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Iowa Municipal Professional’s Institute July 24, 2012 Municipal Oversight House File 2455

Iowa Municipal Professional’s Institute July 24, 2012 Municipal Oversight House File 2455 As approved and enacted April 2012. State of Iowa Iowa Fraud in the Headlines. Des Moines Register:

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Iowa Municipal Professional’s Institute July 24, 2012 Municipal Oversight House File 2455

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  1. Iowa Municipal Professional’s InstituteJuly 24, 2012 Municipal OversightHouse File 2455 As approved and enacted April 2012

  2. State of Iowa Iowa Fraud in the Headlines Des Moines Register: “Iowa ranked fourth in the nation last year in a ranking of states most likely to have losses from major embezzlement cases.” “But private businesses are not the only victims. Taxpayers, particularly those in small cities, have been the victims of thefts that totaled $11.5 million since 2005.” Des Moines Register, Embezzlement a growing problem in Iowa, Feb. 18, 2012

  3. State of Iowa Fraud Statistics

  4. Fraud Triangle Opportunity Fraud Triangle Rationalization Pressure

  5. State of Iowa Current Law • Current Law: • Cities over 2,000 population are required to receive an annual audit. • Cities with populations from 700 to 2,000 are required to be audited once every 4 years. • Cities with populations under 700 are not required to be audited except by petition of the citizens. • All cities may hire an auditor to audit their cities. • Cities may use the State Auditor or a CPA firm of their choice. • Cities pay a filing fee to file their audit report with the State Auditor’s office.

  6. State of Iowa House File 2455 Changes • Changes effective July 1, 2013 (for audits/examinations starting in fiscal year 2014): • All cities over 2,000 population - • Still required to receive an annual audit • 4-year city audit category (population 700-2,000) - • No longer exists • Cities with population under 2,000 - • Will receive examinations (not audits) • Based on budgeted expenditures/disbursements

  7. State of Iowa House File 2455 Changes • What is an examination? • Chapter 11.1(b) of the Code of Iowa: • “Examination means procedures that are less in scope than an audit but which are directed toward reviewing financial activities and compliance with legal requirements.” • Agreed-upon procedures engagement • Less in scope than an audit • Less cost than an audit

  8. State of Iowa House File 2455 Changes • Changes effective July 1, 2013 (fiscal year 2014): • Cities under 2,000 population with $1 million or more budgeted gross expenditures (in two consecutive years) will receive an annualexamination: • Cities may choose their auditor: • RFP required to engage independent auditors for annual examination (like audits) • Cities must pay for the annual examination • Cities pay an examination filing fee to Auditor of State

  9. State of Iowa House File 2455 Changes • Changes effective July 1, 2013 (fiscal year 2014): • Cities under 2,000 population with less than $1 million in budgeted gross expenditures will pay an annual examination fee to the Auditor of State to cover the costs of a periodicexamination.

  10. State of Iowa House File 2455 Changes • Changes effective July 1, 2013 (fiscal year 2014): • Cities subject to periodicexamination: • Cities must exceed $1 million in budgeted gross expenditures for two consecutive years to require annualexamination. Otherwise subject to periodic examination • Examination required at least every 8 years • AOS will administer the RFP process • AOS will develop the procedures to be performed • Cities that pay an audit or annual examination filing feeare not required to pay the annual examination fee.

  11. State of Iowa House File 2455 Changes • Periodic Examination – Proposed Fees • Auditor of State shall adopt administrative rules • To establish and collect a periodic examination fee • From cities not required to have an audit or required fiscal year examination • Fees due initially March 31, 2014 (and then each year thereafter)

  12. State of Iowa House File 2455 Changes • Periodic Examination – Proposed Fees • Scaled Fee – based on budgeted gross expenditures: • Less than $50,000 -- $0 • $50,000 to $300,000 -- $500 • $300,000 to $600,000 -- $900 • $600,000 to $1,000,000 -- $1,200

  13. State of Iowa House File 2455 Changes • Periodic Examinations • Cities Subject to Periodic Examination – 603 • Total Fees Collected -- $368,700 • Maximum Exams Possible with Fees Collected – 123 • If fees collected exceed $375,000, any overage is set aside to provide financial management training to City officials. • Assumptions • Fees Collected are based on full participation • Examinations will cost approximately $3,000

  14. State of Iowa House File 2455 Changes • Questions???

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