An Act
ENROLLED 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. 2023, Section
17-105), which relates to annual audits of
municipalities; deleting certain requirements for
agreed-upon-procedures engagement; providing
requirements for agreed-upon-procedures engagement;
allowing certain public trusts to follow certain
audit procedures; amending 60 O.S. 2021, Section
180.1, which relates to annual audits; allowing
certain public trusts to follow certain audit
procedures; and providing an effective date.
SUBJECT: Cities and towns
BE IT ENACTED BY THE PEOPLE 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. 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 p ublic
accountant, an annual financial statement audit to be conducted in ENR. H. B. NO. 2362 Page 2
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. Suc h 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 i s a
beneficiary, and with a population of less t han 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
an independent licensed public acc ountant 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 an d 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 treasure rs, 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 thi s
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 Refor m 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
attestation standards of The the American Institute o f Certified
Public Accountants.
ENR. H. B. NO. 2362 Page 3
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) mont hs 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 ag reed-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 benefic iary
of the trust; provided, income from trusts esta blished principally
for the purpose of operating elect ric, 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 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 ca sh deposits were made in the
appropriate accounts an d verify utility billing receipts or posting
reports agree with the daily deposits;
3. Agree upon a pay rate for the city manager or town
administrator, city or town clerk, city or 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 appropriat e
documentation of authorization for such pay. The requirement s of ENR. H. B. NO. 2362 Page 4
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;
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 complian ce with the statutory
prohibition of creating fund balance defic its;
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 depos its 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 s 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, as an alternative
to obtaining an audit as required in Section 180.1 of Title 60 of
the Oklahoma Statutes, follow the biennial agreed -upon-procedures
engagement outlined in subsection D of this section.
SECTION 2. AMENDATORY 60 O.S. 2021, Section 180.1, is
amended to read as follows:
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 mun icipality 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 ENR. H. B. NO. 2362 Page 5
trust, such audit to be ordered within thirty (30) days of the close
of each fiscal year o f 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) i n 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 specif ic procedures
to be performed are:
1. Prepare a schedule of reve nues, 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 resour ces to
their restrictions;
5. Determine compliance with requirem ents 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) da ys of the
close of each fiscal year of the trust. Copies of the a nnual 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. ENR. H. B. NO. 2362 Page 6
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
public trust which did not have fin ancial 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 ou tstanding debt obligations.
D. A public trust with a municipal g overnment 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, as an alternative to obtaining an audit as
required in this section, follow the bienn ial agreed-upon-procedures
engagement outlined in subsection D of Section 17 -105 of Title 11 of
the Oklahoma Statutes.
SECTION 3. This act shall become effective Novembe r 1, 2024. ENR. H. B. NO. 2362 Page 7
Passed the House of Representatives the 6th day of May, 2024.
Presiding Officer of the House
of Representatives
Passed the Senate the 23rd day of April, 2024.
Presiding Officer of the Senate
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: _________________________________