OAR Chapter 162 — Secretary of State, Audits Division

Division 1 PROCEDURAL RULES

Or. Admin. R. 162-001-0000 Notice of Proposed Rule

Prior to the adoption, amendment, or repeal of any rule, the Division of Audits shall give notice of the proposed adoption, amendment or repeal:

(1) In the Secretary of State's Bulletin referred to in ORS 183.360 at least 15 days prior to the effective date.

(2) By mailing a copy of the Notice to persons on the Division of Audits mailing list established pursuant to ORS 183.351(4).

(3) By mailing a copy of the Notice to the following persons or organizations listed according to Division programs, where Division determines that such persons or organizations would have an interest in the subject matter proposed:

(a) Oregon Society of Certified Public Accountants;

(b) League of Oregon Cities;

(c) Association of Oregon Counties;

(d) Oregon School Boards Association;

(e) Special Districts Association of Oregon;

(f) Oregon Board of Accountancy

History

• Statutory/Other Authority: ORS 183
• Statutes/Other Implemented: ORS 297.210 & 297.465
• AUDIT 1-2015, f. & cert. ef. 8-19-15
• DOA 4-1985, f. & cert. ef. 11-18-85

Or. Admin. R. 162-001-0005 Model Rules of Procedure

The Model Rules of Procedure as promulgated by the Attorney General of the State of Oregon under the Administrative Procedures Act effective January 1, 2006, are adopted as the rules of procedure for the Audits Division of the Secretary of State's Office.

[ED. NOTE: The full text of the Attorney General’s Model Rules of Procedure is available from the office of the Attorney General or Audits Division.]

History

• Statutory/Other Authority: ORS 183
• Statutes/Other Implemented: ORS 297.210, 297.465, 128.435 & 692.285
• AUDIT 1-2006, f. & cert. ef. 10-11-06
• AUDIT 1-2001, f. & cert. ef. 4-26-01
• AUDIT 1-1999, f. & cert. ef. 12-16-99
• DOA 6-1991, f. & cert. ef. 12-5-91
• DOA 4-1991, f. & cert. ef. 8-28-91
• DOA 1-1988, f. & cert. ef. 8-10-88
• DOA 1-1985, f. & cert. ef. 10-11-85

Division 10 MINIMUM STANDARDS FOR AUDITS OF OREGON MUNICIPAL CORPORATIONS

Or. Admin. R. 162-010-0000 Preface

(1) Pursuant to the provisions of ORS 297.465, there is presented herewith the Minimum Standards for Audits 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 audits of municipal corporations shall be made in accordance with these Standards, and all audit reports shall be in the form prescribed herein.

History

• Statutory/Other Authority: ORS 297
• Statutes/Other Implemented: ORS 297.465
• AUDIT 2-2015, f. & cert. ef. 8-19-15
• AUDIT 1-2014, f. & cert. ef. 2-13-14
• AUDIT 1-2010, f. 3-23-10, cert. ef. 4-1-10
• AUDIT 1-2007, f. 6-7-07, cert. ef. 6-30-07
• AUDIT 2-2001, f. 4-26-01, cert. ef. 7-1-01
• DOA 2-1995, f. 3-1-95, cert. ef. 7-1-95
• DOA 1-1991, f. 3-8-91, cert. ef. 7-1-91
• DOA 3-1986, f. & cert. ef. 5-29-86

Or. Admin. R. 162-010-0010 Definitions

The following definitions describe terms within the context of their application to Municipal Audit Law.

(1) “Independent Auditor” means the Accountants whose names are included in the roster prepared and maintained by the Oregon Board of Accountancy and defined in ORS 297.405.

(2) “Municipal Audit Law” means the laws enacted by the Oregon Legislature and prescribed in Oregon Revised Statutes (ORS) Chapter 297.405 to 297.740 and 297.990.

(3) “Municipal Corporation” means any public entity subject to audit defined in ORS 297.405.

(4) “Cash basis or modified cash basis” means a basis of accounting that the entity uses to record cash receipts and disbursements and modifications of the cash basis having substantial support, such as recording depreciation on capital assets. The cash basis of accounting is the only special purpose framework allowable under Oregon law.

(5) “Fiscal year” means for a municipal corporation with the power to impose ad valorem property taxes, the fiscal year commencing on July 1 and ending on June 30, and for all other municipal corporations, an accounting period of 12 months ending on the last day of any month.

(6) “Documentation” means the written record of procedures performed, relevant evidence obtained, and conclusions the independent auditor reached.

(7) “Governing body” means the city council, board of commissioners, board of directors, county court or other managing board of a municipal corporation including a board managing a municipality owned public utility or a dock commission.

(8) “Management” means the person(s) with executive responsibility for the conduct of the municipal corporation’s operation and may include some or all of those charged with governance; for example the elected or appointed public officials.

(9) “Legally adopted budget” means the statutory budget required by Oregon law prescribed on ORS Chapter 294.305 to 294.565 (Local Budget Law) and intergovernmental entities formed under ORS Chapter 190.

(10) “Expenditures” for the purpose of ORS 297.435 and 297.485 and throughout OAR 162-010 and 162-040 includes the amount reported as expenses on the government-wide Statement of Activities; or, in the case of a municipal corporation that reports only proprietary funds, expenditures include total operating and non-operating expenses reported on the proprietary fund operating statement.

History

• Statutory/Other Authority: ORS 297
• Statutes/Other Implemented: ORS 297.465
• AUDIT 3-2024, amend filed 06/03/2024, effective 07/01/2024
• AUDIT 1-2014, f. & cert. ef. 2-13-14
• AUDIT 1-2007, f. 6-7-07, cert. ef. 6-30-07
• AUDIT 2-2001, f. 4-26-01, cert. ef. 7-1-01
• DOA 2-1995, f. 3-1-95, cert. ef. 7-1-95
• DOA 1-1991, f. 3-8-91, cert. ef. 7-1-91
• DOA 3-1986, f. & cert. ef. 5-29-86, Renumbered from 165-030-0665
• SD 104-1976, f. 2-20-76, cert. ef. 7-1-76

Or. Admin. R. 162-010-0020 General Requirements

(1) All municipal corporations, as defined in ORS 297.405, are required to have their accounts and fiscal affairs audited annually in accordance with generally accepted auditing standards as promulgated by the American Institute of Certified Public Accountants (AICPA), unless they qualify under 297.435 for agreed-upon procedures reporting in accordance with Statements on Standards for Attestation Engagements (SSAE), or file financial reports in lieu of having an audit.

(2) The independent auditor who contracts to conduct an audit of a municipal corporation must personally conduct the audit to an extent satisfactory to the Secretary of State, prepare an Independent Auditor’s Report and express an opinion on the accounts in accordance with these rules. The expression of opinion must be signed by the independent auditor. The Independent Auditor’s Report and expression of opinion are to be issued to the municipal corporation within six months after the close of the calendar or fiscal year unless an extension of time has been granted by the Secretary of State.

(3) Management (of the municipal corporation) has the responsibility for adopting sound accounting policies, for maintaining an adequate and effective system of accounts, for the safeguarding of assets, and for devising a system of internal control that will, among other things, help assure the production of proper financial statements. The transactions which should be reflected in the accounts and in the financial statements are matters within the direct knowledge and control of management. The independent auditor's knowledge of such transactions is limited to that acquired through the audit. Accordingly, the fairness of the representations made through financial statements is an implicit and integral part of management's responsibility. The independent auditor may make suggestions as to the form or content of financial statements or he/she may draft them in whole or in part, based on management's accounts and records. However, responsibility for the statements examined is confined to the expression of opinion on them. The financial statements remain the representations of management.

(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 auditor must be familiar with legal provisions applicable to municipal corporations and the accounting principles promulgated by GASB and other accounting principles considered to be generally acceptable for governmental organizations. The independent auditor shall review the information systems of accounting and internal control, develop audit programs to adequately test those systems, and form an opinion with respect to the financial statements of the municipal corporation.

(5) Officials of the municipal corporation should make an accounting of all resources for which they are responsible. Preparation of the financial statements and notes thereto and the supplementary schedules considered necessary for full disclosure of financial position and results of operations as set forth in OAR 162-010-0050 through 162-010-0140 will be considered an appropriate accounting.

(6) The independent auditor is expected to determine if the accounts and records are maintained in a manner that will permit the preparation of financial statements that will fairly present the financial position and results of operations of the municipal corporation in accordance with legal provisions and in accordance with generally accepted accounting principles. The accounting principles contemplated are those contained in the pronouncements of authoritative bodies including, but not necessarily limited to, the Governmental Accounting Standards Board (GASB), the AICPA and the Financial Accounting Standards Board (FASB). If the municipal corporation fails to prepare and present the financial statements specified in OAR 162-010-0050 through 162-010-0140, the independent auditor may consider modifying the engagement terms and making a reasonable attempt to draft them for the municipal corporation from the accounts and records made available or, encourage the municipality to engage with another accountant to perform that work. If the financial statements cannot be drafted with reasonable effort, appropriate comments must be included in the audit report, together with recommendations for improvements necessary to permit their preparation in the future. Wherever there is a conflict between legal provisions and professional standards setting bodies, legal provisions are to take precedence. The independent auditor shall make appropriate disclosure of such conflicts and shall be aware that a qualification of the opinion may be necessary.

(7) In addition to auditing the accounts and financial statements of a municipal corporation, the independent auditor is required to review the municipal corporation’s fiscal affairs. The review shall include, but not necessarily be limited to, determining if financial 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. It is the independent auditor's responsibility to disclose in the audit report material instances of noncompliance with such legal provisions.

(8) The scope of the audit of a municipal corporation shall include programs wholly or partially funded by other federal, state, or local governmental agencies. In determining the audit procedures to be applied to such programs, the independent auditor shall consider any specific audit procedures which may have been developed for those programs by appropriate governmental agencies. The independent auditor shall also determine if financial reporting requirements applicable to such programs have been complied with.

(9) The audit report of a municipal corporation shall contain financial statements with appropriate notes, the Independent Auditor’s Report containing his or her expression of opinion on the financial statements, or an assertion that an opinion cannot be expressed, and the auditor's comments relating to the review of fiscal affairs and compliance with legal requirements.

(a) The independent auditor must prepare the independent auditor’s opinion in accordance with the Statements on Auditing Standards issued by the AICPA.

(b) The independent auditor’s report should include either an opinion on whether the accompanying financial information is fairly presented in all material respects in relation to the basic financial statements taken as a whole or a disclaimer of opinion depending on whether the information has been subjected to the auditing procedures applied in the audit of the basic financial statements.

(c) In a GAAP presentation the independent auditor shall express an “in relation to” opinion on budgetary comparison schedules presented as required supplementary information.

(d) The independent auditor shall express an “in relation to” opinion” on the combining and individual fund statements and schedules presented as supplementary information required by OAR 162-010-0050 through 162-010-140.

(e) The auditor's comments relating to the review of fiscal affairs, including compliance with legal requirements shall be in accordance with the provisions of OAR 162-010-200 through 162-010-0320.

(10) Audit reports are required to contain, immediately inside the front cover, the names and addresses of officers of the municipal corporation and members of its governing body. In addition, audit reports of special districts, as defined by law, 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 audit report shall so indicate.

(11) It is the responsibility of the municipal corporation to file a copy of its audit report with the Secretary of State. The reports are subject to review for compliance with these rules, and the Secretary of State may call for submission by the independent auditor of the work papers and audit programs covering an engagement. The work papers and audit programs must contain satisfactory documented evidence of compliance with these rules.

(12) The municipal corporation or its designee shall submit a summary of the revenues, expenditures of the municipal corporation, for the period covered by the audit, or other information as requested. The summary shall be made in the manner as prescribed by the Secretary of State, and within 30 days after delivering the audit report, as required by law.

History

• Statutory/Other Authority: ORS 297
• Statutes/Other Implemented: ORS 297.465
• AUDIT 3-2024, amend filed 06/03/2024, effective 07/01/2024
• AUDIT 2-2015, f. & cert. ef. 8-19-15
• AUDIT 1-2014, f. & cert. ef. 2-13-14
• AUDIT 1-2010, f. 3-23-10, cert. ef. 4-1-10
• AUDIT 1-2007, f. 6-7-07, cert. ef. 6-30-07
• AUDIT 2-2001, f. 4-26-01, cert. ef. 7-1-01
• DOA 2-1995, f. 3-1-95, cert. ef. 7-1-95
• DOA 1-1991, f. 3-8-91, cert. ef. 7-1-91
• DOA 3-1986, f. & cert. ef. 5-29-86, Renumbered from 165-030-0015
• SD 104-1976, f. 2-20-76, cert. ef. 7-1-76

Or. Admin. R. 162-010-0030 Contracts

Municipal Audit Law requires audits be performed pursuant to a contract between the independent accountant and the governing body, or managing or executive officer, of the municipal corporation. Laws governing contracts are prescribed in the Oregon Public Contracting Code, ORS Chapters 279A, 279B, and 279C.

History

• Statutory/Other Authority: ORS 297.465
• Statutes/Other Implemented: ORS 297.465
• AUDIT 3-2024, amend filed 06/03/2024, effective 07/01/2024
• AUDIT 2-2015, f. & cert. ef. 8-19-15
• AUDIT 1-2014, f. & cert. ef. 2-13-14
• AUDIT 1-2011, f. & cert. ef. 1-27-11
• AUDIT 1-2010, f. 3-23-10, cert. ef. 4-1-10
• AUDIT 1-2007, f. 6-7-07, cert. ef. 6-30-07
• AUDIT 2-2001, f. 4-26-01, cert. ef. 7-1-01
• DOA 1-1991, f. 3-8-91, cert. ef. 7-1-91
• DOA 3-1986, f. & cert. ef. 5-29-86, Renumbered from 165-030-0020
• SD 104-1976, f. 2-20-76, cert. ef. 7-1-76

Or. Admin. R. 162-010-0050 Financial Statements

(1) 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, notes thereto, and supporting information consistent with GASB Statements and Interpretations and the hierarchy of GAAP applicable to state and local governments established by the AICPA and adopted by GASB.

(2) Since the focus of accounting in a governmental unit is the individual fund, the financial statements to be presented in the municipal corporation's annual report must also include nonmajor fund combining statements and individual fund statements/schedules.

(3) Compliance with municipal audit law includes financial statements prepared on the cash basis or modified cash basis of accounting.

(4) If information necessary to prepare the financial statements, or any of them individually, is not readily available or is not maintained by the municipal corporation appropriate disclosure must be made in the auditor's report.

History

• Statutory/Other Authority: ORS 297
• Statutes/Other Implemented: ORS 297.465
• AUDIT 3-2024, amend filed 06/03/2024, effective 07/01/2024
• AUDIT 2-2015, f. & cert. ef. 8-19-15
• AUDIT 1-2014, f. & cert. ef. 2-13-14
• AUDIT 1-2010, f. 3-23-10, cert. ef. 4-1-10
• AUDIT 1-2007, f. 6-7-07, cert. ef. 6-30-07
• AUDIT 2-2001, f. 4-26-01, cert. ef. 7-1-01
• DOA 2-1995, f. 3-1-95, cert. ef. 7-1-95
• DOA 1-1991, f. 3-8-91, cert. ef. 7-1-91
• DOA 3-1986, f. & cert. ef. 5-29-86, Renumbered from 165-030-0100
• SD 104-1976, f. 2-20-76, cert. ef. 7-1-76

Or. Admin. R. 162-010-0115 Required Supplementary Financial Information (RSI)

For financial statements presented in accordance with GAAP, the Governmental Accounting Standards Board has determined 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. These standards do not place any additional responsibilities upon the independent auditor beyond those required by generally accepted auditing standards and OAR 162-10-0020(9)(c).

History

• Statutory/Other Authority: ORS 297
• Statutes/Other Implemented: ORS 297.465
• AUDIT 1-2014, f. & cert. ef. 2-13-14
• AUDIT 1-2007, f. 6-7-07, cert. ef. 6-30-07

Or. Admin. R. 162-010-0120 Supplementary Financial Information (SI)

In addition to financial statements, notes and required supplementary information thereto, certain other financial information is considered necessary for full disclosure of the fiscal affairs of Oregon municipal corporations. Whenever appropriate, audit reports must contain the other financial information set forth in OAR 162-010-0130 through 162-010-0140 or reasonable combinations thereof. If information necessary to prepare these schedules, or any of them individually, is not readily available or is not maintained by the municipal corporation appropriate comments to that effect shall be included in the audit report. If appropriate, these schedules may be included in the notes to the financial statements.

History

• Statutory/Other Authority: ORS 297
• Statutes/Other Implemented: ORS 297.465
• AUDIT 2-2024, minor correction filed 04/04/2024, effective 04/04/2024
• AUDIT 2-2015, f. & cert. ef. 8-19-15
• AUDIT 1-2014, f. & cert. ef. 2-13-14
• AUDIT 2-2001, f. 4-26-01, cert. ef. 7-1-01
• DOA 2-1995, f. 3-1-95, cert. ef. 7-1-95
• DOA 3-1986, f. & cert. ef. 5-29-86, Renumbered from 165-030-0135
• SD 104-1976, f. 2-20-76, cert. ef. 7-1-76

Or. Admin. R. 162-010-0130 Schedule of Revenues, Expenditures/Expenses, and Changes in Fund Balances/Net Assets/Net Position, Budget and Actual (Each Fund)

An individual schedule of receipts/revenues, expenditures/expenses, and changes in fund balances/net position, budget and actual, must be prepared for each fund of any municipal corporation for which budgets are legally required. They 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.

History

• Statutory/Other Authority: ORS 297
• Statutes/Other Implemented: ORS 297.465
• AUDIT 2-2015, f. & cert. ef. 8-19-15
• AUDIT 1-2014, f. & cert. ef. 2-13-14
• AUDIT 1-2010, f. 3-23-10, cert. ef. 4-1-10
• AUDIT 2-2001, f. 4-26-01, cert. ef. 7-1-01
• DOA 3-1986, f. & ef. 5-29-86, Renumbered from 165-030-0125
• SD 104-1976, f. 2-20-76, cert. ef. 7-1-76

Or. Admin. R. 162-010-0140 Schedule of Accountability for Independently Elected Officials

A schedule of accountability must be prepared for each independently elected official collecting or receiving money on behalf of the municipal corporation. This schedule is to present, at a minimum, beginning balances, receipts, disbursements, refunds, and turnovers to the appropriate governmental official, reconciled to cash on hand at the beginning and end of the audit period.

History

• Statutory/Other Authority: ORS 297
• Statutes/Other Implemented: ORS 297.465
• AUDIT 1-2014, f. & cert. ef. 2-13-14
• AUDIT 1-2007, f. 6-7-07, cert. ef. 6-30-07
• AUDIT 2-2001, f. 4-26-01, cert. ef. 7-1-01
• DOA 2-1995, f. 3-1-95, cert. ef. 7-1-95
• DOA 1-1991, f. 3-8-91, cert. ef. 7-1-91
• DOA 3-1986, f. & cert. ef. 5-29-86, Renumbered from 165-030-0140
• SD 104-1976, f. 2-20-76, cert. ef. 7-1-76

Or. Admin. R. 162-010-0190 Other Financial or Statistical Information (OI)

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

History

• Statutory/Other Authority: ORS 297
• Statutes/Other Implemented: ORS 297.465
• AUDIT 1-2014, f. & cert. ef. 2-13-14
• AUDIT 1-2007, f. 6-7-07, cert. ef. 6-30-07
• DOA 3-1986, f. & ef. 5-29-86, Renumbered from 165-030-0195
• SD 104-1976, f. 2-20-76, cert. ef. 7-1-76

Or. Admin. R. 162-010-0200 Independent Auditor’s Review of Fiscal Affairs

Each audit report shall contain appropriate comments and disclosures relating to the independent auditor’s review of fiscal affairs and compliance with legal requirements. These comments and disclosures shall, at a minimum, reference the subjects set forth in OAR 162-010-0230 through 162-010-0320. The independent auditor is required to prepare working papers that show a clear understanding of the procedures performed, the evidence obtained and its source, and the conclusions reached to support each disclosure.

History

• Statutory/Other Authority: ORS 297
• Statutes/Other Implemented: ORS 328.465
• AUDIT 1-2014, f. & cert. ef. 2-13-14
• AUDIT 1-2010, f. 3-23-10, cert. ef. 4-1-10
• AUDIT 1-1998, f. 2-2-98, cert. ef. 2-15-98
• DOA 3-1986, f. & ef. 5-29-86, Renumbered from 165-030-0200
• SD 104-1975, f. 2-20-76, ef. 7-1-76

Or. Admin. R. 162-010-0230 Accounting Records and Internal Control

The independent auditor shall state in a separately issued by-product report, that in planning the audit, he or she followed generally accepted auditing standards in obtaining an understanding of the entity and its internal control over financial reporting. If significant deficiencies, material weaknesses or other recommendations for improvements have been communicated in a separate letter to management or in a report issued in accordance with Government Auditing Standards, the independent auditor shall file a copy of the letter with the Secretary of State within 30 days of delivering the report to the municipal corporation.

History

• Statutory/Other Authority: ORS 297.465
• Statutes/Other Implemented: ORS 297.465
• AUDIT 2-2015, f. & cert. ef. 8-19-15
• AUDIT 1-2014, f. & cert. ef. 2-13-14
• AUDIT 1-2010, f. 3-23-10, cert. ef. 4-1-10
• AUDIT 1-2007, f. 6-7-07, cert. ef. 6-30-07
• AUDIT 2-2001, f. 4-26-01, cert. ef. 7-1-01
• DOA 1-1991, f. 3-8-91, cert. ef. 7-1-91
• DOA 3-1986, f. & ef. 5-29-86, Renumbered from 165-030-0215
• SD 104-1975, f. 2-20-76, ef. 7-1-76

Or. Admin. R. 162-010-0240 Public Fund Deposits

There shall be comments regarding the municipal corporation's compliance with ORS Chapter 295 — Depositories of Public Funds and Securities.

History

• Statutory/Other Authority: ORS 297
• Statutes/Other Implemented: ORS 297.465
• AUDIT 1-2010, f. 3-23-10, cert. ef. 4-1-10
• AUDIT 1-2007, f. 6-7-07, cert. ef. 6-30-07
• AUDIT 2-2001, f. 4-26-01, cert. ef. 7-1-01
• DOA 3-1986, f. & cert. ef. 5-29-86, Renumbered from 165-030-0220
• SD 104-1975, f. 2-20-76, cert. ef. 7-1-76

Or. Admin. R. 162-010-0250 Indebtedness

There shall be comments regarding the municipal corporation’s compliance relating to short-term and long-term debt. These comments shall include limitations on the amount of debt which may be incurred, liquidation of debt within the prescribed period of time, and compliance with provisions of bond indentures or other agreements, including any restrictions on the use of moneys available to retire indebtedness.

History

• Statutory/Other Authority: ORS 297
• Statutes/Other Implemented: ORS 297.465
• DOA 3-1986, f. & cert. ef. 5-29-86, Renumbered from 165-030-0225
• SD 104-1975, f. 2-20-76, cert. ef. 7-1-76

Or. Admin. R. 162-010-0260 Budget

Compliance with legal requirements relating to the preparation, adoption, and execution of the annual or biennial budget for the year being audited, and the preparation and adoption of the budget for the next succeeding year shall be disclosed. The auditor shall also disclose the financial or organizational level at which the governing body makes the annual appropriations. The minimum levels of legal appropriation are established in ORS 294.

History

• Statutory/Other Authority: ORS 297
• Statutes/Other Implemented: ORS 297.465
• AUDIT 2-2015, f. & cert. ef. 8-19-15
• AUDIT 1-2014, f. & cert. ef. 2-13-14
• AUDIT 1-2007, f. 6-7-07, cert. ef. 6-30-07
• DOA 2-1995, f. 3-1-95, cert. ef. 7-1-95
• DOA 3-1986, f. & cert. ef. 5-29-86, Renumbered from 165-030-0230
• SD 104-1975, f. 2-20-76, cert. ef. 7-1-76

Or. Admin. R. 162-010-0270 Insurance and Fidelity Bonds

Compliance with legal requirements and the government’s policies relating to insurance and fidelity bond coverage shall be disclosed. Recommendations for further review of coverage by qualified individuals may be included, if appropriate.

History

• Statutory/Other Authority: ORS 297
• Statutes/Other Implemented: ORS 297.465
• AUDIT 1-2010, f. 3-23-10, cert. ef. 4-1-10
• DOA 3-1986, f. & ef. 5-29-86, Renumbered from 165-030-0235
• SD 104-1975, f. 2-20-76, ef. 7-1-76

Or. Admin. R. 162-010-0280 Programs Funded from Outside Sources

(1) Compliance with appropriate laws, rules, and regulations pertaining to programs funded wholly or partially by other governmental agencies shall be disclosed. This would include, but not necessarily be limited to, state and federal governmental agencies. Material instances of noncompliance must be sufficiently disclosed to enable the municipal corporation and the appropriate governmental agencies to initiate corrective action.

(2) If separate reports have been issued to disclose compliance with federal financial assistance programs under the Single Audit Act Amendments of 1996 (the Single Audit Act), then reference to those reports is required in this disclosure.

History

• Statutory/Other Authority: ORS 297.465
• Statutes/Other Implemented: ORS 297.465
• AUDIT 1-2007, f. 6-7-07, cert. ef. 6-30-07
• DOA 1-1991, f. 3-8-91, cert. ef. 7-1-91
• DOA 3-1986, f. & ef. 5-29-86, Renumbered from 165-030-0240
• SD 104-1975, f. 2-20-76, ef. 7-1-76

Or. Admin. R. 162-010-0295 Highway Funds

Compliance with legal requirements, (as contained in Article IX, section 3a of the Oregon Constitution), pertaining to the use of revenue from taxes on motor vehicle use and fuel shall be disclosed. The auditor shall also disclose compliance with statutory requirements pertaining to the use of road funds (as contained in ORS 294, 368, and 373).

History

• Statutory/Other Authority: ORS 297
• Statutes/Other Implemented: ORS 297.465
• AUDIT 2-2015, f. & cert. ef. 8-19-15
• AUDIT 1-2007, f. 6-7-07, cert. ef. 6-30-07
• DOA 2-1995, f. 3-1-95, cert. ef. 7-1-95

Or. Admin. R. 162-010-0300 Investments

Compliance with legal requirements, (as contained in ORS Chapter 294), pertaining to the investment of public funds shall be disclosed.

History

• Statutory/Other Authority: ORS 297.465
• Statutes/Other Implemented: ORS 297.465
• DOA 1-1991, f. 3-8-91, cert. ef. 7-1-91
• DOA 3-1986, f. & ef. 5-29-86

Or. Admin. R. 162-010-0310 Public Contracts and Purchasing

Compliance with Public Contracting Code, ORS Chapters 279A, 279B and 279C pertaining to: The awarding of public contracts; and the construction of public improvements shall be disclosed.

History

• Statutory/Other Authority: ORS 297
• Statutes/Other Implemented: ORS 297.465
• AUDIT 1-2010, f. 3-23-10, cert. ef. 4-1-10
• DOA 3-1986, f. & ef. 5-29-86

Or. Admin. R. 162-010-0315 State School Fund

There shall be comments regarding the school district’s compliance with legal requirements as stated in ORS 327.013 and as further defined by the Oregon State Department of Education pertaining to the district’s calculation and reporting of the factors used to compute the State School Fund distribution.

History

• Statutory/Other Authority: ORS 297
• Statutes/Other Implemented: ORS 328.465
• AUDIT 1-1998, f. 2-2-98, cert. ef. 2-15-98

Or. Admin. R. 162-010-0316 Public Charter Schools

Public charter schools created under ORS Chapter 338 are subject to review and compliance with the following:

(1) Insurance and Fidelity Bonds — OAR 162-010-0270;

(2) Programs Funded from Outside Sources — OAR 162-010-0280; and

(3) Public Contracts and Purchasing — OAR 162-010-0310.

History

• Statutory/Other Authority: ORS 297
• Statutes/Other Implemented: ORS 328.465
• AUDIT 1-2010, f. 3-23-10, cert. ef. 4-1-10

Or. Admin. R. 162-010-0320 Other Comments and Disclosures

(1) The independent auditor shall include such other comments or disclosures with respect to the review of fiscal affairs and compliance with legal requirements as may be appropriate in the circumstances.

(2) Other comments and disclosures may include those related to any county cost audit performed in accordance with ORS 297.525. A cost audit may be performed at a county, specific to any road fund, if (1) the county performs their own road work, (2) the road fund is reported as a major fund, and (3) the county and accountant engagement terms include a cost audit in the scope of work. The cost audit does not consist of specific procedures required by these Minimum Standards; the objectives are to verify the cost of performance and administration of county road work performed by the county, establish the accuracy of costing data and expense records, and determine whether the county adhered to approved budgets and planning. Contracted road work is not subject to cost auditing. The auditor should perform cost audit procedures in accordance with professional standards, be responsive to the auditor’s risk assessment procedures, and consider the intent of material compliance as imbedded within these Minimum Standards for audits.

History

• Statutory/Other Authority: ORS 297
• Statutes/Other Implemented: ORS 297.465
• AUDIT 3-2024, amend filed 06/03/2024, effective 07/01/2024
• AUDIT 2-2015, f. & cert. ef. 8-19-15
• DOA 3-1986, f. & ef. 5-29-86, Renumbered from 165-030-0295

Or. Admin. R. 162-010-0330 Extensions of Time to Deliver Audit Reports

If the required report is not filed with the Secretary of State within six months 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) Requests for extensions of time to deliver audit reports must be submitted in a manner as prescribed 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 audit;

(c) The accounting period under audit;

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

(f) Requests applicable to school districts and community colleges must also contain the signed approval or disapproval of the local district superintendent or the superintendent's designee.

(2) A request for extension of time shall be submitted to the Secretary of State. The Secretary of State shall notify the independent auditor and the municipal corporation of its approval to grant an extension of time or reasons for its disapproval.

History

• Statutory/Other Authority: ORS 297
• Statutes/Other Implemented: ORS 297.465
• AUDIT 3-2024, amend filed 06/03/2024, effective 07/01/2024
• AUDIT 2-2015, f. & cert. ef. 8-19-15
• AUDIT 1-2010, f. 3-23-10, cert. ef. 4-1-10
• AUDIT 1-2007, f. 6-7-07, cert. ef. 6-30-07
• AUDIT 2-2001, f. 4-26-01, cert. ef. 7-1-01
• DOA 3-1986, f. & ef. 5-29-86, Renumbered from 165-030-0670
• SD 115-1977, f. & ef. 10-1-77

Division 40 MINIMUM STANDARDS FOR AGREED-UPON PROCEDURES OF OREGON MUNICIPAL CORPORATIONS

Or. Admin. R. 162-040-0001 Preface

(1) Pursuant to the provisions of ORS 297.465, there is presented herewith the Minimum Standards for Agreed-Upon Procedures (AUP) 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 AUP reports and financial statements of municipal corporations shall be made in accordance with these Standards, and shall be in the form prescribed herein.

History

• Statutory/Other Authority: ORS 297
• Statutes/Other Implemented: ORS 297.465
• AUDIT 1-2023, amend filed 10/31/2023, effective 01/01/2024
• AUDIT 3-2015, f. & cert. ef. 8-19-15
• AUDIT 1-2012, f. 2-9-12, cert. ef. 4-1-12
• AUDIT 2-2010, f. 3-23-10, cert. ef. 4-1-10

Or. Admin. R. 162-040-0002 Definitions

The following definitions describe terms within the context of their application to Municipal Audit Law.

(1) Agreed-Upon Procedures (AUP): Agreed-upon procedures are a service, an attestation engagement, the objectives of which are to perform specific procedures over a municipality’s operations and compliance, and certain financial statement assertions, and issue a report that describes the procedures applied and the accountant’s findings, without providing an opinion or conclusion. AUP engagements may be performed in conjunction with a compilation of financial statements.

(2) Financial statements prepared on the cash or modified cash basis of accounting are financial reporting frameworks (special purpose frameworks) other than GAAP and are permitted under municipal audit law.

History

• Statutory/Other Authority: ORS 297.465
• Statutes/Other Implemented: ORS 297.465
• AUDIT 1-2023, amend filed 10/31/2023, effective 01/01/2024
• AUDIT 3-2015, f. & cert. ef. 8-19-15
• AUDIT 1-2012, f. 2-9-12, cert. ef. 4-1-12
• Renumbered from 162-040-0000 by AUDIT 2-2010, f. 3-23-10, cert. ef. 4-1-10
• AUDIT 2-2007, f. 6-7-07, cert. ef. 6-30-07
• DOA 1-1996, f. 4-10-96, cert. ef. 6-1-96
• DOA 2-1991, f. 3-8-91, cert. ef. 7-1-91, Renumbered from 165-040-0000
• SD 6-1981, f. & ef. 9-1-81

Or. Admin. R. 162-040-0005 General Requirements

(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. The following administrative rules apply to agreed-upon procedures (AUP) engagements and reports prepared under 297.435(3). AUP reports must be prepared in accordance with Statements on Standards for Attestation Engagements (SSAE), which contain professional requirements, together with related guidance, in the form of explanatory material. Accountants performing AUP engagements have a responsibility to consider the entire text of SSAE in carrying out their work on an engagement and in understanding and applying the professional requirements of the relevant Standards. If applicable, accountants performing compilation engagements have a responsibility to consider the entire text of Statements on Standards for Accounting and Review Services (SSARS) in carrying out their work.

(2) The objective of an AUP differs significantly from the objective of an audit of financial statements in accordance with generally accepted auditing standards. An AUP does not contemplate obtaining an understanding of the municipal corporation’s internal control; assessing fraud risk; testing and examining accounting records to obtain sufficient appropriate evidence to form an opinion or conclusions through inspection, observation, confirmation, or the examination of source documents; or other procedures ordinarily performed during an audit. The procedures determined to be minimum standards for AUP engagements are designed to report on a municipal corporation’s financial information and presentation, operations and controls, and compliance with certain requirements. The report is limited to the results of specific procedures performed and does not provide an opinion or conclusions.

(3) The accountant who performs an AUP for a municipal corporation in compliance with these rules must:

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

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

(c) Prepare a report of procedures and results in accordance with these rules. The report must be signed by the accountant. The report is to be issued to the municipal corporation within six months after the close of the fiscal year.

(d) Make AUP engagement documentation available for review upon request by the Secretary of State.

(4) 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.

(5) Officials of the municipal corporation are responsible for the financial information and the existence of appropriate internal controls over financial information and compliance.

(6) The municipal corporation must ensure financial statements are prepared that fairly present its financial position and results of operations in accordance with legal provisions, and in accordance with generally accepted accounting principles or other financial reporting framework 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. The cash basis and modified cash basis of accounting are special purpose frameworks permitted under Municipal Audit Law.

(7) The complete annual filing of the municipal corporation shall include financial statements with appropriate notes and management's representations of compliance, filing fee, summary information, and the accountant's AUP report containing the procedures performed, results thereof, and the elements prescribed by the Statements on Standards for Attestation Engagements issued by the American Institute of Certified Public Accountants.

(8) The municipal corporation must file its financial report with the Secretary of State. The financial report must include the financial statements and management’s representations of compliance. The report and supporting documentation are subject to review by the Secretary of State for compliance with these rules.

(9) The accountant shall submit summary information including total revenues/receipts and expenditures/disbursements of the municipal corporation within 30 days after delivering the AUP report to the municipality. The summary information shall encompass the period covered by the financial and AUP report and shall be prepared and submitted in a manner and on forms prescribed by the Secretary of State.

History

• Statutory/Other Authority: ORS 297.465
• Statutes/Other Implemented: ORS 297.465
• AUDIT 1-2023, amend filed 10/31/2023, effective 01/01/2024
• AUDIT 3-2015, f. & cert. ef. 8-19-15
• AUDIT 1-2012, f. 2-9-12, cert. ef. 4-1-12
• AUDIT 2-2007, f. 6-7-07, cert. ef. 6-30-07
• DOA 1-1996, f. 4-10-96, cert. ef. 6-1-96
• DOA 2-1991, f. 3-8-91, cert. ef. 7-1-91, Renumbered from 165-040-0005
• SD 6-1981, f. & ef. 9-1-81

Or. Admin. R. 162-040-0010 Contracts

Laws governing contracts are prescribed in the Oregon Public Contracting Code, ORS Chapters 279A, 279B, and 279C. AUP engagements shall be performed in accordance with a contract executed by the municipal corporation. The contract 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 contract should include a provision for the reporting of agreed-upon procedures performed and results obtained. The municipality may ask the accountant to perform procedures outside the scope of those required by the Minimum Standards. Additional procedures should be established in the contract. The additional procedures and results may be included in the AUP report submitted for compliance with these Minimum Standards and should be clearly noted in a separate report section titled “Other Procedures Performed.”

History

• Statutory/Other Authority: ORS 297.465
• Statutes/Other Implemented: ORS 297.465
• AUDIT 1-2023, amend filed 10/31/2023, effective 01/01/2024
• AUDIT 3-2015, f. & cert. ef. 8-19-15
• AUDIT 1-2012, f. 2-9-12, cert. ef. 4-1-12
• AUDIT 2-2007, f. 6-7-07, cert. ef. 6-30-07
• DOA 2-1991, f. 3-8-91, cert. ef. 7-1-91, Renumbered from 165-040-0010
• SD 6-1981, f. & ef. 9-1-81

Or. Admin. R. 162-040-0020 Financial Statements

(1) The Governmental Accounting Standards Board (GASB) is recognized as the standard-setting body of GAAP for state and local governments. As such, Oregon municipal corporation financial statements and related notes presented in conformity with GAAP are those consistent with GASB Statements and Interpretations and the hierarchy of GAAP applicable to state and local governments.

(2) The focus of accounting in an Oregon governmental unit is the individual fund. Therefore, the financial statements prepared in accordance with these administrative rules, and subject to the accountant’s procedures, should include the nonmajor combining and individual fund financial statements and schedules, whether presented as basic, required supplementary information (RSI) or supplementary information (SI).

(3) Financial statements presented in accordance with these minimum standards should be clearly identified as unaudited.

History

• Statutory/Other Authority: ORS 297.465
• Statutes/Other Implemented: ORS 297.465
• AUDIT 1-2023, amend filed 10/31/2023, effective 01/01/2024
• AUDIT 3-2015, f. & cert. ef. 8-19-15
• AUDIT 1-2012, f. 2-9-12, cert. ef. 4-1-12
• AUDIT 2-2010, f. 3-23-10, cert. ef. 4-1-10
• AUDIT 2-2007, f. 6-7-07, cert. ef. 6-30-07
• DOA 1-1996, f. 4-10-96, cert. ef. 6-1-96
• DOA 2-1991, f. 3-8-91, cert. ef. 7-1-91, Renumbered from 165-040-0020
• SD 6-1981, f. & ef. 9-1-81

Or. Admin. R. 162-040-0054 Required Supplementary Financial Information (RSI)

In addition to financial statements, the 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.

History

• Statutory/Other Authority: ORS 297.465
• Statutes/Other Implemented: ORS 297.465
• AUDIT 3-2015, f. & cert. ef. 8-19-15
• AUDIT 1-2012, f. 2-9-12, cert. ef. 4-1-12
• AUDIT 2-2007, f. 6-7-07, cert. ef. 6-30-07

Or. Admin. R. 162-040-0055 Supplementary Information (SI)

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.

History

• Statutory/Other Authority: ORS 297.465
• Statutes/Other Implemented: ORS 297.465
• AUDIT 3-2015, f. & cert. ef. 8-19-15
• AUDIT 1-2012, f. 2-9-12, cert. ef. 4-1-12
• AUDIT 2-2007, f. 6-7-07, cert. ef. 6-30-07
• DOA 1-1996, f. 4-10-96, cert. ef. 6-1-96
• DOA 2-1991, f. 3-8-91, cert. ef. 7-1-91, Renumbered from 165-040-0055
• SD 6-1981, f. & ef. 9-1-81

Or. Admin. R. 162-040-0060 Statement/Schedule of Revenues/Receipts, Expenditures/Expenses, and Changes in Fund Balances/Net Position, Budget and Actual (Each Fund)

The municipal corporation must prepare an individual statement or schedule of revenues/receipts, expenditures/expenses, and changes in fund balances/net position, budget and actual, for each fund for which budgets are legally required. It must compare estimated with actual revenues or receipts, transfers in, expenditures/expenses 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 that differ materially from the presentation of estimated expenditures/expenses in the budget document, a separate schedule must be included that compares actual expenditures/expenses with the legally adopted appropriations.

History

• Statutory/Other Authority: ORS 297.465
• Statutes/Other Implemented: ORS 297.465
• AUDIT 1-2023, amend filed 10/31/2023, effective 01/01/2024
• AUDIT 3-2015, f. & cert. ef. 8-19-15
• AUDIT 1-2012, f. 2-9-12, cert. ef. 4-1-12
• AUDIT 2-2010, f. 3-23-10, cert. ef. 4-1-10
• AUDIT 2-2007, f. 6-7-07, cert. ef. 6-30-07
• DOA 2-1991, f. 3-8-91, cert. ef. 7-1-91, Renumbered from 165-040-0060
• SD 6-1981, f. & ef. 9-1-81

Or. Admin. R. 162-040-0085 Other Financial or Statistical Information (OI)

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.

History

• Statutory/Other Authority: ORS 297.465
• Statutes/Other Implemented: ORS 297.465
• AUDIT 3-2015, f. & cert. ef. 8-19-15
• AUDIT 2-2007, f. 6-7-07, cert. ef. 6-30-07
• DOA 2-1991, f. 3-8-91, cert. ef. 7-1-91, Renumbered from 165-040-0085
• SD 6-1981, f. & ef. 9-1-81

Or. Admin. R. 162-040-0095 Officers and Registered Agent of the Municipal Corporation

Immediately inside the front cover, each financial report shall contain the names and addresses of officers of the municipal corporation and members of its governing body. In addition, financial 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, the report shall so indicate.

History

• Statutory/Other Authority: ORS 297.465
• Statutes/Other Implemented: ORS 297.465
• AUDIT 1-2023, amend filed 10/31/2023, effective 01/01/2024
• AUDIT 3-2015, f. & cert. ef. 8-19-15
• AUDIT 1-2012, f. 2-9-12, cert. ef. 4-1-12
• AUDIT 2-2007, f. 6-7-07, cert. ef. 6-30-07
• DOA 2-1991, f. 3-8-91, cert. ef. 7-1-91, Renumbered from 165-040-0095
• SD 6-1981, f. & ef. 9-1-81

Or. Admin. R. 162-040-0096 Management Representation of Fiscal Affairs

(1) 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:

(2) Management Representation of Fiscal Affairs: 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 Agreed-Upon Procedures 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

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Printed Name Title Date

History

• Statutory/Other Authority: ORS 297
• Statutes/Other Implemented: ORS 297.465
• AUDIT 1-2023, amend filed 10/31/2023, effective 01/01/2024
• AUDIT 3-2015, f. & cert. ef. 8-19-15
• AUDIT 1-2012, f. 2-9-12, cert. ef. 4-1-12

Or. Admin. R. 162-040-0165 Agreed-Upon Procedures

The following procedures are required for agreed-upon procedures engagements performed in accordance with ORS 297.435. In performing procedures and reporting the results:

(1) Total amounts must include all funds and activities of the municipal corporation.

(a) The accountant should not report personally identifiable or confidential information. The accountant may consider including position titles rather than individual names, where appropriate, and refrain from referencing payment card numbers or other potentially sensitive information when reporting results of procedures performed. The accountant should retain information and support as necessary for their records only.

(b) The type of procedure is noted in parenthesis after each procedure or procedure category and includes the following:

(A) I – Informational/Procedural

(B) A - Accounting/financial reporting

(C) IC - Internal Control over either accounting/financial reporting or compliance

(D) C – Compliance

(2) OBTAIN AND REPORT GENERAL INFORMATION (I)

(a) Municipal Corporation Name

(b) Fiscal Year-End date (Month XX, 20XX)

(c) Municipal corporation type and Oregon Statute of formation (for example: Water District, ORS 264)

(3) FINANCIAL REPORT

(a) Obtain a copy of the municipal corporation’s financial report.

(b) Threshold Calculation (I): For the purposes of performing these procedures calculate a threshold where the threshold equals total expenses multiplied by five percent. Total expenses are the total primary government expenses reported on the government-wide statement of activities, including depreciation if applicable to the basis of accounting used. If the municipal corporation reports only Proprietary funds, expenses for the purposes of calculating the threshold include operating and non-operating expenses.

(c) Compare amounts reported on the financial report to the municipal corporation’s general ledger/trial balance used to prepare the financial report plus all the adjustments to the financial report basis. Inspect any differences greater than the calculated threshold and inquire of management about the reason for difference(s). The accountants’ report should include a list of the reporting categories (for example: Materials and Services, or Accounts Payable) and managements’ description justifying the differences noted. (A)

(d) Does the financial report include the names and addresses of officers of the municipal corporation and members of its governing body? (A)

(e) If a special district, does the financial report include the name and address of the registered agent or the fact that one has not been designated? (OAR 162-040-0095)

(f) Does the financial report include the statements and schedules required by GAAP as dictated by GASB and considering the basis of accounting used? (A)

(g) Does the financial report include a budget to actual schedule for each fund for which budgets are legally required? (OAR 162-040-0060) (A/C)

(h) Does the financial report include management’s representations regarding compliance required by rule? (OAR 162-040-0096) (C)

(4) OPERATIONS, POLICIES + PROCEDURES

(a) Obtain and inspect the municipal corporation’s written policies and procedures and determine whether they address each of the categories listed in subsection (b): (IC)

(b) A municipal corporation’s written policies and procedures should address each of the following topics:

(A) Budgeting

(B) Purchasing

(C) Disbursements

(D) Receipts/collections

(E) Payroll/personnel

(F) Contracting + procurement

(G) Travel and expense reimbursement

(H) Credit cards (debit, fuel cards, P-cards)

(I) Ethics

(J) Debt service

(c) Report Y or N next to each category, or report N/A if the category does not apply to the municipal corporation.

(5) PUBLIC MEETINGS (C)

(a) Public meetings are generally governed by ORS 192.610 to 192.695.

(b) Obtain access to (or copies of) meeting minutes of the governing body.

(c) Haphazardly select two meetings held during the reporting period and perform the following:

(A) Was required notice given?

(B) Did the notice include an agenda?

(C) Was there a process for public comment?

(D) If a portion of the meeting was closed to the public, determine that:

(i) before the meeting was closed, the reason for holding the closed meeting was documented in the meeting minutes and a roll call vote was taken,

(ii) the reason for closing the meeting was permitted under statute.

(6) ACCOUNTING RECORDS

(a) Inquire of management regarding whether policies and procedures are current and reflect the operations in place during the reporting period. Report management’s response. (I)

(b) Inquire of the governing body chairperson whether they receive periodic financial information updating them on budgeted vs. actual spending and report the chairperson’s response. (I/IC)

(c) Inquire of the governing body chairperson whether the governing body, or certain members of the governing body, approves payments and contracts and report the chairperson’s response. If not, report the position title approval authority is delegated to. (IC)

(7) RELATED PARTIES (A/IC)

(a) Obtain a list of payments during the reporting period by payee/vendor.

(b) Inquire of management whether any of the payees listed are related parties (as defined in standards).

(c) Recalculate payments to related parties and report the total paid to each party, and the nature of the payments (for example: goods or services, reimbursement).

(8) PAYMENT CARDS (A/IC)

(a) Obtain from management a complete listing of all active payment cards (i.e., credit cards, purchase cards) for the fiscal period, including the name(s) of the person(s) who maintained possession of the cards.

(b) Haphazardly select one month and request the monthly statement from each active card (but not more than 5 cards) and observe whether:

(A) The card had assessed finance charges or late fees. Report amounts if applicable.

(B) The monthly statement was reviewed and approved for payment, in writing by someone other than the cardholder (for example: initials and date, or electronically approved, approved as noted in the governing body meeting minutes).

(9) PROPERTY TAXES (A)

(a) If the municipality receives property tax revenue perform the following:

(b) Obtain a property tax revenue schedule or turnover report from the municipality.

(c) Report the property tax revenue received by type (for example: permanent rate tax, local option tax).

(d) Trace amounts to the financial records, such as the trial balance or general ledger.

(10) ACCOUNTS RECEIVABLE (A)

(a) For municipal corporations reporting on an accrual basis of accounting perform the following:

(b) Obtain an accounts receivable aging report as of the last day of the fiscal year and agree to accounting records (trial balance).

(c) For all accounts greater than 90 days, inquire of management whether the amount is collectible.

(d) Report the balance that is considered by management to be uncollectable, if any.

(e) If the accountant is unable to agree the aging report to the accounting records, report the reason(s) why, if known.

(11) ACCOUNTS PAYABLE (A)

(a) For municipal corporations reporting on an accrual basis of accounting perform the following:

(b) Obtain an accounts payable listing and agree to the accounting records (trial balance).

(c) Obtain a listing of disbursements subsequent to fiscal year end and haphazardly select a sample of five transactions (or transactions totaling the calculated threshold, whichever is less).

(d) Inspect supporting documentation (invoice, purchase order, contract, etc.) for each sample transaction and confirm it was reported in the correct period.

(12) FUND BALANCE/NET POSITION (A)

(a) Agree beginning fund balance/net position to prior year ending fund balance/net position and reconcile any differences.

(b) If there are any changes to beginning fund balance/net position, confirm that the financial report discloses the changes to fund balance/net position and the reason for the difference (for example: error, implementation of new accounting policy, change in accounting estimate, change in reporting entity).

(13) REVENUE – CHARGES FOR SERVICES (A)

(a) If the municipal corporation reports charges for services perform the following:

(b) Obtain the fee schedule(s).

(c) Haphazardly select a sample of 10 transactions (or transactions totaling the calculated threshold, whichever is less).

(d) Based on the fee schedule(s), recalculate the charges for services.

(14) PAYROLL (A)

(a) If the municipal corporation has employees, perform the following:

(b) Calculate the amount of payroll expenditures for the reporting period (year) compared to total operating costs. If payroll expenditures are greater than 20 percent of annual operating cost, perform the following:

(A) Obtain all payroll checks or direct deposit records, but not more than five, for one haphazardly selected month during the reporting period. Compare the names and pay rates to employee records.

(B) Obtain a listing of employees and officials employed during the fiscal period. Haphazardly select five employees or officials (or all, if fewer than five) and obtain related paid salaries or pay rates and personnel files. Person(s) with the ability to enter payroll or who approves payroll related payments must be included in the sample selected.

(i) Agree annual paid salaries and bonuses to authorized salaries/pay rates in the personnel files.

(ii) Observe that individuals selected and receiving pay have a corresponding personnel file and were employees or officers during the reporting period.

(15) CASH (A/IC/C)

(a) Obtain a listing of all bank accounts from management.

(b) Obtain year-end statements and trace ending balances to the year-end bank reconciliations. If possible, the year-end statement should be viewed via online account access as confirmation.

(c) If the independent accountant can view accounts online, vouch that each account listed online was included in the list of accounts provided by management.

(d) For each depository account, obtain the year-end bank reconciliation and one additional month’s reconciliation, haphazardly selected from a different quarter, and observe whether:

(A) Reconciliations were prepared and reviewed within 2 months of the related statement’s closing date. If not, report the date prepared and reason given by management for why the reconciliation was prepared after two months.

(B) The statement balance traces to the reconciliation.

(C) The reconciled book balance traces to the general ledger and the trial balance or summary schedule.

(D) Mathematically, the reconciliation and detailed supporting schedules are accurate.

(e) Obtain a check register for the fiscal year and confirm if there are any gaps in check numbers issued during the year. Account for all voided checks by obtaining supporting documentation (for example: voided check).

(f) Inquire of the municipal corporation whether they are required to maintain any separate bank accounts for a particular fund, program, loan, grant, or other purpose. If yes, observe whether the municipal corporation maintains a separate bank account as required.

(g) If account(s) were opened or closed during the year (determined by comparing the current listing to prior years), inspect the minutes of the governing body and observe that the decision(s) are included. If approval authority is delegated to open and close accounts and not approved by the governing body, report the position title that authority is delegated to only if there were new or closed accounts during the year.

(h) Determine whether deposits are covered by Federal Deposit Insurance Corporation (FDIC) or National Credit Union Administration (NCUA) insurance, or deposited with institutions participating in the public funds collateralization pool. (ORS 295 – Depositories of Public Funds and Securities)

(16) DEBT (A/C)

(a) Obtain a complete list of debt (loans, mortgages, bonds, notes, or other debt instruments) and management’s representations that the listing is complete.

(b) Obtain supporting documentation for all newly issued debt (new during the engagement period and fiscal period reported) and carried forward debt.

(c) Reconcile new debt to the list of debt, and the list of debt to the reported amount(s) on the financial report, as applicable.

(d) Inquire of management about any debt covenants, such as a required cash reserve or coverage ratio. If such covenants exist, report the requirement(s) and report management’s responses on:

(A) how the entity monitors the requirement(s) and

(B) whether the municipal corporation met the requirement(s) throughout the year.

(17) LOCAL BUDGET LAW (C)

(a) This section describes procedures over compliance with legal requirements relating to the preparation, adoption, and execution of the annual or biennial budget for the fiscal year engaged for AUP and included in the annual financial report, and the preparation and adoption of the budget for the next succeeding year. If the municipal corporation is subject to local budget law (ORS 294) complete the following procedures (b) through (f):

(b) Adopted Budget

(A) Obtain a copy of the original approved and adopted budget.

(B) Determine whether the budget was adopted before the start of the budget year. (ORS 294.408)

(C) Determine whether the budget committee passed a motion to approve each tax levy and the budget dollar amount. (ORS 294.428)

(D) Compare the original adopted budget levy and the budget amount to the approved budget levy and budget. If there were any changes/differences, determine whether procedures were followed to make the change. (ORS 294.456)

(E) If resources do not equal requirements, document which funds are not balanced and report management’s response as to why they are not balanced. Report N/A if the budget is balanced.

(c) Budget Resolution - Obtain a copy of the resolution and observe whether the municipal corporation has appropriated by organization unit or program. (ORS 294.388(2))

(d) Budget Meetings

(A) Obtain a copy of budget committee meeting notice(s).

(B) Compare the dates of published notice to the meeting dates and conclude whether notices were published timely. (ORS 294.426)

(e) Budget Hearing

(A) Obtain a copy of the notice of budget hearing (LB-1, ED-1, UR-1 or CC-1).

(B) Observe each statement to ensure the notices of budget hearing are complete and published timely. (ORS 294.438)

(f) Budget Execution, Resolution Transfer or Supplemental Budget: The following procedures relate to the execution of the budget for the fiscal year engaged for AUP and as reported in the annual financial report.

(A) Compare the budget resolution to final, actual spending and report whether the municipal corporation overspent any appropriation category. If a budget exception exists per ORS 294.338, there is no violation and the accountant should exclude an overspending comment from the report. (ORS 294.338)

(B) Obtain a copy of any resolution transfer or supplemental budget.

(C) Determine whether the transfer or changes were made prior to overspending appropriation authority. (ORS 294.463 and ORS 294.471)

(18) FIDELITY BOND + INSURANCE (C)

(a) Obtain from management a copy of the fidelity or faithful performance bond covering the principal responsible official (those responsible for receiving and disbursing moneys on behalf of the municipality).

(b) Observe that the bond was in force during the fiscal period.

(c) Observe that the bond was in an amount sufficient as required by ORS 297.435(3).

(19) CONTRACTING + PROCUREMENT (A/IC/C)

(a) Obtain, from management, a list of contracts and agreements for professional services, materials and supplies, leases, and construction activities that were initiated or renewed during the fiscal period.

(b) For contracts or agreements over $25,000 or the calculated threshold, whichever is greater, obtain the procurement documentation and observe whether there is evidence of obtaining multiple quotes (or bids if required due to the total contract amount) or documentation as to why sole source selection was reasonable in the circumstance. (Y/N) If N, document the goods or services purchased and the total amount of the purchase or contract.

(20) PROGRAMS FUNDED FROM OUTSIDE SOURCES (C)

(a) Inquire of municipal corporation management and obtain a listing of any grant or similar funding, to identify any outside sources of funding, and whether there are requirements restricting the use those funds or related to the timing of spending the funding.

(b) Report on the source(s) and amount(s) received during the year reported for any source that exceeds the calculated threshold, or 10 percent of revenues, whichever is greater.

(21) HIGHWAY FUNDS (C) - ORS 294, 368, and 373; Article IX section 3a of the Oregon Constitution

(a) If the municipal corporation spent highway funds during the year, perform the following (highway funds refer specifically to revenue from taxes on motor vehicle use and fuel, and road funds):

(b) Inquire of management if funds were spent in compliance with the law (as contained in Article IX, section 3a of the Oregon Constitution and ORS 294, 368, and 373 pertaining to the use of road funds). (Y/N) If N, report the violation.

(c) Inquire of management whether highway funds were loaned to any other funds. Y/N, and if Y report whether amounts were repaid by the end of the following fiscal year. (ORS 294.050)

History

• Statutory/Other Authority: ORS 297
• Statutes/Other Implemented: ORS 297.465
• AUDIT 1-2025, amend filed 04/30/2025, effective 05/01/2025
• AUDIT 1-2024, minor correction filed 01/30/2024, effective 01/30/2024
• AUDIT 1-2023, adopt filed 10/31/2023, effective 01/01/2024

Or. Admin. R. 162-040-0170 Reporting Results of Additional Procedures

The accountant may perform additional procedures, and report results, with respect to the AUP engagement as may be requested by the municipal corporation and included in a legally executed contract in accordance with OAR 162-040-0010. If additional procedures are performed, the accountant’s AUP report should include the procedures and results in a separate section titled “Other Procedures Performed.”

History

• Statutory/Other Authority: ORS 297.465
• Statutes/Other Implemented: ORS 297.465
• AUDIT 1-2023, adopt filed 10/31/2023, effective 01/01/2024

Division 50 AUDITS CONDUCTED BY SECRETARY OF STATE

Or. Admin. R. 162-050-0020 Audits of School Districts and Education Service Districts

(1) Pursuant to ORS 297.210, the Secretary of State shall use the following factors to determine whether to initiate a performance audit of a school district or education service district:

(a) Total annual expenditures of district

(b) Total full time equivalent employees of district

(c) The district’s annual financial audit, including any findings it contains

(d) Any other audits, reviews or reports indicating inappropriate, inefficient or ineffective operations or business practices at one or more school districts or education service districts

(e) A request from the Department of Education

(f) A request from the Governor

(g) A request from a member or committee of the Oregon Legislature

(h) A request from a school district or education service district

(i) A request from a member of the public

(j) Evaluation of any response given to the Secretary of State by a school district or education service district after notice of intent to audit is made to the district by the Secretary of State.

(2) The Secretary shall weigh these factors when determining whether to initiate an audit.

(3) The Secretary shall forward a copy of any audit conducted pursuant to this rule to:

(a) The Governor

(b) The school district board or the board of directors of an education service district that is the subject of the audit

(c) The requestor of the audit if there is one

(d) Any other entity that the Secretary determines would benefit from review of the audit or that has requested a copy of the audit

History

• Statutory/Other Authority: ORS 297
• Statutes/Other Implemented: ORS 297-210
• AUDIT 2-2012, f. & cert. ef. 11-27-12

Or. Admin. R. 162-050-0030 Audit Selection Criteria

The Audits Division of the Office of the Secretary of State is responsible for producing performance audits that result in reports and recommendations that can generate significant improvements in government programs to benefit the public. An annual audit schedule is produced in consultation with the Secretary and considering Legislative priorities, with the goal of using audit resources efficiently and strategically. An essential element for all audits is a determination that the topic is auditable; that is, there is reliable data to answer the audit question and a feasible scope and methodology for conducting an audit in accordance with professional auditing standards. The following are other considerations and criteria used by the Division when choosing topics for performance audits.

(1) Mandated audits — audits required by law (one-time or recurring audits);

(2) Issues relating to an agency or program mission — audits that can help an agency better achieve its mission;

(3) Audits of agencies — audits of agencies and/or important programs within agencies that have not been audited for some time;

(4) Public safety/vulnerable populations — topics relating to public safety and protecting vulnerable populations (e.g., emergency preparedness, child welfare);

(5) Significant challenges facing the state — topics can involve multiple agencies and/or levels of government (e.g., improving K-12 education, workforce development and economic development)

(6) Cost savings, revenue enhancements — topics that have potential to produce significant cost savings or large increases in revenue;

(7) Efficiency and effectiveness — topics that have the potential for increased economy, efficiency, or effectiveness of a program;

(8) High risk topics/large impacts — topics that are high risk, where we suspect the controls in place over a program are weak, and the resulting effects potentially large;

(9) Troubled agencies/programs — multiple ideas/problems at a single agency or program;

(10) Emerging/time sensitive issues — agencies facing emerging issues or problems, or trying to design more effective service delivery options for key programs.

History

• Statutory/Other Authority: ORS 297
• Statutes/Other Implemented: ORS 297.070
• AUDIT 1-2017, f. & cert. ef. 1-5-17