Audits of Local Governments Summary of Results (n = 22)

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1 Audits of Local Governments Summary of Results (n = 22) Tennessee state statutes provide for the audit of all local governments (cities and counties) regardless of size. Audits are to be performed under GAGAS and financial statements are to be presented on a GAAP basis. Recently, the Division of County Audit has been involved in discussions about the continued relevance of auditing of very small governments and presenting financial statements in accordance with GAAP. We are requesting the following information to assist us in the evaluation process. 1. Does state statute or other similar provisions require the audit of all local governments (Cities and Counties in Tennessee) in your state? 2. Are there exemptions from audit for small cities and counties? What thresholds or other criteria are used to define those small governments that will not be audited? 3. Are small governments in your state required to report on a GAAP basis or is some other comprehensive basis of accounting allowed? 4. How many local governments (actual numbers or an estimated percent) have complied with GASB Statement No. 34 in your state? Question 1 AR AZ Does state statute or other similar provisions require the audit of all local governments (Cities and Counties in Tennessee) in your state? Arkansas Code Annotated (copy attached below) requires annual financial audits for all counties and municipalities in Arkansas. By statute, the Division of Legislative Audit is required to audit all counties in the state. Municipalities may use other licensed certified public accountants to conduct the annual financial audit. All reports of the annual financial audits by the private CPA firms must be filed with the Legislative Auditor within 10 days of issuance of the audit report. Counties and Community College Districts Arizona Revised Statutes (A.R.S.) , requires our office to annually perform the financial statement and compliance audits of counties and community college districts. The compliance portion has long been a reference to OMB A-133 single audits. Cities & Towns A.R.S , requires cities to have financial statement audits performed annually. Towns subject to the Single Audit Act must also have financial statement audits performed annually. All other towns may have financial statement audits performed either annually or biennially, as specified in A.R.S School Districts School districts subject to the Single Audit Act are required to have annual single audits. A.R.S requires any school district not subject to the Single Audit Act to comply with the following requirements. If a school district has an adopted expenditure budget of $2 million or more for the Maintenance and Operation (M&O) Fund (their General Fund), the district shall contract for an annual financial statement audit. If a school district has an adopted expenditure budget of less than $2 million but more than $700,000 for the M&O Fund, the district shall contract for a biennial financial statement audit (e.g., an audit of FY 2009 and FY 2010 performed after the 2 nd year). Charter Schools A.R.S requires any Charter School not required to have a single audit (governmental and not-for-profit entities expending less than $500,000 in federal financial assistance and for-profit entities) to have at least an annual financial statement audit. Special Districts A.R.S requires special districts not exempt under A.R.S (C) to prepare an annual report (not full financial September 22,

2 Question 1 CO FL GA IA IN KS Does state statute or other similar provisions require the audit of all local governments (Cities and Counties in Tennessee) in your state? statements). According to A.R.S , Parts D and E of the report (the Schedule of Revenues, Expenditures, and Changes in Fund Balances and the Schedule of Revenues, Expenses, and Changes in Retained Earnings/Fund Equity, respectively) must be audited annually for districts with budgets that are $1,000,000 or more. Districts with budgets that are $100,000 or more, but less than $1,000,000 must have a financial review of these schedules performed annually. Districts with budgets that are more than $50,000 and less than $100,000 must have a financial review of these schedules for each year performed at least biennially. Districts whose budgets are $50,000 or less must have a financial review performed only if requested by the board of supervisors, or on receipt of a request for a financial review that is signed by at least ten residents of the district. Colorado statutes require an audit of the financial statements for each fiscal year. All counties, and all municipalities that meet a specified audit threshold, are required by (Section , Florida Statutes), to provide for a financial audit. Yes. The Official Code of Georgia Annotated (OCGA), Section requires that local governments (defined as municipalities, counties, consolidated city-county governments and other political subdivisions of the state) provide for and cause to be made an annual audit of the financial affairs and transactions of all funds and activities of the local government for each fiscal year of the local government. Local governments must engage a properly licensed CPA firm to perform the audit. State law requires all counties and certain cities to be audited annually. Indiana Code states: (a) The state examiner, personally or through deputy examiners, field examiners, or private examiners, shall examine all accounts and all financial affairs of every public office and officer, state office, state institution and entity. (b) An examination of an entity deriving: (1) less than fifty percent (50%); or (2) at least fifty percent (50%) but less than one hundred thousand dollars ($100,000) if the entity is organized as a not-for-profit corporation; of its disbursements during the period of time subject to an examination from appropriations, public funds, taxes, and other sources of public expense shall be limited to matters relevant to the use of the public money received by the entity. (c) The examination of an entity described in subsection (b) may be waived or deferred by the state examiner if the state examiner determines in writing that all disbursements of public money during the period subject to examination were made for the purposes for which the money was received. Yes. Kansas statute requires all municipalities to have their accounts examined and audited at least once each year if exceeding dollars threshold allows for those municipalities not meeting the dollars threshold in to have an audit done if 20% of the electorate approve of the audit Chapter 75.--STATE DEPARTMENTS; PUBLIC OFFICERS AND EMPLOYEES Article 11.--MUNICIPAL ACCOUNTING BOARD Annual audits of school districts and certain municipalities; assistance from division of accounts and reports. (a) The governing body of every unified school district, the governing body of every recreation commission having aggregate annual gross receipts in excess of $150,000 and the governing body of all other municipalities either having aggregate annual gross receipts in excess of $275,000 or which has general obligation or revenue bonds outstanding in excess of $275,000 shall have its accounts examined and audited by a licensed municipal public accountant or accountants or certified public accountant or accountants at least once each year. In the case of school districts, all September 22,

3 Question 1 Does state statute or other similar provisions require the audit of all local governments (Cities and Counties in Tennessee) in your state? tax and other funds such as activity funds and accounts shall also be examined and audited. (b) The governing body of any city of the third class required to have its accounts examined and audited pursuant to the provisions of this section shall annually determine the total cost to be incurred by the city in complying with the requirements of this act and shall identify the same in the budget of the city. History: L. 1935, ch. 275, 12; L. 1967, ch. 442, 1; L. 1978, ch. 334, 2; L. 1983, ch. 276, 1; L. 1990, ch. 66, 51; L. 1993, ch. 46, 3; L. 2008, ch. 163, 24; July Chapter 75.--STATE DEPARTMENTS; PUBLIC OFFICERS AND EMPLOYEES Article 11.--MUNICIPAL ACCOUNTING BOARD KY LA MD MI MN MO Audits may be made in municipalities not provided for by ; petition. The governing body of any municipality not covered by K.S.A may employ a licensed municipal public accountant or accountants or certified public accountant or accountants to examine and audit the accounts of such municipality for such period as it may deem proper: Provided, That upon a written petition filed with the governing body of any such municipality not provided for by K.S.A by 20% or more of the voters of said municipality who voted at the last election for officers of such municipality it shall be the duty of said governing body to employ a licensed municipal public accountant or accountants or certified public accountant or accountants to examine and audit the accounts of such municipality for such period of time as may be set out in the petition of the voters. History: L. 1935, ch. 275, 15; May 15. Yes. For counties, however cities have a different requirement. Yes, LA R.S. 24:513 provides for the audit/review/compilation or sworn statements of local governments in Louisiana. State law (Article 19, Section 40 of the Annotated Code of Maryland) requires that each local government (county, municipal corporation (i.e., incorporated city / town), taxing districts) in Maryland be audited on an annual basis with the results of the audit being reported to the Legislative Auditor. Yes. Michigan Compiled Law section requires all local units of government to obtain an audit. Yes (see example below for counties). Pursuant to the requirements of Minn. Stat. 6.48, Minnesota counties are required to have an annual audit. The statute states, At least once in each year, if funds and personnel permit, the state auditor may visit, without previous notice, each county and make a thorough examination of all accounts and records relating to the receipt and disbursement of the public funds and the custody of the public funds and other property. The State Auditor may decide not to conduct the annual audit of a county. This does not release the county from the audit requirement. Instead the audit must then be conducted by a certified public accountant. No, Missouri statutes (RSMo) do not uniformly require all local governments and special districts to be audited. The state auditor's office (SAO) is responsible for auditing: a. Counties that do not elect a county auditor (Section , RSMo). Counties that do have an elected county auditor (the larger counties) are audited by private sector CPA firms. September 22,

4 Question 1 Does state statute or other similar provisions require the audit of all local governments (Cities and Counties in Tennessee) in your state? b. Other political subdivisions such as cities or school districts upon petition by the voters of those subdivisions (Section , RSMo). Recurring audits of these other subdivisions are normally conducted by private sector CPA firms, if a political subdivision is required to or chooses to have an audit. On a related note, Section , RSMo, requires political subdivisions other than counties and school districts to file an annual financial report with the SAO. The Code of State Regulations (15 CSR , available at the Web site specifies the formats and contents for the reports. Under Section , RSMo, the governing body of a political subdivision whose cash receipts are $10,000 or less in a reporting period is required to report only the beginning and ending cash balances and summaries of receipts and disbursements. Separate filing requirements exist for counties--for example, the annual budget for third-class counties (Sections , RSMo) and the annual published financial statements for all counties (Sections , RSMo) (both filed with the SAO). Also, Section , RSMo, requires school districts to file their annual audit reports with the state Department of Elementary and Secondary Education. MS MT ND NE NY OH (The statutory sections referred to above are available at the Web site Effective , (FYE 9/30/2010), all municipalities are required to have an annual audit. Currently, State Statutes require all County governments to be post-audited by the State Auditor each year. The State Auditor also has the authority to contract with qualified public accounting firms to perform County government audits. In Montana we have a statutory State Single Audit Act (attached). The Montana Legislative Audit Division does not audit at the local level, rather the Local Government Services Bureau within the Department of Administration, administers the State Single Audit Act (as opposed to the Federal Single Audit Act which we conduct). Independent accounting firms audit Montana local governments. All audits of Montana local governments must be submitted to the Local Government Services Bureau for review. State law requires the audit of cities and counties once every two years. State Statutes require audit of all local governments, but gives State Auditor authority to waive the requirement. New York State has several thousand local government entities. Counties, cities, towns, villages, and school districts are considered the primary entities along with a number of other special purpose governmental units. Some local government entities such as school districts (about 700 of them), industrial development agencies, and fire districts meeting revenue thresholds are required by New York State statute to have an annual financial statement audit conducted by an external auditor. Of course, the larger local governments within the State are also subject to an annual financial statement audit to comply with the federal Single Audit Act provisions. In addition, various statutes require the legislative body of local governments to audit or cause to be audited the entity s financial statements and the records and documents of various officers and employees responsible for receiving and disbursing moneys. For this purpose, the relevant laws do not define the term audit and the depth and involvement of such audits can vary. Governing board members or designated officials performing this audit function internally would not generally be expected to comply with professional standards or perform the same type of audit services as an independent public accountant hired for that purpose. Ohio Revised Code states, The auditor of state shall audit each public office at least once every two fiscal years. This includes all September 22,

5 Question 1 SD WA Does state statute or other similar provisions require the audit of all local governments (Cities and Counties in Tennessee) in your state? counties, cities, villages, and townships, among other units of local government. In South Dakota the term local governments includes school districts, cities, counties, townships and various other special districts (sanitary, water, fire protection, etc.) authorized by state law. State law requires all school districts and counties to be audited at least once every two years. State law also requires certain cities to have audits at least once every two years as described in the answer to question 2. Townships are not required to be audited. Some types of special districts are required by state law to have audits while others are not. We, the Department of Legislative Audit, have general authority to conduct an audit of any of these local governments if we believe reason exists to conduct an audit regardless of what specific statutory authority may provide for. Yes, Washington State law ( requires an audit of all local governments at least once every three years in accordance with the schedule determined by our Office. Our policy defining audit frequency is attached. Question 2 AR AZ Are there exemptions from audit for small cities and counties? What thresholds or other criteria are used to define those small governments that will not be audited? a. Yes, as an alternative to a financial audit, the Legislative Auditor may choose to conduct an agreed upon procedures engagement of the records and accounts of all municipal or county offices, officials, or employees. These agreed-upon procedures engagements are conducted in accordance with standards established by the AICPA and subject to the minimum procedures prescribed by the Legislative Auditor. b. The thresholds or other criteria used to define those small governments approved for agreed-upon procedures are determined at the discretion of the Legislative Auditor. Counties & Community College Districts No exemptions from the audit requirements are available for small counties or community college districts. Cities & Towns No exemptions from the audit requirements are available for small cities or towns. School Districts Districts budgeting expenditures of less than $700,000 for the M&O Fund are subject to procedural reviews performed at the discretion of the State of Arizona, Office of the Auditor General. However, a financial statement or single audit may be accepted in lieu of a procedural review if the audit is performed in accordance with Government Auditing Standards. Charter Schools No exemptions from the audit requirements are available for charter schools. CO FL Special Districts The exemption for special districts with budgets of $50,000 or less, is describe in the response to #1 above. There is an exemption provision in Colorado statutes. Any local government where neither revenues nor expenditures exceed $500,000 for any fiscal year may apply for an exemption from audit. The Colorado Office of the State Auditor reviews each application and approves (or denies) the request for exemption from audit. This is an excerpt from the law, which can be viewed at September 22,

6 Question 2 GA IA IN KS KY LA MD Are there exemptions from audit for small cities and counties? What thresholds or other criteria are used to define those small governments that will not be audited? %3eCh0218-%3eSection%2039: 1) If, by the first day in any fiscal year, a local governmental entity, district school board, charter school, or charter technical career center has not been notified that a financial audit for that fiscal year will be performed by the Auditor General, each of the following entities shall have an annual financial audit of its accounts and records completed within 12 months after the end of its fiscal year by an independent certified public accountant retained by it and paid from its public funds: (a) Each county. (b) Any municipality with revenues or the total of expenditures and expenses in excess of $250,000. (c) Any special district with revenues or the total of expenditures and expenses in excess of $100,000. (d) Each district school board. (e) Each charter school established under s (f) Each charter technical center established under s (g) Each municipality with revenues or the total of expenditures and expenses between $100,000 and $250,000 that has not been subject to a financial audit pursuant to this subsection for the 2 preceding fiscal years. (h) Each special district with revenues or the total of expenditures and expenses between $50,000 and $100,000 that has not been subject to a financial audit pursuant to this subsection for the 2 preceding fiscal years. Small governments are granted additional options for complying with the above statutory requirement. Each unit of local government with expenditures of less than $300,000 in that government s most recently ended fiscal year may elect to (1) have an audit not less often than once every two fiscal years which must cover both years, (2) have an annual audit or (3) engage a CPA to perform agreed upon procedures. With regard to Option 3, OCGA requires that these procedures shall include: proof and reconciliation of cash, confirmation of cash balances, a listing of bank balances by bank, a statement of cash receipts and cash disbursements, a review of compliance with state law, and a report of agreed upon procedures. These options apply to municipalities since there are no counties in Georgia with expenditures under $300,000. The audit requirement for cities varies according to the city's population. Cities with a population of 2,000 or more are required to be audited annually. Cities with a population of at least 700 but less than 2,000 are required to be audited once every four years. Cities with a population of less than 700 may be audited whenever the city chooses to have an audit performed or upon a petition of city residents. Since our law calls for us to examine, we have set our own parameters for auditing vs. examination. For our office, we audit all governmental units that qualify for a Single audit, and perform examinations on all others. Yes. See 1 above. Exemption only for cities. Counties are required to have an annual audit per statute. KRS (Kentucky Revised Statutes) allow the following exemptions for cities-see KRS 91A.040 attached. Yes there are exemptions. Entities with less than $50,000 revenue and other sources may file an annual sworn statement with the LLA. Entities with revenues $50,000 to $200,000 may file a compilation prepared by CPA. $200,000 to $500,000 file a review report and over $500,000 file audits performed by CPA. The state law does provide for a waiver of the annual audit requirement for certain small local governments. Specifically, the state law provides that the Legislative Auditor may authorize a municipal corporation or taxing district with annual revenues of less than $250,000 in the prior 4 fiscal years to have an audit conducted once every 4 years. The small governments must specifically request a waiver from the annual audit requirement. (Note, all local governments are required to submit certain financial information in a format prescribed by our Department even in years in which the governments have a waiver of the annual audit requirement.) September 22,

7 Question 2 Are there exemptions from audit for small cities and counties? What thresholds or other criteria are used to define those small governments that will not be audited? MI Local units of government that have a population of less than 4,000 persons may have their audit conducted biennially. However, if an audit discloses a material deviation by the local unit from generally accepted accounting practices or from applicable rules and regulations of a state department or agency or discloses any fiscal irregularity, defalcation, misfeasance, nonfeasance, or malfeasance, the department of treasury may require an audit to be conducted in the next year. See #3 response below. MN MO See our response to Question 1. MS Effective , municipalities with either, revenues or expenditures less than $10 million can request to have an audit of their combined statement of Cash Receipts and Disbursements. This statement is OCBOA. Municipalities with revenues or expenditures that are less than 1 million can request a compilation for the Cash Receipts and Disbursements and an additional agreed upon procedure report. Municipalities with revenues or expenditures less than $100,000 can request a form that our office will provide to summarize their revenues and expenditures. There are no exemption levels for County governments as all levels are required to have an audit. ND There is no exemption from audit for counties. However, cities with a population of less than 500 are not required to have an audit. Instead, those small cities must file an annual report with the State Auditor s Office. NE The current guideline used by the State Auditor to waive the audit requirement is whether expenditures of the local governments exceed $300,000. Generally local governments exceeding less than $300,000 are given the waiver unless an allegation of wrong doing has been made. NY No. If the local government is required by statute to be audited, there are no thresholds or criteria other than those stated above in question #1. OH SD WA There are no exemptions in Ohio law for smaller units of local government. However, the Auditor of State does have some discretion to define what constitutes an audit under the law. Recently, in an attempt to reduce the burden of audit costs, the Auditor of State has initiated a policy allowing certain smaller governments that have historically experienced clean audits to receive agreed-upon procedures in place of full GAGAS audits. That policy will be initially implemented with our December 31, 2009 audits. Only cities with annual revenue over $600,000 are required to have audits. Cities with annual revenue between $100,000 and $600,000 are required to have Internal Control Reviews (ICR) done. These ICRs are limited scope engagements designed to determine whether certain basic internal controls and accounting records exist at the city. Cities with annual revenue under $100,000 are not required to have any sort of audit, ICR or other engagement but may do so if they choose to, subject to approval of the engagement by our office. All local governments are required by Washington State law ( to submit an unaudited financial report to our Office within 150 days of fiscal year end. Also, all local governments are also required by law to receive an audit as described above. However, we do not perform a financial statement audit for all local governments; for small local governments, we often only perform an accountability audit focusing on compliance and safeguarding of public resources. Our policy defining audit frequency (attached) also describes the thresholds for when a financial statement audit is performed. Question 3 AR Are small governments in your state required to report on a GAAP basis or is some other comprehensive basis of accounting allowed? A Regulatory Basis of Presentation is prescribed by Arkansas Code Annotated (copy attached below). However, the governing body of September 22,

8 Question 3 AZ Are small governments in your state required to report on a GAAP basis or is some other comprehensive basis of accounting allowed? the municipality or county may adopt an annual resolution requiring its annual financial audit to be performed and financial statements presented in accordance with the standards prescribed by the GASB, the AICPA, and the GAO, if applicable. The Division would then comply with that resolution. Counties & Community College Districts GAAP basis reporting is required. Cities & Towns GAAP basis reporting is required. School Districts GAAP basis reporting is required. Charter Schools GAAP basis reporting is required. CO FL GA IA IN KS Special Districts The reporting requirements for special districts in A.R.S do not require the use of GAAP or any other specific basis of accounting in preparing the financial component of the required schedules. The application for exemption may be filled out on a cash or accrual basis. Previously, all Florida local governments were required to annually prepare GAAP financial statements, but that requirement was repealed during the 2004 Legislative session. However, all Florida local governments required to provide for a financial audit pursuant to Section , Florida Statutes, must prepare GAAP financial statements for audit pursuant (see Section (17), Florida Statutes, which defines a financial audit as an examination of financial statements in order to express an opinion on the fairness with which they are presented in conformity with generally accepted accounting principles... ). Municipalities with annual expenditures under $300,000 electing to engage a CPA to perform agreed upon procedures are required to submit a statement of cash receipts and cash disbursements. Counties are required by state law to report on a GAAP basis but cities, regardless of size, may choose their basis of accounting for reporting purposes. In Indiana there is no statutory requirement to report on a GAAP basis. Most governmental units maintain cash basis records, therefore, their financial statements are prepared on a cash basis. If a governmental unit maintains GAAP records, then their financial statements are prepared on the GAAP basis. Yes and Yes a Chapter 75.--STATE DEPARTMENTS; PUBLIC OFFICERS AND EMPLOYEES Article 11.--MUNICIPAL ACCOUNTING BOARD a. Uniform system of fiscal procedure, accounting and reporting for municipalities; use of generally accepted accounting principles; waivers, when. (a) Except as otherwise provided in this section, the governing body of each municipality, as defined in K.S.A , and amendments thereto, shall utilize accounting procedures and fiscal procedures in the preparation of financial statements and financial reports that conform to generally accepted accounting principles as promulgated by the governmental accounting September 22,

9 Question 3 KY LA MD MI Are small governments in your state required to report on a GAAP basis or is some other comprehensive basis of accounting allowed? standards board and the American institute of certified public accountants and adopted by rules and regulations of the director of accounts and reports. (b) The governing body of any municipality, which has aggregate annual gross receipts of less than $275,000 and which does not operate a utility, shall not be required to maintain fixed asset records. (c) (1) The director of accounts and reports shall waive the requirements of subsection (a) upon request therefor by the governing body of any municipality. The waiver shall be granted to the extent requested by the governing body. Prior to requesting the waiver provided for in this subsection, the governing body, by resolution, annually shall make a finding that financial statements and financial reports prepared in conformity with the requirements of subsection (a) are not relevant to the requirements of the cash-basis and budget laws of this state and are of no significant value to the governing body or members of the general public of the municipality. No governing body of a municipality shall request the waiver or adopt the resolution authorized under this subsection if the provisions of revenue bond ordinances or resolutions or other ordinances or resolutions of the municipality require financial statements and financial reports to be prepared in conformity with the requirements of subsection (a). The governing body of any municipality which is granted a waiver under this subsection shall cause financial statements and financial reports of the municipality to be prepared on the basis of cash receipts and disbursements as adjusted to show compliance with the cash-basis and budget laws of this state. (2) The provisions of this subsection do not apply to community colleges. (d) The director of accounts and reports shall waive the requirements of law relating to the preparation and maintenance of fixed asset records upon request therefor by the board of trustees of any community college. The waiver shall be granted to the extent and for the period of time requested by the board of trustees. Nothing contained in this subsection shall be construed so as to exempt any community college from compliance with the provisions of K.S.A , and amendments thereto, which requires the use by all community colleges of a standardized and uniform chart of accounts. History: L. 1978, ch. 334, 5; L. 1979, ch. 279, 1; L. 1981, ch. 327, 1; L. 1982, ch. 348, 1; L. 1994, ch. 274, 7; July 1. No, for counties (OCBOA is used, although a handful of counties use GAAP). Yes, for cities (GAAP is used). Audits and reviews are performed on GAAP basis financial statements; compilations and sworn financial statements are not required to be prepared in accord with GAAP. All local governments are required to report on a GAAP basis. The State law states that the audited financial statements be prepared in accordance with GAAP and audited in accordance with GAAS. We could not find a state law that specifically required the use of GAAP. Michigan Compiled Law Section requires the State Treasurer to establish the chart of accounts for local units to follow and permits the State Treasurer to publish standard operating procedures and forms to assist local units in establishing and maintaining uniform accounting. Treasury's Local Audit and Finance Division has determined that omission of the following sections in an audit report will not result in any sanctions or in a request for remediation: Management s Discussion and Analysis The Government-Wide Statements Infrastructure Reporting Those communities that choose not to present the Government-Wide statements would not report the reconciliation between the fund based statements and the government-wide statements. In addition, the specific note requirements of GASB 34 paragraph 115 (a, b, c, e, f) would not be September 22,

10 Question 3 MN Are small governments in your state required to report on a GAAP basis or is some other comprehensive basis of accounting allowed? included. The auditor s opinion may need to be modified for the departure(s) from generally accepted accounting principles, if those departures are considered material to overall financial statement presentation. Cities: Cities over 2,500 in population, according to the latest census, must have an annual audit in accordance with generally accepted accounting principles. Cities under 2,500, where there are separate offices of clerk and treasurer, are not required to have an audit. Cities under 2,500 with the combined office of clerk and treasurer must have an annual audit if total revenues exceed the annual threshold. Cities under 2,500 with the combined office of clerk and treasurer must have an audit once in every five-year period if total revenues are less than the annual threshold. For the year ended December 31, 2008, the audit threshold is $187,000. Towns: Towns over 2,500 in population, according to the latest census, must have an annual audit in accordance with generally accepted accounting principles if total revenues exceed the annual threshold. For the year ended December 31, 2008, the audit threshold for towns over 2,500 is $834,000. Towns under 2,500, where there are separate offices of clerk and treasurer, are not required to have an audit. Towns under 2,500 with the combined office of clerk and treasurer must have an annual audit if total revenues exceed the annual threshold. Towns under 2,500 with the combined office of clerk and treasurer must have an audit once in every five-year period if total revenues are less than the annual threshold. For the year ended December 31, 2008, the audit threshold for towns under 2,500 is $187,000. MO MS ND NE NY Counties: All counties must have an annual audit in accordance with generally accepted accounting principles. Response: Some local governments report on a GAAP basis and others do not; Missouri has no statutory or regulatory requirements for GAAP financial statements. However, of the counties that the SAO is responsible for auditing, those that have chosen to prepare financial statements in the formats required by GASB Statement No. 34 have followed the cash basis or modified cash basis of accounting. Only municipalities with revenues or expenditures greater than 10 million are required to report on the GAAP basis. All County governments regardless of size are required to have an audit performed on its financial statements prepared in accordance with generally accepted accounting principles (GAAP). All counties, regardless of size, are required to report on a GAAP basis. Small cities may file an annual non-gaap report with the State Auditor s Office. Local governments are allowed to report on the cash basis of accounting and the majority of them use this option. Although the system of accounts prescribed by the New York State Comptroller for local government accounting records implement GAAP principles, the forms prescribed to meet the annual filing requirements with the State Comptroller are not GASB financial statements. The annual reports collect detailed information on balance sheet, revenue and expenditure accounts on an individual fund basis. The State Comptroller has September 22,

11 Question 3 OH SD WA Are small governments in your state required to report on a GAAP basis or is some other comprehensive basis of accounting allowed? provided guidance to assist local governments in consolidating the annual reporting data to generate financial statements that conform with GASB 34. Consequently, while we encourage all local governments to implement the provisions of GASB Statement 34, full implementation is not required to meet the annual financial reporting requirements of New York State General Municipal Law. In Ohio, all local public offices are required to file annual financial reports with the Auditor of State. All counties, cities, and school districts (regardless of size) are required to report on a GAAP basis. Although other local governments may prepare their financial statements on a cash basis, in order to avoid an adverse opinion, they must comply with the AICPA interpretation that cash statements must look like a GAAP presentation. In Ohio, if a local government receives an adverse opinion for failure to comply with the GAAP-like format requirement, we will issue a second, unqualified opinion should the government qualify based on its cash accounting. State law is silent on the basis to be used for reporting for all of our local government types. There are other external parties that do require GAAP reporting for some of these governments. Examples include, HUD requiring GAAP for Housing and Redevelopment Commissions and Rural Development requiring GAAP for local governments that it loans money to. All local governments, regardless of size, are allowed to choose whether to report on a GAAP basis or a Cash Basis presentation with a few exceptions. The exceptions are not based on size, but on entity type due to oversight agency requirements for example, all Risk Pools are required to report on a GAAP basis and all Conservation Districts are required to report on a Cash Basis. Reporting requirements for local governments other than School Districts are defined by our Budgeting Accounting and Reporting (BARS) manuals, which are available online at Our BARS manual is authoritative under Washington State law ( and forms the basis for local government annual reports. The GAAP manual refers to GAAP reporting requirements; the Cash manual is our OCBOA option. School Districts report in accordance with a different manual issued in conjunction with the Office of Superintendent of Public Instruction, which allows the Districts to choose between GAAP, Modified Accrual and Cash Basis. Question 4 AR AZ How many local governments (actual numbers or an estimated percent) have complied with GASB Statement No. 34 in your state? Currently, all municipality and county audits performed by the Division of Legislative Audit are reported using the Regulatory Basis as described above. Approximately 40 municipalities use private firms to conduct the annual financial audit. In 2007, approximately 15 of those 40 audits were reported on a GAAP basis in compliance with GASB Statement No. 34. Counties & Community College Districts All 15 counties and 11 community college districts in Arizona prepare financial statements in accordance with GASB 34. Cities & Towns All 90 cities and towns in Arizona prepare financial statements in accordance with GASB 34. School Districts All School Districts required to prepared financial statements for audit, approximately 200 of the 240 school Districts in the state, prepare the statements in accordance with GASB 34. Charter Schools Charter Schools are generally not governmental entities, and therefore, are not required to comply with GASB 34. The few charter schools that are governmental entities are included in the financial statements of their sponsoring government. Those sponsoring September 22,

12 Question 4 How many local governments (actual numbers or an estimated percent) have complied with GASB Statement No. 34 in your state? CO FL governments prepare their statements in accordance with GASB 34 or 35, as applicable. Special Districts We do not receive the financial statements of special districts, if prepared, so we are not able to speak to their adherence to GASB 34. Additionally, the schedules referred to in the reporting requirements described above are not full financial statements, so GASB 34 would not apply to them. Many special districts are included in the reporting entity of a county, city, or town and those entities prepare their financial statements in accordance with GASB 34. All local governments in Colorado that file audits have complied with GASB Statement No. 34 at this time. A local government not in compliance with GASB No. 34 may cause the auditor to give an adverse opinion. In accordance with Colorado statutes, an adverse opinion would cause the financial statements of the local government to be rejected and the local government considered delinquent until conforming statements could be submitted. Generally, all that have been required to provide for an audit appear to have complied based on statement presentation. For those that we received that were obviously not in compliance, we rejected receipt of the report and advised that the report needed to be in compliance with GASB Statement No. 34. We annually review all local government audit reports submitted to us for compliance with GAAP. See our report No for the results of our most recent review of local government audit reports (this report can be viewed on our web site at GA Based on reports for fiscal year ended in 2007 submitted by local governments (the most recent year for which complete data is available), 68 municipalities elected to submit an agreed upon procedures report in lieu of audited financial statements. All other cities and all counties and consolidated governments submitting audited financial statements were required to report in accordance with generally accepted accounting principles, including the provisions of GASB Statement No. 34. IA IN For fiscal year 2008, 100% of counties reported in accordance with GASB 34 and 17.7% of city audit reports filed (49 of 277) were in accordance with GASB 34. The only governmental units that we require GASB 34 Statements from are those that require a single audit and most of those are prepared on a cash basis. In a normal year this is approximately 260. With the stimulus money, that number will increase. For all others, they are required to report on a regulatory basis. With this we require just a simple statement of beginning cash and investment balance, receipts, disbursements, and ending cash and investment balances by fund. Total engagements performed a year is approximately 2,500. Our governmental units are also statutorily required to file an annual report. This annual report is prescribed by the State Board of Accounts. This report includes a breakdown of their receipts and disbursements by type and function respectively. KS This number/percent is not known. Estimate less than 50. KY To our knowledge, all cities comply with GASB 34 (APA does not audit cities). All counties comply with GASB 34 reporting requirements using modified cash basis (OCBOA). LA 100% of those local governments with revenues and other sources greater than $200,000. MD All local governments in Maryland have implemented GASB 34. When local governments submit their audited financial statements to the Legislative Audit, we perform a desk review of the financial statements. When departures from GAAP are noted, we send letters to the local government and their auditors regarding areas of noncompliance. Through these letters, we have been able to get all local governments to comply with GASB 34. MI We do not have statistics that would provide this data. MN Out of the 854 cities in Minnesota, 493 (58%) are GAAP, and 361 are Cash. Out of the 1,788 towns, 33 are GAAP (2%), and 1,755 are Cash. All September 22,

13 Question 4 How many local governments (actual numbers or an estimated percent) have complied with GASB Statement No. 34 in your state? 87 counties (100%) are GAAP. MO This information is not readily available because the SAO does not audit all local governments and special districts in the state. MS For municipalities, presently 81 out of 297. For County governments, all 82 Counties have complied ND Approximately one-half of ND s local governments have complied with GASB Statement No. 34. NE Approximately 100% of local governments are reporting in compliance with GASB 34, but are under the cash basis of accounting, so no infrastructure reporting. NY We believe most of our school districts and approximately 25% of our other types of primary local governments either by statute or single audit comply with GASB 34. OH As mentioned above, all counties, cities, and school districts (including joint vocational school districts, educational service centers, and charter schools) are required to file financial statements on a GAAP basis, using the GASB 34 reporting model. In 2008, Ohio had approximately 730 school districts (including the other related filers), and approximately 600 complied with the GAAP requirement. 65 of Ohio s 88 counties complied, and approximately 246 of the state s 258 cities complied. Again, other units of local government including 1,308 townships, 251 public libraries, approximately, 690 villages, and numerous other special districts are not required to file GAAP financial statements. SD All school districts comply with GASB34. Of our 66 counties, 7 are GASB34. Approximately 25% of our 310 cities are GASB34 compliant. I do not have a good estimate of the percentage of the other local governments that are GASB34 compliant. Some are compliant because of the requirements of external parties as indicated in the answer to question 3. WA 469 of 2,212 local governments currently report on a GAAP Basis (about 21%). Please note that prior to July 2007, our Office was requiring all local governments over a certain size to report GAAP (the thresholds were >25,000 population for Cities, >50,000 population for Counties and >$5,000,000 in operating revenues for other local governments). Also, almost all School Districts utilize jointly developed accounting software which is designed to produce OCBOA statements (modified accrual or cash basis in accordance with the Schools Manual) which contributes to the fact that only 16 of our 297 School Districts currently report on a GAAP Basis. September 22,

14 KENTUCKY 91A.040 Annual city audits -- Publication -- Contents -- Exception -- Penalties. (1) Each city of the first through fifth class shall, after the close of each fiscal year, cause each fund of the city to be audited by the Auditor of Public Accounts or a certified public accountant. The audits shall be completed by February 1 immediately following the fiscal year being audited. Within ten (10) days of the completion of the audit and its presentation to the city legislative body, in accordance with subsection (4)(e) of this section, each city shall forward three (3) copies of the audit report to the Governor's Office for Local Development for information purposes. The Governor's Office for Local Development shall forward one (1) copy of the audit report to the Legislative Research Commission to be used for the purposes of KRS to (2) Except as provided in subsection (3) of this section, each city of the sixth class shall, after the close of each odd-numbered fiscal year, cause each fund of the city to be audited by the Auditor of Public Accounts or a certified public accountant. The audits shall be completed by February 1 immediately following the fiscal year to be audited. Within ten (10) days of the completion of the audit and its presentation to the city legislative body, in accordance with subsection (4)(e) of this section, each sixth class city shall forward three (3) copies of the audit report to the Governor's Office for Local Development for information purposes. The Governor's Office for Local Development shall forward one (1) copy of the audit report to the Legislative Research Commission to be used for the purposes of KRS to After the close of each even-numbered fiscal year, each sixth class city shall prepare a financial statement in accordance with KRS and immediately forward one (1) copy to the Governor's Office for Local Development, which shall forward one (1) copy of the financial statement to the Legislative Research Commission. (3) Any city of the sixth class, which for any fiscal year receives and expends, from all sources and for all purposes, less than seventy-five thousand dollars ($75,000), and which has no long-term debt, whether general obligation or revenue debt, shall not be required to audit each fund of the city for that particular fiscal year. Each city shall annually prepare a financial statement in accordance with KRS and immediately forward one (1) copy to the Governor's Office for Local Development for information purposes. The Governor's Office for Local Development shall be responsible for forwarding one (1) copy of the financial statement to the Legislative Research Commission to be used for the purposes of KRS to (4) Each city required by this section to conduct an annual or biannual audit shall enter into a written contract with the selected auditor. The contract shall set forth all terms and conditions of the agreement which shall include but not be limited to requirements that: (a) The auditor be employed to examine the basic financial statements, which shall include the government-wide and fund financial statements; (b) The auditor shall include in the annual city audit report an examination of local government economic assistance funds granted to the city under KRS to The auditor shall include a certification with the annual audit report that the funds were expended for the purpose intended;