MISSISSIPPI LEGISLATURE

2024 Regular Session

To: State Affairs

By: Representative Yates

House Bill 1225

(COMMITTEE SUBSTITUTE)

AN ACT TO AMEND SECTION 21-35-31, MISSISSIPPI CODE OF 1972, TO AUTHORIZE THE STATE AUDITOR, IN HIS DISCRETION, TO REVIEW AND EXAMINE MUNICIPALITIES UNDER CERTAIN PRESCRIBED CONDITIONS; AND FOR RELATED PURPOSES.

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

     SECTION 1.  Section 21-35-31, Mississippi Code of 1972, is amended as follows:

 * * * [For municipal fiscal years commencing before October 1, 2009, this section shall read as follows:]

21‑35‑31.  The governing authorities of every municipality in the state shall have their books audited annually, prior to the close of the next succeeding fiscal year, either by a competent accountant approved by the State Auditor or by a certified public accountant, who has paid a privilege tax as such in this state, and shall pay for same out of the General Fund.  No advertisement shall be necessary before entering into such contract, but same shall be entered into as a private contract.  Said audit shall be made upon a uniform formula set up and promulgated by the State Auditor, as the head of the State Department of Audit, or the director thereof, appointed by him, as designated and defined in Title 7, Chapter 7, of the Mississippi Code of 1972, or any office or officers hereafter designated to replace or perform the duties imposed by said chapter.  Provided, however, any municipality with a population of three thousand (3,000) or less may employ a competent accountant or auditor, approved by the State Auditor, to prepare annually a compilation report and a compliance letter, in a format prescribed by the State Auditor, in lieu of an annual audit when such audit will be a financial hardship on the municipality.  Two (2) copies of said audit or compilation shall be mailed to the said State Auditor within thirty (30) days after completion of said audit.  Said State Auditor shall, at the end of each fiscal year, submit to the Legislature a composite report showing any information concerning municipalities in this state that he might deem pertinent and necessary to the Legislature for use in its deliberations.  A synopsis of said audit, in a format prescribed by the State Auditor, shall be published within thirty (30) days by the governing authorities of such municipalities in a newspaper published in such municipalities or, if no newspaper be published in any such municipality, in any newspaper having a general circulation published in the county wherein such municipality is located.  The publication of the audit may be made as provided in Section 21‑17‑19, Mississippi Code of 1972.  Such publication shall be made one (1) time, and the governing authorities of such municipalities shall be authorized to pay only one‑half (1/2) of the legal rate prescribed by law for such legal publication.

[For municipal fiscal years commencing on or after October 1, 2009, this section shall read as follows:]

     21-35-31.  (1)  The governing authority of every municipality in the state shall have the municipal books audited annually, before the close of the next succeeding fiscal year, in accordance with procedures and reporting requirements prescribed by the State Auditor.  The municipality shall pay for the audit or report out of its general fund.  No advertisement shall be necessary before entering into the contract, and it shall be entered into as a private contract.  The audit or report shall be made upon a uniform formula set up and promulgated by the State Auditor, as the head of the State Department of Audit, or the director thereof, appointed by him, as designated and defined in Title 7, Chapter 7, Mississippi Code of 1972, or any office or officers hereafter designated to replace or perform the duties imposed by * * *said that chapter. Two (2) copies of the audit or report shall be mailed to the * * *said State Auditor within thirty (30) days after completion.  The State Auditor, at the end of each fiscal year, shall submit to the Legislature a composite report showing any information concerning municipalities in this state that the Auditor deems pertinent and necessary to the Legislature for use in its deliberations.  A synopsis of the audit or report, in a format prescribed by the State Auditor, shall be published within thirty (30) days by the governing authority of each municipality in a newspaper published in the municipality or, if no newspaper is published in a municipality, in any newspaper having a general circulation published in the county wherein the municipality is located.  The publication of the audit or report may be made as provided in Section 21-17-19. Publication shall be made one (1) time, and the governing authority of each municipality shall be authorized to pay only one-half (1/2) of the legal rate prescribed by law for such legal publication.

     (2)  It shall be the duty of the State Auditor to determine whether each municipality has complied with the requirements of subsection (1) of this section.  If, upon examination, the State Auditor determines that a municipality has not initiated efforts to comply with the requirements of subsection (1), the State Auditor shall file a certified written notice with the clerk of the municipality notifying the governing authority of the municipality that a certificate of noncompliance will be issued to the * * *State Tax Commission Department of Revenue and to the Attorney General thirty (30) days immediately following the date of the filing of the notice unless within that period, the municipality substantially complies with the requirements of subsection (1).  If, after thirty (30) days from the giving of the notice, the municipality, in the opinion of the State Auditor, has not substantially initiated efforts to comply with the requirements of subsection (1), the State Auditor shall issue a certificate of noncompliance to the clerk of the municipality, * * *State Tax Commission Department of Revenue and the Attorney General.  Thereafter, the * * *State Tax Commission Department of Revenue shall withhold from all allocations and payments to the municipality that would otherwise be payable the amount necessary to pay one hundred fifty percent (150%) of the cost of preparing the required audit or report as contracted for by the State Auditor.  The cost shall be determined by the State Auditor after receiving proposals for the audit or report required in subsection (1) of this section.  The State Auditor shall notify the * * *State Tax Commission Department of Revenue of the amount in writing, and the * * *State Tax Commission Department of Revenue shall transfer that amount to the State Auditor.  The State Auditor is authorized to escalate, budget and expend these funds in accordance with rules and regulations of the Department of Finance and Administration consistent with the escalation of federal funds.  All remaining funds shall be retained by the State Auditor to offset the costs of administering these contracts.  The State Auditor shall not unreasonably delay the issuance of a written notice of cancellation of a certificate of noncompliance but shall promptly issue a written notice of cancellation of certificate of noncompliance upon an affirmative showing by the municipality that it has come into substantial compliance.

(3)  At the discretion of the State Auditor, the Auditor may review and examine a municipality using methods and procedures prescribed by the State Auditor whenever any of the following occur:

(a)  The audits filed by the municipality during the preceding three (3) years contain an adverse opinion or disclaimer of opinion; or

(b)  Any audit has been performed by an audit firm with a grade of "Pass with Deficiencies" or "Fail" on the firm's most recent peer review; or

(c)  The municipality's contract auditor has received a violation relating to a government audit from the Mississippi State Board of Public Accountancy in the preceding three (3) years.

     SECTION 2.  This act shall take effect and be in force from and after July 1, 2024.

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