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Iowa House File 2455: Changing Governmental Audit Requirements

 By: Elizabeth Thyer, CPA  email

During the last legislative session, House File 2455 was passed initiating changes in governmental audit requirements.  Currently, all Iowa cities with a population over 2,000 are required to receive an annual audit.  Cities with population from 700 to 2,000 are required to be audited once every four years and cities with a population under 700 are not required to be audited, except by petition of the citizens.  The Cities had the option to hire a CPA firm or the Auditor of State to perform the audit through the request for proposal process, and cities paid a filing fee based on budgeted expenditures to the State Auditor’s Office with the submission of their report. 

Effective July 1, 2013, all Iowa cities with population over 2,000 will still be required to have an annual audit to be filed with the Auditor of State, however, cities with a population under 2,000 will receive examinations, not audits. 

Chapter 11.1(b) of the Code of Iowa states that examinations are defined as, “procedures that are less in scope than an audit but which are directed toward reviewing financial activities and compliance with legal requirements.”  Examinations will consist of procedures approved by the Auditor of State and will be at a lesser cost than audits.

Selection for the examinations will be based on population and budgeted expenditures.  Cities with under 2,000 population and $1 million or more in budgeted gross expenditures in two consecutive years will receive an annual examination.  Cities with under 2,000 population and less than $1 million in budgeted gross expenditures will pay an annual examination fee to the Auditor of State, but will only have an examination at least one every eight years.

Cities with under 2,000 population and $1 million or more in budgeted gross expenditures that require an annual examination may choose their auditor through the request for proposal process.  The Cities pay for their own examination and pay an examination filing fee to the Auditor of State.

Cities with under 2,000 population and less than $1 million in budgeted gross expenditures are subject to pay an annual examination fee to the Auditor of State to cover the costs of periodic examinations.  The Auditor of State will determine which cities will have examinations performed, will administer the request for proposal process and will pay for these examinations from annual examination fees collected.