85R5573 JXC-D

By: Kolkhorst S.B. No. 1563

A BILL TO BE ENTITLED

AN ACT

relating to audits of the fiscal accounts and records of emergency services districts.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Chapter 775, Health and Safety Code, is amended by adding Subchapter N to read as follows:

SUBCHAPTER N. AUDIT OF DISTRICTS

Sec. 775.451. DUTY TO AUDIT. (a) The board shall have the district's fiscal accounts and records audited annually at the expense of the district.

(b) The person who performs the audit shall be a certified public accountant holding a license issued by the Texas State Board of Public Accountancy.

(c) The audit required by this section shall be completed not later than the 120th day after the close of the district's fiscal year.

Sec. 775.452. FORM OF AUDIT. (a) For a district located wholly in one county, the commissioners court shall adopt accounting and auditing manuals.

(b) For a district located in more than one county, the county auditors of each county in which the district is located, with the approval of the commissioners court of each county, shall adopt accounting and auditing manuals.

(c) Except as otherwise provided by the manuals, the district audit shall be performed according to the generally accepted auditing standards adopted by the American Institute of Certified Public Accountants. Financial statements shall be prepared in accordance with generally accepted accounting principles.

Sec. 775.453. FINANCIAL REPORTS. The district's depository, the district's treasurer, and the district's bookkeeper, if any, who receives or has control over any district funds shall keep a full and itemized account of district funds in the depository's, treasurer's, or bookkeeper's possession. The itemized accounts and records shall be available for audit.

Sec. 775.454. FILING OF AUDITS, AFFIDAVITS, AND FINANCIAL REPORTS. (a) After the board has approved the audit report, the board shall, not later than the 135th day after the close of the district's fiscal year, submit a copy of the report to the commissioners court of each county in which the district is located for filing.

(b) If the board refuses to approve the annual audit report, the board shall, not later than the 135th day after the close of the district's fiscal year, submit a copy of the report to the commissioners court of each county in which the district is located for filing, accompanied by a statement from the board explaining the reasons for the board's failure to approve the report.

(c) Copies of each audit report, annual financial dormancy affidavit described by Section 775.458, or annual financial report described by Section 775.459, as applicable, shall be filed annually in the office of the district.

(d) Each district shall file with the commissioners court of each county in which the district is located an annual filing affidavit, executed by an authorized representative of the board, stating that all copies of the annual audit report, annual financial dormancy affidavit, or annual financial report have been filed under this section.

(e) The annual filing affidavit shall be submitted with the applicable annual document when the document is submitted to a commissioners court for filing under this subchapter.

(f) A commissioners court shall file with the attorney general the names of any districts in the county that do not comply with this subchapter.

(g) A submission to a county commissioners court required by this section may be made electronically.

Sec. 775.455. REVIEW BY COMMISSIONERS COURT. (a) The commissioners court of each county in which a district is located may review the audit report of the district.

(b) If the commissioners court has any objections or determines any violations of generally accepted auditing standards or accounting principles, statutes, or board rules, or if the commissioners court has any recommendations, the commissioners court shall notify the board and the district's auditor.

(c) Before the audit report may be accepted by the commissioners court as being in compliance with the provisions of this subchapter, the board and the auditor shall remedy objections and correct violations of which they have been notified by the commissioners court.

(d) If the audit report indicates that a penal law has been violated, the commissioners court shall notify the appropriate county or district attorney and the attorney general.

(e) A commissioners court in which a district is located may request that the state auditor assist in the establishment of standards and procedures for review of district audits by the commissioners court. Participation by the state auditor is subject to approval by the legislative audit committee for inclusion in the audit plan under Section 321.013(c), Government Code.

Sec. 775.456. REVIEW BY COUNTY AUDITOR. (a) A county auditor may review the audit report of each district in the county.

(b) A commissioners court may request that the state auditor assist in the establishment of standards and procedures for review of district audits by the county auditors. Participation by the state auditor is subject to approval by the legislative audit committee for inclusion in the audit plan under Section 321.013(c), Government Code.

Sec. 775.457. ACCESS TO AND MAINTENANCE OF DISTRICT RECORDS. (a) The commissioners court of each county in which a district is located shall have access to all vouchers, receipts, district fiscal and financial records, and other district records the commissioners court considers necessary.

(b) All district fiscal records shall be prepared on a timely basis and maintained in an orderly manner in accordance with generally accepted accounting principles. The fiscal records shall be available for public inspection during regular business hours. A district's fiscal records may be removed from the district's office for the purposes of recording the district's fiscal affairs and preparing an audit, during which time the fiscal records are under the control of the district's auditor.

Sec. 775.458. FINANCIALLY DORMANT DISTRICTS. (a) A financially dormant district is a district that had:

(1) $500 or less of receipts from operations, tax assessments, loans, contributions, or any other sources during the calendar year;

(2) $500 or less of disbursements of funds during the calendar year;

(3) no bonds or other long-term (more than one year) liabilities outstanding during the calendar year; and

(4) no cash or investments that exceeded $5,000 at any time during the calendar year.

(b) A financially dormant district may elect to file with the commissioners court of each county in which the district is located a financial dormancy affidavit instead of complying with the audit requirements of Section 775.451.

(c) The annual financial dormancy affidavit must be:

(1) prepared in a format prescribed by the commissioners court to which the affidavit is submitted; and

(2) submitted for filing by an authorized representative of the district.

(d) The affidavit must be filed annually on or before January 31 until the district becomes financially active. The board shall send notice to the commissioners court of each county in which the district is located if the district becomes financially active. After the district becomes financially active, the district shall file annual audit reports as prescribed by this subchapter.

(e) A district that becomes financially dormant after having been financially active shall file annual financial dormancy affidavits on or before January 31, until the district is dissolved or again becomes financially active.

(f) A district governed by this section is subject to periodic audits by the commissioners court of each county in which the district is located.

Sec. 775.459. AUDIT REPORT EXEMPTION. (a) A district may elect to file annual financial reports with the commissioners court of each county in which the district is located instead of complying with the audit requirements of Section 775.451 if:

(1) the district had no bonds or other long-term (more than one year) liabilities outstanding during the fiscal period;

(2) the district did not have gross receipts from operations, loans, taxes, or contributions in excess of $250,000 during the fiscal period; and

(3) the district's cash and temporary investments were not in excess of $250,000 during the fiscal period.

(b) The annual financial report must be:

(1) accompanied by an affidavit attesting to the accuracy and authenticity of the financial report that is signed by an authorized representative of the district;

(2) prepared in a format prescribed by the commissioners court to which the report is submitted; and

(3) on file with the commissioners court of each county in which the district is located not later than the 45th day after the close of the district's fiscal year.

(c) A district governed by this section is subject to periodic audits by the commissioners court of each county in which the district is located.

Sec. 775.460. FAILURE TO AUDIT. If a district fails to file an audit report, an annual financial dormancy affidavit, or an annual financial report, as applicable, according to the schedule required by this subchapter, the president and treasurer of the board are removed from the board and:

(1) in a district located wholly in one county, the commissioners court shall fill the vacancies as provided by Section 775.034; and

(2) in a district located in more than one county, notwithstanding Section 775.044, the commissioners courts shall fill the vacancies with qualified persons by joint order.

Sec. 775.461. POLICIES AND AUDITS OF DISTRICTS. (a) The board shall adopt a written:

(1) code of ethics for district directors, officers, employees, and persons who are engaged in handling investments for the district;

(2) policy relating to travel expenditures;

(3) policy relating to district investments that ensures that:

(A) purchases and sales of investments are initiated by authorized individuals, conform to investment objectives and regulations, and are properly documented and approved; and

(B) periodic review is made of district investments to evaluate investment performance and security;

(4) policy and procedure for selection, monitoring, or review and evaluation of professional services; and

(5) policy that ensures a better use of management information including:

(A) budgets for use in planning and controlling cost;

(B) an audit committee of the board; and

(C) uniform reporting requirements that require the use of generally accepted accounting and audit principles.

(b) The state auditor may audit the financial transactions of a district if the state auditor determines that the audit is necessary.

SECTION 2. Sections 775.082, 775.0821, and 775.0825, Health and Safety Code, are repealed.

SECTION 3. This Act takes effect July 1, 2018.