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. Statutory/Other Authority: ORS 297 Statutes/Other Implemented: ORS 297.465 History: 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