Municipal Accountability

It has long been a state law that every local government entity must be subject to some form of financial accountability. Most cities undergo an annual audit. As you dive deeper into the smaller municipalities, water boards, and other forms of local government, the requirements are based on revenue. Some must undergo at least biennial audits, but the smallest may submit an annual report to Alabama’s Department of Examiners of Public Accounts.

 

The irony in this attempt at accountability is that there has been one piece missing from these requirements: accountability. I am aware of some cities that have gone 15 years without an audit, with seemingly no consequences. Poor fiscal management is simply poor management, but it’s the taxpayers that ultimately lose when its leaders fail to place a priority on fiscal management and accountability.

The State’s Chief Examiner, Rachel Riddle, told me last week that it is about to change. Two bills have been introduced as part of her strategy. The first is HB17 (HB17-int.pdf) by Rep. Bill Lamb. As discussed in prior Ledgers, this bill raises the revenue thresholds related to annual, biennial or other audits/financial reporting. The second is SB105 (SB105-int.pdf) by Sen. Keith Kelley. His bill would require counties and municipalities to publish their financial statements online.

 

But that’s not all. She has directed a point person within her department to make a list of all municipalities and cross-reference those with their most recent financial reports. If they fail to comply, there will be consequences. While she didn’t elaborate on what those were, I believe she could be weighing fines on those responsible. She could also explore the possibility of withholding state-shared revenue from those municipalities until those reports are brought up to date.

 

The point here is that she is sounding the alarm, both to those municipal leaders AND to the CPA community. For those in public accounting that provide small government attest services, you are about to get a bunch of phone calls from mayors who need your help.

 

Clearly, one piece of the strategy remains to be determined: who is going to pay the bill? Poor fiscal accountability usually accompanies poor fiscal management, meaning that these municipalities don’t have the cash to pay for accounting and auditing services. In the more extreme cases, it will have to be determined how far back we need to go and how much work would be required to create a set of books, much less get them audited.

 

All I can say is to be aware but stay tuned. I hope to have many more conversations about this important issue soon.

 

Now for a couple quick updates:

1. Governor Ivey signed HB59 on Friday and our Pathways the CPA Act is in the books!
2. HB250 (Garrett), intended to clear the way for Trump accounts in Alabama and to provide an indefinite extension to a provision allowing employers to pay employee student loans as a tax-free benefit, has cleared the House and passed Senate Committee. I anticipate it will be on the Senate floor Tuesday or Thursday of this week.
3. SB221 (Orr) intends to exempt credit card fees charged by retailers from sales tax.
4. The Watchlist on our Advocacy web page is being constantly updated. Check in often.

CLICK HERE FOR THE WATCHLIST

There have been 602 bills filed so far. If we’ve missed something or you have any questions, please do not hesitate to contact me at rpearson@alabama.cpa.