Stricken language would be deleted from and underlined language would be added to present law.
Act 453 of the Regular Session
1 State of Arkansas
2 94th General Assembly A Bill
3 Regular Session, 2023 HOUSE BILL 1571
5 By: Representative Gazaway
6 By: Senator D. Wallace
8 For An Act To Be Entitled
9 AN ACT TO AMEND ARKANSAS LAW CONCERNING AUDITS OF
10 COUNTIES AND MUNICIPALITIES; AND FOR OTHER PURPOSES.
14 TO AMEND ARKANSAS LAW CONCERNING AUDITS
15 OF COUNTIES AND MUNICIPALITIES.
18 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF ARKANSAS:
20 SECTION 1. Arkansas Code 10-4-412 is amended to read as follows:
21 10-4-412. Audits of counties and municipalities Definitions.
22 (a) As used in this section:
23 (1) "Required report" means a report prepared by a licensed
24 certified public accountant or a licensed accountant in public practice in
25 good standing with the Arkansas State Board of Public Accountancy and filed
26 with the Legislative Auditor under:
27 (A) Subdivision (b)(2)(A) of this section; or
28 (B) Subdivision (d)(3) of this section; and
29 (2) "Turnback funds means:
30 (A) General revenue turnback funds, as defined in the
31 Revenue Stabilization Law, 19-5-101 et seq.; and
32 (B) Highway revenue turnback funds, as distributed under
34 (a)(1)(b)(1) Except as provided in subdivision (a)(2)(b)(2) of this
35 section, the Legislative Auditor shall audit counties and municipalities in
36 the state.
*MBM128* 03/07/2023 09:05:19 AM MBM128
1 (2)(A)(i) Any municipality may retain the services of a licensed
2 certified public accountant or a licensed accountant in public practice in
3 good standing with the Arkansas State Board of Public Accountancy to conduct
4 a financial audit as prescribed in subsection (b)(c) of this section.
5 (ii) All reports of the annual financial audit shall
6 be filed with the Legislative Auditor within ten (10) days of issuance of the
7 audit report.
8 (B) Nothing in subdivision (a)(2)(A)(b)(2)(A) of this
9 section limits the authority of the Legislative Auditor to conduct an audit
10 of any municipality.
11 (b)(c) Financial Audits.
12 (1)(A) For purposes of this subsection, a financial audit shall
13 be planned and conducted, and the results of the work reported in accordance
14 with auditing standards generally accepted in the United States and the
15 Government Auditing Standards issued by the Comptroller General of the United
17 (B) The report shall include a report on internal control
18 over financial reporting and on compliance and other matters based on an
19 audit of financial statements performed in accordance with the Government
20 Auditing Standards.
21 (2) Regulatory Basis.
22 (A) For county and municipal financial audits, the
23 financial statements shall be presented on a fund-basis format with, at a
24 minimum, the general fund and the street or road fund presented separately,
25 and all other funds included in the audit presented in the aggregate.
26 (B) The financial statements shall consist of the
28 (i) A balance sheet;
29 (ii) A statement of revenues (receipts),
30 expenditures (disbursements), and changes in fund equity (balances);
31 (iii) A comparison of the final adopted budget to
32 the actual expenditures for the general fund and street or road fund of the
33 entity; and
34 (iv) Notes to the financial statements.
35 (C) The report shall include as supplemental information a
36 schedule of capital assets, including:
2 03/07/2023 09:05:19 AM MBM128
1 (i) Land;
2 (ii) Buildings; and
3 (iii) Equipment.
4 (3) Alternative Basis. As an alternative to the basis prescribed
5 in subdivision (b)(2)(c)(2) of this section, the governing body of a
6 municipality or a county may adopt an annual resolution requiring its annual
7 financial audit to be performed and financial statements presented in
8 accordance with the standards prescribed by the Governmental Accounting
9 Standards Board, the American Institute of Certified Public Accountants, and
10 the United States Government Accountability Office, if applicable.
11 (c)(d) Agreed-Upon Procedures and Compilation Reports.
12 (1) As an alternative to a financial audit, the Legislative
13 Auditor may conduct an agreed-upon procedures and compilation engagement of
14 the records and accounts of all municipal or county offices, officials, or
16 (2) For purposes of this subsection, agreed-upon procedures and
17 compilation engagements shall be conducted in accordance with standards
18 established by the American Institute of Certified Public Accountants and
19 subject to the minimum procedures prescribed by the Legislative Joint
20 Auditing Committee.
21 (3)(A) Unless otherwise provided by law, the governing body of a
22 municipality may choose and employ accountants in public practice who are
23 licensed and in good standing with the Arkansas State Board of Public
24 Accountancy to conduct agreed-upon procedures and compilation engagements.
25 (B) All reports shall be filed with the Legislative
26 Auditor within ten (10) days of issuance.
27 (e)(1) If a required report is not filed with the Legislative Auditor
28 on behalf of the municipality within eighteen (18) months after the end of a
29 fiscal year that the required report covers, the Legislative Joint Auditing
30 Committee may give notice of that fact to the Treasurer of State, who shall
31 then withhold the municipalitys turnback funds in escrow until notified by
32 the Legislative Joint Auditing Committee that all required reports covering
33 periods through the most recent fiscal year have been filed, at which time
34 the escrowed turnback funds shall be released to the municipality.
35 (2) If the Treasurer of State holds a municipalitys turnback
36 funds under this subsection longer than twelve (12) months:
3 03/07/2023 09:05:19 AM MBM128
1 (A) The turnback funds shall be redistributed to all other
2 municipalities receiving turnback funds; and
3 (B) The municipality shall not accrue additional turnback
4 funds until the Legislative Joint Auditing Committee notifies the Treasurer
5 of State that all required reports covering periods through the most recent
6 fiscal year ended have been filed.
8 SECTION 2. Arkansas Code 14-71-101(b)(2)(A), concerning the
9 accounting method for county budget and treasury audit purposes, is amended
10 to read as follows:
11 (2)(A) For county government and the regulatory basis of
12 accounting under 10-4-412(b)(2) 10-4-412(c)(2), modified accrual
13 accounting basis is defined as an accounting system that recognizes revenues
14 at the time revenues become available and measurable and expenditures at the
15 time liabilities are incurred.
17 SECTION 3. Arkansas Code 14-234-120 is amended to read as follows:
18 14-234-120. Filing of report Withholding of turnback funds
20 (a) As used in this section, "turnback funds means:
21 (1) General revenue turnback funds, as defined in the Revenue
22 Stabilization Law, 19-5-101 et seq.; and
23 (2) Highway revenue turnback funds, as distributed under 27-
25 (b)(1) Within thirty (30) days of completion of the audit report or
26 the agreed-upon procedures and compilation report, the accountant performing
27 the audit or agreed-upon procedures and compilation shall submit the report
28 to the Legislative Auditor.
29 (2) The report shall be submitted in an electronic media format
30 approved by the Legislative Auditor.
31 (c)(1) If the report for a municipal water or sewer system is not
32 submitted to the Legislative Auditor on behalf of the municipality within
33 eighteen (18) months after the end of a fiscal year that the report covers,
34 the Legislative Joint Auditing Committee may give notice of that fact to the
35 Treasurer of State, who shall then withhold any turnback funds due the
36 municipality in escrow until notified by the Legislative Joint Auditing
4 03/07/2023 09:05:19 AM MBM128
1 Committee that all reports covering periods through the most recent fiscal
2 year have been filed, at which time the escrowed turnback funds shall be
3 released to the municipality.
4 (2) If the Treasurer of State holds a municipality's turnback
5 funds under this subsection longer than twelve (12) months:
6 (A) The turnback funds shall be redistributed to all other
7 municipalities receiving turnback funds; and
8 (B) The municipality shall not accrue additional turnback
9 funds until the Legislative Joint Auditing Committee notifies the Treasurer
10 of State that all reports under this section covering periods through the
11 most recent fiscal year ended have been filed.
12 (3) The withholding of turnback funds under this subsection (c)
13 is in addition to penalties that may be assessed under 14-234-122.
15 SECTION 4. DO NOT CODIFY. EFFECTIVE DATE. This act is effective on
16 and after June 30, 2024.
19 APPROVED: 4/4/23
5 03/07/2023 09:05:19 AM MBM128Statutes affected:
HB 1571: 10-4-412, 19-5-101, 27-70-207, 14-71-101(b)
Act 453: 10-4-412, 19-5-101, 27-70-207, 14-71-101(b)