited States, or an
agreed-upon-procedures engagement over certain financial information
and compliance requirements to be performed in accordance with the
applicable attestation standards of The American Institute of
Certified Public Accountants. The spe cific procedures to be
performed are as follows for the fiscal year:
1. Prepare a schedule of changes in fund balances for each fund
and determine compliance wit h the statutory prohibition of creating
fund balance deficits;
2. Prepare a budget and actual financial schedule for the
General Fund and any other significant funds listing separately eac h
federal fund and determine compliance with the legal level of
appropriations by comparing expenditures and encumbrances to
authorized appropriations;
3. Agree material bank account balances to bank statements, and
trace significant reconciling items to subsequent clearance;
4. Compare uninsured deposits to fair value of pledged
collateral;
5. Compare use of material -restricted revenues and resources to
their restrictions;
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6. Determine compliance with requirements for separate funds;
and
7. Determine compliance with reserve account and debt service
coverage requirements of bond indentures. Each biennial audit sha ll
cover the two (2) preceding years.
The governing body of each municipality may alternatively
request a biennial agreed -upon-procedures engagement to be
prescribed by the State Auditor and Inspector, developed in
collaboration with a r epresentative from a statewide organization
that has represented municipal governments for at least fifty (50)
years, a representative from an organization that advises or trains
municipal clerks and treasurers, and a certified public accountan t.
Each biennial agreed -upon-procedures engagement shall cover the two
(2) preceding years.
For engagements performed for the fiscal year ending June 30,
2023, the prescribed procedures developed under the terms of this
subsection will be utilized on a on e-year basis ending June 30,
2024. The procedures shall then be submitted to the Legislature for
ratification. If the rules are not ratified by the Legisla ture on
or before December 31, 2023, the Municipal Audit Reform Act of 2022
shall sunset and be repealed as a matter of law. Agreed-upon
procedures required under this act sha ll be performed in accordance
with the applicable attestation standards of The A merican Institute
of Certified Public Accountants.
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Such The audit or agreed-upon-procedures engagement shall be
ordered within thirty (30) days o f the close of each the fiscal year
that the audit is due . Copies shall be filed with the State Auditor
and Inspector within six (6) nine (9) months after the close of the
fiscal year in accordance with the provisions of Sections 3022 and
3023 paragraph 2 of subsection A of Section 212 A of Title 68 74 of
the Oklahoma Statutes and with the governing body of the
municipality., with the deadline to order and file the audit or
agreed-upon procedures eligible for extension by the State Auditor
for special circumstances or emergencies.
C. The municipal income requirements in su bsections A and B of
this section shall not include any grant monies provided to a
municipality from any federal, state, or other gover nmental entity.
The municipal income requirements shall not include income of any
public trust established under Section s 176 through 180.4 of Title
60 of the Oklahoma Statutes with a municipality as the be neficiary
of the trust; provided, income from trusts established principally
for the purpose of operating electric, water, wastewater , and
sanitation utilities shall be i ncluded for purposes of the municipal
income requirements.
SECTION 3. AMENDATORY 11 O.S. 20 21, Section 17-107, is
amended to read as follows:
Section 17-107. If a municipality does not file a copy of its
audit or agreed-upon-procedures report as provided in Section 17-105
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of this title, the State Auditor and Inspector shall notify the
Oklahoma Tax Commission which shall withhold from the municipality
its monthly allocations of gasoline taxes un til notified by the
Office of the State Auditor and Inspector that the audit report is
has been filed. If a report is not filed within two (2) years after
the close of the fisc al year in the case of an annual audit, or the
second fiscal year of a biennial audit period, the funds being
withheld shall be remitt ed by the Oklahoma Tax Commission to the
county in which the incorporated city or town is located and
deposited to the cou nty highway fund of that county to be used as
otherwise provided by law Special Investigative Unit Auditing
Revolving Fund created pursuant to Section 4 of this act.
SECTION 4. NEW LAW A new section of law to be codified
in the Oklahoma Statutes as Section 17-107A of Title 11, unless
there is created a duplica tion in numbering, reads as follows:
There is hereby created in the State Treasury a revolving fund
for the State Auditor and Inspector to be designated the “Special
Investigative Unit Auditing Revolving Fund ”. The fund shall be a
continuing fund, not sub ject to fiscal year limitations, and shall
consist of all monies received by the State Auditor and Inspector
from funds withheld from a municipality ’s allocations of gasoline
taxes as provided in Section 17-107 of Title 11 of the Oklahoma
Statutes and all monies received from legislative appropriations for
the purpose of conducting investigative municipal audits. All
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monies accruing to the credit of such fund are hereby appropriated
and may be budgeted and expended by the State Auditor an d Inspector
for the purpose of offsetting expenses incurred from speci al
investigative audit activities relating to municipal government.
Expenditures from the fund shall be made upon warrants issued by the
State Treasurer against claims filed as prescri bed by law with the
Director of the Office of Management and Enterpris e Services for
approval and payment.
SECTION 5. REPEALER 11 O.S. 20 21, Section 17-108, is
hereby repealed.
SECTION 6. This act shall become effec tive July 1, 2022.
SECTION 7. It being immediately ne cessary for the preservation
of the public peace, health or safety, an emergency is hereby
declared to exist, by reason whereof this act shall take effect and
be in full force from and a fter its passage and approval.”
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Passed the Senate the 25th day of April, 2022.
Presiding Officer of the Sena te
Passed the House of Representatives the ____ day of __________,
2022.
Presiding Officer of the House
of Representatives
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ENGROSSED HOUSE
BILL NO. 1058 By: Boles of the House
and
Hall of the Senate
An Act relating to cities and towns; amending 11 O.S.
2011, Sections 17-105, as last amended by Section 1,
Chapter 82, O.S.L. 2017 and 17 -107 (11 O.S. Supp.
2020, Section 17-105), which relate to municipal
finances; modifying minimum municipal income for
which certain audits shall be require d; making
certain audits biennial; replacing certain auditing
procedures with procedures prescribed by the State
Auditor and Inspector; modifying time certain audit
report is due; modifying municipal income
requirements; redirecting certain funds; creating the
Special Investigative Unit Auditing Revolving Fund;
providing for revenue and expenditures; providing for
codification; repeali ng 11 O.S. 2011, Section 17 -108,
which relates to municipal trust exemptions;
providing an effective date; and declaring an
emergency.
BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA:
SECTION 8. AMENDATORY 11 O.S. 2011, Section 17-105, as
last amended by Section 1, Chapter 82, O.S.L. 2017 (11 O.S. Supp.
2020, Section 17-105), is amended to re ad as follows:
Section 17-105. A. The governing body of each municipality
with an income of Twenty-five Thousand Dollars ($25,000. 00) Fifty
Thousand Dollars ($50,000.00) or more to its general fund in revenue
to all funds, including component units of wh ich the municipality is
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a beneficiary, during a fiscal year shall cause to be prepared, by
an independent licensed public accountant or a certified public
accountant, an annual financial statement audit to be conducted in
accordance with auditing standards generally accepted in the United
States of America and "Government Auditing Standards " as issued by
the Comptroller General of the United States. Such audit shall be
ordered within thirty (30) days of the close of each fiscal year.
Copies shall be filed with the State Auditor and Inspector within
six (6) months after the close of the fiscal year in accordance with
the provisions of Sections 3022 and 3023 paragraph 2 of subsection A
of Section 212A of Title 68 74 of the Oklahoma Statutes and with the
governing body of the municipality.
B. The governing body of each municipality with an income of
Twenty-five Thousand Dollars ($25,000. 00) Fifty Thousand Dollars
($50,000.00) or more to its general fund during a fiscal year in
total revenue to all funds, incl uding component units of which the
municipality is a beneficiary, and with a population of less than
two thousand five hundred (2,50 0) as of the most recent Federal
Decennial Census, and for whom an annual financial statement audit
is not required by anoth er law, regulation or contract, shall cause
to be prepared, by an independent licensed public accountant or a
certified public accou ntant, an annual a biennial financial
statement audit in accordance with auditing standards generally
accepted in the United States and Government Auditing Standards as
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issued by the Comptroller General of the United States , or an. Each
biennial audit shall cover the two (2) preceding years. The
governing body of each municipality may alternatively request
biennial agreed-upon-procedures engagement over certain financial
information and compliance requirements to be performed in
accordance with the applic able attestation standards of The American
Institute of Certified Public Accountants. The specific procedures
to be performed are as follows for the fiscal year:
1. Prepare a schedule of changes in fund balances for each fund
and determine compliance wit h the statutory prohibition of creating
fund balance deficits;
2. Prepare a budget and actual financial schedule for the
General Fund and any other significant funds listing separately each
federal fund and determine compliance with the legal level of
appropriations by comparing expenditures and encumbrances to
authorized appropriations;
3. Agree material bank account balance s to bank statements, and
trace significant reconciling items to subsequent clearance;
4. Compare uninsured deposits to fair value of pledged
collateral;
5. Compare use of material -restricted revenues and resources to
their restrictions;
6. Determine compliance with requirements for separate funds;
and
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7. Determine compliance with reserve account and debt service
coverage requirements of bond indentures.
Such prescribed by the State Auditor and Inspector. Each
biennial agreed-upon-procedures engagement shall cover the two (2)
preceding years. The audit or agreed-upon-procedures engagement
shall be ordered within thirty (30) days o f the close of each the
fiscal year that the audit is due . Copies shall be filed with the
State Auditor and Inspector withi n six (6) nine (9) months after the
close of the fiscal year in accordance with the provisions of
Sections 3022 and 3023 paragraph 2 of subsection A of Section 212A
of Title 68 74 of the Oklahoma Statutes and with the governing body
of the municipality.
C. The municipal income requirements in subsections A and B of
this section shall not include any grant monies provided to a
municipality from any federal, state, or other governmental entity.
The municipal income requirements shall also not include income of
any public trust established under Sections 176 through 180.4 of
Title 60 of the Oklahoma Statutes with a municipality as the
beneficiary of the trust; provided, that income from trusts
established principally for the purpose of operating electric,
water, wastewater, and sanitation utilities shall be included for
purposes of the municipal income requirements.
SECTION 9. AMENDATORY 11 O.S. 2011, Section 17 -107, is
amended to read as follows:
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Section 17-107. If a municipality do es not file a copy of its
audit or agreed-upon-procedures report as provided in Section 17 -105
of this title, the State Auditor and Inspector shall notify the
Oklahoma Tax Commission which shall withhold from the municipality
its monthly allocations of gas oline taxes until the audit report is
filed. If a report is not filed within two (2) years one (1) year
after the close of the fisc al year in the case of an annual audit,
or the second fiscal year of a biennial audit period , the funds
being withheld shall be remitted by the Oklahoma Tax Commission to
the county in which the incorporated city or town is located and
deposited to the cou nty highway fund of that county to be used as
otherwise provided by law Special Investigative Unit Auditing
Revolving Fund created pursuant to Section 3 of this act .
SECTION 10. NEW LAW A new section of law to be codified
in the Oklahoma Statutes as Section 17 -107A of Title 11, unless
there is created a duplication in numbering, reads as follows:
There is hereby created in the State Treasury a revolving fund
for the State Auditor and Inspector to be designated the "Special
Investigative Unit Auditing Revolving Fund". The fund shall be a
continuing fund, not subject to fiscal year limitations, and shall
consist of all monies received by the State Auditor and Inspector
from funds withheld from a municipality's allocations of gasoline
taxes as provided in Section 17 -107 of Title 11 of the Oklahoma
Statutes and all monies received from legislative appropriatio ns.
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All monies accruing to the credit of said fund are hereby
appropriated and may be budgeted and expended by the State Auditor
and Inspector for the purpose of offsetting expenses incurred from
special investigative audit activities relating to municipa l
government. Expenditures from said fund shall be made upon warrants
issued by the State Treasurer against claims filed as prescri bed by
law with the Director of the Office of Management and Enterprise
Services for approval and payment.
SECTION 11. REPEALER 11 O.S. 2011, Section 17 -108, is
hereby repealed.
SECTION 12. This act shall become effec tive July 1, 2021.
SECTION 13. It being immediately necessary for the preservation
of the public peace, heal th or safety, an emergency is hereby
declared to exist, by reason whereof this act shall take effect and
be in full force from and a fter its passage and approval.
Passed the House of Representatives the 1st day of March, 2021.
Presiding Officer of th e House
of Representatives
Passed the Senate the ___ day of __________, 2021.
Presiding Officer of the Senate
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