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ENGROSSED HOUSE
BILL NO. 3463 By: Boles of the House
and
Daniels of the Senate
An Act relating to cities and towns; amending 11 O.S.
2021, Section 17-105, as last amended by Section 1,
Chapter 287, O.S.L. 2024 (11 O.S. Supp. 2025, Section
17-105), which relates to annual audits of
municipalities; requiring submission of annual
financial statement audit by certain municipalities;
permitting agreed-upon-procedures engagement;
requiring copies be filed with State Auditor and
Inspector six months after the close of the fiscal
year; amending 11 O.S. 2021, Section 17-107, as
amended by Section 3, Chapter 254, O.S.L. 2022 (11
O.S. Supp. 2025, Section 17-107), which relates to
failure of municipalities to file audit or agreed-
upon-procedures report; modifying period of
withholding funds; clarifying citation; clarifying
passage of House bill made section effectively not
repealed; directing the Oklahoma Tax Commission to
release certain funds; clarifying timeline for
release of funds by the Oklahoma Tax Commission;
providing for noncodification; providing an effective
date; and declaring an emergency.
BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA:
SECTION 1. AMENDATORY 11 O.S. 2021, Section 17-105, as
last amended by Section 1, Chapter 287, O.S.L. 2024 (11 O.S. Supp.
2025, Section 17-105), is amended to read as follows:
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Section 17-105. A. The governing body of each municipality
with Fifty Thousand Dollars ($50,000.00) or more in total revenue to
all funds, including component units of which the municipality is a
beneficiary, during a fiscal year shall cause to be prepared, by an
independent licensed public accountant or a certified public
accountant, an annual financial statement audit to be conducted in
accordance with auditing standards generally accepted in the United
States of America and Government Auditing Standards as issued by the
Comptroller General of the United States. Such audit shall be
ordered within thirty (30) days of the close of each fiscal year.
Copies shall be filed with the State Auditor and Inspector within
six (6) months after the close of the fiscal year in accordance with
the provisions of the Municipal Audit Reform Act of 2022 and with
the governing body of the municipality.
B. The governing body of each municipality with Fifty Thousand
Dollars ($50,000.00) or more in total revenue to all funds,
including component units of which the municipality is a
beneficiary, and with a population of less than two thousand five
hundred (2,500) as of the most recent Federal Decennial Census, and
for whom an annual financial statement audit is not required by
another law, regulation or contract, shall cause to be prepared, by
an independent licensed public accountant or a certified public
accountant, a biennial an annual financial statement audit in
accordance with auditing standards generally accepted in the United
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States and Government Auditing Standards as issued by the
Comptroller General of the United States. Each biennial audit shall
cover the two (2) preceding years.
The governing body of each municipality may alternatively
request a biennial, or an agreed-upon-procedures engagement.
Agreed-upon procedures An agreed-upon-procedures engagement required
under the Municipal Audit Reform Act of 2022 shall be performed in
accordance with the applicable attestation standards of the American
Institute of Certified Public Accountants.
The audit or agreed-upon-procedures engagement shall be ordered
within thirty (30) days of the close of the fiscal year that the
audit is due. Copies shall be filed with the State Auditor and
Inspector within nine (9) months six (6) months after the close of
the fiscal year in accordance with the provisions of paragraph 2 of
subsection A of Section 212A of Title 74 of the Oklahoma Statutes
and with the governing body of the municipality, with the deadline
to order and file the audit or agreed-upon-procedures engagement
eligible for extension by the State Auditor and Inspector for
special circumstances or emergencies.
C. The municipal income requirements in subsections A and B of
this section shall not include any grant monies provided to a
municipality from any federal, state, or other governmental entity.
The municipal income requirements shall not include income of any
public trust established under Sections 176 through 180.4 of Title
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60 of the Oklahoma Statutes with a municipality as the beneficiary
of the trust; provided, income from trusts established principally
for the purpose of operating electric, water, wastewater, and
sanitation utilities shall be included for purposes of the municipal
income requirements.
D. The governing body of each municipality that requests the
biennial an agreed-upon-procedures engagement as provided in
subsection B of this section shall:
1. Determine the establishment of policies related to
adjustments, write-downs, or write-offs for various receivables due
to the municipality or the utility-related trust and select a sample
of adjustments to test for adherence to policies and for appropriate
supporting documentation;
2. Obtain two (2) months of bank statements of the general fund
and utility fund and confirm that cash deposits were made in the
appropriate accounts and verify utility billing receipts or posting
reports agree with the daily deposits;
3. Agree upon a pay rate for the city manager or town
administrator, city or town clerk, city or town treasurer, and
payroll clerk, to be authorized and documented in the personnel file
or in approved meeting minutes. If any employee received
compensation over and above his or her authorized salary or hourly
rate, the payroll clerk, upon request, shall provide appropriate
documentation of authorization for such pay. The requirements of
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this paragraph shall not include expense reimbursements but shall
include any allowances considered taxable;
4. Determine the establishment of policies of use, proper
municipal purpose, and adherence to prescribed policies for entities
that use debit or credit cards;
5. Select a sample of transactions to test for supporting
documentation;
6. Prepare a cash basis schedule of changes in fund balances
for each fund and determine compliance with the statutory
prohibition of creating fund balance deficits;
7. Agree material fiscal year-end bank account balances to bank
statements and trace significant reconciling items to subsequent
clearance and determine if any bank accounts exist that are not
under city council purview;
8. Compare uninsured deposits at fiscal year-end to the fair
value of pledged collateral;
9. Inquire if any instances of known fraud, illegal acts, or
noncompliance with laws and regulations have occurred; and
10. Compare the use of material-restricted revenues and
resources to the restrictions of the governing body of the
municipality.
E. A public trust with a municipal government or governments as
the beneficiary that meet the same financial requirements
established in subsection B of this section may, as an alternative
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to obtaining an audit as required in Section 180.1 of Title 60 of
the Oklahoma Statutes, follow the biennial agreed-upon-procedures
engagement outlined in subsection D of this section.
SECTION 2. AMENDATORY 11 O.S. 2021, Section 17-107, as
amended by Section 3, Chapter 254, O.S.L. 2022 (11 O.S. Supp. 2025,
Section 17-107), is amended to read as follows:
Section 17-107. If a municipality does not file a copy of its
audit or agreed-upon-procedures report as provided in Section 17-105
of this title, the State Auditor and Inspector shall notify the
Oklahoma Tax Commission which shall withhold from the municipality
its monthly allocations of gasoline taxes until notified by the
Office of the State Auditor and Inspector that the audit report has
been filed. If a report is not filed within two (2) years after the
close of the fiscal year in the case of an annual audit, or the
second fiscal year of a biennial audit period an agreed-upon-
procedures engagement, the funds being withheld shall be remitted by
the Oklahoma Tax Commission to the State Auditor and Inspector's
Special Investigative Unit Auditing Revolving Fund created pursuant
to Section 4 17-107A of this act title.
SECTION 3. NEW LAW A new section of law not to be
codified in the Oklahoma Statutes reads as follows:
A. The Legislature finds as a result of Enrolled House Bill No.
2362 of the 2nd Session of the 59th Oklahoma Legislature, effective
November 1, 2024, the Municipal Audit Reform Act of 2022 was not
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repealed. Any monies still withheld by the Oklahoma Tax Commission
for the 2022 fiscal year audits shall be released to the counties;
any monies still withheld for the 2023 fiscal year audits by the
Oklahoma Tax Commission for the Special Investigative Unit Auditing
Revolving Fund shall be released to the Office of the State Auditor
and Inspector for purposes consistent with law.
B. The Oklahoma Tax Commission shall release all funds withheld
for failure to file the 2024 audit required under Section 17-105 of
Title 11 of the Oklahoma Statutes, after the close of the 2026
fiscal year to the Office of the State Auditor and Inspector for
purposes consistent with law.
SECTION 4. This act shall become effective July 1, 2026.
SECTION 5. It being immediately necessary for the preservation
of the public peace, health or safety, an emergency is hereby
declared to exist, by reason whereof this act shall take effect and
be in full force from and after its passage and approval.
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Passed the House of Representatives the 3rd day of March, 2026.
Presiding Officer of the House
of Representatives
Passed the Senate the _____ day of __________, 2026.
Presiding Officer of the Senate