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ENGROSSED SENATE AMENDMENT
TO
ENGROSSED HOUSE
BILL NO. 2362 By: Boles of the House
and
Garvin of the Senate
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. Su pp. 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.
AMENDMENT NO. 1. Page 1, strike the title, enacting clause and
entire bill and insert
“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. 2023, Section
17-105), which relates to annua l audits of
municipalities; providing agreed -upon procedures;
directing the governing body of each municipality to
carry out certain audit procedures; updating
statutory references; amending 60 O.S. 2021, Section
180.1, which relates to annual audits; allo wing
certain public trusts to follow certain audit
procedures; and providing an effective date.
BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA:
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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. 2023,
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 u nits of which the municipality is 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 this act the Municipal Audit Reform Act of 2022
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 mo st recent 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
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an independent licensed public accountant or a certified public
accountant, a bienni al financial statement audit in accordance with
auditing standards generally accepted in the United States and
Government Auditing Standards as issued by the Comptroller 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 representative 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 accountant.
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 one -year basis ending June 30,
2024. The procedures shall then b e submitted to the Legislature for
ratification. If the rules are not ratified by the Legislature 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 unde r this act the Municipal Audit Reform Act of
2022 shall be performed in accordance with the applicable
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attestation standards of The American Institute of Certified Public
Accountants.
The audit or agreed-upon-procedures engagement shall be ordered
within thirty (30) days of 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
the State Auditor and Inspector for special circumstances or
emergencies.
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 not i nclude 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, income from trusts established principally
for the purpose of operating elect ric, water, wastewater, and
sanitation utilities shall be included for purposes of the municipal
income requirements.
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D. The governing body of each municipality that requests the
biennial agreed-upon-procedures engagement provided in 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 or the utility -related trust and select a sample
of adjustments to test for adherence to policies and for appropriate
supporting documentation;
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 accounts and verify utility billing receipts or posting
reports agree to the daily deposits;
3. Agree upon a pay rate for the city manager/town
administrator, city/town clerk, city/town treasurer, and payroll
clerk, to be authorized and documented in the personnel file or in
approved meeting minutes. If any employee rece ived compensation
over and above his or her authorized salary or hourly rate, the
payroll clerk, upon request, shall provide appropriate documentation
of authorization for such pay. The requirements of this paragraph
shall not include expense reimbursemen ts but shall include any
allowances considered taxable;
4. Determine the establishment of policies of use, proper
municipal purpose, and adherence to prescribed policies for entities
that use debit or credit cards;
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5. Select a sample of transactions to t est for supporting
documentation;
6. Prepare a cash basis schedule of changes in fund balances
for each fund and determine compliance with the statutory
prohibition of creating fund balance deficits;
7. Agree material fiscal year -end bank account balance s to bank
statements and trace significant reconciling items to subsequent
clearance and determine if any bank accounts exist that are not
under city council purview;
8. Compare uninsured deposits at fiscal year -end to the fair
value of pledged collateral ;
9. Inquire if any instances of known fraud, illegal acts, or
noncompliance with law and regulations have occurred; and
10. Compare the use of material -restricted revenues and
resources to the restrictions of the governing body of the
municipality.
E. A public trust with a municipal government or 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. AMENDATORY 60 O.S. 2021, Section 180.1, is
amended to read as follows:
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Section 180.1. A. The trustees of every trust created for the
benefit and furtherance of any public function with the State of
Oklahoma or any county or municipality as the beneficiary or
beneficiaries thereof, with assets or revenues in excess of Fifty
Thousand Dollars ($50,000.00) or wi th outstanding debt obligations,
must cause an audit to be made of the financial statements of the
trust, such audit to be ordered within thirty (30) days of the close
of each fiscal year of the trust. The audit shall be filed in
accordance with the requi rements set forth for financial statement
audits in Section 212A of Title 74 of the Oklahoma Statutes.
B. The trustees of a trust which has more than Fifty Thousand
Dollars ($50,000.00) in revenues or assets, and for whom an annual
financial statement aud it is not required by another law, regulation
or contract, shall cause to be conducted, by an independent licensed
public accountant or a certified public accountant, an annual audit
of the trust’s financial statements in accordance with auditing
standards generally accepted in the United States and Government
Auditing Standards as issued by the Comptroller General of the
United 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 specific procedures
to be performed are:
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1. Prepare a schedule of revenues, expenditures/expenses and
changes in fund balances/net assets f or each fund and determine
compliance with any applicable trust or other prohibitions for
creating fund balance deficits;
2. Agree material bank account balances to bank statements, and
trace significant reconciling items to subsequent clearance;
3. Compare uninsured deposits to fair value of pledged
collateral;
4. Compare use of material -restricted revenues and resources to
their restrictions;
5. Determine compliance with requirements for separate funds;
and
6. Determine compliance with reserve accoun t and debt service
coverage requirements of bond indentures.
Such engagement shall be ordered within thirty (30) days of the
close of each fiscal year of the trust. Copies of the annual audit
or agreed-upon-procedures report shall be filed with the State
Auditor and Inspector within six (6) months after the close of the
fiscal year and with the trustees and governing body of the
beneficiaries.
C. Public trusts which have less than Fifty Thousand Dollars
($50,000.00) in revenue and less than Fifty Thousand Dollars
($50,000.00) in assets, and for whom an annual financial statement
audit is not required by another law, regulation or contract and any
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public trust which did not have financial activity exceeding Fifty
Thousand Dollars ($50,000.00) since its last audit shall be exempt
from the requirements of subsections A and B of this section unless
the public trust has outstanding debt obligations.
D. A public trust with a municipal government or governments as
the beneficiary that meet the same financial requ irements
established in subsection B of Section 17 -105 of Title 11 of the
Oklahoma Statutes may, in alternative to obtaining an audit as
required in this section, follow the biennial agreed -upon-procedures
engagements outlined in subsection D of Section 17 -105 of Title 11
of the Oklahoma Statutes.
SECTION 3. This act shall become effective November 1, 2024. ”
Passed the Senate the 23rd day of April, 2024.
Presiding Officer of the Senate
Passed the House of Representatives the ____ day of __________,
2024.
Presiding Officer of the House
of Representatives
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ENGROSSED HOUSE
BILL NO. 2362 By: Boles of the House
and
Garvin of the Senate
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 4. 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
States of America and Government Auditing Standards as issued by the
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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
that has represented municipal governments for at least fifty (50)
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years, a representative from an organization that advises or trains
municipal clerks and treasurers, and a certified public accountant.
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 one-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 202 2
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
the State Auditor and Inspector for special circumstances or
emergencies.
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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 ;
3. For the following four positions: city manager/town
administrator, city/town clerk, c ity/town treasurer, and payroll
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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 docum entation
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 creat ing 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
9. Compare the use of material-restricted revenues and
resources to their restrictions .
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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 5. This act shall beco me effective November 1, 2023.
Passed the House of Representatives th e 6th day of March, 2023.
Presiding Officer of the House
of Representatives
Passed the Senate the ___ day of __________, 2023.
Presiding Officer of the Senate