The Illinois General Assembly recently amended the Governmental Account Audit Act. 50 ILCS 310/1 et. al., effective 8/13/18. This Act applies to municipal corporations and political subdivisions within the State that appropriate more than $5,000.00 for a fiscal year, except for school districts and municipal corporations that file reports under the Municipal Auditing Act and those that file reports directly to the Illinois Comptroller under 3.1-35.115 of the Municipal Code.
The term auditor under the Audit Act has been amended to mean a licensed CPA who performs the audit of financial statements and expresses an opinion on these. The word auditor now replaces the previous term accountant in the remainder of the Audit Act.
Further, prior to fiscal year 2019, audit reports must contain financial statements that conform with generally accepted accounting principals or other comprehensive basis of accounting. To use another accounting basis, there are additional regulations as noted below.
For fiscal year 2019 and beyond, the requirements for the audit reports are:
- Reports shall contain only financial information, findings, and conclusions that are supported by the auditor’s working papers. Governmental units must retain the right to inspect the auditor’s working papers and make them available to the Comptroller. The audits shall also include the professional opinion of the auditor with respect to the financial statements, or a declaration from the auditor that he or she is unable to express an opinion and the reasons therefor. Auditors also have to certify compliance with generally accepted auditing standards.
- Municipalities cannot impose limitations on the scope of an audit that would effect the opinion of the auditor. Audit reports filed with the Comptroller must be accompanied by a copy of each official statement (or other offering of materials) prepared in connection with the issuance of indebtedness incurred by the municipality since the last audit report.
- Audit reports shall also contain financial statements prepared in conformity with generally accepted accounting principles and likewise audited in conformity with these principals. If prior to 2019 a governing body submitted reports that were certified by the auditor that they were prepared according to generally accepted accounting principles, all audit reports thereafter must likewise conform to these principals.
- Audit reports may contain financial statements in conformity with another comprehensive basis of accounting (i.e. not generally accepted accounting principles) if these follow best practices and guidelines as outlined by the American Institute of Certified Public Accountants. However, once a governing body submits an audit report prepared in conformity of general accepted accounting principles, it must do so for all future audits.
Audits may be made on financial statements prepared using either an accrual or cash basis of accounting, depending on the system followed by the governmental unit.
The remainder of this legislative amendment changes the Illinois Municipal Code to reflect these new requirements.
In sum, the legislative changes to the requirements for audit reports continues to allow accrual or cash basis accounting. They also permit a basis of accounting other than accepted accounting principles, if this other basis follows best practices and guidelines of the AICPA and the municipality has not before used accepted accounting principles in their filed audit reports.