Oklahoma 2024 Regular Session

Oklahoma House Bill HB2362 Compare Versions

Version 1 (Old)

Version 2 (New)

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1		-	An Act
2		-	ENROLLED HOUSE
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	28	+	ENGROSSED SENATE AMENDMENT
	29	+	TO
	30	+	ENGROSSED HOUSE
3	31		BILL NO. 2362 By: Boles of the House
4	32
5	33		and
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7	35		Garvin of the Senate
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	40	+	An Act relating to cities and towns; amending 11
	41	+	O.S. 2021, Section 17 -105, as amended by Section
	42	+	2, Chapter 254, O.S.L. 2022 (11 O.S. Su pp. 2022,
	43	+	Section 17-105), which relates to annual audits
	44	+	of municipalities; providing agreed -upon-
	45	+	procedures; directing the governing body of each
	46	+	municipality to carry out certain audit
	47	+	procedures; and providing an effective date.
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15		-	An Act relating to cities and towns; amending 11 O.S.
16		-	2021, Section 17-105, as amended by Section 2,
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	52	+	AMENDMENT NO. 1. Page 1, strike the title, enacting clause and
	53	+	entire bill and insert
	54	+
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	56	+	“An Act relating to cities and towns; amending 11
	57	+	O.S. 2021, Section 17 -105, as amended by Section 2,
17	58		Chapter 254, O.S.L. 2022 (11 O.S. Supp. 2023, Section
18	59		17-105), which relates to annua l audits of
19		-	municipalities; deleting certain requirements for
20		-	agreed-upon-procedures engagement; providing
21		-	requirements for agreed-upon-procedures engagement;
22		-	allowing certain public trusts to follow certain
23		-	audit procedures; amending 60 O.S. 2021, Section
	60	+	municipalities; providing agreed -upon procedures;
	61	+	directing the governing body of each municipality to
	62	+	carry out certain audit procedures; updating
	63	+	statutory references; amending 60 O.S. 2021, Section
24	64		180.1, which relates to annual audits; allo wing
25	65		certain public trusts to follow certain audit
26	66		procedures; and providing an effective date.
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	70	+	BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA:
30	71
31		-
32		-
33		-	SUBJECT: Cities and towns
34		-
35		-	BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA:
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36	96
37	97		SECTION 1. AMENDATORY 11 O.S. 2021, Section 17 -105, as
38	98		amended by Section 2, Chapter 254, O.S.L. 2022 (11 O.S. Supp. 2023,
39	99		Section 17-105), is amended to read as follows:
40		-
41	100		Section 17-105. A. The governing body of each municipality
42	101		with Fifty Thousand Dollars ($50,000.00) or more in total revenue to
43	102		all funds, including component u nits of which the municipality is a
44	103		beneficiary, during a fiscal year shall cause to be prepared, by an
45	104		independent licensed public accountant or a certified public
46		-	accountant, an annual financial statement audit to be conducted in ~~ENR. H. B. NO. 2362 Page 2~~
	105	+	accountant, an annual financial statement audit to be conducted in
47	106		accordance with auditing standards generally accepted in the United
48	107		States of America and Government Auditing Standards as issued by the
49	108		Comptroller General of the United States. Such audit shall be
50	109		ordered within thirty (30) days of the close of each fiscal year.
51	110		Copies shall be filed with the State Auditor and Inspector within
52	111		six (6) months after the close of the fiscal year in accordance with
53	112		the provisions of this act the Municipal Audit Reform Act of 2022
54	113		and with the governing body of the municipality.
55		-
56	114		B. The governing body of each municipality with Fifty Thousand
57	115		Dollars ($50,000.00) or more in total revenue to all funds,
58	116		including component units of which the municipality is a
59	117		beneficiary, and with a population of less than two thousand five
60	118		hundred (2,500) as of the mo st recent Federal Decennial Census, and
61	119		for whom an annual financial statement audit is not required by
62	120		another law, regulation or contract, shall cause to be prepared, by
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63	147		an independent licensed public accountant or a certified public
64	148		accountant, a bienni al financial statement audit in accordance with
65	149		auditing standards generally accepted in the United States and
66	150		Government Auditing Standards as issued by the Comptroller General
67	151		of the United States. Each biennial audit shall cover the two (2)
68	152		preceding years.
69		-
70	153		The governing body of each municipality may alternatively
71	154		request a biennial agreed -upon-procedures engagement to be
72	155		prescribed by the State Auditor and Inspector, developed in
73	156		collaboration with a representative from a statewide organization
74	157		that has represented municipal governments for at least fifty (50)
75	158		years, a representative from an organization that advises or trains
76	159		municipal clerks and treasurers, and a certified public accountant.
77	160		Each biennial agreed -upon-procedures engagement shall cover the two
78	161		(2) preceding years.
79		-
80	162		For engagements performed for the fiscal year ending June 30,
81	163		2023, the prescribed procedures developed under the terms of this
82	164		subsection will be utilized on a one -year basis ending June 30,
83	165		2024. The procedures shall then b e submitted to the Legislature for
84	166		ratification. If the rules are not ratified by the Legislature on
85	167		or before December 31, 2023, the Municipal Audit Reform Act of 2022
86	168		shall sunset and be repealed as a matter of law . Agreed-upon
87	169		procedures required unde r this act the Municipal Audit Reform Act of
88	170		2022 shall be performed in accordance with the applicable
89		-	attestation standards of The the American Institute o f Certified
90		-	Public Accountants.
91		-	ENR. H. B. NO. 2362 Page 3
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	197	+	attestation standards of The American Institute of Certified Public
	198	+	Accountants.
92	199		The audit or agreed-upon-procedures engagement shall be ordered
93	200		within thirty (30) days of the close of the fiscal year that the
94	201		audit is due. Copies shall be filed with the State Auditor and
95	202		Inspector within nine (9) months after the close of the fiscal year
96	203		in accordance with the provisions of paragraph 2 of subsection A of
97	204		Section 212A of Title 74 of the Oklahoma Statutes and with the
98	205		governing body of the municipality, with the deadline to order and
99	206		file the audit or agreed -upon procedures eligible for extension by
100	207		the State Auditor and Inspector for special circumstances or
101	208		emergencies.
102		-
103	209		C. The municipal income requirements in subsections A and B of
104	210		this section shall not include any grant monies provided to a
105	211		municipality from any federal, state, or other governmental entity.
106	212		The municipal income requirements shall not i nclude income of any
107	213		public trust established under Sections 176 through 180.4 of Title
108	214		60 of the Oklahoma Statutes with a municipality as the beneficiary
109	215		of the trust; provided, income from trusts established principally
110	216		for the purpose of operating elect ric, water, wastewater, and
111	217		sanitation utilities shall be included for purposes of the municipal
112	218		income requirements.
113	219
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114	245		D. The governing body of each municipality that requests the
115	246		biennial agreed-upon-procedures engagement provided in subsection B
116	247		of this section shall:
117		-
118	248		1. Determine the establishment of policies related to
119	249		adjustments, write-downs, or write-offs for various receivables due
120	250		to the municipality or the utility -related trust and select a sample
121	251		of adjustments to test for adherence to policies and for appropriate
122	252		supporting documentation;
123		-
124	253		2. Obtain two (2) months of bank statements of the general fund
125	254		and utility fund and confirm that cash deposits were made in the
126	255		appropriate accounts and verify utility billing receipts or posting
127		-	reports agree with the daily deposits;
128		-
129		-	3. Agree upon a pay rate for the city manager or town
130		-	administrator, city or town clerk, city or town treasurer, and
131		-	payroll clerk, to be authorized and documented in the personnel file
132		-	or in approved meeting minutes. If any employee rece ived
133		-	compensation over and above his or her authorized salary or hourly
134		-	rate, the payroll clerk, upon request, shall provide appropriat e
135		-	documentation of authorization for such pay. The requirement s of ENR. H. B. NO. 2362 Page 4
136		-	this paragraph shall not include expense reimbursemen ts but shall
137		-	include any allowances considered taxable;
138		-
	256	+	reports agree to the daily deposits;
	257	+	3. Agree upon a pay rate for the city manager/town
	258	+	administrator, city/town clerk, city/town treasurer, and payroll
	259	+	clerk, to be authorized and documented in the personnel file or in
	260	+	approved meeting minutes. If any employee rece ived compensation
	261	+	over and above his or her authorized salary or hourly rate, the
	262	+	payroll clerk, upon request, shall provide appropriate documentation
	263	+	of authorization for such pay. The requirements of this paragraph
	264	+	shall not include expense reimbursemen ts but shall include any
	265	+	allowances considered taxable;
139	266		4. Determine the establishment of policies of use, proper
140	267		municipal purpose, and adherence to prescribed policies for entities
141	268		that use debit or credit cards;
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143	295		5. Select a sample of transactions to t est for supporting
144	296		documentation;
145		-
146	297		6. Prepare a cash basis schedule of changes in fund balances
147	298		for each fund and determine compliance with the statutory
148	299		prohibition of creating fund balance deficits;
149		-
150	300		7. Agree material fiscal year -end bank account balance s to bank
151	301		statements and trace significant reconciling items to subsequent
152	302		clearance and determine if any bank accounts exist that are not
153	303		under city council purview;
154		-
155	304		8. Compare uninsured deposits at fiscal year -end to the fair
156	305		value of pledged collateral ;
157		-
158	306		9. Inquire if any instances of known fraud, illegal acts, or
159		-	noncompliance with law s and regulations have occurred; and
160		-
	307	+	noncompliance with law and regulations have occurred; and
161	308		10. Compare the use of material -restricted revenues and
162	309		resources to the restrictions of the governing body of the
163	310		municipality.
164		-
165	311		E. A public trust with a municipal government or governments as
166	312		the beneficiary that meet the same financial requirements
167		-	established in subsection B of this section may, as an alternative
168		-	to obtaining an audit as required in Section 180.1 of Title 60 of
169		-	the Oklahoma Statutes, follow the biennial agreed -upon-procedures
170		-	engagement outlined in subsection D of this section.
171		-
	313	+	established in subsection B of this section may, in alternative to
	314	+	obtaining an audit as required in Section 180.1 of Title 60 of the
	315	+	Oklahoma Statutes, follow the biennial agreed -upon-procedures
	316	+	engagements outlined in subsection D of this section.
172	317		SECTION 2. AMENDATORY 60 O.S. 2021, Section 180.1, is
173	318		amended to read as follows:
174	319
175		-	Section 180.1 A. The trustees of every trust created for the
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	345	+	Section 180.1. A. The trustees of every trust created for the
176	346		benefit and furtherance of any public function with the State of
177	347		Oklahoma or any county or municipality as the beneficiary or
178	348		beneficiaries thereof, with assets or revenues in excess of Fifty
179	349		Thousand Dollars ($50,000.00) or wi th outstanding debt obligations,
180		-	must cause an audit to be made of the financial statements of the ~~ENR. H. B. NO. 2362 Page 5~~
	350	+	must cause an audit to be made of the financial statements of the
181	351		trust, such audit to be ordered within thirty (30) days of the close
182	352		of each fiscal year of the trust. The audit shall be filed in
183	353		accordance with the requi rements set forth for financial statement
184	354		audits in Section 212A of Title 74 of the Oklahoma Statutes.
185		-
186	355		B. The trustees of a trust which has more than Fifty Thousand
187	356		Dollars ($50,000.00) in revenues or assets, and for whom an annual
188	357		financial statement aud it is not required by another law, regulation
189	358		or contract, shall cause to be conducted, by an independent licensed
190	359		public accountant or a certified public accountant, an annual audit
191	360		of the trust’s financial statements in accordance with auditing
192	361		standards generally accepted in the United States and Government
193	362		Auditing Standards as issued by the Comptroller General of the
194	363		United States or an agreed -upon-procedures engagement over certain
195	364		financial information and compliance requirements to be performed in
196	365		accordance with the applicable attestation standards of The American
197	366		Institute of Certified Public Accountants. The specific procedures
198	367		to be performed are:
199	368
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200	394		1. Prepare a schedule of revenues, expenditures/expenses and
201	395		changes in fund balances/net assets f or each fund and determine
202	396		compliance with any applicable trust or other prohibitions for
203	397		creating fund balance deficits;
204		-
205	398		2. Agree material bank account balances to bank statements, and
206	399		trace significant reconciling items to subsequent clearance;
207		-
208	400		3. Compare uninsured deposits to fair value of pledged
209	401		collateral;
210		-
211	402		4. Compare use of material -restricted revenues and resources to
212	403		their restrictions;
213		-
214	404		5. Determine compliance with requirements for separate funds;
215	405		and
216		-
217	406		6. Determine compliance with reserve accoun t and debt service
218	407		coverage requirements of bond indentures.
219		-
220	408		Such engagement shall be ordered within thirty (30) days of the
221	409		close of each fiscal year of the trust. Copies of the annual audit
222	410		or agreed-upon-procedures report shall be filed with the State
223	411		Auditor and Inspector within six (6) months after the close of the
224	412		fiscal year and with the trustees and governing body of the
225		-	beneficiaries. ENR. H. B. NO. 2362 Page 6
226		-
	413	+	beneficiaries.
227	414		C. Public trusts which have less than Fifty Thousand Dollars
228	415		($50,000.00) in revenue and less than Fifty Thousand Dollars
229	416		($50,000.00) in assets, and for whom an annual financial statement
230	417		audit is not required by another law, regulation or contract and any
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231	444		public trust which did not have financial activity exceeding Fifty
232	445		Thousand Dollars ($50,000.00) since its last audit shall be exempt
233	446		from the requirements of subsections A and B of this section unless
234	447		the public trust has outstanding debt obligations.
235		-
236	448		D. A public trust with a municipal government or governments as
237	449		the beneficiary that meet the same financial requ irements
238	450		established in subsection B of Section 17 -105 of Title 11 of the
239		-	Oklahoma Statutes may, ~~as an~~ alternative to obtaining an audit as
	451	+	Oklahoma Statutes may, in alternative to obtaining an audit as
240	452		required in this section, follow the biennial agreed -upon-procedures
241		-	engagement outlined in subsection D of Section 17 -105 of Title 11 of
242		-	the Oklahoma Statutes.
	453	+	engagements outlined in subsection D of Section 17 -105 of Title 11
	454	+	of the Oklahoma Statutes.
	455	+	SECTION 3. This act shall become effective November 1, 2024. ”
	456	+	Passed the Senate the 23rd day of April, 2024.
243	457
244		-	SECTION 3. This act shall become effective Novembe r 1, 2024. ENR. H. B. NO. 2362 Page 7
245		-	Passed the House of Representatives the 6th day of May, 2024.
	458	+
	459	+
	460	+	Presiding Officer of the Senate
	461	+
	462	+
	463	+	Passed the House of Representatives the ____ day of __________,
	464	+	2024.
	465	+
	466	+
	467	+
	468	+	Presiding Officer of the House
	469	+	of Representatives
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	496	+	ENGROSSED HOUSE
	497	+	BILL NO. 2362 By: Boles of the House
	498	+
	499	+	and
	500	+
	501	+	Garvin of the Senate
	502	+
	503	+
	504	+
	505	+
	506	+
	507	+
	508	+	An Act relating to cities and towns; amending 11
	509	+	O.S. 2021, Section 17 -105, as amended by Section
	510	+	2, Chapter 254, O.S.L. 2022 (11 O.S. Supp. 2022,
	511	+	Section 17-105), which relates to annual audits
	512	+	of municipalities; providing agreed-upon-
	513	+	procedures; directing the governing body of each
	514	+	municipality to carry out certain audit
	515	+	procedures; and providing an effective date.
	516	+
	517	+
	518	+
	519	+
	520	+	BE IT ENACTED BY THE PE OPLE OF THE STATE OF OKLAHOMA:
	521	+	SECTION 4. AMENDATORY 11 O.S. 2021, Section 17-105, as
	522	+	amended by Section 2, Chapter 254, O.S.L. 2022 (11 O.S. Supp. 2022,
	523	+	Section 17-105), is amended to read as follows:
	524	+	Section 17-105. A. The governing body of each municipality
	525	+	with Fifty Thousand Dollars ($50,000.00) or more in total revenue to
	526	+	all funds, including component units of which the municip ality is a
	527	+	beneficiary, during a fiscal year shall cause to be prepared, by an
	528	+	independent licensed pub lic accountant or a certified public
	529	+	accountant, an annual financial statement audit to be cond ucted in
	530	+	accordance with auditing standards generally acce pted in the United
	531	+	States of America and Government Auditing Standards as issued by the
	532	+
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	558	+	Comptroller General of the United States. Such audit shall be
	559	+	ordered within thirty (30) days of the close of each fiscal year.
	560	+	Copies shall be filed with the State A uditor and Inspector within
	561	+	six (6) months after the close of the fiscal year in accordance with
	562	+	the provisions of this act and with the governing body of the
	563	+	municipality.
	564	+	B. The governing body of each municipality with Fifty Thousand
	565	+	Dollars ($50,000.00) or more in total revenue to all funds,
	566	+	including component units of which the municipality is a
	567	+	beneficiary, and with a population of less than two thousand five
	568	+	hundred (2,500) as of the most rec ent Federal Decennial Census, and
	569	+	for whom an annual finan cial statement audit is not requir ed by
	570	+	another law, regulation or contract, shall cause to be prepared, by
	571	+	an independent licensed public accountant or a certified public
	572	+	accountant, a biennial financial statement audit in accordance with
	573	+	auditing standards generally accepted in the Unite d States and
	574	+	Government Auditing Standards as issued by the Comptrol ler General
	575	+	of the United States. Each biennial audit shall cover the two (2)
	576	+	preceding years.
	577	+	The governing body of each municipality may alternatively
	578	+	request a biennial agreed -upon-procedures engagement to be
	579	+	prescribed by the State Auditor and Inspector , developed in
	580	+	collaboration with a r epresentative from a statewide organization
	581	+	that has represented municipal governments for at least fifty (50)
	582	+
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	608	+	years, a representative from an organization that advises or trains
	609	+	municipal clerks and treasurers, and a certified public accountant.
	610	+	Each biennial agreed -upon-procedures engagement shall cover the t wo
	611	+	(2) preceding years.
	612	+	For engagements performed for the fiscal year ending June 30,
	613	+	2023, the prescribed procedures developed under the terms of this
	614	+	subsection will be utilized on a one-year basis ending June 30,
	615	+	2024. The procedures shall then be submitted to the Legislature for
	616	+	ratification. If the rules are not ratified by the Legisla ture on
	617	+	or before December 31, 2023, the Municipal Audit Reform Act of 202 2
	618	+	shall sunset and be repealed as a matter of law . Agreed-upon
	619	+	procedures required under this act shall be performed in accordance
	620	+	with the applicable attestation standards of The A merican Institute
	621	+	of Certified Public Accountants .
	622	+	The audit or agreed-upon-procedures engagement shall be ordered
	623	+	within thirty (30) days o f the close of the fiscal year that the
	624	+	audit is due. Copies shall be filed with the State Auditor and
	625	+	Inspector within nine (9) months after the close of the fiscal year
	626	+	in accordance with the provisions of paragraph 2 of subsection A of
	627	+	Section 212A of Title 74 of the Oklahoma Statutes and with the
	628	+	governing body of the municipality, with the deadline to order and
	629	+	file the audit or agreed-upon procedures eligible for extension by
	630	+	the State Auditor and Inspector for special circumstances or
	631	+	emergencies.
	632	+
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	658	+	C. The municipal income requ irements in subsections A and B of
	659	+	this section shall not include any grant monies provided to a
	660	+	municipality from any federal, state, or other gover nmental entity.
	661	+	The municipal income requirements shall not include income of any
	662	+	public trust established under Sections 176 through 180.4 of Title
	663	+	60 of the Oklahoma Statutes with a municipality a s the beneficiary
	664	+	of the trust; provided, income from trusts established principally
	665	+	for the purpose of operating electric, water, wastewater , and
	666	+	sanitation utilities shall be included for purposes of the municipal
	667	+	income requirements.
	668	+	D. The governing body of each municipality that requests the
	669	+	biennial agreed-upon-procedures engagement of subsection B of this
	670	+	section shall:
	671	+	1. Determine the establishment of policies related to
	672	+	adjustments, write-downs, or write-offs for various receivables due
	673	+	to the municipality and/or the utility-related trust and select a
	674	+	sample of adjustments to test for adherence to policies and for
	675	+	appropriate supporting documentatio n;
	676	+	2. Obtain two (2) months of bank statements of the General Fund
	677	+	and Utility Fund and confirm that cash deposits were made in the
	678	+	appropriate account(s) and verify utility billing receipts and/or
	679	+	posting reports agree to the daily deposits ;
	680	+	3. For the following four positions: city manager/town
	681	+	administrator, city/town clerk, c ity/town treasurer, and payroll
	682	+
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	708	+	clerk, the governing body shall agree upon a pay rate to be
	709	+	authorized and documented in the personnel file or in approved
	710	+	meeting minutes. Inquire of the payroll clerk or equivalent if any
	711	+	employees received compensation o ver and above their authorized
	712	+	salary or hourly rate, and if so, trace to appropriate docum entation
	713	+	of authorization for such pay . This shall not include expense
	714	+	reimbursements, but shall include any allowances considered taxable;
	715	+	4. For entities that us e debit or credit cards, determine the
	716	+	establishment of policies of use , select a sample of transactions to
	717	+	test for supporting documentation, proper municipal purpose, and
	718	+	adherence to prescribed policies;
	719	+	5. Prepare a cash basis schedule of changes in f und balances
	720	+	for each fund and determine compliance with the statutory
	721	+	prohibition of creat ing fund balance deficits;
	722	+	6. Agree material fiscal year-end bank account balances to bank
	723	+	statements and trace significant reconciling items to subsequent
	724	+	clearance; shall determine if any bank accounts exist that are not
	725	+	under city council purview ;
	726	+	7. Compare uninsured deposits at fiscal year-end to the fair
	727	+	value of pledged collateral ;
	728	+	8. Inquire if any instances of known fraud, illegal acts, or
	729	+	noncompliance with law and regulations have occurred; and
	730	+	9. Compare the use of material-restricted revenues and
	731	+	resources to their restrictions .
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	758	+	E. Public trusts with m unicipal governments as the beneficiary
	759	+	that meet the same financial requirements established in subsection
	760	+	B of this section may, in alternative to obtaining an audit as
	761	+	required in Section 180.1 of Title 60 of the Oklahoma Statutes ,
	762	+	follow the biennial agreed -upon-procedures engagements outlined in
	763	+	subsection D of this section.
	764	+	SECTION 5. This act shall beco me effective November 1, 2023.
	765	+	Passed the House of Representatives th e 6th day of March, 2023.
	766	+
246	767
247	768
248	769
249	770		Presiding Officer of the House
250	771		of Representatives
251	772
252	773
253	774
254		-	Passed the Senate the 23rd day of April, 2024.
	775	+	Passed the Senate the ___ day of __________, 2023.
	776	+
255	777
256	778
257	779
258	780		Presiding Officer of the Senate
259	781
260	782
261		-	OFFICE OF THE GOVERNOR
262		-	Received by the Office of the Governor this ____________________
263		-	day of ___________________, 20_______, at _______ o'clock _______ M.
264		-	By: _________________________________
265		-	Approved by the Governor of the State of Oklahoma this _____ ____
266		-	day of ___________________, 20___ ____, at _______ o'clock _______ M.
267	783
268		-
269		-	_________________________________
270		-	Governor of the State of Oklahoma
271		-
272		-	OFFICE OF THE SECRETARY OF STATE
273		-	Received by the Office of the Secretary of State this __________
274		-	day of ___________________, 20_______, at _______ o'clock _______ M.
275		-	By: _________________________________