Mississippi Municipal Audit and Accounting Guide
Municipal Budgeting
1
STATE OF MISSISSIPPI
OFFICE OF THE STATE AUDITOR
SHAD WHITE
STATE AUDITOR
July 1, 2022
TO THE GOVERNING AUTHORITIES OF ALL MISSISSIPPI MUNICIPALITIES
We are pleased to provide the 2022 Municipal Audit and Accounting Guide. This guide is
published by this office in cooperation with the Center for Government and Community
Development, Mississippi State University Extension Service.
Mississippi laws charge this office with prescribing various accounting procedures,
policies, and forms for use by all Mississippi municipalities. Accordingly, the procedures
presented in this guide are prescribed and are effective immediately.
Special attention has been given to providing municipal officials with an easy guide to
understand and follow. This guide should be reviewed by all appropriate officials and placed on
file with the municipal clerk.
Sincerely,
Auditor
Table of Contents
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SECTION I - MUNICIPAL BUDGETING
A. INTRODUCTION …….………................................................................................ 6
B. THE BUDGETARY PROCESS …………………………………………………... 9
C. LEGAL REQUIREMENTS …………………………………………………….... 12
D. PUBLIC BUDGET HEARINGS ………………………………...………………. 17
E. REGULATIONS AND
AMENDMENT REGULATIONS ……………………………………………….. 20
F. BUDGET FORMS ………………………………………………………………... 24
SECTION II - ACCOUNTING SYSTEM
A. ACCOUNTING GUIDELINES AND RECORDS SYSTEM
Purpose of the Accounting System ………………………………………………. 41
Responsibility for the Accounting System ………………………………………. 41
Funding the Accounting System …………………………………………………. 41
Public Access to Accounting Records……………………………………………. 41
Budgetary Support of Accounting Record………………………………………. 41
Accounting System Fiscal Year ….………………………………………………. 41
Accounting System Basis of Accounting ………………………………………… 42
Accounting System’s Required Records ………………………………………… 42
Ledgers ………………………………………………..…………………………… 42
Doubtful Accounts ……………………………………………………...………… 42
Cash Funds …………………………………………………………………...…… 43
Cash Receipt Warrants ……………………………………………………...…… 43
Cash Disbursement Warrants or Checks …………………………………..…… 43
Cash Receipts Journal …………………………………..…………………...…… 44
Cash Disbursements Journal …………………………………………………….. 44
Cash Receipts and Disbursements Ledger ……..……………………………….. 44
Municipal Clerk’s Monthly Cash Budget Report …………………………..….. 45
Table of Contents
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SECTION II - ACCOUNTING SYSTEM - continued
B. CLASSIFICATION AND CHART OF ACCOUNTS SYSTEM
Purpose of the Chart of Accounts ………………..………………………………. 46
Chart of Accounts Number System ………..………………………….…………. 46
How the Chart of Accounts Works ………..………………………….…………. 46
First Three Digits of the Chart of Accounts ………..………...…………………. 47
Definitions: Fund and Account Groups ………..…………......…………………. 48
Second Three Digits of the Chart of Accounts ……......……………………...…. 49
Third Three Digits of the Chart of Accounts ……......………………..……...…. 50
Account Extensions ……......…………………………………………………...…. 50
Summary of Chart of Accounts Classifications ……......………………….....…. 51
Classification of Fund and Account Group Numbers ……......……..…….....…. 52
Classification of Program and Department Function Numbers ……………….. 54
Classification of Operating Account Numbers ………………………………….. 58
C. PROPERTY ACCOUNTING SYSTEM
Introduction to Fixed Assets …………………………………………………...… 68
Classification of Fixed Assets ……………………………………………...…...… 69
Data Elements of Fixed Assets ………………………………….……………...… 70
Guidelines to Develop Cost of Fixed Assets ……………………………………... 71
Equipment Accounting Procedures ……………………………………………… 77
Capital Asset Financial Reporting Procedures ………………….……………… 78
Property Number System ………………………………………………………… 81
Property Tagging System ………………………………………………………… 82
Annual Inventory System ………………………………………………………… 83
Form - Annual Inventory of Property ……………………………...…………… 84
Form - Fixed Asset Subsidiary Ledger ………………………………………….. 85
Form - Fixed Asset Inventory Ledger:
Land …………………………………………………………………………… 86
Buildings ………………………………………………………………………. 87
Infrastructure and Improvements Other Than Buildings ………………… 88
Construction in Progress …………………………………………………….. 89
Mobile Equipment ……………………………………………………………. 90
Other Furniture and Equipment …………………………………………….. 91
Leases ………...………………………………………………………………... 92
Table of Contents
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SECTION III - SPECIAL PROCEDURES
A. OFFICIAL TRAVEL …………………………………………………………… 94
B. PETTY CASH FUNDS
Routine Petty Cash Fund Procedures …………………………………………. 96
Petty Cash Fund to Account for Procurement of Evidence ………………….. 99
C. MUNICIPAL COURT PROCEDURES
Accounting System …………………………………………………………….. 100
Partial Payment Accounting ………………………………………………….. 100
Refunds ………………………………………………………………………… 101
Uniform Traffic Tickets - Court Procedures ………………………………... 102
Uniform Traffic Ticket - State Auditor’s Regulations ……………………… 103
D. MUNICIPAL POLICE DEPARTMENT PROCEDURES
Improper Motor Vehicle Tag or Decal Procedure ……………….…………. 104
Uniform Traffic Tickets - Police Procedures ………………………………... 104
E. CONTRACTING WITH COLLECTION AGENCIES ……………………. 105
F. CONTRACTING TO ACCEPT CREDIT CARDS ………………………... 108
Table of Contents
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SECTION IV - MUNICIPAL AUDIT REQUIREMENTS
A. LEGAL REQUIREMENTS FOR THE AUDIT ……………………………… 112
B. GUIDELINES FOR MUNICIPAL OFFICIALS
Audit Contracts …………………………………………………………………. 114
Management’s Discussion and Analysis ……………………………………….. 114
Publication and Distribution of Annual Audit ………………………..……….. 114
Municipal Compliance Questionnaire …………………………...…………….. 118
C. GUIDELINES FOR MUNICIPAL AUDITORS
Qualifications and Procedures ………………………………………………..… 125
D. FINANCIAL REPORTING
Financial Audit for all funds of the municipality under either:
General Purpose Financial Reporting Framework (GAAP) or
Special Purpose Financial Reporting Framework (Cash Basis – OCBOA) 126
Compilation Report using OCBOA (Cash Basis) and
Agreed Upon Procedures ………………………...……………………… 126
Exemption from Compilation and Agreed Upon Procedures Report ……….. 130
E. EXAMPLES OF REPORTS AND SCHEDULES
Schedule of Investments ……………………………………………………. 131
Schedule of Capital Assets …………………………………………………. 132
Schedule of Long-Term Debt ……………………………………………… 133
Schedule of Surety Bonds for Municipal Officials ……………………….. 134
Suggested Compliance Audit Procedures ………………………………… 135
The Office of the State Auditor does not discriminate on the basis of race, religion, national
origin, sex, age, or disability.
Mississippi Municipal Audit and Accounting Guide
Municipal Budgeting
6
State laws require all municipalities to adopt and base their operations on a budget. These laws
require specific budgetary procedures and require the State Auditor to regulate the process.
This section of the guide explains budgetary requirements and procedures.
SECTION I - MUNICIPAL BUDGETING
A. INTRODUCTION …….………................................................................................ 6
B. THE BUDGETARY PROCESS …………………………………………………... 9
C. LEGAL REQUIREMENTS …………………………………………………….... 12
D. PUBLIC BUDGET HEARINGS ………………………………...………………. 17
E. REGULATIONS AND
AMENDMENT REGULATIONS ……………………………………………….. 20
F. BUDGET FORMS ………………………………………………………………... 24
Mississippi Municipal Audit and Accounting Guide
Municipal Budgeting - Introduction
7
Mississippi law requires municipalities to adopt a formal budget. Generally, a budget is a plan of
action for a fiscal year representing the choices of the governing authorities as to how the
municipality will allocate its limited resources among various competing demands. The budget
also serves to justify the need to levy taxes to support municipal operations.
Many different kinds of budgets exist, each designed for different purposes. However, Mississippi
law requires municipalities to use a particular type of budget and employ specific budgetary
procedures. Municipal governing authorities may adopt additional budgetary controls and
monitoring procedures so long as legally required procedures are followed. A useful working
definition of this particular budget is:
A statement by fund of estimated receipts, disbursements, and balances for the next
fiscal year, accompanied by other information that helps understand the fund
statements and the municipality's overall financial picture.
As a collection of financial decisions, a budget becomes a detailed plan of operations and capital
outlay for the fiscal year. The budget includes the activities and services the municipality plans to
provide its citizens during the fiscal year; physical improvements such as streets, water systems,
and buildings the municipality plans to construct (all or part of) during the fiscal year; the
expenditures required to support these operations and capital projections; and the resources
available for meeting the planned expenditures. The budget also addresses such policy issues as
debt service needs, cash management, purchasing requirements, taxation, and other revenue levels
and rates imposed upon local taxpayers.
Mississippi Municipal Audit and Accounting Guide
Municipal Budgeting - Introduction
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Importance of the Budget - Chart
The following chart demonstrates how the budget provides essential information on
governmental financial policies and practices for various users.
Users Information Purpose
The Public An opportunity to learn about Accountability
and understand the government's
public service programs and
policies
Governing Body An opportunity to judge the Control
adequacy of operating programs,
to establish level of services to
be rendered to the public, and to
provide input into the budgetary
process
Departments of An opportunity to justify the Planning
the Governmental department's programs and operations,
Unit to propose changes in services, and to
recommend changes in organization
and methods
Fiscal Financial An opportunity to review Control and
Officers/ organization, methods and procedures; Management
Comptroller/ to initiate improvements; and to select
Administrators problems for intense study
Grantors/ An opportunity to review the various Decision Making
Legislators/ programs of a government and their
Investors/Etc. costs and financial position for
decision making purposes
Mississippi Municipal Audit and Accounting Guide
Municipal Budgeting – The Budgetary Process
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An effective budget is best developed by employing a deliberate building process. The
recommended process encompasses several different activities and decisions over several months,
the result of which is the annual budget. The "Proposed Budget Calendar" presents the budgetary
process.
The stages of the recommended budgetary process are:
* Starting the process
* Preparing departmental budget requests
* Reviewing of departmental budgets by the municipality's governing authority
* Preparing the recommended annual budget
* Adopting and implementing the budget
Each budgetary process stage encompasses several activities and/or decisions. Responsibility for
carrying out the activities and making the decisions vary among governmental units, financial
administrators, and various departments of governmental units. The governing authority is
responsible for all policy decisions, including setting budgetary guidelines and adopting the annual
budget. The governing authority is responsible for preparing revenue estimates, reviewing
departmental budget requests, preparing a recommended annual budget, and implementing the
adopted annual budget. The departments of the governmental unit are responsible for preparing
and submitting appropriation requests for the ensuing budget year.
The budget process usually takes place over several months. The Proposed Budget Calendar
provides for a five-month budgetary period, but this schedule can be adjusted to meet the needs of
individual municipalities. However, adequate time must be provided so that the various budget
activities can be carried out and decisions made after proper review and consideration.
Budgeting is only one of many financial policy control mechanisms but it is the most basic and,
therefore, the most important. Municipal governments provide services to people, and the
financing of these services must be adequately planned and controlled in order to achieve the
maximum efficiency, economy, and effectiveness of the use of governmental financial resources;
minimize the tax burden upon local citizens; comply with applicable state law, contractual
provisions and professional financial management practices; and to assure that the government's
financial position is sound.
The municipal budgetary process should be a "building blocks" approach to the development of
the budget. Budget information is developed in a set of basic budget documents for estimating
revenues and departmental requests for expenditures.
Mississippi Municipal Audit and Accounting Guide
Municipal Budgeting - The Budgetary Process
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The initial step in the budgetary process involves estimating the amount of revenues, which can
be expected to be available for the coming fiscal year, setting budgetary guidelines, and
transmitting this information, together with the budget forms, to the municipal departments. This
preliminary work sets the stage for later decisions to be made by the municipal departments, the
municipal administration, and the governing authorities.
At the July meeting each year, the municipal departmental budgets should be submitted for
approval by the governing authorities.
The clerk/administrator is usually responsible for the next step in the budget process, which is
developing a proposed budget for the individual funds.
The total proposed budget should be presented at the August meeting of the board/council each
year and should be published at least one time during September. At least one (1) public hearing
must be held at least one (1) week prior to the final official adoption of the budget by September
15. Section 21-35-5 of the Mississippi Code Annotated.
During the budgetary process, the governing authorities are responsible for preparing a statement
showing every source of revenue, the amount received from each source through the last complete
month of the current fiscal year, and a projection for the entire current year Section 21-35-5.
The budget is presented in a format prescribed by the State Auditor, and all funds, which require
expenditure authorization from the governing authorities, must be budgeted individually and
amended by fund Sections 21-35-7, 21-35-9, & 21-35-25.
After the budget is completed, the board must, by resolution, adopt and approve the budget and
enter it in detail upon the minutes Section 21-35-9.
At each regular monthly meeting of the governing authorities, the clerk is to submit a financial
report showing the expenditures and liabilities incurred against each separate budget item during
the preceding month. This report also shows the unexpended balance of each budget item and the
unencumbered balance in each fund. During each meeting, the clerk must set forth the receipts
from all taxes and fees collected from all sources during the preceding month Section 21-35-13.
The governing authorities are to stay within the spending limits set by the budget and annual
revenue. The amount appropriated and authorized to be expended for any item in the budget must
not exceed the amount estimated in Sections 21-35-15 — 21-35-17.
Mississippi Municipal Audit and Accounting Guide
Municipal Budgeting - The Budgetary Process
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Proposed Budget Calendar
The following "Proposed Budget Calendar" establishes a common-sense schedule to complete
the budget process and comply with legal requirements.
Date Process
May Board Meeting Formulate budget policy (governing authorities)
May - Presentation Develop financial forecast (budget officer)
to the Governing
Authorities
June Board Meeting Distribute departmental request forms and notify of due date
(budget officer)
July Board Meeting Deadline for return of departmental request
August Board Meeting Act on request of departmental budgets (governing authorities)
August Board Meeting Publish notice of public hearing to consider the tax levies and
budget for the upcoming fiscal year
August (15-30) Hold a public hearing and adopt tax levies
September (1-15) Adopt budget no later than September 15
September (1-15) Publish or post adopted tax levy resolution
September (1-30) Publish the budget at least one time or post it in three public places
if less than 1,500 inhabitants
September (15-30) Write up and reproduce the budget as adopted (budget officer)
September (15-30) File the budget with the municipal clerk
September (15-30) Give public notice of the availability of the budget for inspection
(budget officer)
Mississippi Municipal Audit and Accounting Guide
Municipal Budgeting – Legal Requirements
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Mississippi laws require municipalities follow very specific budgetary procedures. These laws
attach a wide range of conditions to the preparation and use of the municipality's budget. The
following law overview should help the reader to achieve a general understanding of legal
requirements. For specific information on legal requirements, references to the related Mississippi
Code Sections are provided.
Planning Process Basics
Source of Authority
Statutory - "Municipal Budget Law" - Section 21-35-1. Chapter 35 of Title 21 contains
the statutory requirements that municipalities must follow.
Regulatory - Section 21-35-29. Authorizes the State Auditor to regulate the municipal
budget process.
Funds, Which Must be Budgeted - Sections 21-35-5 & 21-35-9.
Funds receiving revenues for the municipality.
Funds, which will require approval from the board/council for expenditure.
Proprietary funds (utility systems, etc.).
Municipal Reserve Fund, see Section 21-35-22.
Funds confiscated and forfeited in connection with drug and liquor cases,
See Sections 41-29-181 & 41-29-185.
Funds, Which do not have to be Budgeted -
Custodial-type funds do not require board approval to make disbursements.
These include various clearing funds (payroll, state court assessments, etc.).
Municipal Reserve Fund - Section 21-35-22
A municipal reserve fund is a fund to hold money in reserve for other funds for
a fiscal year’s unanticipated expenditures, which were otherwise, not budgeted.
These funds may only be spent by board order for reserve purposes
and as limited by the source of the reserve fund revenue.
Interest earned on fund investments must be credited to the reserve fund.
Mandatory Fiscal Year - Section 21-35-3. Requires an October through September 30
fiscal year.
Mississippi Municipal Audit and Accounting Guide
Municipal Budgeting - Legal Requirements
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Content of Budget - Section 21-35-5.
Revenues, which are to be credited to the budget. Revenues must be defined to the
minimum level prescribed by the State Auditor.
Expenditures, which are to be charged to the budget. Expenditures must also be defined
to the minimum level prescribed by the State Auditor; this would be the purpose
level.
Caution: Liability occurs if the budget is exceeded at the lowest level adopted.
Working cash balance (beginning and ending including investments).
This balance may be budgeted for the purpose of preventing cash flow problems
during the next fiscal year.
Ad valorem taxes may not be levied to accumulate capital for future years' capital
projects.
A statement showing the aggregate revenues collected and expenditures made during the
current fiscal year.
Basis of Budget - Section 21-35-23.
Revenues that are legally receipted (cash basis) from October 1 through September 30
may be credited to the budget.
Expenditures that may be charged to the budget are those which were legally budgeted,
incurred prior to the end of the fiscal year, and disbursed during the fiscal year or
within 30 days thereafter; if not paid within this period, they may be budgeted again
for payment in the next fiscal year.
Expenditures for uncompleted improvements in progress of construction may be charged
to the budget at any time.
Preparation Requirements
Section 21-35-7- Budget Forms.
The budget must be prepared on forms prescribed by the State Auditor; these forms are
published in the “Budget Process” section of the Mississippi Municipal Audit and
Accounting Guide.
Section 21-35-5.
The budget must be adopted on the board/council's minutes by September 15.
A public hearing must be held at least one week prior to the adoption of the budget.
The budget and the statement of current revenues and expenses must be published at least
once in September.
Municipalities with a population of 1,500 or more: publish in a newspaper published in
the municipality (in the county, if none in the municipality).
Municipalities with a population of less than 1,500: publish by posting in at least three
public places in the municipality.
Mississippi Municipal Audit and Accounting Guide
Municipal Budgeting - Legal Requirements
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Additional Adoption Process –
Section 27-39-203.
Form of the notice for the public hearing on tax levy and budget.
Requires a specific public hearing and notice publication.
Section 21-33-47.
Adopted tax levy resolution certified to the tax collector and the State Tax Commission
The resolution is published in a newspaper within the municipality one time or posted in
three public places if no such newspaper, within ten days after its adoption.
Accounting and Budgets
Accounting Records - Section 21-35-1.
The records must conform to the system prescribed by the State Auditor in the
Mississippi Municipal Audit and Accounting Guide.
The records must correspond to the budget line items and basis of accounting.
The city clerk must maintain the records and is liable for damages to the municipality if
records are not maintained as required.
A municipality may keep any additional records that it may need.
Monthly Budget Report - Section 21-35-13.
The city clerk must prepare a monthly report to the governing authorities showing for each
budgeted fund, the expenditures and liabilities incurred against the budget during the prior
month and year-to-date, with like information for receipts and unencumbered balances.
Budget Revisions - Section 21-35-25.
When Budgets are Revised
The budget may be revised at any time, except the governing authority is limited to one
revision during the first three months of its term of office.
The budget must be revised at the first meeting in July and every year thereafter if it
appears that budgeted revenues will not materialize.
Budget Revision Publication Requirement
Budget revisions resulting in more than a 10 percent change in a department's originally
adopted budget must be publicized in the same way the municipality published its
original budget. The publication must explain the revision, including amounts, need,
and purpose.
Mississippi Municipal Audit and Accounting Guide
Municipal Budgeting - Legal Requirements
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Emergency Expenditures - Sections 21-35-19 & 21-35-21.
The governing authority may, by unanimous vote, revise the budget without any public
hearings or notice, if an emergency situation exists as defined in Section 21-35-19.
Money may be borrowed to keep the budget in balance.
Expenditure Limitations and Liabilities
Exceeding the Budget Limitation - Section 21-35-15.
Expenditures shall not exceed budget estimates, measured at the lowest level adopted in the
budget, except for capital outlay, election expenses, and payment of emergency warrants.
Personal Liability for Exceeding the Budget
Personal liability exists for expenditures made, liabilities incurred, or warrants issued, except
upon proper court order or emergencies in excess of the budget (measured at the lowest level
adopted in the budget) Section 21-35-17.
Officials making or incurring excess expenditures or issuing warrants are liable
personally and upon their official bonds.
Governing authority members approving excess claims are liable for twice the amount of
the claims.
City clerks and governing authorities issuing excess warrants are liable for twice the
amount of the claims.
Special Compliance Requirements
Last Year of Term Expenditure Limitation - Section 21-35-27.
The governing authority is prohibited from charging against the budget more than one-
fourth of any item of the original budget from April through July of the last year of its term
of office, and the city clerk is prohibited from issuing a warrant in violation of this
provision. This prohibition does not apply to purchases made which are subject to Section
31-7-13, seasonal purchases, or emergency purchases.
Annual Audit of Municipality - Section 21-35-31
(see Section IV of this guide)
Every municipality must complete an audit within 12 months of the end of the fiscal year
(no-bid solicitation required).
The auditor must be a CPA or an auditor approved by the State Auditor.
The audit must be performed and reported as required by the State Auditor.
A synopsis of the audit must be published or a notice published with posting in three
places of the audit report.
Mississippi Municipal Audit and Accounting Guide
Municipal Budgeting - Legal Requirements
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Criminal Penalty - Section 21-35-33.
Any person violating any provision of Chapter 35 of Title 21 is guilty of a misdemeanor,
in addition to any other legal penalties.
Mississippi Municipal Audit and Accounting Guide
Municipal Budgeting – Public Budget Hearings
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Municipal Public Hearing Requirement
Section 21-35-5 requires municipal governing authorities to hold a public hearing at least one
week prior to the adoption of the final budget. Notice of this hearing must be published in the
same manner, as the municipality is required to publish its final budget. This means the notice
must be published in a municipal newspaper (county newspaper, if no newspaper exists in the
municipality); or for municipalities with a population of less than 1,500, posted in three public
places in the municipality. The proposed budget is not required to be published.
The budget hearing may be combined with the public hearing to consider the tax levies and budget
required by Section 27-39-203.
The format for this notice may be as follows:
A public hearing will be held on (Date) to provide the general public with an opportunity to
comment on the taxing and spending plan incorporated in the proposed budget of (Municipality)
for the fiscal year beginning October 1, 20XX, and ending September 30, 20XX. The meeting
will be held at (Place) at [Time (must be outside normal working hours)]. All interested citizens
are encouraged to attend and comment.
Additional Public Hearing Requirement (Taxing Entity)
Section 27-39-203 revised requires the governing body of all taxing entities to hold a public
hearing to consider the tax levies and budget for the upcoming fiscal year. The requirements for
this public hearing are different from those required under Sec. 21-35-5. Notice of the hearing
must be made by advertisement in a newspaper published at least five days a week in the county
unless the only paper in the county is published less than five days a week. The notice must be
published once each week for the two-week period preceding the adoption of the levy, and the
hearing must be no less than seven days after the day of the first advertisement.
Municipalities with a population of less than 2,000 and proposed tax levies not in excess of the
current fiscal year’s certified tax rate may advertise the public hearing by posting the required
notice of public hearing in three public places in the municipality.
(To comply with both public hearing laws timing of the public notices, hearing, and budget
adoption must be carefully planned.)
The form of the public notice is specified by Section 27-39-203, depending on if the proposed tax
levies for the upcoming fiscal year will exceed the current fiscal year’s certified tax rate. This
notice format may take the place of Section 21-35-5, the notice suggested above.
If the tax levies for the upcoming fiscal year do not exceed the current fiscal year’s certified tax
rate then the following notice should be used:
Mississippi Municipal Audit and Accounting Guide
Municipal Budgeting - Public Budget Hearings
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"NOTICE OF A PUBLIC HEARING ON THE PROPOSED BUDGET AND PROPOSED
TAX LEVIES FOR THE UPCOMING FISCAL YEAR FOR - (Name of the taxing entity)
The (name of the taxing entity) will hold a public hearing on its proposed budget and proposed tax
levies for fiscal year (insert the year) on (date and time) at (meeting place). The (name of the taxing
entity) is now operating projected total budget revenue of $_________. (____ percent) or
$__________ of such revenue is obtained through ad valorem taxes. For the next fiscal year, the
proposed budget has total projected revenue of $_________. Of that amount, (____ percent) or
$______, is proposed to be financed through a total ad valorem tax levy.
The decision to not increase the ad valorem tax millage rate for fiscal year (insert the year) above
the current fiscal year's ad valorem tax millage rate means you will not pay more in ad valorem
taxes on your home, automobile tag, utilities, business fixtures and equipment, and rental real
property unless the assessed value of your property has increased for fiscal year (insert the year).
Any citizen of (name of the taxing entity) is invited to attend this public hearing on the proposed
budget and tax levies for fiscal year (insert the year) and will be allowed to speak for a reasonable
amount of time and offer tangible evidence before any vote is taken."
If however, the tax levies for the upcoming fiscal year do exceed the current fiscal year’s certified
tax rate then the following notice should be used:
The remainder of page is intentionally left blank.
Mississippi Municipal Audit and Accounting Guide
Municipal Budgeting - Public Budget Hearings
19
"NOTICE OF A TAX INCREASE AND A PUBLIC HEARING ON THE PROPOSED
BUDGET AND PROPOSED TAX LEVIES FOR - (Name of the taxing entity)
The (name of the taxing entity) will hold a public hearing on a proposed ad valorem tax revenue
increase for fiscal year (insert the year) and on its proposed budget and proposed tax levies for
fiscal year (insert the year) on (date and time) at (meeting place).
The (name of the taxing entity) is now operating with projected total budget revenue of
$_________. (____ percent) or $__________ of such revenue is obtained through ad valorem
taxes. For next fiscal year, the proposed budget has total projected revenue of $_________. Of that
amount, (____ percent) or $______ is proposed to be financed through a total ad valorem tax levy.
For next fiscal year, the (name of the taxing entity) plans to increase your ad valorem tax millage
rate by _____ mills from _____ mills to _____ mills. This increase means that you will pay more
in ad valorem taxes on your home, automobile tag, utilities, business fixtures and equipment, and
rental real property.
Any citizen of (name of the taxing entity) is invited to attend this public hearing on the proposed
ad valorem tax increase, and will be allowed to speak for a reasonable amount of time and offer
tangible evidence before any vote is taken."
(b) If an increase in the tax levy is necessary only because of an increased funding request
made by a county district or any other cost which by law the county must fund and may not
decrease in amount, then the notice required by this subsection shall be used and the county
shall explain, in clear language in the notice, that the increase in the tax levy is necessary
only because of the increased funding request of the county district or other cost incurred.
It should be noted that if the ad valorem tax levy is not adopted at the Section 27-39-203 public
hearing, further advertisements will be required. .........................................
Mississippi Municipal Audit and Accounting Guide
Municipal Budgeting – Regulations and Amendment Regulations
20
Section 21-35-29 empowers the State Auditor to prescribe rules, regulations, and classifications
necessary to carry out the provisions of the municipal budgeting laws. Accordingly, the following
regulations are prescribed.
Budget Nature [Balanced Budget]
The nature of the budget is to project a balanced estimate of revenues, expenditures, and
cash/investment balances. Reasonable estimates must be made to justify the levy of ad valorem
taxes to balance the budget. A balanced budget means beginning cash/investments and revenues
equal expenditures and ending cash/investments.
Budget Detail
The minimum detail of the finally adopted budget is fund, department, and purpose. This means
there must be a separate budget for each fund; with amounts of money detailed for revenue items,
departmental purposes, and working cash balances. The following definitions apply to these terms.
Examples of this detail may be found in the municipal accounting system in section II of the
Mississippi Municipal Audit and Accounting Guide.
Budgeted Fund Definition
For purposes of budgeting, a fund is an account established to hold revenues of the municipality
available for expenditure by the municipal governing authorities. Separate funds should be set up
as required by law to account for a restricted purpose and continuing revenues. Funds not subject
to expenditure by the municipal governing authorities should not be budgeted; such as trust or
custodial funds (clearing accounts, etc.). Note: Legal fund revenues may not be excluded from
claim obligations by setting them aside as separate funds.
Budgeted Revenue Definition
For purposes of budgeting, revenue means cash receipts to a fund defined in sufficient detail to
show the nature of the revenue. This means definition by type of tax, fee, grant, loan, etc...
Budgeted Department Definition
A department is established by budgeting money within a fund for expenditure for a function
prescribed by state law or legal order of the municipal governing authorities. Departments must
be established so that responsibility for exceeding a department’s budget vests with one officer or
the board or council see Section 21-35-1.
Some departments must be budgeted as separate departments as a matter of funding the ability of
a statutory officer to perform statutory functions. Examples are police department, fire
department, court department, municipal clerk’s department, and mayor’s departments ex:
Sections 21-21-1, 21-25-1, 21-23-11, 21-15-21, and 21-3-15.
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Budgeted Department Definition - continued
Some obligations and appropriations of municipalities are by state law or municipal policy the
direct responsibility of the municipal board or council. In these cases, a municipal department
budget under the direct responsibility of the board or council may be established. Only the board
or council may initiate charges against this type of budget. Board or council departments are
typically for special purpose functions; such as to make money available for debt service, transfers,
donations, and similar appropriations.
Budgeted Department Purpose Definitions
The total amount available to each separately budgeted municipal department must be presented
by purpose. The following defined purposes (as appropriate) are the minimum acceptable
breakdown of a department’s budget.
Personnel Services
Personnel services include employee or officer salaries or compensation and their benefits.
Contractual Services
Contractual services are work or benefits that are provided to the municipality by contract.
Supplies
Supplies include material items provided.
Grants, Subsidies, and Allocations
Gants, subsidies, and allocations are appropriations and donations to others. These are
appropriations from a municipal fund to another entity when no obligation exists. Examples:
Sections 17-3-3, 21-19-65, 43-1-12, 17-19-1. Caution: Section 66 & 96 Miss. Constitution and
Section 21-17-5 limit authority to donate.
Debt Service
Debt service is principal debt and interest on debt. Example: Section 21-33-87.
Capital Outlay
Capital outlay includes material items providing benefits beyond a budget year.
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Transfers and Other Functions
Transfers are the appropriation of money from one fund to another. Examples: Section 27-105-
367 & 21-33-59. Other functions are all other charges to cash, such as thefts.
Working Cash Definition
A budgeted ending cash and investment balance in a fund sufficient to meet cash flow requirements
of the next fiscal year. This budget item is necessary when budgeted revenues will not be realized
until after expenditure requirements; such as bond maturities early in a fiscal year. Note: Sections
21-33-325 & 21-33-326 provide for certain revenue anticipation loans.
Year-End Accrual to Budget
Section 21-35-23 allows disbursements made within 30 days after September 30 to be charged to
the budget. This provision applies to obligations incurred prior to the end of the fiscal year and
intended (appropriated) to be paid from that year’s budget. To qualify for this chargeback, the
claim for payment (Section 21-39-9) must be approved and the check for payment is dated no later
than October 30.
If for some reason budgeted obligations cannot be paid by October 30, the next year’s budget
should be revised (Section 21-35-25) to provide for the payment after October 30. As a result of
not charging the prior year’s budget, additional cash is carried over to the new year’s budget
(beginning cash balance). This cash is then available to fund the budget revision.
Line Item Budgets
These regulations require municipal budgets to be adopted by fund, department, and purpose. A
municipal board or council may adopt a budget in greater detail, such as to the object level (line
item). However, it should be noted the penalty for exceeding the budget applies at the lowest level
adopted (Section 21-35-17).
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BUDGET AMENDMENT REGULATIONS
Section 21-35-25 provides for the revision of the final adopted budget. This law allows governing
authorities to revise the budget at any time. The only exception is that no revision may be made during the
first three months of a new term of office unless a deficit is indicated; then one revision may be made no
later than the last regular meeting in August.
It is mandatory that the governing authorities revise the budget (at a regular board meeting) to bring it into
proper balance at any time it appears revenues will not materialize and a deficit is indicated. This mandatory
revision must be made prior to the regular July meeting.
Public notice must be provided when budget amendments result in a 10 percent increase or decrease in a
municipal department's total budget. For purposes of determining if a 10 percent change has occurred, all
amendments made to a department's budget since its budget was originally adopted, or since the last adopted
published revision, must be added together.
The method of providing public notice for revisions is the same, as the municipality must use for the
publication of its final adopted budget (Section 21-35-5). This means authorities must publish it in a
municipal newspaper, or, for municipalities with a population of less than 1,500, post it in three (3) public
places.
The public notice must contain a description of the amendment, the amount of money and funds affected,
a detailed statement explaining the need and purpose of the amendment, and the vote of each member of
the municipality's governing authority on each amendment. It is not necessary to publish the entire budget,
only the portions affected by the budget amendments.
BUDGET REGULATIONS CLARIFICATION
Budget Nature (BUDGET MUST BE IN BALANCE)
The nature of the budget is to project a balanced estimate of revenues, expenditures, and cash/investment
balances. Reasonable estimates must be made to justify the levy of ad valorem taxes to balance the budget.
A balanced budget means beginning cash/investments and revenues equal expenditures and ending
cash/investments.
BUDGET AMENDMENT REGULATIONS
CLARIFICATION
Section 21-35-23 provides for charges to be made to the budget within 30 days after the end of the fiscal
year (see budget regulations). This extension for charges is also considered an extension for budget revision
purposes. This means the budget may be revised at any time during the fiscal year and within the 30-day
chargeback period.
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Sections 21-35-7 and 21-35-29 require the Office of the State Auditor to prescribe the form of the
budget. The following final budget forms are prescribed for this purpose and must be used for all
budgets and budget revisions.
These forms may be removed from the Municipal Audit and Accounting Guide and duplicates
made for use in budget preparations. The originals should be replaced in the manual for future
use. Municipalities may also substitute substantially equivalent forms to satisfy local preferences
and information requirements. The budget may also be developed and adopted by substituting
electronically generated forms as provided by Section 75-12-13.
These forms also include a column for “Estimated Total for Current Fiscal Year”. Section 21-35-
5 requires publication of the final budget, including a statement of revenues and expenses. This
column should satisfy the information required by this statute. The estimated total for the current
fiscal year should be the total of the available current year’s actual and estimated revenues and
expenditures. These figures provide a comparison of the coming year’s budget to a projection of
the current year’s actual revenues and expenditures.
The following worksheet forms are provided for the convenience of the municipality to assist in
the development of the final budget and are not required to be adopted as part of the final budget.
The remainder of the page is intentionally left blank.
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Budget Worksheet #1
DEPARTMENTAL PERSONNEL SERVICES REQUEST
Fiscal Year Ending __________
DEPARTMENT:
________________________________________________________________________
A. Personnel Costs
Positions
Requested
Annual Salary
Approved
Annual Salary
1.
$
$
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
TOTAL
$
$
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Budget Worksheet #1 - (Cont'd)
DEPARTMENTAL PERSONNEL SERVICES REQUEST
Fiscal Year Ending __________
B. Employer Costs
Requested
Annual Salary
Approved
Annual Salary
1. FICA
$
$
2. Retirement
3. Group Insurance
4. Unemployment Insurance
5. Workers' Compensation
6. Other
TOTAL
$
$
C. Summary
Requested
Annual Salary
Approved
Annual Salary
1. Total Personnel Costs
$
$
2. Total Employer Costs
TOTAL
$
$
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Budget Worksheet #2
DEPARTMENTAL CONTRACTUAL SERVICES REQUEST
Fiscal Year Ending __________
DEPARTMENT:______________________________________________________________
Item
Requested
Approved
1.
$
$
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
TOTAL
$
$
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Budget Worksheet #3
DEPARTMENTAL SUPPLIES REQUEST
Fiscal Year Ending __________
DEPARTMENT: _____________________________________________________________
Item
Requested
Approved
1.
$
$
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
TOTAL
$
$
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Budget Worksheet #4
DEPARTMENTAL CAPITAL OUTLAY REQUEST
Fiscal Year Ending __________
DEPARTMENT: _____________________________________________________________
Item
Requested
Approved
1.
$
$
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
TOTAL
$
$
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Budget Worksheet #5
DEPARTMENTAL BUDGET SUMMARY
Fiscal Year Ending __________
DEPARTMENT: _____________________________________________________________
1. Personnel Services
$
2. Contractual Services
3. Supplies
4. Capital Outlay
TOTAL
$
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Budget Worksheet #6
DEBT SERVICE SCHEDULE
Fiscal Year Ending __________
____________________________________________
(Type of Issues: General, Revenue, Other)
Issue
Bond
Redemption
Interest
Paid
Other
Charges
Total
1.
$
$
$
$
2.
3.
4.
5.
6.
7.
8.
9.
10.
TOTAL
$
$
$
$
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Budget Worksheet #7
GRANTS, SUBSIDIES, AND ALLOCATIONS SCHEDULE
(Appropriations and Donations,)
Fiscal Year Ending __________
DEPARTMENT(S): BOARD/COUNCIL
Who or Where Paid
Purpose - Reason
Authority
Total
1.
$
2.
3.
4.
5.
6.
7.
8.
9.
10.
TOTAL
$
$
$
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Budget Worksheet #8
TRANSFERS AND OTHER FUNCTIONS SCHEDULE
(Transfers and Cash Charges)
Fiscal Year Ending __________
DEPARTMENT(S): BOARD/COUNCIL
Fund Charged
Fund (or other)
Receiving
Function (Transfer
or Other)
Explanation for
Transaction
Total
1.
$
2.
3.
4.
5.
6.
7.
8.
Total Transfers
Total Other 1
Total Other 2
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__________________________________________
(MUNICIPALITY)
_____________________________
(Fund)
BUDGET OF ESTIMATED REVENUES AND EXPENDITURES
For the Fiscal Year Ended September 30, 20___
Final Budget Estimated Total
For Next For Current
Fiscal Year Fiscal Year
RECEIPTS
License and Permits $ ______________ $ ___________
Intergovernmental Revenues:
Federal Grants _______________ ____________
Federal Shared Revenues _______________ ____________
Federal Payments in Lieu of Taxes _______________ ____________
State Grants _______________ ____________
State Shared Revenues _______________ ____________
Grants from Local Units _______________ ____________
Charges for Governmental Services:
_____________________________________ _______________ ____________
_____________________________________ _______________ ____________
_____________________________________ _______________ ____________
_____________________________________ _______________ ____________
Fines and Forfeits _______________ ____________
Miscellaneous:
_____________________________________ _______________ ____________
_____________________________________ _______________ ____________
_____________________________________ _______________ ____________
_____________________________________ _______________ ____________
Charges for Utility Services:
_____________________________________ _______________ ____________
_____________________________________ _______________ ____________
_____________________________________ _______________ ____________
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Mississippi Municipal Audit and Accounting Guide
Accounting System
39
SECTION II - ACCOUNTING SYSTEM
A. ACCOUNTING GUIDELINES AND RECORDS SYSTEM
Purpose of the Accounting System ………………………………………………. 41
Responsibility for the Accounting System ………………………………………. 41
Funding the Accounting System …………………………………………………. 41
Public Access to Accounting Records……………………………………………. 41
Budgetary Support of Accounting Record………………………………………. 41
Accounting System Fiscal Year ….………………………………………………. 41
Accounting System Basis of Accounting ………………………………………… 42
Accounting System’s Required Records ………………………………………… 42
Ledgers ………………………………………………..…………………………… 42
Doubtful Accounts ……………………………………………………...………… 42
Cash Funds …………………………………………………………………...…… 43
Cash Receipt Warrants ……………………………………………………...…… 43
Cash Disbursement Warrants or Checks …………………………………..…… 43
Cash Receipts Journal …………………………………..…………………...…… 44
Cash Disbursements Journal …………………………………………………….. 44
Cash Receipts and Disbursements Ledger ……..……………………………….. 44
Municipal Clerk’s Monthly Cash Budget Report …………………………..….. 45
B. CLASSIFICATION AND CHART OF ACCOUNTS SYSTEM
Purpose of the Chart of Accounts ………………..………………………………. 46
Chart of Accounts Number System ………..………………………….…………. 46
How the Chart of Accounts Works ………..………………………….…………. 46
First Three Digits of the Chart of Accounts ………..………...…………………. 47
Definitions: Fund and Account Groups ………..…………......…………………. 48
Second Three Digits of the Chart of Accounts ……......……………………...…. 49
Third Three Digits of the Chart of Accounts ……......………………..……...…. 50
Account Extensions ……......…………………………………………………...…. 50
Summary of Chart of Accounts Classifications ……......………………….....…. 51
Classification of Fund and Account Group Numbers ……......……..…….....…. 52
Classification of Program and Department Function Numbers ……………….. 54
Classification of Operating Account Numbers ………………………………….. 58
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C. PROPERTY ACCOUNTING SYSTEM
Introduction to Fixed Assets …………………………………………………...… 68
Classification of Fixed Assets ……………………………………………...…...… 69
Data Elements of Fixed Assets ………………………………….……………...… 70
Guidelines to Develop Cost of Fixed Assets ……………………………………... 71
Equipment Accounting Procedures ……………………………………………… 77
Capital Asset Financial Reporting Procedures ………………….……………… 78
Property Number System ………………………………………………………… 81
Property Tagging System ………………………………………………………… 82
Annual Inventory System ………………………………………………………… 83
Form - Annual Inventory of Property ……………………………...…………… 84
Form - Fixed Asset Subsidiary Ledger ………………………………………….. 85
Form - Fixed Asset Inventory Ledger:
Land …………………………………………………………………………… 86
Buildings ………………………………………………………………………. 87
Infrastructure and Improvements Other Than Buildings ………………… 88
Construction in Progress …………………………………………………….. 89
Mobile Equipment ……………………………………………………………. 90
Other Furniture and Equipment …………………………………………….. 91
Leases ………..………………………………………………………………... 92
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Purpose of the Accounting System
A properly operating municipal accounting system must comply with Mississippi legal
requirements. These requirements are intended to provide a system that will present information
to the officers and employees of the municipality for the proper operation and management of the
municipality. The system is also designed to provide the public, municipal auditors, and regulatory
agencies, such as the Office of the State Auditor, with the information they may require.
Responsibility for the Accounting System
Section 21-35-11 of the Mississippi Code Annotated requires the clerk of the municipality to open
and keep the books and records of the accounting system. This means the municipal clerk is
responsible for the accounting records and, at all times, should ensure they are secure from loss,
damage, and alteration.
Funding the Accounting System
Governing authorities should provide for funding for accounting records within the municipal
clerk's department. The cost of accounting records should be paid from the municipal general
fund. The costs of accounting records required for some special funds (such as utility system
funds) may be paid from those funds or reimbursed to the General Fund.
Public Access to Accounting Records
Section 21-35-11 requires accounting records to be available for inspection by any citizen during
regular office hours. The open records laws Chapter 61 of Title 25, also require that books and
records be available to the public for inspection and copying. Municipal authorities should review
the open records laws and develop appropriate policies.
Budgetary Support of Accounting Records
Section 21-35-11 makes clear the primary objective of accounting records is to present financial
information in such a way that the status of the budget can be easily determined by anyone
comparing the records to the adopted budget. This law requires the books must contain headings
and accounts corresponding with those adopted in the municipal budget. These headings and
accounts should clearly present the purpose of each expenditure group and the source of each item
of revenue.
Accounting System Fiscal Year
Accounting records must be maintained on a fiscal year beginning October 1 and ending on
September 30. This is necessary for financial information to be comparable with the municipal
budget Section 21-39-5.
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Accounting System Basis of Accounting
Accounting records must be maintained on a cash basis. This means transactions are recorded
when cash is received, or disbursements are made during the fiscal year. The only exception to
this rule is if claims are received prior to the end of the current fiscal year and paid within thirty
days after the end of the current fiscal year, these payments may be recorded within the current
fiscal year's records. This is necessary for the financial information to be comparable with the
municipal budget Section 21-35-23.
Accounting System Required Records
Certain records must be maintained by all municipalities. The following list explains what these
record requirements are and their minimum content. It should also be understood any other records
required by law or other regulation must also be maintained, even though they may not be included
in this list.
The design and overall content of these records may also vary with the needs of each municipality.
Records may be maintained manually or electronically as provided by Section 75-12-13.
Municipalities may maintain any additional records they deem appropriate for their needs.
Additional records may be necessary to meet reporting requirements associated with grants, loans,
contracts, or federal law.
Ledgers
Records of the municipality’s assets and liabilities must be maintained. This means a separate
ledger must be maintained to define each of the municipality’s asset and liability classifications.
The ledger must contain sufficient information to define the nature and source of individual assets
or liabilities listed. This requirement is to cover classifications such as receivables, investments,
and debt obligations, which are not otherwise covered in this guide, state law, or other regulations.
Doubtful Accounts
Municipal governing authorities may determine the collection of certain receivables is doubtful.
Such a finding may be required for financial reporting purposes. However, records of doubtful
receivables must be maintained. (Section 100, Miss. Constitution prohibits the forgiving of
receivables without legislative authority.)
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Cash Funds
A cash fund is established to account for designated receipts and disbursements. This
accountability is necessary to demonstrate compliance with legal or other restrictions. The total
number of funds should be kept to a minimum by placing revenues in funds with similar purposes;
for example, funds available for all legal municipal purposes should be placed in the General Fund.
A special fund must be set up to account for any continuing revenue item with legally restricted
expenditures. For example, proceeds of special ad valorem tax levies, state insurance rebate
receipts, and littering fines are revenues that must be accounted for in special funds. A separate
bank account is not necessary for a fund unless required by law or contractual obligation.
Cash Receipt Warrants
All cash collections must be documented by the issuance of receipt warrants. Receipt warrants
must be pre-numbered and accounted for. The receipt warrant form must provide space for the
date issued, amount of money received, from whom the money was received, to what fund(s)
money was deposited, the purpose of money received, and the signature of the municipal official
who issued the receipt warrant. The receipt warrant must also contain sufficient copies to provide
for a municipal record and a copy for the person(s) or entity paying the money. Other copies may
be necessary, depending upon the needs of the municipality's total accounting system.
The receipt must itemize all items of costs or services if the payer makes a request for an “itemized
receipt.” However, it is not required that a copy of a receipt (routine or itemized) be delivered to
the payer unless requested.
Cash Disbursement Warrants or Checks
Sections 21-39-5 & 21-39-13 require and explain the legal content of disbursement warrants and
checks. Disbursement warrants and checks must be pre-numbered and accounted for; on their
faces, they must express the date issued, amount of money payable, to whom payable, from what
treasury and fund payable, the purpose and municipal minute book authorizing the payment, claim
number, the seal of the municipality, and space for the mayor (or majority of the board/council) to
sign and the municipal clerk to attest. The disbursement warrant or check must also contain a copy
to provide for a municipal record. Other copies of the disbursement warrant or check may be
necessary, depending upon the needs of the municipality's total accounting system.
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Cash Receipts Journal
All cash receipts must be recorded in cash receipts journals. A separate journal must be maintained
for each fund. Each journal must be set up on a fiscal year basis, kept in receipt warrant number
order, and totaled monthly with a summary of collections by fund and objective function.
Each journal must have separate columns, so the entry(s) for each receipt warrant will be recorded
to show the receipt warrant date, receipt warrant number, payer, and amount(s) received. Each
journal should also have columns to classify the amounts received by the functional nature of the
receipt and the objective function account(s) the money was credited to. It may be necessary to
have more than one entry for one receipt number.
Cash Disbursements Journal
All cash disbursements must be recorded in a cash disbursements journal. A separate journal must
be maintained for each fund. This journal must be set up on a fiscal year basis, kept in
disbursement warrant number order, and totaled monthly with a summary of the payments,
department, and objective function.
Due to a special provision in Section 21-35-23, claims recorded prior to the end of the fiscal year
but paid within 30 days after the end of the year, maybe charged to the month of September. This
means journals are held open for one month to accommodate these disbursements. This process
is necessary for accounting records to coincide with the legally adopted budget.
Each journal must have separate columns, so the entry(s) for each disbursement warrant will be
recorded to show the disbursement warrant date, disbursement warrant number, payee, and
amount(s) paid. The journal should also have columns to classify the amounts paid by
department(s) and objective function account(s) to be charged. It may be necessary to have more
than one entry for one disbursement warrant. Care should be taken to classify disbursement
warrants to the proper funds, departments, and objects so compliance with budget laws will be
demonstrated.
Cash Receipts and Disbursements Ledger
A cash receipts and disbursements ledger must be maintained for each fund. These ledgers are
designed to present monthly and annual totals of cash received and disbursed from the funds.
Each ledger record must present the departments and object columns to correspond to those used
in the cash receipts and disbursements journals for the corresponding fund. Each month
summarized totals from each fund’s cash receipts, and cash disbursements journals should be
posted to their corresponding ledgers. At the end of the fiscal year, the postings to the ledger
should be totaled to present the total fiscal year’s receipts and disbursements.
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Municipal Clerk's Monthly Cash Budget Report
Section 21-35-13 requires the municipal clerk to prepare a budget report to be presented to the
governing authority at the regular meeting each month. This report is intended to provide
information to the board/council so it can determine the status of the budget. This information is
important for the proper management of municipal finances and for the claims approval process.
Approval of claims that result in the budget being exceeded could result in liability of the
governing authority Section 21-35-17.
For receipts - This report should show the total amount received for the fiscal year through the
preceding month for property taxes and each other revenue item.
For disbursements - The report must show the status of each department's budget. This means
totals for each item adopted in the department's budget. These totals are as follows:
* Charges to each budget item from the beginning of the fiscal year through the end of the
previous month - This means the total of disbursements and any unpaid claims previously
approved;
* Charges to each budget item for the previous month - This means the total of disbursements
and any unpaid claims approved at the previous month's board/council meeting;
* The total balance of each budget item - This means the total budget item less the charges to
the item for the year; and
* The total balance of each budget item as it will be if the board/council approves claims
currently under consideration.
Other information - The report may contain such additional information as the board/council
may request (See Section 21-39-19). For example, it is recommends that a listing of each
municipal fund and with its cash balance be included.
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Purpose of Chart of the Accounts
The classification and chart of accounts system was developed to provide an accounting for
expenditures and revenues on a basis consistent with the municipal budget. The system is also
designed to provide information necessary for other purposes, such as financial reporting. The
accounts in the chart are intended to define the purpose of expenditures and the source and nature
of revenues.
Chart of Accounts Number System
The accounts listed in the chart should be sufficient to meet the needs of most municipalities.
Additional accounts may be added, and accounts may be subdivided as needed. Accounts numbers
for funds, departments, or objects not required or beneficial to the interest of the municipality may
be deleted, provided sufficient accounts are used to demonstrate compliance with budget laws and
other state legal compliance laws.
Numbers have been assigned to these accounts for organizational purposes and easy reference.
Some numbers have not been assigned. Municipal authorities may adopt a different set of numbers
for use with this chart of accounts. This may be necessary if the assigned numbers are not flexible
enough to meet the needs of the municipality or are not consistent with the accounting software
used by the municipality. If a different set of numbers is adopted for the chart of accounts, the
municipality must maintain a reference record to clearly associate each number with the account
it represents.
How the Chart of Accounts Works
This is a cash-basis system designed to meet the mandatory requirement that a municipality
maintain accounting records readily showing the status of compliance with its budget Section 21-
35-11. The system accounts for cash activity by associating a nine-digit code and optional
extensions to each transaction. The nine digits are separated into three groups of three each, so
each transaction will be defined in terms of fund affected, department or function related, and
purpose. Extensions separated from the primary number by a decimal point may be added for
further classification purposes.
Also included in the system are supplemental (non-mandatory) classifications to account for assets,
liabilities, etc.
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First Three Digits of the Chart of Accounts
The first set of three digits of the nine-digit code identifies the fund affected by the financial
transaction. The numbers in these three digits are divided into groups to categorize the funds used.
Accounting numbers are also provided for supplemental records for long-term debt and fixed
assets. These numbers should be used to organize long-term debt and fixed asset information for
governmental financial reporting purposes.
Fund and Account Groups
General Funds From 001 to 099
Special Revenue Funds 100 to 199
Debt Service Funds 200 to 299
Capital Projects Funds 300 to 389
Permanent Funds 390 to 399
Enterprise Funds 400 to 499
Internal Service Funds 500 to 599
Private Purpose Trust Funds 600 to 649
Custodial Funds 650 to 699
For Future Expansion 700 to 799
Long-term Debt 800
Capital Assets 900
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Definitions: Fund and Account Groups
General Fund - To account for the municipal general fund and funds created and budgeted by
local option to account for money that could have been accounted for within the General Fund
(See budget regulations).
Special Revenue Funds - To account for funds required by law to be accounted for within a
separate fund that does not fall within any of these other fund groups (such as proceeds of a
special tax levy).
Debt Service Funds – Funds used to account for funds designated by law for debt payments
(such as a tax levy or assessment to repay bonded debt).
Capital Projects Funds – Funds used to account for funds designated by law for capital
projects (such as proceeds of any bond issue).
Permanent Funds – Funds used to account for funds legally restricted to the expenditure of
their earnings, expenditure of principal is prohibited; and where expenditure is for
governmental purposes.
Enterprise Funds – Funds used to account for utility funds (such as funds required for utility
system operations by Chapter 27 of Title 21).
Internal Service Funds - To account for funds received by a municipal department from
another municipal department for services rendered (such as a municipal repair shop or legal
department).
Private Purpose Trust Funds – are funds used to account for funds for trust arrangements
where principal and income benefit others (individuals, private organizations, or other
governments).
Custodial Funds – are funds used to account for funds not subject to expenditure control of
the municipality's board/council (such as payroll clearing or the employment security trust
fund, state court assessments, etc.).
Long-term Debt – are separate accounting numbers to be used with the municipality's debt
accounting system and to organize information for financial reporting purposes.
Capital Assets – are separate accounting numbers to be used with the property accounting
system prescribed in this guide and to organize information for financial reporting and other
municipal purposes.
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Second Three Digits of the Chart of Accounts
The second set of three digits of the nine-digit code identifies the department or program affected
by the financial transaction. The numbers in these three digits are divided into groups to categorize
the functions of the departments. These functional groups are for financial reporting purposes and
may not be used to group departments into a single budget. The following table lists the range of
numbers available for departmental or program functions.
Program and Department Functions
Program Functions:
Define as Appropriate From 001 to 099
Departmental Functions:
General Government From 100 to 199
Public Safety 200 to 299
Public Works 300 to 399
Health and Welfare 400 to 499
Culture and Recreation 500 to 599
Conservation of Natural Resources 600 to 649
Economic Development and Assistance 650 to 699
Enterprise 700 to 799
Debt Service 800
Inter-fund Transactions / Other 900
It is required that each budgeted department be accounted for separately so the status of the budget
is readily apparent Section 21-35-11. A separate number must be assigned to each municipal
department. Expenditure transactions must be coded with the department function number of the
department whose budget will be charged.
Revenue transactions must also be coded with a program or department function number if the
municipality is required to prepare full-scope financial statements (See Section IV of this guide).
Revenue coding is not required if the municipality qualifies for and elects to prepare a limited
scope financial report.
Revenue classification is determined by identifying the department associated with the revenue.
If a revenue item is not associated with a department, it should be classified by function. For
example, fees produced by department activity, grants for the operation of the department, etc.
should be classified using that department’s number. Revenues that are not associated with
specific department functions should be classified as general functions. Revenues that are not
associated with a single department or available for general municipal use may be assigned a
separate function number.
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Second Three Digits of the Chart of Accounts – continued
The "Summary of Classification of Accounts for Municipalities” provides specific program
function numbers to classify each department, and program numbers for revenues not associated
with a specific department. The summary also includes a “most probable classification”
department or program function number (in parentheses) by the revenue operating account
numbers.
Third Three Digits of the Chart of Accounts
The third set of three digits of the nine-digit code provides for the objective account number. The
numbers in these three digits are divided into groups to classify transactions by their nature and at
the minimum detail level required for municipal budgeting. These numbers should be assigned to
define the information required for financial reporting and other purposes to be determined locally.
Objective Functions
Assets and Other Debits From 001 to 099
Liabilities and Other Credits 100 to 199
Receipts 200 to 399
Disbursements for Personnel Services 400 to 499
Disbursements for Supplies 500 to 599
Disbursements for Contractual Services 600 to 699
Disbursements for Grants, Subsidies and Allocations 700 to 799
Disbursements for Debt Service 800 to 899
Disbursements for Capital Outlay 900 to 949
Transfers and Other Functions 950 to 999
Account Extensions
An account extension is one or more numbers positioned after a decimal at the end of the assigned
account number. Extension numbers are used to define separate financial information in an
account when it is not practical to establish a separate account.
Municipalities preparing financial statements in accordance with generally accepted accounting
principles (see Section IV of this guide) will require additional financial information, such as when
expenditures are associated with a capital project. Extensions are used for this purpose or any
other good reason; such as tracking special projects, year of agreement, compiling operating costs
of a particular vehicle or monitoring an individual’s travel expenses.
Extensions may be added to any of the three classification groups (Fund, Function or Department,
or Object). If extensions are used, they must be defined in writing by the municipal clerk and on
file in the municipal clerk’s office.
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Summary of Chart of Accounts Classifications
Series of Numbers for Funds and Accounts
Fund
Number (---)
Department
or Function
Number (---)
Operating Account
Number (---)
Fund and Account Groups:
General Funds
Special Revenue Funds
Debt Service Funds
Capital Projects Funds
Permanent
Enterprise Funds
Internal Service Funds
Private Purpose Trust Agency
Custodial Funds
For Future Expansion
Long-term Debt Accounts
Fixed Assets Accounts
001-099
100-199
200-299
300-389
390-399
400-499
500-599
600-649
650-699
700-799
800
900
Program Functions:
Department Functions:
General Government
Public Safety
Public Works
Health and Welfare
Culture and Recreation
Conservation and Natural resources
Economic Development and Assistance
Enterprise
Debt Service
Inter fund Transactions
001-099
100-199
200-299
300-399
400-499
500-599
600-649
650-699
700-799
800
900
Objective Functions:
Assets and Other Debits
Liabilities and Other Credits
Receipts
Disbursements:
Personnel Services
Supplies
Contractual Services
Grants, Subsidies and Allocations
Debt Service
Capital Outlay
Transfers and Other Functions
001-099
100-199
200-399
400-499
500-599
600-699
700-799
800-899
900-949
950-999
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Classification of Fund and Account Group Numbers
Fund Accounts
Fund
Number (---)
Department
Or Function
Number (---)
Operating Account
Number(---)
GENERAL FUNDS (001-099):
Local Source Funds (001-049)
General Fund
Court Fines
Not Assigned
State/Federal Source Funds (050-099)
Not Assigned
001
002
003-049
050-099
SPECIAL REVENUE FUNDS (100-199):
Local Source Funds (100-149)
Parks and Recreation Fund
Library Fund
Garbage and Solid Waste Fund
Litter Prevention Fund
Fire Protection Fund
Insurance Rebate Fund
Not Assigned
State/Federal Source Funds (150-199)
Community Development Block Grant Fund
Not Assigned
100
101
102
103
104
105
106-149
150
151-199
DEBT SERVICE FUNDS (200-299):
General Obligation Bonds
Certificates of Indebtedness
Not Assigned
200-224
225-249
250-299
CAPITAL PROJECTS FUNDS (300-399):
Governmental Purposes
Enterprise Purposes
Not Assigned
300-349
350-374
375-389
PERMANENT FUNDS (390-399):
Cemetery Perpetual Fund
Not Assigned
390
391-399
ENTERPRISE FUNDS (400-499):
Utilities:
Recreational Facilities:
Not Assigned
400-449
450-474
475-499
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Classification of Fund and Account Group Numbers - continued
Fund Accounts
Fund
Number (---)
Department
Or Function
Numbers(---)
Operating
Account
Number (---)
INTERNAL SERVICE FUNDS (500-599):
Central Garage and Motor Pool
Central Printing and Duplicating
Central Purchasing and Stores
Central Data Processing
Legal Services
Not Assigned
500
501
502
503
504
505-599
PRIVATE PURPOSE TRUST FUNDS (600-649):
Museum Trust Fund
Not Assigned
600
601-649
CUSTODIAL FUNDS (650-699)
State Assessment Clearing
Payroll Clearing
Cash Bail Bond Fund
Performance Bond Deposit Fund
Not Assigned
650
651
652
653
654
655-699
FOR FUTURE EXPANSION
700-799
LONG-TERM DEBT
800
CAPITAL ASSETS
900
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Department Accounts
Fund
Number (---)
Department
Or Function
Number (---)
Operating
Account
Number (---)
PROGRAM FUNCTIONS (001-099)
General
Education
Not Assigned
GENERAL GOVERNMENT (100-199):
Legislative (100-109):
Board, Council or Commission
Not Assigned
Judicial (110-119):
Court
Not Assigned
Executive (120-129):
Mayor
City Manager
Boards and Commissions
Not Assigned
Elections (130-139):
Elections
Not Assigned
Financial Administration (140-159):
General Finance:
General Supervision (City Clerk)
Tax Administration
Not Assigned
Legal (160-169):
Attorney and Staff
Not Assigned
Purchasing (170-179):
Purchasing Agent
Not Assigned
Personnel Administration (180-189):
Personnel Administration
Not Assigned
Other General Government (190-199):
Planning and Zoning
Data Processing
General Government Building and Plant
Not Assigned
001
002
003-099
100
101-109
110
111-119
120
121
122
123-129
130
131-139
140
141
142-159
160
161-169
170
171-179
180
181-189
190
191
192
193-199
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Department Accounts
Fund
Number (---)
Department
Or Function
Number (---)
Operating
Account
Number (---)
PUBLIC SAFETY (200-299):
Police (200-259):
Police Administration
Not Assigned
Crime Control and Investigation:
Criminal Investigation
Vice Control
Patrol
Records and Identification
Youth Investigation and Control
Custody of Prisoners
Custody of Property
Crime Laboratory
Not Assigned
Traffic Control:
Not Assigned
Police Training:
Police Training
Not Assigned
Support Service:
Communications Service
Automotive Service
Ambulance Service
Medical Services
Not Assigned
Special Detail Service:
Special Detail Service
Not Assigned
Police Station and Building:
Police Station and Building
Not Assigned
Fire (260-269):
Fire Administration
Fire Fighting
Fire Prevention
Fire Training
Fire Communications
200
201-209
210
211
212
213
214
215
216
217
218-219
220-229
230
231-239
240
241
242
243
244-249
250
251-254
255
256-259
260
261
262
263
264
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Department Accounts
Fund
Number (---)
Department
Or Function
Number (---)
Operating
Account
Number (---)
Fire Repair Service
Medical Service
Fire Stations and Buildings
Not Assigned
Corrections (270-279):
Jail
Juvenile Correctional Institutions
Not Assigned
Protective Inspection (280-289):
Building Inspection
Plumbing Inspection
Electrical Inspection
Gas Inspection
Not Assigned
Other Protection (290-299):
Civil Defense
Traffic Engineering
Flood Control
Not Assigned
265
266
267
268-269
270
271
272-279
280
281
282
283
284-289
290
291
292
293-299
PUBLIC WORKS (300-399):
Public Works Administration:
Street Department (301-319):
Streets
Street Lighting
Not Assigned
Sanitation and Waste Removal (320-349):
Sanitary Administration
Street Cleaning
Waste Collection
Waste Disposal
Not Assigned
Sewage Collection and Deposit:
Not Assigned
Other:
Weed Control
Not Assigned
Not Assigned
300
301
302
303-319
320
321
322
323
324-329
330-339
340
341-349
350-399
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Department Accounts
Fund
Number (---)
Department
Or Function
Number (---)
Operating
Account
Number (---)
HEALTH AND WELFARE (400-499):
Health (400-449):
Communicable Disease Control:
Rabies and Animal Control (Dog Pound)
Not Assigned
Other Communicable Diseases:
Extermination of Rodents, Mosquitoes
and Flies
Not Assigned
Not Assigned
Welfare (490-499):
400
401-409
410
411-419
420-449
450-499
CULTURE AND RECREATION (500-599):
Culture (500-549)
Recreation (550-599)
500-549
550-599
CONSERVATION OF NATURAL RESOURCES
(600-649):
Municipal Drainage
Not Assigned
600
601-649
ECONOMIC DEVELOPMENT AND ASSISTANCE (650-
699):
Economic Development Administration
Industrial Recruitment
Advertising Municipal Resources
Not Assigned
650
651
652
653-699
ENTERPRISE (700-799):
Administrative and General
Finance and Customer Accounts
Operation and Maintenance Of:
Buildings, Grounds and Equipment
Structures and Improvements
Transmission and Distribution
Treatment and Purification Operations
Pumping Operations
Source of Supply (Reservoir and Wells)
Sanitary Sewer Lines
Not Assigned
Debt Service
Not Assigned
700
710
720
721
722
723
724
725
726
727-729
730
740-799
DEBT SERVICE (800):
800
INTERFUND TRANSACTIONS (900):
900
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Operating Accounts
58
Operating Accounts
Fund
Number (---)
Department
Or Function
Number(---)
Operating
Account
Number (---)
ASSETS AND OTHER DEBITS (001-099):
Assets and Investments: (001-018):
Cash in Bank
Not Assigned
Investments
Not Assigned
Petty Cash
Not Assigned
Cash With Fiscal Agent
Receivables: (019-064)
Accrued Interest Receivable
Property Taxes Receivable
Accounts Receivable
- Allowance for Uncollectible Accounts
Fines Receivable
- Allowance for Uncollectible Accounts
Loans Receivable
Capital Lease Receivable
Assessments Receivable:
Not Assigned
Intergovernmental Receivable
Other Receivables
Due from Other Funds
Not Assigned
Advances to Other Funds
Due From Component Units
Due From Primary Government
Not Assigned
001
002-007
008
009-014
015
014-017
018
019
020
021
022
023
024
025
026
027
028-049
050
051-052
053
054-055
056
057
058
059-064
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Operating Accounts
Fund
Number (---)
Department
Or Function
Number(---)
Operating
Account
Number (---)
Prepaid Expenses: (065-069)
Prepaid Insurance
Not Assigned
Inventories: (070-074)
Inventory - Materials and supplies
Inventory - Held for Resale
Not Assigned
Restricted Assets: (075-079)
Restricted Cash and Cash Equivalents
Restricted Investments
Not Assigned
Capital Assets: (080-099)
Land
Construction-in-Progress
Buildings -
- Accumulated Depreciation
Improvements Other Than Buildings -
- Accumulated Depreciation
Mobile Equipment -
- Accumulated Depreciation
Other Furniture and Equipment -
- Accumulated Depreciation
Leased Property Under Finance Leases -
- Accumulated Depreciation
Infrastructure - Streets -
- Accumulated Depreciation
Infrastructure - Bridges -
- Accumulated Depreciation
Other Capital Assets - One -
- Accumulated Depreciation
Not Assigned
065
066-069
070
071
072-074
075
076
077-079
080
081
082
083
084
085
086
087
088
089
090
091
092
093
094
095
096
097
098-099
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Operating Accounts
Fund
Number (---)
Department
Or Function
Number(---)
Operating
Account
Number (---)
LIABILITIES, EQUITIES, AND
OTHER CREDITS (100-199):
Claims Payable
Due to Primary Government
Due to Component Unit
Liabilities Payable From Restricted Assets
Net Wages Payable
Workmen’s Compensation Payable
Garnishments Payable
Retained Payables
Deposits Payable
Not Assigned
Intergovernmental Payables: (121-147)
Due to Federal Government: (121-129)
Not Assigned
Social Security FICA Payable
Federal Withholding Tax Payable
Not Assigned
Due to State Government: (130-146)
Not Assigned
Judicial Assessments
Not Assigned
State Withholding Tax
Retirement System
Not Assigned
Due to Local Governments
Due to Other Funds
Not Assigned
Advances From Other Funds
Matured Bonds and Interest Payable
Accrued Interest Payable
Deferred Revenue: (154-158)
Property Taxes
Federal
Garbage Fees
Lease Principal Payable
Lease Interest Payable
Not Assigned
100
101
102
103
104
105
106
107
108
109-120
121
122
123
124-129
130
131
132-133
134
135
136-146
147
148
149-150
151
152
153
154
155
156
157
158
159-160
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Operating Accounts
Fund
Number (---)
Department
Or Function
Number(---)
Operating
Account
Number (---)
Long Term Debt
Due Within One Year (161-183)
Not Assigned
Compensated Absences Payable
Claims and Judgments Payable
Certificates of Indebtedness
Finance Leases Payable
General Obligation Capital Bonds Payable
General Obligation Operation Bonds Payable
Not Assigned
Due In More Than One Year (184-189)
Limited Obligation Capital Bonds
Limited Obligation Operational Bonds
Revenue Bonds
Other Long Term Debt
Not Assigned
Equities (190-199)
Fund Balance - Unreserved
Fund Balance - Reserved for
Advances to Other Funds
Fund Balance - Reserved for Inventory
Other Reserve Fund Balance
Not Assigned
161-162
163
164
165
166
167
168
169-183
184
185
186
187
188-189
190
191
192
193
195-199
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Operating Accounts
Fund
Number (---)
Department
Or Function
Number(---)
Operating
Account
Number (---)
RECEIPTS (200-399):
Taxes (200-219):
General Property Taxes:
Real
Personal:
Automobiles
Other
Prior Year Taxes:
Real
Automobile
Other
Payments in Lieu of Taxes
Not Assigned
Penalties and Interest on Delinquent Taxes
Other Taxes (211-219)
Not Assigned
Licenses and Permits (220-229):
Privilege Licenses
Franchise Charges - Utilities
Permits - Building
Not Assigned
Intergovernmental Revenues (230-279):
Federal Operating Grants:
Public Safety
Public Works
Health and Welfare
Culture and Recreation
Education
Conservation of Natural Resources
Economic Development
Federal Capital Grants:
Public Safety
Public Works
Health and Welfare
Culture and Recreation
Education
Conservation of Natural Resources
Economic Development
Federal Enterprise Fund Grants:
Operating Grants
Capital Grants
Not Assigned
(001)
(001)
(001)
(001)
(001)
(280-289)
(200-299)
(300-399)
(400-499)
(500-599)
(002)
(600-649)
(650-699)
(200-299)
(300–399)
(400-499)
(500 or 599)
(002)
(600-649)
(650-699)
(700-799)
(700-799)
200
201
202
203
204
205
206
207-209
210
211-219
220
221
222
223-229
230
231
232
233
234
235
236
237
238
239
240
241
242
243
244
245
246-249
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Operating Accounts
Fund
Number (---)
Department
Or Function
Number(---)
Operating
Account
Number (---)
State Grants:
Not Assigned
Homestead Exemption Reimbursement
Emergency Management Reimbursement
Not Assigned
General Sales Tax
Grants from Local Units:
County Fire Protection
Pro rata County Road Tax
Not Assigned
Charges for Governmental Services (280-329)
(Exclusive of Revenues from Utilities and Other
Enterprises):
General Government:
Not Assigned
Public Safety:
Special Police Service
Special Fire Service
Protective Inspection Fees
Not Assigned
Highways and Streets:
Not Assigned
Parking Meters
Not Assigned
Sanitation:
Sewer Charges
Not Assigned
Health:
Animal Control and Shelter Fees
Not Assigned
(001)
(001)
(001)
(260-269)
(001)
(200-259)
(260-269))
(280-289)
(001)
(700-799)
(400-449)
250
251
252
253-259
260
261
262
263-279
280-284
285
286
287
288-289
290
291
292-294
295
297-299
300
301-304
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Operating Accounts
Fund
Number (---)
Department
Or Function
Number(---)
Operating
Account
Number (---)
Welfare:
Not Assigned
Culture and Recreation:
Golf Fees
Swimming Pool Fees
Playground Fees
Park and Recreation Concessions
Auditorium/Coliseum Use Fees
Library Use Fees (Not Fines)
Participation Fees
Not Assigned
Not Assigned
Fines and Forfeits (300-339):
Court Fines
Litter Fines
Parking Fines
Library Fines
Not Assigned
Miscellaneous (340-359):
Interest Earned
Rents and Royalties
Cemetery Fees (Not Sale of Lots)
Special Assessments - Current
Special Assessments - Delinquent
Not Assigned
Donations from Private Sources
Not Assigned
Premiums on Bonds Sold
Not Assigned
Billings to Other Departments
Not Assigned
Charges for Services (360-379):
Metered Sales
Other Sales
Service Connection Charges
Sewer Charges
Interest Earned
Golf Green Fees
Swimming Fees
(450-499)
(500-599)
(001)
(110-119)
(110-119)
(110-119)
(110-119)
(001)
(001)
(001)
(300-399)
(300-399)
(001)
(001)
(001)
(001)
(700-799)
(700-799)
(700-799)
(700-799)
(001)
(550-599)
(550-599)
305-309
310
311
312
313
314
315
316
317-319
320-329
330
331
332
333
334-339
340
341
342
343
344
345
346
347
348
349
350
351-359
360
361
362
363
364
365
366
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Operating Accounts
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Accounting System - Property Accounting System
Introduction to Fixed Assets
68
Real and personal property belonging to the municipality must be accounted for in the
municipality's fixed asset records. The following fixed assets accounting system is prescribed for
this purpose.
Introduction to Fixed Assets
Fixed assets are those assets of a long-term nature intended to be held or used by the municipality.
This definition generally includes land, infrastructure, buildings, and improvements other than
buildings, equipment, and furniture.
The importance of developing and maintaining a complete and accurate accounting of fixed assets
cannot be emphasized too strongly. The municipality should recognize a great responsibility for
the custody of its assets. This protective custody cannot be accomplished without complete and
accurate records.
A second reason for developing and maintaining complete and accurate fixed asset records is to
allow for accurate financial reporting. The value of fixed assets for all local governments is
substantial and usually far more significant in value than current assets. When records are not
adequate, an audit opinion will be qualified for fixed assets, which means the auditor does not have
enough evidence to offer an opinion.
Capital assets are major assets that benefit more than a single fiscal period. By definition, an asset
that benefits more than one fiscal period potentially could be classified as a capital asset. As a
practical matter, however, municipalities should capitalize only their higher-cost assets.
Municipalities must also maintain adequate control over all assets, including lower-cost capital
assets. Therefore, different thresholds (dollar values) have been established for recording fixed
assets for legal compliance purposes and capitalizing assets for reporting purposes.
All deletions of fixed assets, regardless of method, shall be entered on the minutes of the governing
board.
A ledger for each fixed asset is used for providing detailed information about the various assets.
These subsidiary records are to be used for the accountability of general fixed assets of the local
government. Each ledger sheet should contain a description of the asset, including any identifying
markings, its cost or estimated fair market value at acquisition, the date purchased, the location of
the assets, and the identification number, if applicable, which appears on the asset. Sample ledgers
for fixed assets are shown in Exhibits C through I. Any changes, such as changes in location,
should be recorded in the ledgers. At all times, the total of all individual ledger pages should equal
the total on the "Fixed Assets Ledger," Exhibit B.
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Classification of Fixed Assets
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The following types of classifications should be used to account for fixed assets:
Land - Land includes the amount of investment held in real estate other than buildings and/or
other improvements. All land, as herein defined, should be capitalized without regard to its size
or value.
Buildings - Buildings include all local government-owned buildings. Permanently installed
fixtures to or within the building are considered a part of the building. The costs of major
improvements to a building, such as additions or renovations, should be capitalized and added to
the value of the building.
Infrastructure – Infrastructure includes long-lived capital assets that normally are stationary in
nature and normally can be preserved for a significantly greater number of years than most capital
assets. Examples of infrastructure assets include roads, bridges, tunnels, drainage systems, water
and sewer systems, dams, and lighting systems.
Improvements Other Than Buildings - This is a fixed asset account, which reflects the
acquisition value of permanent improvements other than buildings, which add value to land.
Examples are fences, retaining walls, sidewalks, and pavements.
Construction-in-progress - Construction-in-progress includes all partially completed projects for
the construction of an asset. The cost of construction-in-progress should not be capitalized until
the construction is completed. In the interim, the cost of construction-in-progress should be
recorded as an expenditure of the appropriate capital projects fund.
Equipment - (Road Equipment and Other Furniture and Equipment) - Equipment includes
movable property of significant value having a useful life that extends beyond one year.
Equipment with a value of $1,000 and over should be capitalized. A local government may
consistently exercise the option to capitalize selected items of lesser value. Each local government
should establish policies with respect to those items of equipment of lesser value that are to be
capitalized.
Finance Leases - Lease agreements are contractual agreements, which are termed "leases," but
which, in substance, amount to purchase contracts.
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Data Elements of Fixed Assets
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Data elements consist of identifying characteristics that will be recorded for fixed assets. It is
important that the municipality initially identify the data elements to satisfy both internal and
external reporting requirements.
The municipality must capture the following required data elements for all fixed assets:
Major asset class
Fund number
Acquisition date
Description of asset (Manufacturer, year model, model number, etc.)
Vendor
Serial number
Property control number
Location
Warrant (check) number
Method of acquisition (purchased, constructed, donated, etc.)
Acquisition cost or value
Method of disposition
Minute book and page number authorizing purchase or disposition
Date of disposition
Trade-in amount/sale proceeds
Special conditions
Other relevant information (related board orders, court/investigation cases, etc.)
In addition to the required data elements listed above, the municipality must capture the following
required data elements for assets that exceed capitalization thresholds:
Useful life of the asset
Salvage value of the asset
Function
Percentage of use by function if not 100%
Current year depreciation expense
Accumulated depreciation
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The following are guidelines to use in determining the total acquisition cost of fixed assets which
are to be used in establishing a value for the asset and which are to be recorded in the subsidiary
ledgers:
Land (Exhibit C)
The acquisition cost of all parcels of land includes all expenditures in connection with its
procurement, including the following:
Purchase price
Appraisal and negotiation fees
Title search fees
Surveying fees
Cost of consents
Payment of damage claims
Clearing land for use
Demolishing or removing structures
Filing costs
Receipts from the sale of land subsequent to the acquisition of the land should be credited against
the cost recorded in the subsidiary ledger.
Land should be recorded at cost or if donated to the municipality, at fair market value. It will be
maintained on the inventory, regardless of the purchase price.
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Buildings (Exhibit D)
The acquisition cost of buildings, structures, and improvements to buildings include all
expenditures in connection with the acquisition and construction including the following:
The purchase price or cost of construction
Fixtures attached to the structure
Professional fees (architect and/or engineering fees, etc.)
Cost of permits and licenses
Payment of damage claims
Insurance premiums
All buildings and building improvements are to be included in this classification regardless of
value for legal compliance purposes. Buildings and building improvements with a cost in excess
of $50,000 should be capitalized for reporting purposes. The straight-line method should be used
to calculate depreciation expense based on a useful life of 40 years and a 20% salvage value. Any
building or building improvement with a value less than the required capitalization threshold will
be an expense in the year of acquisition. A memo amount should be recorded in the fixed asset
records to document the cost.
The acquisition cost of buildings, structures, and improvements to buildings should be reduced by
receipts for the sale or salvage of materials initially charged to the cost of acquisition or
construction costs. These would include discounts, allowances and rebates secured, and amounts
recovered through the surrender of liability and/or casualty insurance.
Buildings should be recorded at cost or at fair market value (of the building at the time it was
donated to the municipality). All buildings, including portable and temporary building structures,
will be maintained on the inventory, regardless of the purchase price.
Additions to buildings are new and separate units, or extensions of existing units, and are
considered fixed assets. The cost of additions to existing assets should be capitalized and added
to the value of existing assets.
Alterations to buildings are changes to the physical structure of fixed assets that neither materially
add to the value of an asset nor prolong its expected life. As such, alterations should not be
capitalized.
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Infrastructure (Exhibit E)
Acquisition cost for infrastructure includes the following expenditures:
Construction costs (i.e. contract amounts, payroll, fringe benefits, rental value for equipment,
etc.)
Legal fees
Engineering fees
Right of way costs
Payment of damage claims connected with construction
Materials
All infrastructure is to be included in this classification regardless of its value for both legal
compliance and reporting purposes. The straight-line method should be used to calculate
depreciation expense for roads based on a useful life of 20 years and a 30% salvage value. The
straight-line method should be used to calculate depreciation expense for concrete bridges based
on a useful life of 50 years and no salvage value and timber bridges based on a 30-year useful life
and no salvage value.
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Improvements Other Than Buildings (Exhibit E)
Acquisition cost includes all expenditures in connection with their acquisitions, including the
following:
The purchase price, contract price, or job order cost
Professional fees (architects, attorneys, appraisers, engineers, financial advisors, etc.)
Payment of damage claims
Insurance premiums
All Improvements Other Than Buildings are to be included in this classification regardless of value
for legal compliance purposes. Improvements Other Than Buildings with a cost in excess of
$25,000 should be capitalized for reporting purposes. The straight-line method should be used to
calculate depreciation expense based on a useful life of 20 years and a 20% salvage value.
Improvements Other Than Buildings with a value less than the required capitalization threshold
will be an expense in the year of acquisition. A memo amount should be recorded in the fixed
asset records to document the cost.
The acquisition cost of improvements other than buildings, if applicable, should be reduced by
receipts from the sale of materials initially charged to the cost of acquisition.
The category for improvement other than buildings is the classification created for the capital
outlay of infrastructures (roads, bridges, parking lots, sidewalks, and lighting) and other
improvements other than buildings. A theoretical distinction between capital outlay and
maintenance operation for improvements other than buildings is difficult to determine. The
following definitions and guidelines are to assist the municipalities in distinguishing between
maintenance and capital outlay:
Maintenance is defined as expenditures that neither materially add to the value of an asset nor
appreciably prolong its life. Rather, maintenance keeps an asset in an ordinary, efficient
operating condition. As such, maintenance costs should not be capitalized.
Capital outlay is defined as expenditures resulting in the acquisition of/or addition to fixed
assets that materially add to the value of an asset and prolong its life. Capital outlay should be
capitalized.
All new construction, reconstruction, major repairs, resurfacing, and altering of surfaces costing
in excess of $1,000 should be reported as a capital outlay.
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Construction-in-Progress (Exhibit F)
Construction-in-Progress represents a temporary capitalization of labor, materials, equipment, and
overhead cost of a construction project. The cost is accumulated the same as building cost and
improvements other than building cost.
When the project is completed, the cost in the Construction-in-Progress account is classified into
one or more of the other major asset classes.
Equipment (Computer Equipment and Peripherals, Vehicles and Equipment, Heavy
Equipment and Furniture and Fixtures) (Exhibits G and H)
The acquisition cost of equipment includes all expenditures in connection with its procurement,
including the following:
Purchase price
Transportation charges
Installation cost
Other expenditures required to place the asset in its intended state of operation
All Equipment with a value of $1,000 or more and those items required to be included regardless
of value are to be included in this classification for legal compliance purposes. Equipment with a
cost in excess of $5,000 should be capitalized for reporting purposes. The straight-line method
should be used to calculate depreciation expense based on a useful life of 3 years for Computer
Equipment and Peripherals and a 1% salvage value, 5 years for Vehicles and Equipment and a
10% salvage value, 10 years for Heavy Equipment and a 10% salvage value and 7 years for
Furniture and Fixtures and a 10% salvage value.
Equipment with a value less than the required capitalization threshold above will be an expense in
the year of acquisition. A memo amount should be recorded in the fixed asset records to document
the cost.
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Leased Property Under Finance Leases (Exhibit I)
Finance leases for municipalities are authorized by Section 31-7-13(e). If the purchases are under
this authority, they must obtain the following information:
The municipality should have the company from which the equipment and/or furniture was
purchased furnish the municipality with an amortization table. The amortization table should
have the payment date, interest rate, total payment, interest, principal, and contract payable for
each year of the lease purchase. It is important to have the cash price, the amount of each
annual payment, commission, and other costs associated with the lease purchase. Pertinent
information about the company that sold the furniture and/or equipment to the municipality
should be kept on file, i.e., name of the company, location, etc.
A lease ledger, Exhibit I, must be prepared at the beginning of the lease agreement on each
finance lease. The asset and related liability should be recorded in accordance with GASB 87
Standards. Leased property should be recorded separately from the equipment inventory sheets
until title has been transferred to the municipality. At that time, it should be added to the
equipment and/or furniture inventory.
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Equipment Accounting Procedures
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All municipalities are required to have and maintain complete and current inventory lists of each
property item with a cost to the municipality of $1,000 or more. Donated equipment is recorded
based on its fair market value.
Some equipment should be included on a municipality's inventory list, regardless of the price paid
by the municipality to acquire the item or the fair market value of the items. Weapons, audiovisual
equipment, power tools, refrigerators, televisions, lawn maintenance machinery, chain saws, air
compressors, welders, generators, and similar type items are examples of equipment to be
considered when the municipality adopts its policy.
Items acquired through surplus property shall be added to a municipality's inventory list at fair
market value; that is, surplus property items are added at the appraised value.
In the event a municipality is required to include an item on its property inventory list using the
item's fair market value, the municipality will be required to maintain adequate documentation to
justify how the fair market value was obtained.
A municipality may include other property items on its inventory list, regardless of price, provided
the policy is consistently applied and recorded in the board's minutes.
Municipalities are free to label property items not included on their inventory lists with tags
entitled "Property of _____________________ (Name of Municipality)." Items deleted from
property inventory lists must have their inventory numbers removed from the items. Items
required by this rule to be included on property inventory lists will continue to be labeled with
numbered tags or other permanently affixed numbering such as enamel paint.
For the purposes of these rules, "property" is defined as all furniture, vehicles, equipment, and
other personal property having a useful life expectancy of at least one year and with a cost of
$1,000 or more. "Property" does not include the following: carpeting, draperies, installed floor-
to-ceiling partitions, window shades or blinds, mattresses and box springs, hot water heaters,
installed drinking fountains, museum accessions, library books, films, or archival collections.
Other Fixed Assets Accounting Procedures
All other fixed assets, property rights, and/or limitations not accounted for within the system
defined in this chapter should be accounted for in supplemental accounting records. The
supplemental accounting records should be designed in accordance with local policy to provide a
permanent record of rights and limitations. Examples of other fixed asset rights and limitations
are mineral rights and land use reversion clauses.
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Accounting System - Property Accounting System
Capital Asset Financial Reporting Procedures
78
In addition to accounting for property for compliance with the state auditor’s property
accountability regulations, municipalities must also maintain records for financial reporting
purposes (see section IV of the Municipal Audit and Accounting Guide). The municipality’s legal
reporting requirements and additional reporting initiatives of the board or council will require the
adoption of additional property record policies.
These policies include capital asset thresholds for financial reports, useful lives of property, and
salvage values of the property. Capital asset threshold refers to the value a piece of property must
have for it to be included in the financial report, useful life is the amount of time a piece of property
is productive, and salvage value is the worth of the property at the end of its useful life.
Financial reporting policies should be developed with a clear understanding of legal requirements,
costs, and benefits. For example, Section 21-35-31 and State Auditor’s regulations may qualify a
municipality for a financial audit report that does not require property reporting. In this case, these
additional records may not be required. This office recommends municipalities consult with the
preparers and auditor of the financial report, and the users of the financial statements to determine
the consequences of all financial reporting policies.
Recommended Thresholds, Useful Lives, and Salvage Values for Financial Reporting
This office recommends the following capital asset thresholds, useful lives and salvage values
for financial reporting purposes.
Capital Asset Thresholds:
Land N/A
Infrastructure N/A
Furniture, Vehicles, and Equipment $ 5,000
Improvements other than Buildings $25,000
Buildings $50,000
Useful Lives:
Computer Equipment and Peripherals 3 years
Vehicles and Equipment 5 years
Heavy Equipment (backhoes, dozers, front-end loaders, tractors, etc.) 10 years
Furniture and Fixtures 7 years
Improvements other than Buildings 20 years
Buildings 40 years
Infrastructure:
Roads 20 years
Concrete bridges 50 years
Timber bridges 30 years
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Salvage Values:
Computer Equipment 1 %
Furniture 10%
Vehicles and Heavy Equipment 10%
Improvements other than Buildings 20%
Buildings 20%
Roads 30%
Bridges 0%
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Recommended Depreciation Rates for Financial Reporting
Depreciation of property accounted for financial reporting (within the “Capital Asset Threshold”)
is also necessary. Depreciation is defined as the allocation of the cost of the asset over its useful
life. Factors to consider in the calculation of depreciation are cost, useful life, and salvage value.
Depreciation may be calculated in different ways but the easiest and most efficient is the straight-
line method. A full year’s depreciation expense should be taken for all purchases and sales of
capital assets during the fiscal year. Depreciation may be calculated at the end of the fiscal year.
Listed below are the suggested useful lives, salvage value and depreciation rate for fixed assets:
Type of Asset Useful Salvage Value Depreciation
Life % of cost Rate
Buildings 40 20% 2.5%
Improvements Other
Than Buildings 20 20% 5%
Infrastructure
Roads 20 30% 5%
Bridges-Concrete 50 0% 2%
Bridges-Timber 30 0% 3.33%
Equipment
Computer Equipment 3 1% 33.33%
Furniture & Fixtures 7 10% 14.30%
Moveable 5 10% 20%
Mobile
Cars, Trucks 5 10% 20%
Heavy Equip 10 10% 10%
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Accounting System - Property Accounting System
Property Number System
81
There are many methods of numbering fixed assets. The primary rule in any numbering scheme
is to select a logical and uniform procedure.
Categorize the several classifications of general fixed assets and assign blocks of numeric codes
to each category.
SAMPLE CLASSIFICATION SYSTEM
General Fixed
Asset Categories Property Number
Equipment:
Mobile Equipment 001 - 199
Office Machinery and Equipment 200 - 399
Furniture and Fixtures 400 - 599
Other Equipment 600 - 699
Buildings 700 - 799
Improvements Other Than Buildings 800 - 899
Land 900 - 999
Determine a means of tagging equipment. The identification tags may be self-adhesive metal tags,
stencils or other suitable tags on which a permanent number can be affixed and the tag attached to
an item of equipment.
Note: Only items of equipment are to be physically tagged with property numbers. For internal
control purposes, fixed assets such as buildings, improvements other than buildings, and
land are assigned property numbers in the accounting records. However, the asset is not
physically tagged with this number.
Order the identification tags well in advance of the date on which the initial inventory of fixed
assets is to begin.
Each fixed asset should be assigned a unique fixed asset property control number. When assigning
a number to "land and buildings," use only the property number. When assigning a number to
"equipment and improvements other than buildings," the number should indicate both the
department to which the asset is assigned and the property number of the asset within the
appropriate asset category.
SAMPLE PROPERTY NUMBERS
Department Code Property Number
040 201
(Municipal Clerk's Office) (Copy Machine) (Typewriter)
Department heads should assign a property control number to each fixed asset inventoried. The
control number assigned should then be entered on the fixed asset inventory form along with a
detailed description of the asset (Exhibits G through I). An identification tag should be attached
to each item of equipment inventoried
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Property Tagging System
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Physical tagging is one of the most important aspects of physical asset control. The municipality
should investigate the many commercial methods of attaching property numbers. Different
tagging procedures should be used depending upon the type of equipment to be tagged.
Select the next sequential fixed asset property number of the appropriate category of an asset to be
tagged. Enter the number on the fixed asset ledger (Exhibits G through I). Provide the necessary
information concerning each item to be inventoried.
Attach the identification tag or stencil the identification number on each item of equipment. The
following are guidelines for tagging equipment:
Illustrative Items of Equipment Suggested Location of Tag
Adding machines, typewriters, Back of the machine
calculators and similar office equipment
Air compressors, welders, generators, Near the manufacturer's.
I.D.tag
Air conditioners, freezers, refrigerators, Right side of upper cover
vending machines, etc.
Copy machines, printing equipment, etc. Near manufacturer's I.D. tag
Desks, tables, etc. Top or right front leg
Files, safes, and other storage equipment Top right front cover
Automobiles, trucks and other Stencil or print number on
automotive equipment inside of door
Upon completion of the inventory, recheck to be sure that asset property numbers were assigned
to each item included in the inventory.
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Accounting System - Property Accounting System
Annual Inventory System
83
At the end of each fiscal year, a thorough inventory of all fixed assets owned by the municipality
must be made. The board or council should assign general responsibility to oversee the inventory
to the finance officer, comptroller, city administrator, municipal clerk, or other responsible
officers. The purpose of the inventory is necessary to verify the existence of all fixed assets.
However, additional information, such as the condition of the asset may be documented.
The municipality’s auditor should also be consulted prior to inventory. Auditors may observe the
inventory and request additional procedures.
Inventory Procedure:
At the close of each fiscal year, furnish each department head with a supply of blank forms for the
fixed asset inventory (Exhibit A).
Each department head should list each item of equipment in his department, including a brief
description of the item, its condition, and its property number, taken from the actual piece of
equipment.
Return completed inventory forms to the municipal clerk's office.
Verify the information listed on the new inventory forms with previous inventory records. Include
any changes in fixed assets, such as land, buildings, and other improvements.
If a fixed asset included in the previous inventory is not listed in the new inventory, investigate the
reason for the discrepancy.
If any property number tags are missing, replace them.
Note in the records any transfers between departments not previously recorded.
Correct the permanent inventory records (land, buildings, improvements other than buildings,
construction-in-progress, road equipment, other furniture and equipment, and lease purchases) to
reflect actual changes in the inventory.
Prepare a fixed asset ledger based on the inventory (Exhibit B).
Section 17-25-25- Disposal of Personal Property - Provides a uniform requirement for the
municipal sale or disposal of real and personal property. Declare surplus and post notice for at
least 10 days in 3 public places, one of which must be at the governing authority’s main office. If
the personal property does not exceed $1,000 in value, the governing authority, by unanimous
approval of its member, may sell or dispose of the property at a private sale. The governing
authority may dispose of property at a public auction. If the governing authority finds that the
FMV of the personal property is zero and this finding is entered on the minutes, then the governing
authority may dispose of the personal property in the manner it deems appropriate and in its best
interest, but no official or employee of the governing authority shall derive any personal economic
benefit from such disposal
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Exhibit A
ANNUAL INVENTORY OF PROPERTY - SAMPLE FORMAT
Page _____
INVENTORY AND VALUATION OF PROPERTY
(FIXED ASSET)
September 30, 20___
DEPARTMENT/DISTRICT: ___________________________________________________
Description
Serial/Model Number
Property Control
Number
Date Purchased
Cost or Other
Basis
TOTAL
$
Exhibit B
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FIXED ASSET SUBSIDIARY LEDGER
___________________________________________
__________________________
Description
Reference
Beginning
Balance
Purchase/
Additions
Sales/
Deletions
Ending
Balance
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Exhibit C
FIXED ASSET INVENTORY LEDGER
LAND ACQUISITIONS
PROPERTY NO.: _____________________________________
ACRES
LOCATION
LEGAL DESCRIPTION
Method of Acquisition
Date
Check No.
Amount
M.B. No.
Page No.
( ) Purchased
( ) Constructed
( ) Donated (FMV)
( ) Other
Total Acquisition Cost
Improvements:
Total Cost
Type Deed
Volume Recorded
Page
Date
Abstract of Title
Date
Appraised By
Amount
Date
Capitalized By
Amount
Date
DISPOSAL
How Disposed Of
Book Value
Date
Sold or Disposed Of
Amount
Date
Notes and Remarks
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Exhibit D
FIXED ASSET INVENTORY LEDGER
BUILDING ACQUISITIONS
PROPERTY NO.: _____________________________________
Description of Building
Location
Occupied By
Method of Acquisition
Date
Check No.
Amount
M.B. No.
Page No.
Remarks
( ) Purchased
( ) Constructed
( ) Donated (FMV)
( ) Other
Total Acquisition Cost
Improvements:
Total Cost
Appraised By
Amount
Date
Capitalized By
Amount
Date
DISPOSAL
How Disposed Of
Book Value
Date
Sold or Disposed Of
Amount
Date
Remarks
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Exhibit E
FIXED ASSET INVENTORY LEDGER
INFRASTRUCTURE & IMPROVEMENTS OTHER THAN BUILDINGS
PROPERTY NO.: _________________________________________________
Description of Improvements
Location
Method of Acquisition
Date
Check No.
Amount
M.B. No.
Page No.
Remarks
( ) Purchased
( ) Constructed
( ) Donated (FMV)
( ) Other
Total Acquisition Cost
Improvements:
Total Cost
Appraised By
Amount
Date
Capitalized By
Amount
Date
DISPOSAL
How Disposed Of
Book Value
Date
Sold or Disposed Of
Amount
Date
Remarks
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Exhibit F
FIXED ASSET INVENTORY LEDGER
CONSTRUCTION IN PROGRESS
PROPERTY NO.: _________________________________________________
Description of Project
Project/Phase
Date
Check No.
Amount
M.B. No.
Page No.
Remarks
Total Cost
DISPOSAL
To
Cost
Date
Remarks
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Exhibit G
FIXED ASSET INVENTORY LEDGER
MOBILE EQUIPMENT ACQUISITIONS
DEPARTMENT: __________________________________________________________________ PAGE NO.: ___________
DEPARTMENT HEAD: ____________________________________________________________
Date
Purchased
Description
Vendor
Serial No./
Model No.
Property
Control
No.
Check
No.
Purchase/Ad
dition
Sales/
Deletion
Disposition
Minute
Book
Page
No.
Date
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Forms
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Exhibit H
FIXED ASSET INVENTORY LEDGER
OTHER FURNITURE AND EQUIPMENT ACQUISITIONS
DEPARTMENT: __________________________________________________________________ PAGE NO.: ___________
DEPARTMENT HEAD: ____________________________________________________________
Date
Purchased
Description
Vendor
Serial No./
Model No.
Property
Control
No.
Check
No.
Purchase/Ad
dition
Sales/
Deletion
Disposition
Minute
Book
Page
No.
Date
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Forms
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Exhibit I
FIXED ASSET INVENTORY LEDGER
LEASE ACQUISITIONS
DEPARTMENT: __________________________________________________________________ PAGE NO.: ___________
DEPARTMENT HEAD: ____________________________________________________________
Date
Purchased
Description
Vendor
Property
Control No.
Serial Number/
Model Number
Cost
Transfer To
Date
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Special Procedures
93
State laws grant municipal boards/councils with authority to take action to accomplish their
responsibilities. Within these laws, procedures are commonly established or left to the municipal
authorities to develop. In some cases, procedure development is assigned to the State Auditor.
This section of the guide provides guidelines from the State Auditor where specialized procedures
are required.
SECTION III - SPECIAL PROCEDURES
A. OFFICIAL TRAVEL …………………………………………………………… 94
B. PETTY CASH FUNDS
Routine Petty Cash Fund Procedures …………………………………………. 96
Petty Cash Fund to Account for Procurement of Evidence ………………….. 99
C. MUNICIPAL COURT PROCEDURES
Accounting System …………………………………………………………….. 100
Partial Payment Accounting ………………………………………………….. 100
Refunds ………………………………………………………………………… 101
Uniform Traffic Tickets - Court Procedures ………………………………... 102
Uniform Traffic Ticket - State Auditor’s Regulations ……………………… 103
D. MUNICIPAL POLICE DEPARTMENT PROCEDURES
Improper Motor Vehicle Tag or Decal Procedure ……………….…………. 104
Uniform Traffic Tickets - Police Procedures ………………………………... 104
E. CONTRACTING WITH COLLECTION AGENCIES ……………………. 105
F. CONTRACTING TO ACCEPT CREDIT CARDS ………………………... 108
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Special Procedures – Official Travel
94
Section 25-3-41 provides for officers and employees of municipalities to receive reimbursement
for travel costs related to official travel that has been authorized. Generally, “official travel” is
travel associated with official duties; and “authorized” is documented approval from the governing
authority or its designee.
This law sets maximum reimbursement limits for travel where a private motor vehicle is used,
grants the Department of Finance and Administration (DFA) the authority to set maximum meal
reimbursement amounts, and provides for other travel-related expenses such as lodging, public
carrier, etc. to be reimbursed at actual cost. For DFA’s travel information, see their website at
www.dfa.state.ms.us.
Travel-related expenses must be documented. This means invoices or similar support must be
provided for reimbursements of expenses other than meals and travel by private motor vehicle,
and all reimbursed expenses must be defined on a claim form similar to the Department of Finance
and Administration's form "Voucher for Reimbursement of Expenses Incident to Official Travel."
Municipalities are authorized to develop policies relative to official travel. These policies may
further limit reimbursement amounts and may require additional information to justify
reimbursement.
Section 25-3-41 also authorizes municipalities to make travel advances in accordance with Office
of the State Auditor rules and regulations. The following rules and regulations have been issued
for this purpose.
When Travel Advances May be Made - Before any travel advance is made, the following
conditions must exist:
The board must have a policy regarding the use of travel advances. The policy should provide for:
Compliance with these rules and regulations
Compliance with the Department of Finance and Administration's daily limits on
expenditures for meals
Compliance with Section 25-3-41 requirements
Designation of administrative heads who will have the authority to authorize travel advances
Any local limitations and procedures, which are in addition to state laws and regulations
The person receiving the advance must be an officer or employee (part-time or full-time) of the
municipality.
Source of Travel Advance Funds
Money used for a travel advance must come from a fund that may legally make expenditures for
the purpose of the official travel.
The budget of the fund making the travel advance must have an unencumbered balance sufficient
to support the related travel expenditures.
A petty cash fund may be authorized to make travel advances.
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Travel Advances must be used for Travel Related Purposes. This money may not be used for
personal expenses or for any purpose other than the actual expenses of the authorized travel.
Accounting for Travel Advances - Officers and employees must account for travel advances
within the first five working days after the end of the month in which the official travel occurred.
This means:
All travel advance money not used for travel-related expenses must be repaid to the municipality.
The travel reimbursement form prescribed by the Department of Finance and Administration or a
similar form must be completed and submitted. This form must account for all money not
refunded.
Actual receipts must be provided for all travel expenses, except meals and travel in personal
vehicles. The “Travel Manual” issued by the Department of Finance and Administration, Office
of Purchasing and Travel prescribes maximum meal reimbursement amounts.
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PETTY CASH FUNDS
Section 7-7-60 provides authority for municipalities to operate petty cash funds in accordance with
regulations set forth by the Office of the State Auditor.
Special procedures are required to establish and operate a petty cash fund to account for the
procurement of evidence. The purpose of these special procedures is to provide a method to make
expenditures without compromising the confidential nature of related criminal investigations.
The following official regulations are prescribed for the establishment and operation of petty cash
funds. These regulations include “Routine Petty Cash Fund Procedures”; and special regulations
for “Petty Cash Fund to Account for Procurement of Evidence.”
Routine Petty Cash Fund Procedures
Establishment of a Petty Cash Fund
A petty cash fund may be authorized by the municipal governing authorities. The authorization
must be spread upon the minutes and include:
Reasons for establishing the fund
Purposes for which fund money may be spent (must be legal)
The dollar amount of the fund
Custodian(s)
Any special provisions, such as the use of a depository (bank) account(s)
This authorization will serve as authority for the municipal clerk to transfer the money to the
custodian ("Named Custodian, Department Head, etc."). All petty cash funds must be accounted
for within the municipal accounting records for cash balances.
Establishing a petty cash fund does not change how money may be legally spent. The cash in a
petty cash fund may only be authorized to be spent for those purposes that are available to its
source fund and budget. Further, all procedural laws for the expenditure of public funds (such as
purchase laws) must be complied with. This means reimbursements may only be made for
disbursements that could have been made by the source fund, are within the budget of the
authorized department(s), and have been made in accordance with state laws (purchasing, etc.).
Reimbursements to a Petty Cash Fund
Requests for reimbursements may be made by the custodian. For each month when disbursements
are made from the petty cash fund, a request for reimbursement must be prepared by the custodian
and submitted as a claim to be considered by the governing authority. The request for
reimbursement must include a summary of expenditures on the "Voucher for Reimbursement of
Petty Cash Disbursements" along with related invoices and explanations for disbursements made
by the petty cash fund. Reimbursements shall be charged to the appropriate department's budget
and made by municipal warrant, as with the payment of other claims. Reimbursements are then
placed into the petty cash fund.
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Other Petty Cash Requirements
The custodian of a petty cash fund must be bonded (as required by law to handle cash) and will be
responsible at all times for the funds and purchases of the petty cash fund. Note: A surety bond
for an employee’s position (such as for police officers) may not cover handling cash. A separate
bond may be required to handle cash for petty cash purposes.
The amount of cash in the fund paid for invoices and explanations for proper expenditures must
always equal the total amount authorized to be in the petty cash fund.
There must be an accounting for the petty cash fund at the end of each fiscal year. This means the
account should be closed out on the last day of the fiscal year and reissued for the next fiscal year.
In circumstances where closeout is not practical, a cash count by the municipal auditor or other
independent person and a verified reimbursement request for disbursed cash will be an acceptable
alternative. This accounting is necessary to ensure that funds are on hand and that disbursements
are recorded within the proper fiscal year's budget. The governing authorities of the municipality
and the municipal auditor may also require an accounting at any time.
The governing authority must authorize the petty cash fund on an annual basis.
Prescribed Form
Following is the prescribed "Voucher for Reimbursement of Petty Cash Disbursements." The
custodian must list the items, and amounts claimed on the voucher. The municipal clerk
(accounting/bookkeeping department) must verify the amounts and insert proper classification of
expenditure codes for budgetary control. Another form design or electronic record may be
substituted for this form, provided documentation and authorizations are equivalent.
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VOUCHER FOR REIMBURSEMENT OF PETTY CASH DISBURSEMENTS
From: _______________________________
To: _______________________________
_______________________________
DEPARTMENT:
Item
Amount
Verification
Accounting Code
Amount
$
$
Total Amount
Claimed
$
Total Amount
Verified
$
I certify that the above amount claimed for petty cash disbursements for the period
indicated is correct and that payment for any part thereof has not been received.
_______________________________
Custodian Signature
_______________________________
Verified By
Note: Attach all petty cash support (invoices, tickets, explanation, etc.) to the upper left
corner of the voucher. Every item must be supported.
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Petty Cash Fund to Account for Procurement of Evidence Requirements
During the course of procuring evidence, disbursements of a confidential nature may be required.
However, the disbursement of public funds requires accountability. To maintain accountability
and confidentiality, the following procedures should be followed:
Availability of Funds - Funds available for general law enforcement purposes may be used for
procuring evidence. These include, but are not limited to, money from the general fund, Section
41-29-181 forfeitures, and Section 99-27-37 fine proceeds.
Appropriation of Funds - Appropriations for this purpose should be included in the law
enforcement agency's budget(s).
Purpose of Funds - Such funds may be disbursed for, but are not limited to; disbursements related
to surveillance, the purchase of investigative equipment, purchase of samples to be used as
evidence, purchase of information pertaining to an investigation, and the defraying of living
expenses of persons specially employed in investigations.
Disbursement of Funds - In order to maintain confidentiality, petty cash funds must be authorized
by the law enforcement agency's governing authority:
A petty cash fund must be established in accordance with the Office of the State Auditor's
regulations.
Confidential Record – Disbursements from the petty cash funds must be accounted for in a
confidential record. This record must show the following information.
Each transaction
Amount paid
To whom paid
Date paid
Purpose of the transaction
Case number
Such other information as may be necessary to justify the transaction
The record must be available to persons designated by the Office of the State Auditor.
Other Requirements:
Disbursements from the petty cash funds must be made in accordance with purchase law bidding
requirements. (Purchases of evidence and undercover living expenses do not require bids.)
Confidential disbursements may be supported with a summary of the total amounts spent. These
amounts must be defined in sufficient detail to be charged against the appropriate budget items
(supplies, contractual services, and charges or capital outlay).
Non-confidential disbursements must be supported with invoices or other evidence of justification
for the expenditure, the same as for routine petty cash funds.
Equipment purchases must be recorded on the municipal fixed asset inventory and tagged
appropriately.
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State laws (Chapter 23 of Title 21, Ms. Code) require court personnel to receive regular training
organized and certified by the Mississippi Judicial College at the University of Mississippi. In
addition to the procedures presented in this guide, the State Auditor’s Office participates in judicial
college training to present updated and detailed procedures. For information in addition to this
guide on the proper conduct of the municipal court, guidance should be solicited from the
Mississippi Judicial College.
Mississippi law requires the State Auditor to prescribe procedures for the handling of certain court
funds. The following procedures have been issued for this purpose.
Accounting system
Section 21-23-11 explains the municipal court clerk shall administer the collection and settlement
of collections. Separate accounting records must be maintained for the municipal court. This
means these records may not be combined with those of other municipal departments or activities,
regardless of any other positions (municipal clerk, chief of police, etc.) the person serving as court
clerk may hold.
Municipal court clerks should use the accounting system presented in section II of this guide to
the extent applicable. This means receipts must be issued for collections on official court receipts
(only the court clerk or deputy may issue and sign a receipt), and cash journals must account for
all collections.
A municipal court clerk has no authority to disburse funds. Therefore, collections must be
deposited into the municipal treasury on a daily basis (Section 21-15-21). Such collections must
be defined in a report to the municipal clerk at least monthly.
Partial payment accounting
Municipal Court Judges may allow defendants to pay on a partial payment basis. This means the
Municipal Court Clerk will have to maintain some type of receivable record.
An accounts receivable system must account for each receivable. The receivable record must
contain the following information (if available):
the case record creating the obligation,
a costs bill detailing the defendant’s total obligation,
the name of the defendant or responsible person,
where the defendant (or associated persons) may be found (current and official address),
any other information relevant to collection,
and each receipt by number, date, and amount.
A card, journal, computer, or other appropriate accounting method may be used. In addition, a
running total account should be maintained to show the total amount due.
Each account should be balanced monthly. Periodically, analysis should be made to determine
such things as the age of accounts. Reports should be made to the judge and board/council
containing such information as they may require. What is important is that a record be kept to
account for each defendant’s charges, payments, balances due and status; and that the information
be used.
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Partial payment accounting - continued
In addition to accounting records, the case record should note the judgment of the court; and once
the receivable has been totally collected or some other disposition has been ordered by the court,
the case record should disclose the final disposition. It should be noted that Section 15-1-51, Miss.
Code and Section 100, Miss. Constitution make clear there is no statute of limitation that runs
against a municipality; therefore, obligations may not be written off without specific legal
authority (such as Sections 9-1-47 and 99-19-25).
Refunds
Occasionally refunds of collections will be required. A municipal court clerk has no authority to
make a disbursement; therefore, the following procedure is prescribed for refunds. This procedure
is also to comply with Sections 99-19-73 and 83-39-31.
Who Authorizes Refunds - Municipal Court Clerks - When:
Over payments have been made due to collection error,
court order directs,
convictions have been overturned upon appeal,
or in the case of an appearance bond fees, when the prosecutor enters a nolle prosequi or
retires the case to the file.
How Refunds Are Authorized - Certificates of Eligibility
A Certificates of Eligibility is a mandatory document issued by the municipal court clerk to
the defendant and municipal clerk to authorize refunds.
A Certificate of Eligibility document must be written, signed and include the date, case
number, payee, amount due and reason for the refund.
Copies of all certificates issued must be maintained by the court clerk.
This certificate may also be used to support claims filed with the municipal board for refunds
of fines, costs, bonds, etc.
Who Must Make Refunds - Municipal Clerks
Refunds must be authorized by “certificates of eligibility”.
Copies of all certificates received must be maintained by the municipal clerk.
Source of Refunds - Refunds must be made from the funds into which the original money was
settled. For example, Section 99-19-73 uniform assessments would be refunded from the “State
Assessment Clearing Fund”. If assessment money has already been settled to the state, refunds
are made from later similar collections in the clearing fund.
Board of Aldermen/Council Responsibilities - Municipal Board Orders are not required for the
municipal clerk to refund court assessments processed through clearing funds; such as county
(law library) or state (uniform assessment) assessments. A board order is required to authorize a
refund of money placed in a municipal fund; such as court cost, fines or special municipal
assessments. The Certificate of Eligibility shall serve as authorization for a clearing fund refund;
and may also serve as a basis for the municipal board to judge a claim for refund.
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Uniform Traffic Tickets - Court Procedures
Section 63-9-21 requires the Commissioner of Public Safety and the Attorney General to jointly
prescribe uniform traffic tickets to be used by municipal police officers. This law also requires
the clerk of the municipal court to keep a record of all traffic ticket books issued and to whom
issued, accounting for all books printed and issued.
Due to frequent changes in implied consent and other related traffic-related laws, actual examples
of prescribed tickets will not be presented in this guide.
The following procedures are provided for the issuing and accounting for uniform traffic tickets:
Uniform Traffic Ticket Statutory Requirements of Section 63-9-21
Original tickets must be used
Tickets must be filed as specified by the Commissioner of Public Safety
Tickets must be as the Commissioner of Public Safety and the Attorney General prescribe
Tickets must be uniform throughout all jurisdictions
Tickets must show the name of issuing officer
Ticket must show the name of court where cause is to be heard
Ticket must show the date and time of required appearance
Ticket must show all other information, which is necessary for a complaint charging the offense
for which the ticket was issued (sworn to, filed with the court clerk, etc.). No separate complaint
is required when the ticket is properly issued under Section 99-19-3
Tickets must be bound in book form (hard copy or electronic)
Tickets must be consecutively numbered
Ticket books are issued and accounted for by the court clerk (county or chancery) and the
Commissioner of Public Safety
Original and commissioner’s copies of the ticket must be returned to the court clerk
The officer’s copy of the ticket is retained by the officer
The ticket number must be noted on the court docket
Tickets must be filed as specified by the State Auditor
Ticket copies must be retained for two years
Tickets may be filed electronically, so long as the ticket conforms in all substantive respects
(content, layout, etc.) to that of hard copy tickets
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Electronic tickets are automatically filed with the Commissioner of Public Safety and either the
clerk of the municipal court or the clerk of the of the justice court.
Uniform Traffic Tickets - State Auditor’s Regulations
Uniform Traffic Ticket Issuing and Log Book
The municipal court clerk must issue the uniform traffic tickets to be used by municipal law
enforcement officers and trainees. These pre-numbered tickets must bound in booklets and
accounted for in a log book of all ticket booklets issued. The log book must document the name
of the officer each ticket book issued to him/her; including date of issue and ticket numbers
included in the booklet. Log books may be hard copy or electronic (see Section 75-12-13). Unused
tickets and ticket books may be turned in to the court clerk for reissue or disposal. Accountability
for disposition of individual traffic tickets is a matter of local policy.
Uniform Traffic Ticket Processing
Uniform traffic tickets prescribed by the State Auditor and Attorney General must be printed to
include the name of the issuing municipality and numbered as required for processing with the
Department of Public Safety. Other information relevant to charges and court processing may be
added. The violator’s copy of the ticket must contain the prescribed “notice to violator”
information.
All copies of the traffic ticket must be completely filled out and signed by the issuing law
enforcement officer. The officer must also swear to the statement of the original ticket when
required by Section 63-9-21.
All traffic tickets (except those filed electronically) must contain an original with at least two
copies. The tickets are distributed with the
Original citation for the court clerk,
First copy for the issuing officer, and
Second copy for the violator.
The court clerk must then file a copy with the Commissioner of Public Safety within forty-five
days after the judgment. If no judgment is rendered, then the clerk has to file the copy within one
hundred twenty days.
Section 63-11-37 requires abstracts of DUI convictions be filed within five days. The
Department of Public Safety may request earlier filing.
It is not necessary to include or send a copy for the State Auditor.
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Improper Motor Vehicle Tag or Decal Procedure
Section 27-19-63, states a $250 penalty shall be assessed against any person who is liable for the
motor vehicle privilege license tax and who displays an out-of-state license tag on the vehicle; or
displays a license tag or privilege license decal on the motor vehicle, which was issued for another
vehicle.
It also states that "penalties shall be assessed on the privilege license tax at the rate of 5 percent
(5%) for the first fifteen (15) days of delinquency, or part thereof, and 5 percent (5%) for each
additional thirty-day period of delinquency, or part thereof, not to exceed a maximum penalty of
twenty-five percent (25%)."
Section 27-19-127 explains if a municipal law enforcement officer enforces the violation, then
one-half (½) of the $250 penalty and one-half (½) of the penalty assessed on delinquent privilege
license taxes shall be paid into a special fund of the municipality and may be appropriated and
expended for any lawful purpose.
Procedures for Applying Legal Provisions
A municipal law enforcement officer may issue a ticket if a Mississippi resident displays an out-
of-state license tag on his or her motor vehicle or displays a license tag or privilege license decal
on an inappropriate motor vehicle. If the municipal law enforcement officer issues a ticket for one
of these charges, he/she should inform the offender of the $250 penalty.
The municipal law enforcement officer must transmit a copy of the ticket to the tax collector in
the county in which the offender resides.
The county tax collector must collect the $250 penalty and any other applicable penalties when
the offender pays the privilege tax. The county tax collector must send the $250 penalty and any
other applicable penalties to the chancery clerk of the county where the offender resides. These
amounts are a part of the monthly settlement of the tax collector. The county tax collector must
identify the municipal law enforcement officer who issued the applicable ticket.
If a municipal law enforcement officer issued a ticket resulting in the collection, the chancery
clerk shall deposit one-half (½) of the $250 penalty and one-half (½) of the delinquent penalties
on the privilege license tax into the county road fund. The other one-half (½) of the applicable
penalties shall be sent to the city clerk in the municipality for which the law enforcement officer
works. When the city clerk receives the municipality's portion of the applicable penalties, the
clerk shall deposit the penalties into a special fund for the police department. This money may
be used for any lawful purpose. The law enforcement officer is not personally entitled to any of
the penalties.
Uniform Traffic Tickets - Police Procedures
Section 63-9-21, Miss. Code requires the State Auditor and Attorney General to jointly prescribe
uniform traffic tickets to be used by municipal police officers. This law requires the municipal
court clerk to account for and issue these tickets; therefore, procedures for uniform traffic tickets
are included in the “Municipal Court Procedures” section of this guide. These procedures should
be reviewed by the municipal police chief and officers for an understanding of police officer
responsibility.
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Section 21-17-1 authorizes the Board/Council to contract with certain collectors for the
collection of delinquent payments owed to the municipality (fines, fees, etc.). This law limits
who the Board/Council may contract with sets conditions on contract provisions, and requires
compliance with regulations prescribed by the State Auditor. It also allows the Board/Council to
impose specified percentage amounts to be paid by a delinquent person.
Section 63-1-53 also authorized contracts to give notice to defendants who fail to appear at trial.
These contracting procedures are as follows:
Who Can Be Contracted With
The municipal Board/Council may contract with the following collection agents in addition to in
house collection efforts.
Office of the District Attorney for the circuit court district in which the municipality is located.
Private Attorneys in good standing with the Mississippi Bar.
Private Collection Agents or Agencies who meet all licensing requirements for doing business in
the State of Mississippi. (Local Privilege License Sec. 27-17-9)
Collection Fees
Imposing Collection Fees
Collection fees may be set by the Board/Council upon the person obligated for a delinquency or
entitled to a failed to appear notice. Successful collection is required.
In House Collection Fees
In house means collections made by employees of the municipality.
These fees may be imposed for in house collections when fines, etc. have been delinquent for 90
days. Fees may be imposed on “failed to appear” collections authorized under Section 63-1-53
(4) 90 days after the Commission of Public Safety has suspended the license of the defendant.
Up to Twenty Five per cent (25 %) of total collection made in state.
Up to Fifty per cent (50 %) of total collection made out of state.
Contract Collection Fees
These fees are imposed up to the following limits upon the person obligated for delinquent
payments or entitled to a failed to appear notice. Delinquency and/or failed to appear must be
defined in the order imposing the fees. These fees apply to collections made under contract with
district attorneys, qualified attorneys or collection agencies.
Up to Twenty Five per cent (25 %) of total collection made in state.
Up to Fifty Per Cent (50 %) of total collection made out of state
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Credit Card Use
Delinquent payments and collection fees may be collected by credit card or electronic transfer.
The municipality may pay the credit service fee from the collection fee. See Sec. 17-25-1 (and
Contracting to Accept Credit Cards in this guide) for other credit card service fee payment
authority.
Fee Settlement
Collection fees must be deposited into the General Fund as an unrestricted revenue item.
Bonding Requirements
Collection agents, agencies and attorneys must give bond or surety payable to the municipality in
an amount set by the Board/Council. (No special bond required for District Attorneys.)
Collection Agent Contract Terms
Nature of Contract
Contracts may be approved for collection of delinquent payments. Contracts may also be
approved for collection of cash appearance bonds from defendants who has failed to appear in
court.
All contracts must address collection procedures. Contracts must require collection procedures
comply with all federal and state law.
Special attention should be given to contract understandings related to collections of cash
appearance bonds related to failures to appear. For example: these collections are subject to the
right of a defendant who is charged with an offense to a trial on the merits of the charge against
him/her.
This office strongly recommends all contracts for collections of delinquent payments, and
especially contracts for collection of cash appearance bonds related to failures to appear, be
reviewed by an attorney representing the municipality (board attorney or board employed
attorney).
Collection Agent’s Compensation
Compensation for collection and other services must be included in a contract authorized by the
Board/Council. The method of compensation is a matter to be determined by the Board/Council
to be in the best interest of the municipality. For example, terms of the collection contract may
be for payment as a percentage of the successfully collected money, or a flat amount payment for
the service. The percentage payment method may be contracted for more or less than the
percentage collection fee amount imposed by the Board/Council upon the defendant. Contracts
may also provide for payments for specific services such as letter mailings, telephone calls, etc.
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Collection Agent’s Settlements
Contracts must require total of all collections be turned in to the municipality (Collections may
not be reduced for compensation, costs, etc.). The Municipality must provide the contracted
collector with a receipt for all collections. Municipal officers must provide necessary
information to the Board/Council for claim evaluation purposes (Section 21-39-9).
Collection Agent’s Claims for Payment
Payments due collection agencies, attorneys, etc. must be paid by a claim properly filed with the
clerk of the municipality and approved by the Board/Council pursuant to Section 21-39-9.
Special Contract Conditions
Contracts should address circumstances where a person (whose delinquency has been turned
over to the collector for collection) pays his/her delinquent payment directly to the municipality
rather than the contracted collector.
Care should be taken to assure municipal personnel who collect money are aware of accounts
assigned to contract collectors. Subject to the conditions of the contract, such collections may
require the addition of delinquency fees and verification of collections for purposes of contract
collector obligations.
Contracts should explain that the total delinquent amount is due to be paid to the municipality,
and may not be reduced by such things as collector’s cost for out of state taxes on collections.
Contracts should also address any other issues that may confuse what is collectable, amounts due
and compensation.
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Special Procedures – Contracting to Accept Credit Cards
108
Authority To Accept Credit Cards
Section 17-25-1 authorizes municipalities to accept payment of taxes, fees and other accounts
receivable by credit cards, charge cards, debit cards and other forms of electronic payment in
accordance with policies established by the State Auditor.
This law requires service fees or charges be assessed to the user of the electronic payment system
as an additional charge for processing the electronic payment, so that the user will pay the full
cost of using the electronic payment system. These policies were issued for this authority.
Who May Be Contracted With
The governing authority may enter into a contract with one or more credit card issuers, financial
institutions or third party credit card processors to accept payments for fees, taxes and other
accounts receivable by credit cards, charge cards, debit cards, and other forms of electronic
payment.
Contract Requirements
The services to be provided by the processor and the fees for such services must be included in a
contract approved by the governing authority.
The contract must allow the addition of the processing service fee to the originating tax, fee or
other payment. It is require that the full cost of using electronic forms of payment to be borne by
the taxpayer or fee payer.
The contract may be entered into by negotiation; and must be recorded on the governing
authority’s minutes.
Cost of Service Requirements
The governing authority must determine the amount or percentage service costs to add to each
charge for each type of credit card, charge card, debit card, and other forms of electronic
payment to be accepted. This service costs must be an amount or percentage that is sufficient so
that the user of the electronic payment system will pay the full cost of using such system.
Before charges are assessed, the governing authority must notify the electronic payment user of
the amount of the processing fee that is being added to the tax, fee, or accounts receivable bill.
The processing fee must be plainly included and identified on the receipt given to the payer.
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Receipt and Accounting Requirements
Fee Withholding by Processor Procedure
If the contract calls for the processing fee to be withheld from the amount charged electronically,
the processing cost should be noted on the receipt and included in the total charged to the payer.
The fee must also be noted in the financial records for verification purposes, but should not be
recorded as a revenue receipt in the appropriate journal.
The amount due for payment of the tax, fee or accounts receivable must be recorded and settled
as with ordinary cash collections. The processing fee charged and withheld by the processor
must be verified to insure proper calculation and collection.
Fee Collected by Municipality Procedure
If the contract calls for the processing fee to be paid by invoice as a claim, the processing cost
should be noted on the receipt and included in the total charged to the payer. The fee must also
be recorded in the appropriate accounting journal as a receipt for settlement into a separate fund.
A separate column or field must be set up in the accounting records to record the processing fee.
The processing fee must be recorded in a manner that will allow identification and reconciliation
to the proper processor.
Each invoice from the processor must be itemized and reconciled with the processing costs
received and recorded in the accounting records. This reconciliation should verify the correct
obligation payable to the appropriate processor for each processing fee. The itemized invoices
may then be paid upon approval of the governing authority, as with other claims.
Dishonored Charge Contract Requirements
The contract must clearly indicate that the governing authority is not responsible for processing
costs or penalties for credit cards, charge cards, debit cards or any other form of electronic
payment. Terms for charges disputed by the card account holder and subsequently dishonored
and charged back to the governing authority should be clearly identified in the contract. Such
dishonored transactions charged back to the governing authority after initial approval of the
payment processor should be handled in generally the same manner as bad checks; and are
considered not paid.
Amount of Collection Requirement
For all collections, the governing authority must receive the entire amount that constitutes the
ordinary amount due for the tax, fee or accounts receivable without accepting a discounted
payment of such tax, fee or accounts receivable.
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Collection Agency, etc. Collections – Fee Payment Exception
Municipalities may contract for services to collect delinquent accounts and certain failed to
appear cash appearance bonds (See “Contracting with Collection Agencies” in this section of this
guide). This authority contains procedures to accept credit cards or electronic funds from the
person to pay the delinquent obligation or cash appearance bond.
This procedure allows the municipality to pay the costs of the credit card or electronic funds
transfer from the late fee portion of the collection. This exception to these regulations should be
carefully considered when entering into contracts for electronic payment processing.
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Municipal Audit Requirements
111
State law requires all municipalities to have an annual audit. This law is specific with regard to the
type of audit, who may perform the audit, and other conditions. The State Auditor is charged with
the responsibility to prescribe guidelines for the audit process.
The following explains the municipal audit responsibilities of the municipal officials and the
municipal auditors.
SECTION IV - MUNICIPAL AUDIT REQUIREMENTS
A. LEGAL REQUIREMENTS FOR THE AUDIT ……………………………… 112
B. GUIDELINES FOR MUNICIPAL OFFICIALS
Audit Contracts …………………………………………………………………. 114
Management’s Discussion and Analysis ……………………………………….. 114
Publication and Distribution of Annual Audit ………………………..……….. 114
Municipal Compliance Questionnaire …………………………...…………….. 118
C. GUIDELINES FOR MUNICIPAL AUDITORS
Qualifications and Procedures ………………………………………………..… 125
D. FINANCIAL REPORTING
Financial Audit for all funds of the municipality under either:
General Purpose Financial Reporting Framework (GAAP) or
Special Purpose Financial Reporting Framework (Cash Basis – OCBOA) 126
Compilation Report using OCBOA (Cash Basis) and
Agreed Upon Procedures ………………………...……………………… 126
Exemption from Compilation and Agreed Upon Procedures Report ……….. 130
E. EXAMPLES OF REPORTS AND SCHEDULES
Schedule of Investments ……………………………………………………. 131
Schedule of Capital Assets …………………………………………………. 132
Schedule of Long-Term Debt ……………………………………………… 133
Schedule of Surety Bonds for Municipal Officials ……………………….. 134
Suggested Compliance Audit Procedures ………………………………… 135
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Section 21-35-31 (1), Miss. Code Annotated requires all municipalities to have an annual audit of
their books. The requirements of this law are as follows:
The governing authorities 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 from 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.
Two copies of the audit or compilation must be mailed to the State Auditor within 30 days
after completion.
A synopsis of the audit or report, as defined by the State Auditor, must be published within 30
days after completion of the audit. The publication must be in a newspaper published in the
municipality or, if no newspaper is published in the municipality, in a newspaper having
general circulation in the county. As an alternative to publishing the synopsis, the audit may
be publicized as provided by Section 21-17-19. Further, the publication shall be made one (1)
time, and the municipality may only pay one-half (½) of the legal rate prescribed by law for
such legal publications Section 25-7-65.
Section 21-35-31(2) states that 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 non-compliance will be issued to the State Tax Commission and 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 non-compliance to the clerk of the
municipality, State Tax Commission and the Attorney General.
Thereafter, the State Tax Commission 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.
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The State Auditor shall notify the State Tax Commission of the amount in writing, and the
State Tax Commission 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.
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Audit Contracts
These guidelines have been developed for use by municipal officials when contracting for the
annual municipal audit. These guidelines should be carefully reviewed and followed to ensure full
compliance with state law.
Contract Requirements - The governing authorities must enter into a written contract with a
municipal auditor to perform the annual audit. This contract must assure the auditor's reports,
financial statements, and supplemental schedules are prepared in accordance with the
guidelines presented in the "Municipal Audit and Accounting Guide" and state law, as
explained in this section under "Legal Requirements for the Audit." Audits must be conducted
in accordance with auditing standards generally accepted in the United States of America and
the standards applicable to the financial audits contained in the Government Auditing
Standards issued by the Comptroller General of the United States. The municipal audit firm
must be a firm registered with the Office of the State Auditor. The audit contract may be for
one or more years up to the last year of the term of office of the governing authorities. The
auditor's engagement letter may serve as the written contract. The contract must also address
the requirement to provide necessary hard and electronic copies of the audit report and allow
subsequent auditors reasonable access to the predecessor auditor's working papers.
Record Access - In connection with the annual audit, the municipality must make all relevant
records available to the municipal auditor and provide appropriate assistance.
Audit Content - Section 21-35-31 (1), 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, or any office or officers hereafter designated to replace or perform the
duties imposed by said chapter. Audits must be conducted must be conducted in accordance
with auditing standards generally accepted in the United States of America and the standards
applicable to the financial audits contained in Government Auditing Standards, issued by the
Comptroller General of the United States.
Compliance Questionnaire -As part of the municipality's audit, the governing authorities of
the municipality must make certain assertions with regard to legal compliance. The municipal
compliance questionnaire was developed for this purpose. The questionnaire and related
certification must be completed at the end of the municipality's fiscal year and entered into the
official minutes of the governing authorities at their next regular meeting.
Management’s Discussion and Analysis
Governing authorities that contract for full-scope audits will be required to prepare a
management’s discussion and analysis as required by the Governmental Auditing Standards Board
(GASB). Please refer to GASB for additional guidance. This report will require financial and
statistical information as well as certain statements of the governing authorities. This information
is required by the Government Accounting Standards Board (GASB). Please refer GASB standards
for additional guidance.
Publication and Distribution of Annual Audit
State law requires the municipality, within 30 days after the completion of the annual audit, to
follow certain procedures governing the publication of the audit report information and distribution
of the audit report.
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Publication of the Annual Audit
Legal requirements call for municipalities to provide public notice of the completion and
availability of the annual audit. The form of this public notice depends upon options exercised
by the governing authorities of the municipality.
Municipalities have an option of two public notice procedures. These are as follows:
Synopsis of Audit Option - NOT RECOMMENDED
This option, authorized in Section 21-35-31 (1), requires a municipality to publish a "synopsis
of the audit" as defined by the State Auditor. For this purpose, the following definition is
provided:
Definition of Synopsis - The entire audit report
Substance of Publication Option - RECOMMENDED
This option, as provided by Section 21-17-19, requires:
Publishing of the substance and availability of the audit; posting of the audit at the city
hall, library, or courthouse, and one other public place; and providing a copy of the
audit to any municipal residents who make a request for one.
This office recommends the notice of audit completion be published at least twice in a
newspaper serving the municipality and that the following format be used when publishing
the substance and availability of the audit.
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EXAMPLE 1 - For cities issuing a compiled (unaudited) financial report
PUBLIC NOTICE
The City of ___________________________
hereby gives notice that its annual financial
report for the year ended _________________
has been completed. Copies are available
to the public at _________________________.
EXAMPLE 2 - For cities issuing an audited financial report
PUBLIC NOTICE
The City of ___________________________
hereby gives notice that its annual audited
financial report for the year ended
_________________ has been completed.
Copies are available to the public at
_________________________.
Note: The minimum size of this publication is two columns wide by three inches long.
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Transmittal Letter for Municipal Audit Reports
Number of Copies to be Transmitted - Two hard copies and one electronic copy of the
completed audit or compilation report must be sent to the State Auditor. Electronic copies
should be submitted to municipal.reports@osa.ms.gov. If the Federal Single Audit report is
prepared, the municipality is reminded a copy of the report and a data collection form must be
submitted to the U. S. Census Federal Clearinghouse.
Format for Transmittal Letter - In addition to sending the State Auditor and Clearinghouse
the appropriate reports, the mayor of the municipality must also provide the State Auditor a
transmittal letter. This transmittal letter must contain a statement regarding the existence of
any management letters. If management letters have been written, a hard and electronic copy
must be transmitted to the State Auditor along with each audit or compilation report sent.
The appropriate transmittal letter should be written as follows:
Office of the State Auditor
P.O. Box 956
Jackson, Mississippi 39205
Re: Annual Municipal Audit
Accompanying this letter is a copy of the annual audit (compilation) of the city (town) of
____________________, Mississippi, for the fiscal year ended September 30, 20___. In
connection with this audit (compilation), a separate management letter was written to the
city (town). Enclosed you will find a copy of this management letter along with the audit
(compilation) reports.
OR
Accompanying this letter is a copy of the annual audit (compilation) of the city (town) of
____________________, Mississippi, for the fiscal year ended September 30, 20___. A
separate management letter was not written to the city (town) in connection with this
audit.
Sincerely,
(Mayor's Signature)
Mayor
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Municipal Compliance Questionnaire
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As part of the municipality's audit, the governing authorities of the municipality must make certain
assertions with regard to legal compliance. The municipal compliance questionnaire was
developed for this purpose.
The following questionnaire and related certification must be completed at the end of the
municipality's fiscal year and entered into the official minutes of the governing authorities at their
next regular meeting.
The governing authorities should take care to answer these questions accurately. Incorrect answers
could reduce the auditor's reliance on the questionnaire responses, resulting in the need to perform
additional audit procedures at added cost.
Information
Note: Due to the size of some municipalities, some of the questions may not be applicable. If
so, mark N/A in answer blanks. Answers to other questions may require more than "yes"
or "no," and, as a result, more information on this questionnaire may be required and/or
separate work papers may be needed.
1. Name and address of municipality:
___________________________________________________________________________
______________________________________________________
2. List the date and population of the latest official U.S. Census or most recent official census:
___________________________________________________________________________
___________________________________________________________________________
3. Names, addresses, and telephone numbers of officials (include elected officials, chief
administrative officer, and attorney).
___________________________________________________________________________
4. Period of time covered by this questionnaire:
From: ______________________________ To: ____________________________
5. Expiration date of current elected officials' term: ________________________________
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Year Ended September 30, 20
Answer All Questions: Y - YES, N - NO, N/A - NOT APPLICABLE
PART I - General
1. Have all ordinances been entered into the ordinance book and
included in the minutes? (Section 21-13-13)
2. Do all municipal vehicles have public license plates and
proper markings? (Sections 25-1-87 and 27-19-27)
3. Are municipal records open to the public? (Section 25-61-5)
4. Are meetings of the board open to the public?
(Section 25-41-5)
5. Are notices of special or recess meetings posted?
(Section 25-41-13)
6. Are all required personnel covered by
appropriate surety bonds?
. Board or council members (Section 21-17-5)
• Appointed officers and those handling
money, see statutes governing the form of
government (i.e.,
(Section 21-3-5 for Code Charter)
·
Municipal clerk (Section 21-15-38) _
·
Deputy clerk (Section 21-15-23)
·
Chief of police (Section 21-21-1)
·
Deputy police (Section 45-5-9) (if hired under this law)
7.
Are minutes of board meetings prepared to properly reflect the
actions of the board? (Sections 21-15-17 and 21-15-19)
8.
Are minutes of board meetings signed by the mayor or
the majority of the board within 30 days of the
meeting? (Section 21-15-33)
9.
Has the municipality complied with the nepotism law in its
employment practices? (Section 25-1-53)
10.
Did all officers, employees of the municipality, or their
relatives avoid any personal interest in any contracts with
the municipality during their term or within one year after
their terms of office or employment? (Section 25-4-105)
11.
Does the municipality contract with a Certified Public
Accountant or an auditor approved by the State Auditor for
its annual audit within twelve months of the end of each
fiscal year? (Section 21-35-31)
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12.
Has the municipality published a synopsis or notice of the
annual audit within 30 days of acceptance?
(Section 21-35-31 or 21-17-19)
PART II - Cash and Related Records
1. Where required, is a claims docket maintained?
(Section 21-39-7)
2. Are all claims paid in the order of their entry in the claims
docket? (Section 21-39-9)
3. Does the claims docket identify the claimant, claim number,
amount, and fund from which each warrant will be issued?
(Section 21-39-7)
4. Are all warrants approved by the board, signed by the mayor
or majority of the board, attested to by the clerk, and
bearing the municipal seal? (Section 21-39-13)
5. Are warrants for approved claims held until sufficient cash is
available in the fund from which it is drawn?
(Section 21-39-13)
6. Has the municipality adopted and entered on its minutes a
budget in the format prescribed by the Office of the State
Auditor? (Sections 21-35-5, 21-35-7 and 21-35-9)
7. Does the municipality operate on a cash basis budget, except
for expenditures paid within 30 days of fiscal year-end or for
construction in progress? (Section 21-35-23)
8. Has the municipality held a public hearing and published its
adopted budget? (Sections 21-35-5 and 27-39-203)
9. Has the municipality complied with legal publication
requirements when budgetary changes of 10% or more are
made to a department's budget? (Section 21-35-25)
10. If revenues are less than estimated and a deficit is
anticipated, did the board revise the budget by its regular
July meeting? (Section 21-35-25)
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11. Have financial records been maintained in accordance with
the chart of accounts prescribed by the State Auditor?
(Section 21-35-11)
12. Does the municipal clerk submit to the board a monthly
report of expenditures against each budget item for the
preceding month and fiscal year to date and the unexpended
balances of each budget item? (Section 21-35-13)
13. Does the board avoid approving claims and the city clerk not
issue any warrants which would be in excess of budgeted
amounts, except for court-ordered or emergency
expenditures? (Section 21-35-17)
14. Has the municipality commissioned municipal depositories?
(Sections 27-105-353 and 27-105-363)
15. Have investments of funds been restricted to those
instruments authorized by law? (Section 21-33-323)
16. Are donations restricted to those specifically authorized by
law? [Section 21-17-5 (Section 66, Miss. Constitution) --
Sections 21-19-45 through 21-19-59, etc.]
17. Are fixed assets properly tagged and accounted for?
(Section II - Municipal Audit and Accounting Guide)
18. Is all travel authorized in advance and reimbursements made
in accordance with Section 25-3-41?
19. Are all travel advances made in accordance with the State
Auditor's regulations? (Section 25-3-41)
PART III - Purchasing and Receiving
1.
Are bids solicited for purchases when required by law
(written bids and advertising)? [Section 31-7-13]
2.
Are all lowest and best bid decisions properly documented?
(Section 31-7-13)
3.
Are all one-source items and emergency purchases
documented on the board's minutes? (Section 31-7-13)
4.
Do all officers and employees understand and refrain from
accepting gifts or kickbacks from suppliers? (Section
31-7-23)
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PART IV - Bonds and Other Debt
1.
Has the municipality complied with the percentage of taxable
property limitation on bonds and other debt issued during the
year? (Section 21-33-303)
2.
Has the municipality levied and collected taxes in a sufficient
amount for the retirement of general obligation debt principal
and interest? (Section 21-33-87)
3.
Have the required trust funds been established for utility
revenue bonds? (Section 21-27-65)
4.
Have expenditures of bond proceeds been strictly limited to
the purposes for which the bonds were issued? (Section
21-33-317)
5.
Has the municipality refrained from borrowing, except where
it had specific authority? (Section 21-17-5)
PART V - Taxes and Other Receipts
1.
Has the municipality adopted the county ad valorem tax rolls?
(Section 27-35-167)
2.
Are interest and penalties being collected on delinquent
ad valorem taxes? (Section 21-33-53)
3.
Has the municipality conducted an annual land sale for
delinquent ad valorem taxes? (Section 21-33-63)
4.
Have the various ad valorem tax collections been deposited
into the appropriate funds? (Separate Funds for Each Tax
Levy) (Section 21-33-53)
5.
Has the increase in ad valorem taxes, if any, been limited to
amounts allowed by law? (Sections 27-39-320 and 27-39-321)
6.
Are local privilege taxes collected from all businesses located
within the municipality, except those exempted? (Section
27-17-5)
7.
Are transient vendor taxes collected from all transient
vendors within the municipality, except those exempted?
(Section 75-85-1)
8.
Is money received from the state's "Municipal Fire Protection
Fund" spent only to improve municipal fire departments?
(Section 83-1-37)
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9.
Has the municipality levied or appropriated not less than 1/4
mill for fire protection and certified to the county it
provides its own fire protection or allowed the county to
levy such tax? (Sections 83-1-37 and 83-1-39)
10.
Are state-imposed court assessments collected and settled
monthly? (Section 99-19-73, 83-39-31, etc.)
11.
Are all fines and forfeitures collected when due and settled
immediately to the municipal treasury? (Section 21-15-21)
12.
Are bids solicited by advertisement or, under special
circumstances, three appraisals obtained when real property is
sold? (Section 21-17-1)
13.
Has the municipality determined the full and complete cost for solid
waste for the previous fiscal year? (Section 17-17-347)
14.
Has the municipality published an itemized report of all revenues,
costs, and expenses incurred by the municipality during the
immediately preceding fiscal year in operating the garbage
or rubbish collection or disposal system? (Section 17-17-348)
15.
Has the municipality conducted an annual inventory of its assets in
accordance with guidelines established by the Office of the
State Auditor? (MMAAG)
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(MUNICIPAL NAME)
Certification to Municipal Compliance Questionnaire
Year Ended September 30, 20
We have reviewed all questions and responses as contained in this Municipal Compliance
Questionnaire for the Municipality of , and, to the best of
our knowledge and belief, all responses are accurate.
(City Clerk's Signature) (Mayor's Signature)
(Date) (Date)
Minute Book References:
Book Number Page
(Clerk is to enter minute book references when the questionnaire is accepted by the board.)
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Qualifications and Procedures
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These guidelines have been developed for use by auditors who contract with municipalities for
their legally required annual audit. Generally, they provide information on what is required for
each type of municipal audit.
Qualifications and Procedures
Legal Authority - Municipal audit and accounting requirements are prescribed in accordance with
Sections 21-35-29, 21-35-31, and 7-7-211. This means that for a municipal audit to be prepared
in accordance with state law, it must be prepared as required by this guide.
Contract Requirements - The preceding portion of this guide, "Guidelines for Municipal
Officials,” requires the municipality to enter into a written contract for audit services. This contract
may take the form of a standard engagement letter. This contract should make clear which of the
listed types of audits is to be performed and what additional services are to be provided.
Auditing Standards – Audits must be conducted in accordance with Government Auditing
Standards (Yellow Book or GAS) issued by the Comptroller General of the United States of the
Government Accountability Office (GAO). Federal Audits must be conducted in accordance with
the Single Audit Act and Title 2 U.S. Code of Federal Regulations Part 200, Uniform
Administrative Requirements, Cost Principals, and Audit Requirements for Federal Awards
(Uniform Guidance). Generally Accepted Auditing Standards (GAAS) or Statements on Standards
for Accounting and Review Services (SSARS) as prescribed by the American Institute of Certified
Public Accountants (AICPA) must also be followed depending on the type of engagement.
Auditing Procedures – The auditor’s responsibility is to develop suitable audit procedures to
encompass the above-mentioned applicable standards. AICPA resources such as the Audit and
Accounting Guide State and Local Governments, and the Audit Guide Government Auditing
Standards and Single Audits are examples of resources to use in addition to the Uniform Guidance.
Compliance audit procedures presented in “Example 5” are offered as suggestions only.
Substantial Non-Compliance Reporting Procedure - The auditor should contact the State
Auditor’s Office for additional guidance if misappropriation of public funds, services, or property;
or other substantial non-compliance with legal requirements is determined to have occurred or is
suspected.
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Legal Requirements
Mississippi Code Section 21-35-31(1) states, “The governing authority of every municipality in
the state shall have the municipal books audited annually, prior to 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 from 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 Annotated, or any office or
officers’ hereafter designated to replace or perform the duties imposed by said chapter”.
Report Options
There are three reports that municipal authorities may contract for that will be acceptable in
accordance with Section 21-35-31. The requirements of each are based on total revenues or
expenditures. The three reports are as follows:
1. Perform a financial audit for all funds of the municipality under either:
General Purpose Financial Reporting Framework (GAAP) or
Special Purpose Financial Reporting Framework (Cash Basis – OCBOA)
2. Compilation report using OCBOA (Cash Basis) and Agreed-Upon Procedures
The criteria to determine which report to use is based on total revenues or expenditures, whichever
is lower. We suggest the auditor use current year amounts if available to determine which report
is applicable.
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Financial Audit under Either Framework
All municipalities with total revenues or expenditures equal to or greater than $1,500,000 are
required to have a financial report. The professional services will be performed in conformity with
the applicable standards and guidance required for governmental audits. listed in this paragraph.
Generally accepted auditing standards and the industry audit guide,
The following schedules and reports must be included in the audit report:
Schedule on Surety Bonds for Municipal Official (See Example 4)
Report on Compliance with State Laws and Regulations
Additionally, the following schedules and reports should be included in the audit report using the
Special Purpose Financial Reporting Framework (Cash Basis-OCBOA):
Schedule of Investments (See Example 1)
Schedule of Capital Assets (See Example 2)
Schedule of Long-Term Debt (See Example 3)
Suggested Compliance Audit Procedures (See Example 5)
Each municipality must prepare a "Municipal Compliance Questionnaire" (MCQ) and enter it into
the official minutes. (See the section of this guide on guidelines for Municipal Officials.) The
municipal auditor should review the assertions made in this questionnaire and perform such
compliance audit procedures as are appropriate. Upon completion of audit procedures, the auditor
should prepare a special report for the purpose of reporting instances of material non-compliance
with legal requirements addressed in the MCQ and any other findings of material non-compliance
with legal requirements. If there are no instances of non-compliance, the special report should
make a statement of negative assurance.
Compilation Report using OCBOA (Cash Basis) and Agreed Upon-Procedures
Under certain conditions, municipalities may contract for this type of report in lieu of a financial
audit. This option is intended to provide minimal reporting at a reduced cost. The municipality
should prepare its compilation engagement in accordance with Statements on Standards for
Accounting and Review Services promulgated by the Accounting and Review Services Committee
of the AICPA. In order to qualify for this type of report, a municipality's total revenues or
expenditures must be less than $1,500,000.
This option involves a compilation of certain financial information and a special report on specific
agreed-upon audit procedures. This option should not be used if the municipality is required to have a
federal single audit.
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The minimum required financial presentation for municipalities consists only of the Basic
Financial Statements.
The Basic Financial Statements have two sections:
I.
Fund Financial Statements- (Statement of Cash Receipts and Disbursements)
2. Notes to Financial Statements (if applicable).
Additionally, the following schedules and reports should be included in the audit report:
Schedule of Investments (See Example 1)
Schedule of Capital Assets (Optional) (See Example 2)
Schedule of Long-term debt (See Example 3)
Schedule on Surety Bonds for Municipal Official (See Example 4)
Report on Compliance with State Laws and Regulations
Each municipality must prepare a "Municipal Compliance Questionnaire" (MCQ) and enter it into
the official minutes. (See the section of this guide on guidelines for Municipal Officials.) The
municipal auditor should review the assertions made in this questionnaire and perform such
compliance audit procedures as are appropriate. Upon completion of audit procedures, the auditor
should prepare a special report for the purpose of reporting instances of material non-compliance
with legal requirements addressed in the MCQ and any other findings of material non-compliance
with legal requirements. If there are no instances of non-compliance, the special report should
make a statement of negative assurance.
In addition to the compilation report, the auditor is required to perform an Agreed-Upon
Procedures Engagement.
The procedures required to prepare this report are as follows:
Cash (including investments)
Confirm and reconcile cash on deposit and investments made by all funds as of the
end of the fiscal year.
Physically inspect investment securities as of the end of the fiscal year if amounts
were not confirmed.
Examine all investment transactions during the fiscal year for compliance with Section
21-33-323.
Ad Valorem Taxes
Trace levies to governing body minutes.
Trace settlements to the proper funds.
Determine that increases in ad valorem taxes are within the growth limitation allowed
by law Sections 27-39-320 through 27-39-323.
State Receipts
Confirm payments from the Department of Finance and Administration.
Trace deposits into the municipal treasury as recorded in the cash receipts
journal.
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Disbursements
Test a sample of disbursements and determine that all were approved by the board
prior to disbursement and, if applicable, in compliance with state purchasing laws
Section 31-7-13.
State Court Fine Assessment
Test a sample collection of fines and forfeitures and determine that the municipal
court clerk has settled daily with the municipal clerk Section 21-15-21.
Test a sample of state-imposed court assessments collected and determine that the
municipal clerk has settled monthly with the Department of Finance and
Administration Sections 99-19-73 & 83-39-3.
Municipal Compliance Questionnaire
Determine that the municipal compliance questionnaire was completed, signed, and
recorded in the board's minutes.
Test the completed questionnaire to determine that it was accurately prepared.
Include any instances of non-compliance in the auditor's special report on agreed-
upon procedures.
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Exemption from Compilation and Agreed Upon Procedures Report
A municipality in Mississippi may request an exemption from a compilation, and agreed-
upon procedures report if certain requirements are met. The following requirements must be
met before the State Auditor will consider an exemption from this requirement:
1.
Request must be postmarked within 90 days of fiscal year-end.
2.
Total revenue or expenditures shall not exceed $100,000 for the fiscal year
under consideration.
The State Auditor will consider the request only if both of the above requirements are met. The
Application for Exemption and the instruction on how to complete it can be found on the State
Auditor’s website at osa.state.ms.us/resources.
2022 Municipal Audit and Accounting Guide
Municipal Audit Requirements – Financial Reporting
Examples of Reports and Schedules - Example 1
131
TOWN OF ____________________________, MISSISSIPPI
SCHEDULE OF INVESTMENTS - ALL FUNDS
September 30, 20_____
OWNERSHIP
TYPE OF
INVESTMENT
INTEREST
RATE
ACQUISITION
DATE
MATURITY
DATE
OTHER
INFORMATION
INVESTMENT
COST/VALUE
EXAMPLE:
GENERAL
FUND
CERTIFICATE
OF DEPOSIT
3.25%
09/01/XX
180 Days
State Depository
$100,000
Bank of XXX
Debt Service
U. S. Treasury
Note
3.00%
09/01/XX
90 Days
9,925
TOTAL INVESTMENTS
$109,925
2022 Municipal Audit and Accounting Guide
Municipal Audit Requirements – Financial Reporting
Examples of Reports and Schedules - Example 2
132
TOWN OF ____________________________, MISSISSIPPI
SCHEDULE OF CAPITAL ASSETS
For the Fiscal Year Ended September 30, 20____
Government Activities:
Beginning
Balance
Increases
Decreases
Ending
Balances
Capital Assets:
Land
Buildings
Machinery and Equipment
Infrastructure
Construction in Progress
Total Governmental Activities Capital Assets
Business-Type Activities
Capital Assets:
Land
Buildings
Machinery and Equipment
Construction in Progress
Total Business-Type Activities Capital Assets
2022 Municipal Audit and Accounting Guide
Municipal Audit Requirements – Financial Reporting
Examples of Reports and Schedules - Example 3
133
TOWN OF ____________________________, MISSISSIPPI
SCHEDULE OF LONG-TERM DEBT
For the Fiscal Year Ended September 30, 20____
Definition and Purpose
Balance Outstanding
October 1. 20XX
Increases
Decreases
Balance
Outstanding
September 30.
20XX
General Obligation Bonds:
Revenue Bonds:
Other Long-Term Debt
TOTAL
2022 Municipal Audit and Accounting Guide
Municipal Audit Requirements – Financial Reporting
Examples of Reports and Schedules - Example 4
134
MUNICIPALITY, MISSISSIPPI
SCHEDULE OF SURETY BONDS FOR MUNICIPAL OFFICIALS
September 30, 20___
Name Position Surety Bond Amount
EXAMPLE:
A. A. Citizen Alderman XYZ Company $ 100,000
A. B. Citizen Alderman XYZ Company $ 100,000
A. C. Citizen Alderman XYZ Company $ 100,000
A. D. Citizen Alderman XYZ Company $ 100,000
A. E. Citizen Alderman XYZ Company $ 100,000
B. B. Citizen City Clerk XYZ Company $ 50,000
C. C. Citizen Police Chief XYZ Company $ 50,000
2022 Municipal Audit and Accounting Guide
Municipal Audit Requirements
Suggested Compliance Audit Procedures – Example 5
135
The auditor should develop a legal compliance audit program to test selected legal requirements.
The following compliance audit procedures are recommended. The auditor should also review the
municipal compliance questionnaire to determine if the municipal officials' responses agree with
the audit results.
Budgets
Compliance Requirement:
See the "Laws on Budgeting" portion of the "Municipal Budgeting" section of this guide.
Suggested Audit Procedures:
Review laws and rules governing appropriate budget functions.
Review procedures relating to execution and control over the budget as adopted.
Verify proper approval of both the originally adopted budget and any subsequent revisions.
Compare final budget amounts with actual expenditures to determine whether the budget has
been exceeded.
Vehicle Markings
Compliance Requirement:
Section 25-1-87 Annotated requires all municipal vehicles to be marked, except police vehicles
used for undercover operations and authorized by governing authorities.
Vehicles must be marked in a contrasting color by:
Affixing on both sides of the vehicle a permanent decal or design which is at least twelve
inches in width and height; or
Painting the name of the municipality on each side of each vehicle in letters at least three
inches in height and on the rear of each vehicle in letters at least one and one-half inches in
height.
Suggested Audit Procedures:
By appropriate tests, determine vehicles are marked as required by state law. Particular attention
should be given to vehicles used by elected officials and city management.
2022 Municipal Audit and Accounting Guide
Municipal Audit Requirements
Suggested Compliance Audit Procedures – Example 5
136
Surety Bonds
Compliance Requirement:
Surety bond requirements may vary by position and form of government. Generally, the
requirements are as follows:
Position Amount Law
Municipal Clerk, Etc. $ 50,000 + Section 21-15-38
Deputy Clerk 50,000 + Section 21-15-23
Chief of Police 50,000 + Section 21-21-1
Anyone Handling Money 50,000 + Section 21-3-5
Section 21-8-23
Section 21-9-21
Board or Council 100,000* Section 21-17-5
* An amount not to exceed based on the assessed value of the municipality. For all
municipalities with a population of more than 2,000, according to the latest federal decennial
census, the amount of the bond shall not be less than $50,000.
Suggested Audit Procedures:
Examine the schedule of surety bonds. Determine that coverage meets legal requirements.
2022 Municipal Audit and Accounting Guide
Municipal Audit Requirements
Suggested Compliance Audit Procedures – Example 5
137
Transfer Payments
Compliance Requirement:
These payments carry their own statutory and/or contractual requirements. These requirements can
be identified by reviewing relevant sections of the Mississippi Code and contracts filed in the
municipality.
Suggested Compliance Audit Procedures:
Obtain a listing of disbursements to the municipality from the Department of Finance and
Administration. Trace amounts indicated to proper recording in the accounts.
Note: A listing of disbursements from the Department of Finance
and Administration can be obtained by writing to:
Department of Finance and Administration
P. O. Box 1060
Jackson, Mississippi 39205
Trace amounts indicated on the disbursements listing to proper recording in the municipality's
accounts.
By appropriate tests, determine that funds were accounted for and disbursed in accordance
with legal requirements.
Depositories
Compliance Requirement:
Sections 27-105-1.
Municipalities to select depositories for not more than a two-year term.
Depositories must meet capital requirements and be certified by the State Treasurer.
Securities must be pledged to the State Treasurer in a manner to ensure adequate
collateralization.
Suggested Audit Procedures:
Determine that the municipality selects the depositories in a manner consistent with the statutes.
Determine that controls are in place to ensure adequate collateralization of funds.
2022 Municipal Audit and Accounting Guide
Municipal Audit Requirements
Suggested Compliance Audit Procedures – Example 5
138
Investments
Compliance Requirement:
Section 21-33-323 allows municipalities to invest surplus funds. These funds may only be invested
in the types of investments listed in this law, and certificates of deposit must be d from the
municipality's or the state's depositories. Restrictions also exist on interest rates and the disposition
of interest earnings.
Suggested Audit Procedures:
Determine that the municipality purchases investments of the type authorized by law.
Determine that interest is paid and deposited as required by law.
Issuance of Debt and Use of Proceeds
Compliance Requirement:
Section 21-17-5 prohibits municipalities from issuing debt without specific authority. Typically,
municipal bonded debt is issued by authority of Section 21-33-301; however, separate special
purpose authority is also available for bonds and notes. Each debt instrument should be examined
to determine its source of authority.
Section 21-33-317 requires bond proceeds to be placed in a special fund in the municipal depository
and be expended only for the purposes authorized.
Section 21-33-303 limits a municipality's authority to issue specified new debt. New debt may not
be issued in excess of a specified total debt to the total-assessed valuation percentage.
Suggested Audit Procedures:
Determine compliance with statutory requirements related to issuance and accountability of
debt for the current year.
Determine that bond proceeds are expended as required by examining bond purpose resolutions.
Determine that new debt issuances were not in excess of the total debt limitation as of the date
of the issuance.
2022 Municipal Audit and Accounting Guide
Municipal Audit Requirements
Suggested Compliance Audit Procedures – Example 5
139
Ad Valorem Taxes
Compliance Requirement:
Section 21-33-45 and other sections authorize municipalities to levy ad valorem taxes for specified
purposes. Section 21-33-47 requires certification and publication of the tax levy. Sections 27-39-
320 through 27-39-323 limit ad valorem tax growth in a given tax year and require the escrow of
excess collections.
Sections 21-33-53 and 21-33-63 require municipalities to collect and sell the property for non-
payment of ad valorem taxes in the same manner as provided for Mississippi Counties. Section 27-
41-9 requires interest to be collected on delinquent taxes, and Sections 27-41-15 and 27-41-59
provide for the sale of property for unpaid taxes.
Suggested Audit Procedures:
Determine that each tax levy is authorized, accounted for, and expended as required by law.
Determine that taxes were not increased beyond the growth limitation and, if so, that proper
escrow procedures were followed. Prepare a calculation to demonstrate compliance.
Determine that interest was collected on delinquent ad valorem taxes and that tax sales were
held.
Other Taxes
Compliance Requirement:
Section 27-17-5 requires that municipalities collect a local privilege tax. Sections 27-27-301 and
27-27-303 provide for a vending machine tax to be collected by municipalities. Section 75-85-15
requires municipalities to issue transient vendor license for a fee.
Suggested Audit Procedures:
Determine that these taxes are being collected.
2022 Municipal Audit and Accounting Guide
Municipal Audit Requirements
Suggested Compliance Audit Procedures – Example 5
140
Purchasing and Receiving
Compliance Requirement:
Section 31-7-13 requires municipalities purchase their commodities, printing, and public
construction as provided in this law. Generally, (as of July 1, 2022):
Purchases up to $5,000 do not require bids;
Purchases over $5,000 up to $75,000 require solicitation of two written bids (quotes);
Purchases over $75,000 require solicitation of bids by advertisement;
Specifications must be written in a non-restrictive way;
Lowest and best bid, sole-source, and emergency purchase options are available;
Term contract procedures are available and options when no firm bids are received on petroleum
products;
Authority is provided for leases; and
Certain purchases do not require bids.
Other purchasing procedures are described throughout Chapter 7 of Title 31, Miss. Code Annotated.
Suggested Audit Procedures:
Select a representative sample of purchasing transactions executed during the year under audit.
Determine that appropriate bid procedures were followed on each sample item.
