11.6 - EXAMINATION OF GOVERNMENTAL SUBDIVISIONS -- CONSULTATIVE SERVICES -- ASSOCIATION OF COUNTIES.
11.6 EXAMINATION OF GOVERNMENTAL SUBDIVISIONS --
CONSULTATIVE SERVICES -- ASSOCIATION OF COUNTIES.
1. a. (1) The financial condition and transactions of all
cities and city offices, counties, county hospitals organized under
chapters 347 and 347A, memorial hospitals organized under chapter 37,
entities organized under chapter 28E having gross receipts in excess
of one hundred thousand dollars in a fiscal year, merged areas, area
education agencies, and all school offices in school districts, shall
be examined at least once each year, except that cities having a
population of seven hundred or more but less than two thousand shall
be examined at least once every four years, and cities having a
population of less than seven hundred may be examined as otherwise
provided in this section. The examination shall cover the fiscal
year next preceding the year in which the audit is conducted. The
examination of school offices shall include an audit of all school
funds including categorical funding provided by the state, the
certified annual financial report, the certified enrollment as
provided in section 257.6, supplementary weighting as provided in
section 257.11, and the revenues and expenditures of any nonprofit
school organization established pursuant to section 279.62.
Differences in certified enrollment shall be reported to the
department of management. The examination of school offices shall
include at a minimum a determination that the laws of the state are
being followed, that categorical funding is not used to supplant
other funding except as otherwise provided, that supplementary
weighting is pursuant to an eligible sharing condition, and that
postsecondary courses provided in accordance with section 257.11 and
chapter 261E supplement, rather than supplant, school district
courses. The examination of a city that owns or operates a municipal
utility providing local exchange services pursuant to chapter 476
shall include an audit of the city's compliance with section 388.10.
The examination of a city that owns or operates a municipal utility
providing telecommunications services pursuant to section 388.10
shall include an audit of the city's compliance with section 388.10.
(2) Subject to the exceptions and requirements of subsection 2
and subsection 4, paragraph "a", subparagraph (3), examinations
shall be made as determined by the governmental subdivision either by
the auditor of state or by certified public accountants, certified in
the state of Iowa, and they shall be paid from the proper public
funds of the governmental subdivision.
b. (1) In conjunction with the audit of the governmental
subdivision required under this section, the person performing the
audit shall also perform tests for compliance with the investment
policy of a reasonable number of investment transactions in relation
to the total investments and quantity of transactions in the period
audited. The results of the compliance testing shall be reported in
accordance with generally accepted auditing standards. The person
performing the audit may also make recommendations for changes to
investment policy or practices. The governmental subdivision is
responsible for the remedy of reported noncompliance with its policy
or practices.
(2) (a) As part of its audit, the governmental subdivision is
responsible for obtaining and providing to the person performing the
audit the audited financial statements and related report on internal
control structure of outside persons, performing any of the following
during the period under audit for the governmental subdivision:
(i) Investing public funds.
(ii) Advising on the investment of public funds.
(iii) Directing the deposit or investment of public funds.
(iv) Acting in a fiduciary capacity for the governmental
subdivision.
(b) The audit under this section shall not be certified until all
material information required by this subparagraph is reviewed by the
person performing the audit.
(3) The review by the person performing the audit of the most
recent annual report to shareholders of an open-end management
investment company or an unincorporated investment company or
investment trust registered with the federal securities and exchange
commission under the federal Investment Company Act of 1940, 15
U.S.C. § 80(a), pursuant to 17 C.F.R. § 270.30d-1 or the review, by
the person performing the audit, of the most recent annual report to
shareholders, call reports, or the findings pursuant to a regular
examination under state or federal law, to the extent the findings
are not confidential, of a bank, savings and loan association, or
credit union shall satisfy the review requirements of this paragraph.
(4) All contracts or agreements with outside persons performing
any of the functions listed in subparagraph (2) shall require the
outside person to notify in writing the governmental subdivision
within thirty days of receipt of all communication from the person
performing the audit or any regulatory authority of the existence of
a material weakness in internal control structure, or regulatory
orders or sanctions against the outside person, with regard to the
type of services being performed under the contracts or agreements.
This provision shall not be limited or avoided by another contractual
provision.
(5) As used in this subsection, "outside person" excludes a
bank, savings and loan association, or credit union when acting as an
approved depository pursuant to chapter 12C.
(6) A joint investment trust organized pursuant to chapter 28E
shall file the audit reports required by this chapter with the
administrator of the securities and regulated industries bureau of
the insurance division of the department of commerce within ten days
of receipt from the auditor. The auditor of a joint investment trust
shall provide written notice to the administrator of the time of
delivery of the reports to the joint investment trust.
(7) If during the course of an audit of a joint investment trust
organized pursuant to chapter 28E, the auditor determines the
existence of a material weakness in the internal control structure or
a material violation of the internal control structure, the auditor
shall report the determination to the joint investment trust which
shall notify the administrator in writing within twenty-four hours,
and provide a copy of the notification to the auditor. The auditor
shall provide, within twenty-four hours of the receipt of the copy of
the notice, written acknowledgment of the receipt to the
administrator. If the joint investment trust does not make the
notification within twenty-four hours, or the auditor does not
receive a copy of the notification within twenty-four hours, the
auditor shall immediately notify the administrator in writing of the
material weakness in the internal control structure or the material
violation of the internal control structure.
2. a. A city, community college, school district, area
education agency, entity organized under chapter 28E, county, county
hospital, or memorial hospital desiring to contract with or employ
certified public accountants shall utilize procedures which include a
request for proposals.
b. The governing body of a city, community college, school
district, area education agency, entity organized under chapter 28E,
county, county hospital, or memorial hospital utilizing the auditor
of state instead of a certified public accountant to perform an audit
shall notify the auditor of state by June 1 of the year to be
audited. If the governing body fails to notify the auditor of state
of the decision to use the auditor of state, the auditor of state may
perform the audit required in subsection 1 only if provisions are not
made by the governing body to contract for the audit.
3. A township or city for which examinations are not required
under subsection 1 may contract with or employ the auditor of state
or certified public accountants for an examination of its financial
transactions and condition of its funds. A financial examination is
mandatory on application by one hundred or more taxpayers, or if
there are fewer than five hundred taxpayers in the township or city,
then by fifteen percent of the taxpayers. Payment for the
examination shall be made from the proper public funds of the
township or city.
4. a. In addition to the powers and duties under other
provisions of the Code, the auditor of state may at any time cause to
be made a complete or partial reaudit of the financial condition and
transactions of any city, county, county hospital, memorial hospital,
entity organized under chapter 28E, merged area, area education
agency, school corporation, township, or other governmental
subdivision, or an office of any of these, if one of the following
conditions exists:
(1) The auditor of state has probable cause to believe such
action is necessary in the public interest because of a material
deficiency in an audit of the governmental subdivision filed with the
auditor of state or because of a substantial failure of the audit to
comply with the standards and procedures established and published by
the auditor of state.
(2) The auditor of state receives from an elected official or
employee of the governmental subdivision a written request for a
complete or partial reaudit of the governmental subdivision.
(3) The auditor of state receives a petition signed by at least
fifty eligible electors of the governmental subdivision requesting a
complete or partial reaudit of the governmental subdivision. If the
governmental subdivision has not contracted with or employed a
certified public accountant to perform an audit of the fiscal year in
which the petition is received by the auditor of state, the auditor
of state may perform an audit required by subsection 1 or 3.
b. The state audit shall be paid from the proper public funds
available in the office of the auditor of state. In the event the
audited governmental subdivision recovers damages from a person
performing a previous audit due to negligent performance of that
audit or breach of the audit contract, the auditor of state shall be
entitled to reimbursement on an equitable basis for funds expended
from any recovery made by the governmental subdivision.
c. An examination under this subsection shall include a
determination of whether investments by the governmental subdivision
are authorized by state law.
5. The auditor of state may, within three years of filing, during
normal business hours upon reasonable notice of at least twenty-four
hours, review the audit work papers prepared in the performance of an
audit or examination conducted pursuant to this section.
6. An audit required by this section shall be completed within
nine months following the end of the fiscal year that is subject to
the audit. At the request of the governmental subdivision, the
auditor of state may extend the nine-month time limitation upon a
finding that the extension is necessary and not contrary to the
public interest and that the failure to meet the deadline was not
intentional.
7. The auditor of state shall make guidelines available to the
public setting forth accounting and auditing standards and procedures
and audit and legal compliance programs to be applied in the
examination of the governmental subdivisions of the state, which
shall require a review of the internal control structure and specify
testing of transactions for compliance. The guidelines shall include
a requirement that the certified public accountant immediately notify
the auditor of state regarding any suspected embezzlement or theft.
The auditor shall also provide standard reporting formats for use in
reporting the results of an examination of a governmental
subdivision.
8. The auditor of state shall provide advice and counsel to
public entities and certified public accountants concerning audit and
examination matters. The auditor of state shall adopt rules in
accordance with chapter 17A to establish a fee schedule based upon
the prevailing rate for the service rendered. The auditor of state
shall obtain payment from a public entity or certified public
accountant for advisory and consultation services rendered pursuant
to this subsection. The auditor of state may waive any charge
provided in this subsection and may determine to provide certain
services without cost.
9. The Iowa state association of counties shall keep accounts as
required by the auditor of state. These accounts shall be audited
annually by either the auditor of state or a certified public
accountant certified in the state of Iowa. The audit shall state all
moneys expended for expenses incurred by and salaries paid to
legislative representatives and lobbyists of the association.
10. The auditor of state shall adopt rules in accordance with
chapter 17A to establish and collect a filing fee for the filing of
each report of examination conducted pursuant to subsections 1
through 3. The funds collected shall be maintained in a segregated
account for use by the office of the auditor of state in performing
audits conducted pursuant to subsection 4 and for work paper reviews
conducted pursuant to subsection 5. Any funds collected by the
auditor pursuant to subsection 4 shall be deposited in this account.
Notwithstanding section 8.33, the funds in this account shall not
revert at the end of any fiscal year. Section History: Early Form
[S13, § 100-d, 1056-a11, -a13; C24, 27, 31, 35, 39, § 113;
C46, 50, 54, 58, 62, 66, 71, § 11.6; C73, 75, 77, 79, 81, § 11.6,
332.3(27); S81, § 11.6; 81 Acts, ch 117, § 1000] Section History: Recent Form
84 Acts, ch 1123, § 1; 84 Acts, ch 1128, § 1; 89 Acts, ch 264, §
1; 90 Acts, ch 1013, § 1; 91 Acts, ch 267, §222; 92 Acts, ch 1156, §
2--4; 92 Acts, ch 1187, § 1; 92 Acts, ch 1232, § 301; 92 Acts, ch
1242, § 16, 17; 96 Acts, ch 1215, § 20; 2004 Acts, ch 1022, §1; 2004
Acts, ch 1048, §1; 2005 Acts, ch 179, §90; 2006 Acts, ch 1117, §1;
2008 Acts, ch 1032, §118--120; 2008 Acts, ch 1181, §42
Referred to in § 11.9, 11.19, 11.36, 123.58, 125.55, 216A.98,
230A.16, 256F.4, 257.6, 279.38, 331.402, 331.902, 358C.12, 364.5,
388.10, 411.5