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SECRETARY OF STATE, AUDITS DIVISION

 

DIVISION 40

MINIMUM STANDARDS FOR REVIEW OF OREGON MUNICIPAL CORPORATIONS

162-040-0000 [Renumbered to 162-040-0002]

162-040-0001

Preface

(1) Pursuant to the provisions of ORS 297.465, there is presented herewith the Minimum Standards for Review of Oregon Municipal Corporations.

(2) These Standards have been approved by the Oregon Board of Accountancy (the Board), and have been adopted by the Secretary of State as Administrative Rules under the provisions of ORS Chapter 183.

(3) All reviews of municipal corporations shall be made in accordance with these Standards, and all review reports shall be in the form prescribed herein. The Standards are effective for reviews of fiscal years ending after March 31, 2012.

Stat. Auth.: ORS 297
Stats. Implemented: ORS 297.465
Hist.: AUDIT 2-2010, f. 3-23-10, cert. ef. 4-1-10; AUDIT 1-2012, f. 2-9-12, cert. ef. 4-1-12

162-040-0002

Definitions

(1) "Accountant" as used in these rules means a person licensed by the Oregon Board of Accountancy to conduct municipal audits and reviews.

(2) "Analytical Procedures" are substantive tests of financial information that involve comparisons of expectations developed by the independent accountant to recorded amounts or ratios developed from recorded amounts.

(3) "Determine" as used in these rules means to come to a decision after making inquiries and observations; performing analytical procedures; and other procedures found by the accountant to be necessary under the circumstances.

(4) "Review": A review is a service, the objective of which is to obtain limited assurance that there are no material modifications that should be made to the financial statements in order for them to be in conformity with generally accepted accounting principles (GAAP). Financial statements prepared on the cash or modified cash basis of accounting is another comprehensive basis of accounting (OCBOA) other than GAAP and is permitted under municipal audit law.

Stat. Auth.: ORS 297.465
Stats. Implemented: ORS 297.465
Hist.: SD 6-1981, f. & ef. 9-1-81; DOA 2-1991, f. 3-8-91, cert. ef. 7-1-91, Renumbered from 165-040-0000; DOA 1-1996, f. 4-10-96, cert. ef. 6-1-96; AUDIT 2-2007, f. 6-7-07, cert. ef. 6-30-07; Renumbered from 162-040-0000 by AUDIT 2-2010, f. 3-23-10, cert. ef. 4-1-10; AUDIT 1-2012, f. 2-9-12, cert. ef. 4-1-12

162-040-0005

Introduction

(1) All municipal corporations, as defined in ORS 297.405, are required to have their accounts and fiscal affairs audited annually, unless they are exempt from audit under ORS 297.435. These administrative rules apply to review reports prepared under 297.435(3).

(2) The objective of a review differs significantly from the objective of an audit of financial statements in accordance with generally accepted auditing standards. The objective of an audit is to provide a reasonable basis for expressing opinions on the financial statements that collectively comprise the municipality's basic financial statements. A review does not contemplate obtaining an understanding of the entity’s internal control; assessing fraud risk; testing accounting records by obtaining sufficient appropriate evidence through inspection, observation, confirmation, or the examination of source documents; or other procedures ordinarily performed during an audit. A review is designed to obtain only limited assurance that there are no material modifications that should be made to the financial statements in order for the statements to be in conformity with GAAP or another comprehensive basis of accounting permitted by law.

(3) The accountant who performs a review of the financial statements of a municipal corporation must:

(a) Be licensed by the Oregon Board of Accountancy to conduct municipal audits;

(b) Personally perform the review in accordance with these rules to an extent satisfactory to the Secretary of State; and

(c) Prepare a report expressing limited assurance on the financial statements in accordance with these rules.

(4) Since the functions and forms of government, as well as the accounting, internal control, and management information systems, will vary greatly among municipal corporations, the independent accountant must be or become familiar with legal provisions applicable to a particular government. The accountant must also be familiar with the accounting principles considered to be generally acceptable for governments.

(5) Officials of the municipal corporation must account for all resources for which they are responsible. An appropriate accounting by officials of the municipal corporation will include financial statements, notes to the financial statements, and the supplementary information required by these rules.

(6) Based upon the review, the accountant should ascertain whether the municipal corporation's accounts and records are maintained in a manner that will permit the preparation of financial statements which fairly present its financial position and results of operations in accordance with legal provisions, and in accordance with generally accepted accounting principles or another comprehensive basis of accounting permitted by law. The accounting principles contemplated are those contained in pronouncements of authoritative bodies including, but not necessarily limited to, the Financial Accounting Standards Board, the American Institute of Certified Public Accountants, and the Governmental Accounting Standards Board. If the municipal corporation does not prepare and present the financial statements specified in these rules, the accountant should make a reasonable attempt to draft them for the municipal corporation using its accounts and records. Whenever legal provisions conflict with generally accepted accounting principles or principles applicable to another comprehensive basis of accounting, the accountant shall disclose these conflicts and modify the review report if necessary.

(7) The accountant should establish an understanding of the industry in which the municipality operates, and whether operations have been carried out in accordance with appropriate legal provisions including federal and state laws, charter provisions, court orders, ordinances, resolutions, and rules and regulations issued by other governmental agencies. The independent accountant should communicate to the appropriate level of management, and if applicable, to those charged with governance, material instances of noncompliance with such legal provisions that come to his or her attention during the review.

(8) The report shall include financial statements with appropriate notes, and the independent accountant's review report containing limited assurance on the financial statements. If the accountant becomes aware of a departure from GAAP or another comprehensive basis of accounting permitted by law that is material to the financial statements, the accountant should consider whether modification of the standard report is adequate to disclose the departure. The accountant's review report shall include the reporting elements prescribed by the Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants.

(9) The municipal corporation must file a copy of its report with the Secretary of State. The report and supporting documentation are subject to review by the Secretary of State for compliance with these rules. The Secretary of State may require the accountant to submit documentation covering the review engagement for purposes of this requirement.

(10) The accountant shall submit a summary of the revenues and expenditures of the municipal corporation within 30 days after delivering the review report. The summary shall encompass the period covered by the review and shall be prepared in a manner and on forms prescribed by the Secretary of State. One copy of the summary shall be delivered to the municipal corporation. A supply of the forms will be furnished to the accountant upon request.

Stat. Auth.: ORS 297.465
Stats. Implemented: ORS 297.465
Hist.: SD 6-1981, f. & ef. 9-1-81; DOA 2-1991, f. 3-8-91, cert. ef. 7-1-91, Renumbered from 165-040-0005; DOA 1-1996, f. 4-10-96, cert. ef. 6-1-96; AUDIT 2-2007, f. 6-7-07, cert. ef. 6-30-07; AUDIT 1-2012, f. 2-9-12, cert. ef. 4-1-12

162-040-0010

General Requirements

(1) Reviews shall be performed in accordance with a written agreement executed by the independent accountant and the municipal corporation. The agreement should clearly establish the nature of the services to be performed and shall clearly set forth the scope of work to be conducted by the accountant. The agreement must include a provision for the expression of limited assurance on the financial statements of the municipal corporation. The agreement should also provide for the accountant to make a reasonable attempt to draft the financial statements for the municipal corporation if the municipal corporation has not prepared them.

(2) If prior period financial statements are presented for comparative purposes, the accountant must clearly establish the degree of responsibility, if any, the accountant is assuming for such prior period statements.

[ED. NOTE: Appendix referenced is available from the agency.]

Stat. Auth.: ORS 297.465
Stats. Implemented: ORS 297.465
Hist.: SD 6-1981, f. & ef. 9-1-81; DOA 2-1991, f. 3-8-91, cert. ef. 7-1-91, Renumbered from 165-040-0010; AUDIT 2-2007, f. 6-7-07, cert. ef. 6-30-07; AUDIT 1-2012, f. 2-9-12, cert. ef. 4-1-12

162-040-0020

Financial Statements

(1) In 1984, the Financial Accounting Foundation created the Governmental Accounting Standards Board. The GASB is recognized as the standard-setting authority of GAAP for state and local governments. As such, fair presentation of financial position and results of operations in conformity with GAAP for Oregon municipal corporations are those financial statements consistent with GASB Statements and Interpretations and the hierarchy of GAAP applicable to state and local governments established by the AICPA and adopted in GASB Statement Number 55 — The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments.

(2) The focus of accounting in an Oregon governmental unit is the individual fund. Therefore, the financial statements to be reviewed in accordance with these administrative rules, and upon which the accountant is to express limited assurance, should include the nonmajor combining and individual fund financial statements and schedules, whether presented as basic, required supplementary information (RSI) or supplementary information (SI).

Stat. Auth.: ORS 297.465
Stats. Implemented: ORS 297.465
Hist.: SD 6-1981, f. & ef. 9-1-81; DOA 2-1991, f. 3-8-91, cert. ef. 7-1-91, Renumbered from 165-040-0020; DOA 1-1996, f. 4-10-96, cert. ef. 6-1-96; AUDIT 2-2007, f. 6-7-07, cert. ef. 6-30-07; AUDIT 2-2010, f. 3-23-10, cert. ef. 4-1-10; AUDIT 1-2012, f. 2-9-12, cert. ef. 4-1-12

162-040-0050

Notes to Financial Statements

Fair presentation of financial position and results of operations in conformity with generally accepted accounting principles requires financial statements to be accompanied by appropriate notes. Appropriate notes shall also accompany financial statements prepared in conformity with another comprehensive basis of accounting permitted by law. Notes to financial statements provide additional factual detail beyond that which may be feasibly incorporated in the statements proper; they provide interpretive comment; they provide facts which by convention are excluded from financial statements; or, they explain the degree of uncertainty attaching to items presented in the financial statements.

Stat. Auth.:
Stats. Implemented: ORS 297.465
Hist.: SD 6-1981, f. & ef. 9-1-81; DOA 2-1991, f. 3-8-91, cert. ef. 7-1-91, Renumbered from 165-040-0050; DOA 1-1996, f. 4-10-96, cert. ef. 6-1-96; AUDIT 1-2012, f. 2-9-12, cert. ef. 4-1-12

162-040-0054

Required Supplementary Financial Information (RSI)

In addition to financial statements, the independent accountant should be aware that the Governmental Accounting Standards Board may determine that certain statements, schedules, statistical data, or other information are necessary to supplement, although not required to be a part of, the basic financial statements.

Stat. Auth.: ORS 297.465
Stats. Implemented: ORS 297.465
Hist.: AUDIT 2-2007, f. 6-7-07, cert. ef. 6-30-07; AUDIT 1-2012, f. 2-9-12, cert. ef. 4-1-12

162-040-0055

Supplementary Information

In addition to the basic financial statements, notes, and required supplementary information thereto, supplementary information is considered necessary for full disclosure and compliance with various laws, rules, and regulations relating to the operations and finances of the municipal corporation. Whenever appropriate, reports should contain the supplementary information set forth in OAR 165-040-0060 through 165-040-0085 or reasonable combinations thereof. If appropriate, the municipal corporation may include these schedules in the notes to the financial statements.

Stat. Auth.: ORS 297.465
Stats. Implemented: ORS 297.465
Hist.: SD 6-1981, f. & ef. 9-1-81; DOA 2-1991, f. 3-8-91, cert. ef. 7-1-91, Renumbered from 165-040-0055; DOA 1-1996, f. 4-10-96, cert. ef. 6-1-96; AUDIT 2-2007, f. 6-7-07, cert. ef. 6-30-07; AUDIT 1-2012, f. 2-9-12, cert. ef. 4-1-12

162-040-0060

Schedule of Revenues, Expenditures, and Changes in Fund Balances/Retained Assets, Budget and Actual (Each Fund)

The municipal corporation must prepare an individual schedule of revenues, expenditures/expenses, and changes in fund balances/net assets, budget and actual, for each fund for which budgets are legally required. It must compare estimated with actual revenues or receipts, transfers in, expenditures or disbursements, transfers out and ending balances on the basis of the legally adopted budget. If the municipal corporation has made appropriations in a manner which differs materially from the presentation of estimated expenditures in the budget document, a separate schedule must be included which compares actual expenditures/expenses with the legally adopted appropriations.

Stat. Auth.: ORS 297.465
Stats. Implemented: ORS 297.465
Hist.: SD 6-1981, f. & ef. 9-1-81; DOA 2-1991, f. 3-8-91, cert. ef. 7-1-91, Renumbered from 165-040-0060; AUDIT 2-2007, f. 6-7-07, cert. ef. 6-30-07; AUDIT 2-2010, f. 3-23-10, cert. ef. 4-1-10; AUDIT 1-2012, f. 2-9-12, cert. ef. 4-1-12

162-040-0065

Schedule of Property Tax Transactions or Acreage Assessments

A schedule of property tax transactions or acreage assessments is required which presents the current year and each of the previous five years separately, and all prior years in the aggregate. The schedule should include beginning of year balances, current year levy, adjustments, and end of year balances. In addition, the schedule may include such statistical information as may be desirable in order to fully and adequately disclose the property tax or acreage assessment transactions of the municipal corporation.

Stat. Auth.: ORS 297.465
Stats. Implemented: ORS 297.465
Hist.: SD 6-1981, f. & ef. 9-1-81; DOA 2-1991, f. 3-8-91, cert. ef. 7-1-91, Renumbered from 165-040-0065; AUDIT 2-2007, f. 6-7-07, cert. ef. 6-30-07; AUDIT 2-2010, f. 3-23-10, cert. ef. 4-1-10; AUDIT 1-2012, f. 2-9-12, cert. ef. 4-1-12

162-040-0070

Schedule of Bonded or Long-Term Debt Transactions

At a minimum, supplementary information should include a schedule of total outstanding matured and unmatured principal and matured interest obligations at the beginning of the period, the maturities and redemptions during the period, and the outstanding matured and unmatured principal and matured interest at the end of the period.

Stat. Auth.: ORS 297.465
Stats. Implemented: ORS 297.465
Hist.: SD 6-1981, f. & ef. 9-1-81; DOA 2-1991, f. 3-8-91, cert. ef. 7-1-91, Renumbered from 165-040-0070; DOA 1-1996, f. 4-10-96, cert. ef. 6-1-96; AUDIT 2-2007, f. 6-7-07, cert. ef. 6-30-07; AUDIT 1-2012, f. 2-9-12, cert. ef. 4-1-12

162-040-0075

Schedule of Future Requirements for Retirement of Bonded or Long-Term Debt

At a minimum, supplementary information should include a schedule presenting, by fund and by bond or other type of issue, in the aggregate and for each of the five succeeding years, and in five-year increments thereafter, the amount required for the retirement of bonded or other long term debt, both principal and interest.

Stat. Auth.: ORS 297.465
Stats. Implemented: ORS 297.465
Hist.: SD 6-1981, f. & ef. 9-1-81; DOA 2-1991, f. 3-8-91, cert. ef. 7-1-91, Renumbered from 165-040-0075; DOA 1-1996, f. 4-10-96, cert. ef. 6-1-96; AUDIT 2-2007, f. 6-7-07, cert. ef. 6-30-07; AUDIT 1-2012, f. 2-9-12, cert. ef. 4-1-12

162-040-0085

Other Financial or Statistical Information

The report may include such other financial or statistical information as desired by the municipal corporation, including financial statements or schedules relating specifically to programs funded wholly or partially by other governmental agencies.

Stat. Auth.: ORS 297.465
Stats. Implemented: ORS 297.465
Hist.: SD 6-1981, f. & ef. 9-1-81; DOA 2-1991, f. 3-8-91, cert. ef. 7-1-91, Renumbered from 165-040-0085; AUDIT 2-2007, f. 6-7-07, cert. ef. 6-30-07

Immediately inside the front cover, each report shall contain the names and mailing addresses of officers of the municipal corporation and members of its governing body. In addition, reports of special districts, as defined by law (ORS Chapter 198), shall contain the name of the district's registered agent and its registered address. If a special district has not designated a registered agent or registered address, then the report shall so indicate.

Stat. Auth.: ORS 297.465
Stats. Implemented: ORS 297.465
Hist.: SD 6-1981, f. & ef. 9-1-81; DOA 2-1991, f. 3-8-91, cert. ef. 7-1-91, Renumbered from 165-040-0095; AUDIT 2-2007, f. 6-7-07, cert. ef. 6-30-07; AUDIT 1-2012, f. 2-9-12, cert. ef. 4-1-12

162-040-0096

Management Representation of Fiscal Affairs

Each report shall include inside the back cover a signed report of management’s representation of the municipal corporation’s compliance with its fiscal affairs. At a minimum, the report should include the representations in the following example:

Management Representation of Fiscal Affairs

Required by Oregon Regulation

The [name of entity] is subject to, and responsible for, compliance with various laws, rules, and regulations relating to its operation and finances. Among such laws, rules, and regulations are the requirements prescribed in Municipal Audit Law (ORS Chapter 297) and the Minimum Standards for Review of Oregon Municipal Corporations (OAR 162, division 40) including, but not limited to:

(a) Deposit of public funds with financial institutions (ORS Chapter 295).

(b) Indebtedness limitations, restrictions, and repayment.

(c) Budgets legally required (ORS Chapter 294).

(d) Insurance and fidelity bonds in force or required by law.

(e) Programs funded from outside sources.

(f) Highway revenues used for public highways and roads (ORS Chapters 294, 368 & 373).

(g) Authorized investment of surplus funds (ORS Chapter 294).

(h) Public contracts, purchasing, and improvements (ORS Chapters 279A, 279B, and 279C).

The management of [name of entity] is aware of the requirements of Oregon laws and administrative rules concerning each of the above requirements and has complied, in all material respects, with such requirements. Further, we are not aware of any violations or possible violations of laws, rules, or regulations, whose effects should be considered for disclosure in the financial statements or as a basis for recording a loss contingency.

________________________
Signature

_________________________ ____________________ _____________
Printed Name        Title      Date

Stat. Auth.: ORS 297
Stats. Implemented: ORS 297.465
Hist.: AUDIT 1-2012, f. 2-9-12, cert. ef. 4-1-12

162-040-0150

Other Comments and Disclosures

The accountant shall include such other comments or disclosures with respect to the review of fiscal affairs as may be appropriate in the circumstances.

Stat. Auth.: ORS 297.465
Stats. Implemented: ORS 297.465
Hist.: SD 6-1981, f. & ef. 9-1-81; DOA 2-1991, f. 3-8-91, cert. ef. 7-1-91; Renumbered from 165-040-0150

162-040-0155

Suggested Review Procedures

The AICPA Statement on Standards for Accounting and Review Services provide guidance for the accountant's inquiry and analytical procedures ordinarily performed in a review engagement. Those standards include an appendix of illustrative letters and reportsinquiries.

Stat. Auth.: ORS 297.465
Stats. Implemented: ORS 297.465
Hist.: SD 6-1981, f. & ef. 9-1-81; DOA 2-1991, f. 3-8-91, cert. ef. 7-1-91; Renumbered from 165-040-0155; DOA 1-1996, f. 4-10-96, cert. ef. 6-1-96; AUDIT 2-2007, f. 6-7-07, cert. ef. 6-30-07; AUDIT 1-2012, f. 2-9-12, cert. ef. 4-1-12

162-040-0160

Extensions of Time to Deliver Review Reports

If the required report is not filed with the Secretary of State within 180 days following the end of the fiscal year, the municipal corporation shall file a written request for extension of time. The request shall state the reasons for the delay and the expected filing date of the report. The Secretary of State, for good cause shown, may grant the request for a reasonable period of time.

(1) The municipal corporation must submit a request for extension of time to deliver a review report on forms provided by the Secretary of State. The request must contain the following information:

(a) The name and registered or mailing address of the municipal corporation;

(b) The name, address, and signature of the accountant or firm, if known, conducting the review;

(c) The accounting period under review;

(d) A statement setting forth the reasons for the delay in delivering the review report;

(e) The signed approval or disapproval of the request by the chair of the governing body, or managing or executive officer, of the municipal corporation. Reasons for disapproval must be included.

(2) Three copies of the extension request shall be submitted to the Secretary of State. After acting upon the request, one copy will be returned to the accountant and one copy will be furnished to the municipal corporation. If a request is disapproved, the Secretary of State shall communicate the reasons for disapproval in writing to the accountant and to the municipal corporation.

Stat. Auth.: ORS 297.465
Stats. Implemented: ORS 297.465
Hist.: DOA 2-1991, f. 3-8-91, cert. ef. 7-1-91; AUDIT 2-2007, f. 6-7-07, cert. ef. 6-30-07; AUDIT 2-2010, f. 3-23-10, cert. ef. 4-1-10

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