An Act
ENROLLED HOUSE
BILL NO. 1058 By: Boles of the House
and
Taylor and Hall of the
Senate
An Act relating to cities and towns; enacting the
Municipal Audit Reform Act of 2022 ; amending 11 O.S.
2021, Section 17-105, which relates to annual aud its
of municipalities; increasin g municipal income
threshold for required annual or biennial audits to
be conducted; modify ing manner in which threshold is
calculated; modifying statutory references; defining
scope of biennial audit; deleting certain required
procedures; authorizing th e 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 sunset by operation of law unless certain
conditions have been met; requiring alternate
auditing procedure to meet certain attestation
standards; extending time for filin g 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 Revo lving 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 ENR. H. B. NO. 1058 Page 2
codification; providing an effective date; and
declaring an emergency .
SUBJECT: Cities and towns
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:
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 pub lic 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 G eneral 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 Title 68 of the Oklahoma Statutes this act 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 recen t Federal
Decennial Census, and for whom an annual financial statement audit
is not required by another law, regulation or contract, shall cause
to be prepared, by an i ndependent licensed public accountant or a ENR. H. B. NO. 1058 Page 3
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 f inancial 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 ea ch
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 t o 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 s eparate funds;
and
7. Determine compliance with reserve account and debt service
coverage requirements of bond indentures. Each biennial audit shall
cover the two (2) preceding years .
Such 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. ENR. H. B. NO. 1058 Page 4
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.
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
and Inspector 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
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 ENR. H. B. NO. 1058 Page 5
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 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 sh all
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 approp riations for
the purpose of conducting investigative municipal audits. All
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 incurr ed from special
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 a nd Enterprise 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 necessary 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.
ENR. H. B. NO. 1058 Page 6
Passed the House of Rep resentatives the 11th day of May, 2022.
Presiding Officer of the House
of Representatives
Passed the Senate the 25th day of April, 2022.
Presiding Officer of the Sena te
OFFICE OF THE GOVERNOR
Received by the Office of the Governor this _ ___________________
day of ___________________, 20_______, at _______ o'clock _______ M.
By: _________________________________
Approved by the Governor of the State of Oklahoma this _____ ____
day of ___________________, 20_______, at _______ o'clock ______ _ M.
_________________________________
Governor of the State of Oklahoma
OFFICE OF THE SECRETARY OF STATE
Received by the Office of the Secretary of State this __________
day of ___________________, 20_______, at _______ o'clock _______ M.
By: _________________________________