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STATE OF OKLAHOMA
1st Session of the 59th Legislature (2023)
COMMITTEE SUBSTITUTE
FOR
HOUSE BILL NO. 2362 By: Boles
COMMITTEE SUBSTITUTE
An Act relating to cities and towns; amending 11
O.S. 2021, Section 17 -105, as amended by Section
2, Chapter 254, O.S.L. 2022 (11 O.S. Supp. 2022,
Section 17-105), which relates to annual audits
of municipalities; providing agreed-upon-
procedures; directing the governing body of each
municipality to carry out certain audit
procedures; and providing an effective date.
BE IT ENACTED BY THE PE OPLE OF THE STATE OF OKLAHOMA:
SECTION 1. AMENDATORY 11 O.S. 2021, Section 17-105, as
amended by Section 2, Chapter 254, O.S.L. 2022 (11 O.S. Supp. 2022,
Section 17-105), is amended to read as follows:
Section 17-105. A. The governing body of each municipality
with Fifty Thousand Dollars ($50,000.00) or more in total revenue to
all funds, including component units of which the municip ality is a
beneficiary, 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 cond ucted in
accordance with auditing standards generally acce pted in the United
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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 A uditor and Inspector within
six (6) months after the close of the fiscal year in accordance with
the provisions of this act and with the governing body of the
municipality.
B. The governing body of each municipality with Fifty Thousand
Dollars ($50,000.00) or more 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 (2,500) as of the most rec ent Federal Decennial Census, and
for whom an annual finan cial statement audit is not requir ed by
another law, regulation or contract, shall cause to be prepared, by
an independent licensed public accountant or a certified public
accountant, a biennial financial statement audit in accordance with
auditing standards generally accepted in the Unite d States and
Government Auditing Standards as issued by the Comptrol ler General
of the United States. Each biennial audit shall 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
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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 t wo
(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 shall 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 the fiscal year that the
audit is due. Copies shall be filed with the State Auditor and
Inspector within nine (9) months after the close of the fiscal year
in accordance with the provisions of paragraph 2 of subsection A of
Section 212A of Title 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
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the State Auditor and Inspector for special circumstances or
emergencies.
C. The municipal income requ irements in subsections 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 Sections 176 through 180.4 of Title
60 of the Oklahoma Statutes with a municipality a s the beneficiary
of the trust; provided, 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.
D. The governing body of each municipality that requests the
biennial agreed-upon-procedures engagement of subsection B of this
section shall:
1. Determine the establishment of policies related to
adjustments, write-downs, or write-offs for various receivables due
to the municipality and/or the utility-related trust and select a
sample of adjustments to test for adherence to policies and for
appropriate supporting documentatio n;
2. Obtain two (2) months of bank statements of the General Fund
and Utility Fund and confirm that cash deposits were made in the
appropriate account(s) and verify utility billing receipts and/or
posting reports agree to the daily deposits ;
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3. For the following four positions: city manager/town
administrator, city/town clerk, c ity/town treasurer, and payroll
clerk, the governing body shall agree upon a pay rate to be
authorized and documented in the personnel file or in approved
meeting minutes. Inquire of the payroll clerk or equivalent if any
employees received compensation o ver and above their authorized
salary or hourly rate, and if so, trace to appropriate documentation
of authorization for such pay . This shall not include expense
reimbursements, but shall include any allowances considered taxable;
4. For entities that us e debit or credit cards, determine the
establishment of policies of use , select a sample of transactions to
test for supporting documentation, proper municipal purpose, and
adherence to prescribed policies;
5. Prepare a cash basis schedule of changes in f und balances
for each fund and determine compliance with the statutory
prohibition of creating fund balance deficits ;
6. Agree material fiscal year-end bank account balances to bank
statements and trace significant reconciling items to subsequent
clearance; shall determine if any bank accounts exist that are not
under city council purview ;
7. Compare uninsured deposits at fiscal year-end to the fair
value of pledged collateral ;
8. Inquire if any instances of known fraud, illegal acts, or
noncompliance with law and regulations have occurred; and
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9. Compare the use of material-restricted revenues and
resources to their restrictions .
E. Public trusts with m unicipal governments as the beneficiary
that meet the same financial requirements established in subsection
B of this section may, in alternative to obtaining an audit as
required in Section 180.1 of Title 60 of the Oklahoma Statutes ,
follow the biennial agreed -upon-procedures engagements outlined in
subsection D of this section.
SECTION 2. This act shall beco me effective November 1, 2023.
59-1-7595 MJ 02/21/23