August 2001

ACKNOWLEDGMENTS:

We wish to express our appreciation for the dedicated efforts of the staff members of the Local Audit and Finance Division, Department of Treasury, who devoted many hours to writing, rewriting and reviewing this material prior to submission to the Michigan Committee on Governmental Accounting and Auditing.

The following are members of the Michigan Committee on Governmental Accounting and Auditing:

Richard L. Baldermann, CPA, CGFM, Department of Treasury; Chairman

Larry J. Allen, CPA, Stewart, Beauvais & Whipple; Jim Baker, CPA, Siegfried, Crandall, Vos & Lewis; Robert C. Bendzinski, Bendzinski & Co.; John Bengel, CFE, CGFM, Department of Treasury; Donald R. Breadon, CPA, MBA, Gaudette & Co.; James G. Buckley, CPA, PricewaterhouseCoopers; Darrell Burks, CPA, PricewaterhouseCoopers; Patsy K. Cantrell, City of Farmington; John Cubba, Redford Township; Robert J. Daddow, CPA, Oakland County; Gerald J. Desloover, CPA, Rehmann, Robson & Co.; George Elsworth, Assistant Attorney General; Rana M. Emmons, CPA, Post, Smythe, Lutz & Ziel; Michael J. Frawley, CPA, Yeo & Yeo; Michael T. Gaffney, CPA, Abraham & Gaffney, PC; Joseph C. Heffernan, CPA, Plante & Moran; Susan G. Hendricks, Independence Charter Township; Ernest L. Hodgers, MPA, CGFM, Department of Treasury; Peg Jury, CPA, Dupuis & Ryden; Karen Lawrence-Webster, CPA, City of Saginaw; Janet L. Lazar, Michigan Municipal League/Benefit Evaluation; Ann Marie Dennis, Department of Transportation; John H. Murphy, Cass County; Patrick L. Mutchler, CPA, Brickley DeLong; Brad Niergarth, CPA, Dennis, Gartland & Niergarth; John H. Ogden, CPA, City of Port Huron; Thomas W. Ott, Oakland County; Kenneth D. Parrish, CPA, Kent County; Rick J. Sanborn, City of Sterling Heights; Susan D. Sanford, CPA, Department of Treasury; Robert J. Skrobola, Pittsfield Charter Township; John Sobleski, Wayne County; Linda A. Stephen, CPA, Rehmann, Robson & Co.; Aaron M. Stevens, CPA, Abraham & Gaffney, PC; Michael Styczenski, CPA, Deloitte & Touche, LLP; Cary Jay Vaughn, CPA, Department of Treasury; Ross J. Wilson, CPA, Maner, Costerisan & Ellis; Patricia E. Wysong, Clinton County Road Commission.

Introduction
Auditing Standards
Reporting Requirements
        PA 2 of 1968
        Report on Financial Statements
        Internal Control
        Audit Procedures Report
        Report on Finding of Suspected Fraud and/or Embezzlement
Federal Single Audit Act
        Audit Requirements
        Report Filing Requirements
        Report Filing Dates
Basic Financial Statements for Counties and Local Governments in Michigan
Auditing Procedures References
Miscellaneous
        Audit Fee Responsibility
        Confirmation of State Payments
        Filing Requirements--PA 2 of 1968
        Request for Extension
        Noncompliance with PA 2 of 1968 and PA 275 of 1980
        District Courts of the Third Class
        Noncompliance with Provisions of this Bulletin

Appendix A--Auditing Procedures Report Form 496
Appendix B--Reporting Guidelines for Noncompliance with PA 275 of 1980, PA 2 of 1968, the
        Municipal Finance Act and General Property Tax Act
Appendix C--Confirmation of State Payments
Appendix D--PA 2 of 1968, as Amended
Appendix E--PA 275 of 1980
Appendix F--Generally Accepted Accounting Principles
Appendix G--Governmental Accounting Standards Board Pronouncements
Appendix H--Planning the Compliance Portion of the Audit
Appendix I--School Code--Sinking Fund Audit Requirements
Appendix J--Publications Invoice

The Local Audit and Finance Division of the Department of Treasury has been given the responsibility of implementing the requirements of PA 2 of 1968, as amended, (MCL 141.421 et al.). The requirements of this act are threefold:

The purpose of this bulletin is to establish standards and suggest procedures to assist the independent CPA in the conduct of their audit. The bulletin is not intended to set forth minimum procedures. Neither does it guarantee that by use of all the suggested procedures a satisfactory audit will result. In the final analysis, there is no substitute for the knowledge and experience that the individual independent CPA brings to the engagement. It is only through the use of these skills that an audit plan can be tailored to fit the terms of the engagement.

The primary purpose of the auditing and reporting requirements of PA 2 of 1968 is to maintain the confidence of all interested parties in the integrity of the record keeping and financial reporting of local units of government. Interested parties include, but are not limited to, the following: citizens of the community, state and federal government, creditors and local officials.

The audit will help to assure legal compliance, that systems are in effect to adequately safeguard assets, that the provisions of the state uniform chart of accounts are being complied with, and financial statements are fairly stated in accordance with accounting principles generally accepted in the United States of America. The independent CPA should provide the local units with constructive recommendations which will improve efficiency, safeguard assets, make budgets more useful as "tools to management," and insure that financial reports are fairly presented.

Independent CPAs should be aware that while their client relationships are with the legislative body or officials of the local unit, their basic responsibility is to all users of the financial reports. Without confidence in the integrity of financial statements, there can be no confidence in government.

It should be borne in mind by all concerned that an audit will only assure that the financial representations of the local unit of government are reasonably accurate. It cannot guarantee that the figures are absolutely correct. Nor can an independent CPA guarantee that they will find any shortage that might exist. An audit consists of a series of tests and procedures that the independent CPA feels are necessary to enable them to express an opinion on the financial statements. The opinion expresses whether the financial statements are fairly presented in accordance with accounting principles generally accepted in the United States of America. The cost to perform a complete review of every transaction would be prohibitive and would still not guarantee that a shortage would be uncovered. An adequate system of internal control, coupled with periodic audits, will minimize the possibilities of fiscal irregularities or dishonesty. The independent auditor should follow the guidance of Statement on Auditing Standards SAS No. 82, which relates to the independent auditor's responsibility as it relates to fraud, in the audit of financial statements conducted in accordance with generally accepted auditing standards. Also, the auditor is referred to SAS No. 54, which relates to illegal acts of clients. NOTE: This bulletin repeatedly refers to the term "independent certified public accountant(s), (CPAs)" and it is hereby acknowledged and understood that the term "employees of the Michigan Department of Treasury" may be substituted therefore.

MCL 141.427(1) states:

The examination of the financial records, accounts and procedures by all local units of government shall be made in accordance with generally accepted auditing standards as adopted by the American Institute of Certified Public Accountants in its Statements on Auditing Standards.

Auditing standards, as differentiated from auditing procedures that relate to acts to be performed, deal with the quality of the performance of those procedural acts. These standards, discussed in greater detail in SAS 1, are outlined as follows.

General Standards

1) The audit is to be performed by a person or persons having adequate technical training and proficiency as an auditor.

2) In all matters relating to the assignment, an independence in mental attitude is to be maintained by the auditor or auditors.

3) Due professional care is to be exercised in the performance of the audit and the preparation of the report.

Standards of Field Work

1) The work is to be adequately planned and assistants, if any, are to be properly supervised.

2) Sufficient understanding of the internal control structure is to be obtained to plan the audit and to determine the nature, timing and extent of tests to be performed.

3) Sufficient competent evidential matter is to be obtained through inspection, observation, inquiries and confirmations to afford a reasonable basis for an opinion regarding the financial statements under audit.

Standards of Reporting

1) The report shall state whether the financial statements are presented in accordance with generally accepted accounting principles.

2) The report shall identify those circumstances in which such principles have not been consistently observed in the current period in relation to the preceding period.

3) Informative disclosures in the financial statements are to be regarded as reasonably adequate unless otherwise stated in the report.

4) The report shall either contain an expression of opinion regarding the financial statements, taken as a whole, or an assertion to the effect that an opinion cannot be expressed. When an overall opinion cannot be expressed, the reasons therefore should be stated. In all cases where an auditor's name is associated with financial statements, the report should contain a clear-cut indication of the character of the auditor's work, if any, and the degree of responsibility the auditor is taking.

Department of Treasury Audit Procedure Requirements

Statutory compliance procedures are a required part of the audit of local government in Michigan as indicated in Section 8 of the Act, pages 6, 14 through17 and Appendices B and H of this Bulletin. Appendix H also discusses the professional and statutory requirements for compliance procedures.

Local unit compliance with Department of Treasury manuals and the requirements in the manuals is to be included in the procedures of the auditor.

PA 2 of 1968, as Amended

MCL 141.427(2), reads in part as follows:

MCL 141.428, reads as follows:

"Every audit report shall:
(a) State that the audit has been conducted in accordance with generally accepted auditing standards and with the standards prescribed by the state treasurer.
(b) State that financial statements in such reports have been prepared in accordance with generally accepted accounting principles and with applicable rules and regulations of any state department or agency. Any deviations from such principles, rules or regulations shall be described.
(c) Disclose any material deviations by the local unit from generally accepted accounting practices or from applicable rules and regulations of any state department or agency.
(d) Disclose all fiscal irregularities, defalcations, misfeasance, nonfeasance or malfeasance which came to the auditor's attention."

1) Report on Financial Statements--The financial statements of the local unit of government as required under Section 4 of PA 2 of 1968, as amended, (See Appendix D) shall be reported on by the independent CPA. This report shall conform with one of the standard forms of report on financial statements recommended by the American Institute of Certified Public Accountants. A separate report is required for control units for district courts of the third class.

2) Report on Internal Control; Management Letter; or Report of Comments and Recommendations--The report of comments and recommendations shall include a description of improper, illegal or other actions disclosed by the independent CPAs tests and reviews in connection with their audit of the financial statements. Examples of the types of actions, which should be considered in the preparation of this report, are:

a) Lack of action on previous reports of comments and recommendations by the independent CPA;

b) Unaudited funds, agencies and/or operations;

c) Expenditures not made in accordance with legislative appropriations and other state fiscal requirements and restrictions. The independent CPA should be guided by PA 2 of 1968, as amended, and appropriate reporting guidelines issued by the state treasurer;

d) Improperly accounted for revenues;

e) Inadequate or ineffective internal controls or procedures. Material weaknesses in internal control are to be reported on in writing in accordance with SAS 60;

f) Records and report which could not be reconciled to those of the state fiscal offices;

g) Noncompliance with state statutes, laws, rules and regulations as outlined in the "Auditing Procedures" section of this bulletin (or any other known to the independent CPA) under which the funds, agencies and/or operations of the local unit of government were created and are functioning. Please note Appendix H in planning the compliance portion of the audit;

h) Indication of possible fraud or dishonesty;

i) Indication of a need for review of financial operations and/or financial management;

j) Indication of a lack of current review by government officials of insurance coverage and bonding requirements;

k) Noncompliance with the state and federal financial assistance regulations;

l) Noncompliance with the state uniform chart of accounts; and

m) Departures from accounting principles generally accepted in the United States of America.

3) Report on Auditing Procedures--A report shall be made to the state treasurer, with a copy to the local unit of government, pertaining to the adherence to the minimum requirements outlined in this bulletin and shall include such other information as the state treasurer shall require. The prescribed form located at the Treasury web site Auditing Procedures Report

4) Reports on Findings of Suspected Fraud and/or Embezzlement--During the course of an engagement, the independent CPA should be constantly aware of the possibility of fraud and/or embezzlement. SAS 54 and 82 should be followed where applicable. If the possibility of any fiscal irregularities, defalcation, misfeasance, nonfeasance or malfeasance come to the auditor's attention, an "oral report" should be immediately made to the Local Audit and Finance Division of the Michigan Department of Treasury. Materiality should not be considered when notifying Local Audit and Finance Division about a potential problem. This oral report should be promptly followed up by a written report to the Local Audit and Finance Division of the Michigan Department of Treasury, disclosing the independent CPAs findings.

The state, acting through the attorney general's office, is responsible for prosecution of fraud, if warranted. The Local Audit and Finance Division shall determine what further action should be taken. If it is determined that further investigation is necessary, Treasury personnel specially trained in developing evidence for possible prosecution shall perform the investigation.

Meanwhile, the independent CPA, unless otherwise directed in writing by the state treasurer, should complete their normal audit. The independent CPA may be requested, under a separate engagement, to assist the state in developing evidence for possible prosecution. The state may desire to have a representative directing the compilation of evidence pertaining to the suspected fraud and/or embezzlement.

To avoid any possible conflict with the professional ethics of the independent CPA pertaining to the client relationship, the local unit of government should give written permission to the independent CPA to make the disclosures required by these reports, prior to commencing their audit. Preferably, this permission should be included in the engagement letter or contract for audit. The independent CPA should not discuss any suspected fraud and/or embezzlement with any representative of the local unit of government without first contacting the Local Audit and Finance Division. Similarly, the report of "comments and recommendations" should not refer to suspected fraud or embezzlement. However, the report can refer to the matter in "general" terms by stating that such a situation has been referred to the Michigan Department of Treasury.

Counties, local units, and authorities in Michigan which require a single audit of federal financial assistance under Circular A-133 are currently required to submit a copy of the single audit report with the Federal Clearinghouse in Jeffersonville, Indiana. Also a copy for each federal agency with audit findings in current and prior audit periods.

For specific single audit guidance, the auditor must see OMB Circular A-133, Section 300.

Where to File Single Audit Reports

1) One copy is to be filed with the appropriate federal cognizant agency, if applicable.
2) One copy is to be sent to each federal agency that provided direct federal assistance funds to the recipient.
3) One copy of the reporting package is to be sent to the Federal Clearinghouse.
4) One copy should be filed with: Michigan Department of Treasury, Local Audit and Finance Division, Treasury Building, 1st Floor, P.O. Box 30728, Lansing, Michigan 48909-8228
5) Sub-recipients of federal financial assistance shall submit copies to recipients that provided them federal funds.
6) One copy should go to each state department that provides funds to the local units.

Filing Dates for Single Audit Reports

Federal Requirements

Copies of single audit reports are to be filed with the appropriate federal agency and applicable federal agencies within 30 days after completion of the audit, but no later than 9 months after the end of the audit period.

Sub-recipients shall submit copies of their single audits in accordance with the same time requirements as illustrated above.

The Governmental Accounting Standards Board (GASB) issued Statement No. 34, Basic Financial Statements--and Management's Discussion and Analysis--for State and Local Governments, in June 1999. Michigan Committee on Governmental Accounting and Auditing Statement No. 7 was issued to define the required extent of implementation of GASB 34 financial reporting requirements for Michigan counties and local governments.

The Michigan Committee on Governmental Accounting and Auditing recommends that financial reporting for counties and local governments in Michigan change from the current reporting format to the format required in GASB Statement No. 34.

The minimum financial reporting requirement established by the Michigan Department of Treasury for counties and local governments in Michigan will change from the current reporting format to the format required in GASB Statement No. 34, with the exception of items 1, 2 and 9.

Many local units have expressed dissatisfaction with GASB Statement No. 34, in that they feel the cost of implementing the statement may exceed the benefit of the additional information. The Local Audit and Finance Division of the Michigan Department of Treasury is responsible for overseeing local unit compliance with PA 2 of 1968. The Local Audit and Finance Division has determined that omission of the following sections will not result in any sanctions or in a request for remediation:

• Management's Discussion and Analysis
• The Government-Wide Statements
• Infrastructure Reporting

The auditor's opinion may need to be modified for the departure(s) from generally accepted accounting principles, if those departures are considered material to overall financial statement presentation.

See MCGAA Statement No. 7 for more detailed information.

Since procedures relate to acts to be performed, the following aids are presented as guidelines for the independent CPA in developing auditing procedures for the audit of any local unit of government.

I) The independent CPA should first familiarize themselves with PA 2 of 1968, as amended, MCL 141.421 et al., which appears as Appendix D in this bulletin. This Act is referred to as the Uniform Budgeting and Accounting Act.

II) The independent CPA should also become familiar with PA 275 of 1980. A copy of this act is included as Appendix E in this bulletin.

III) Codification of Governmental Accounting and Financial Reporting Standards. This publication may be ordered from Governmental Accounting Standards Board, 401 Merritt 7, P. O. Box 5116, Norwalk, CT 06856-5116, telephone number 203-847-0700.

IV) The publication, Governmental Accounting, Auditing and Financial Reporting, by the Government Finance Officers Association of the United States and Canada, 180 North Michigan Avenue, Suite 800, Chicago, Illinois 60601.

V) Government Auditing Standards, by the Comptroller General of the United States. This publication may be ordered from Superintendent of Documents, US Government Printing Office, Washington, DC 20401.

VI) The independent CPA, in order to comply with section 8(c) of the act, (as it refers to rules and regulations) must be familiar with the provisions of the following.

A) Industry Audit Guide, Audits of State and Governmental Units, revised. This publication may be obtained from the American Institute of Certified Public Accountants, Inc., P.O. Box 2209, Jersey City, New Jersey 07303-2209.

B) The Constitution of the State of Michigan--1963. This publication may be obtained from the Department of Management and Budget, Office Services Section, P.O. Box 30026, Lansing, Michigan 48909 or the following web site www.michigan.gov/treasury

The independent CPA should note the funding requirements of Article IX, Section 24, pertaining to employee pension plans. All employee pension plans are included; plans that are operated through Michigan Municipal Employees' Retirement System or plans that are self-administered by the local units. Annuity plans and deferred compensation plans for officials and employees are also included.

C) Basic statutes related to the operations of--cities, villages and townships--may be noted with State Boundary Commission. These references may be obtained from the Michigan Department of Consumer and Industry Services, Office of Policy and Legislative Affairs, State Boundary Commission web site http://www.michigan.gov/dleg/0,1607,7-154-10573_45007---,00.html. You may also write the State Boundary Commission at P. O. Box 30004, Lansing, Michigan 48909. This web site includes the basic statutes and administrative rules dealing with the following types of cities, villages, and townships:

1) Fourth Class Cities
(Effective January 1, 1980, all Fourth Class Cities became Home Rule Cities. If Home Rule Charters have not been adopted for these cities by January 1, 1980, the state statutes for Fourth Class Cities will operate as charters).
2) Home Rule Cities
3) General Law Villages
4) Home Rule Villages
5) Charter Townships

Responsibility for Audit Fees

MCL 141.426 states in part:

". . . the entire cost of any such audits will be borne by the local unit."

The state has no desire to disrupt the normal client relationship once it is established, nor does it have any intention of acting as a collection agency for the independent CPA.

Confirmation of State Payments to Local Units

The state treasurer does not directly provide confirmation of state payments to units. Appendix C suggests certain alternative auditing procedures for testing the revenues or receipt for these items.

Filing Requirements

For local units of government under 4,000 population, an annual (one year) audit is required every two years. However, if the local unit has a population of 4,000 or more, an audit is required every year. An annual (one year) audit is required for charter townships, regardless of population.

Because an annual audit of local units of government with a population of 4,000 or less is required only every other year, the independent CPA may be unable to form an opinion as to the consistent application of accounting principles and/or the reasonable accuracy of the account balances at the beginning of the current year. Where the amounts materially affect current results, the independent CPA should state in their report the reasons that prevent them from expressing an unqualified opinion.

One copy of the audit reports (including singles audit reports) shall be sent directly to the Local Audit and Finance Division. Audit reports of authorities, boards, and commissions of these local units shall also be sent to the Local Audit and Finance Division. See the section entitled "Single Audit Act Amendments of 1996 and Single Audit Clearinghouse" for further single audit requirements.

In addition, copies of the "Comments and Recommendations" letter shall be submitted along with the audit reports.

For each audit performed, an Auditing Procedures Report shall also be filed along with the audit reports.

The audit reports, comments and recommendations letters, and report of auditing procedures are to be filed with the state treasurer within 6 months after the end of the fiscal year of the local unit.

Requests for Extension

The independent CPA may file the report at the request of their client. However, the final responsibility for the timely filing of reports rests with the local unit.

The chief administrative officer of a local unit may request an extension of the filing date from the state treasurer, and the state treasurer may grant the request for reasonable cause. When an audit cannot be completed within 6 months after the end of the fiscal year, a written request must be made before the audit is actually delinquent (within 6 months of the end of the fiscal year). A complete request for the extension for filing of an audit will include a letter from the chief administrative officer indicating:

• that the audit is currently in progress (identify any component units);

• when the audit is expected to be completed;

• an explanation of the existence of extraordinary circumstances beyond the control of the local unit and the audit cannot be completed and filed timely (the reasonable cause).

• In addition, requests for extension of the filing requirement for the annual financial report (F-65) must be accompanied by unadjusted year-end trial balance reports. The Department of Treasury will post these unadjusted year-end trial balance reports on the Department's Internet web site if the extension is granted.

Noncompliance with PA 2 of 1968, as amended, and PA 275 of 1980, as amended

For guidance in preparing proper disclosure relating to such noncompliance, the independent CPA is referred to Appendix B. The independent CPA should also make the appropriate recommendations concerning these matters in their report of comments and recommendations. The auditor should also refer to SAS 63 for guidance.

District Courts of the Third Class

Certain local units of government have been assigned the record keeping and accounting functions for district courts of the third class. The independent CPA for such local units of government shall include an audit of the District Court Control Unit. The independent CPA has a responsibility to determine if the local unit has the record keeping and accounting function during the entrance conference with the local unit.

The audit engagement contract for the applicable local unit of government shall provide for a separate audit and report on such District Court Control Unit. A copy of the audit report should be provided to each participating local unit of government. To facilitate the pro-ration of the district court audit expense, the independent CPA shall render a separate invoice for the control unit audit.

Noncompliance with Provisions of this Bulletin

Where the Department of Treasury feels that the conditions of this bulletin have not been met, the state treasurer or his delegate shall review the independent CPAs audit programs and discuss the audit with the independent CPA. After this review, the state treasurer or his delegate may inspect all workpapers of the independent CPA in an attempt to resolve the differences. This can be done voluntarily with permission of the local unit or by subpoena as outlined in section 10 of the act. Should differences of opinion still exist regarding the audit, the entire matter may be turned over to the Michigan Board of Accountancy. The local unit should be aware of the provisions of section 10 and written permission should be obtained by the independent CPA to permit the review of the audit programs and the inspection of the workpapers by the state. (This written permission should be obtained to protect the CPA from any future legal implications as a result of their voluntary action.)

The Michigan Department of Treasury has prepared this bulletin with the advice and cooperation of the Michigan Committee on Governmental Accounting and Auditing. Audits of local units of government in Michigan are to be audited in compliance with the provisions of the bulletin, in addition to generally accepted auditing standards.

The independent CPA should be aware that they are obligated to follow the provisions in the bulletin. Failure to do so is an act discreditable to the profession in violation of Rule 501, unless the member discloses in their report the fact that such requirements were not followed and the reasons therefore.*

*Source--Interpretation 501-3, American Institute of Certified Public Accountants, Professional Ethics Division

The auditing procedures report is available on our web site in PDF format at the following internet location: Auditing Procedures Report

Noncompliance with PA 275 of 1980, as amended: Failure to File Reports and Deficit Elimination Plans

A) The following items would be matters of noncompliance with the statute:

Noncompliance with PA 2 of 1968, as Amended, Uniform Chart of Accounts

A) The following items would be matters of noncompliance with the statute:

1) Local unit failed to establish the uniform chart of accounts required by MCL 141.421.

2) Local unit failed to maintain the uniform chart of accounts required by MCL 141.436. This would most likely be related to material weaknesses in internal control structure and/or failure to maintain an adequate accounting system.

C) In addition to the disclosures required above, the independent CPA should make appropriate comments on these noncompliance areas and recommendations for proper compliance by the local unit.

Noncompliance with PA 2 of 1968, as Amended, Budgeting

A) The following items would be matters of noncompliance with the statute:

C) In addition to the disclosures required above, the independent CPA should make appropriate comments on these noncompliance areas and recommendations for proper compliance by the local unit.

Note:  In applying the above, fund financial statements (Governmental, Proprietary, Fiduciary and Component Units) and combining level financial statements as described in GASB Statement No. 34 and MCGAA Statement No. 7 are considered to be minimum reporting requirements. Notes to the financial statements should be placed immediately after the fund financial statements and before any combining and individual fund financial statements. (Note page 11 through 13)

Violations of an Order Issued Under the Municipal Finance Act or its Requirements, the Revised Municipal Finance Act, or an Order Issued Under the Emergency Municipal Loan Act

The following items would be violations of an order issued under the Municipal Finance Act (PA 202 of 1943, as amended, MCL 131.1 - 139. 3) or its requirements, the Revised Municipal Finance Act (PA 34 of 2001, MCL 141.2101 - 141.2821), or an order issued under the Emergency Municipal Loan Act (PA 243 of 1980, as amended, MCL 141.931 - 141.942) should be reported in the notes to the financial statements and the letter of comments and recommendations:

1) Commingling of debt service funds.

2) Loans obtained by the local unit without Local Audit and Finance Division approval.

3) Inter-fund borrowing of debt service money.

4) Failure to fund reserve accounts.

5) Failure to set aside money as required by a Tax Anticipation Note or State Revenue Sharing Notes.

6) Use of debt service money for other than debt service payments.

7) Excess tax levies for debt service purposes.

8) Transfer of excess debt funds to the local unit's operating funds.

Noncompliance on Delinquent Distribution of Tax Collections (MCL 211.43)

Failure to meet the following schedule for distribution of tax collections constitutes delinquent distribution. Noncompliance with the following should be reported in the letter of comments and recommendations.

A) Units with SEV of more than $15,000,000

1) Within 10 business days after the 1st and 15th day of each month, account for and deliver tax collections (on hand) on the 1st and 15th day of each month; and

2) Within 10 business days after the last day of February, account for and deliver at least 90 percent of the tax collections (on hand) on the last day of February; and

3) A final adjustment and delivery of the total amount of tax collections (on hand) shall be made not later than April 1 of each year; or

4) The local unit may enter into an agreement with tax assessing units to establish an alternative schedule for delivering tax collections.

The Michigan Department of Treasury, Local Audit and Finance Division does not provide independent CPAs with confirmation of state payments to local units of governments.

The following alternatives are offered for the verification of state payments made to local units of government.

1) Warrant Stub--Each state warrant is accompanied with a stub, or in some cases with a special remittance advice. The information listed on the warrant stubs or remittance advice should aid in determining that state monies received have been properly classified to the appropriate funds and accounts of the local unit.

2) Detailed Bank Deposit Tickets--for subsequent tracing to the cash receipts books.

3) Directing Confirmation Requests--to state agencies, which authorize payments to local units of government.

Following on pages 23 through 25 is a listing of state agencies, which authorize payments to local units of government.

Copies of computerized listings or vouchers of state revenue sharing payments are available in the Department of Treasury office in Lansing, or at our Marquette office. A member of your staff may come to either office to prepare schedules of these payments. By using this alternative, it would be possible to obtain information for a number of audits at the same time.

If you have any questions, please contact the Local Audit and Finance Division, Michigan Department of Treasury at 517-373-3227.

STATE DEPARTMENTS TO CONTACT FOR CONFIRMATION
OF PAYMENTS MADE TO LOCAL UNITS OF GOVERNMENT

Type of Payment	Recipients	When Paid	Department
State Aid to Libraries & Penal Fines	Cities, Townships, Villages & Counties	Biannually	Library of Michigan Administrative Services Division 717 West Allegan P.O. Box 30007 Lansing, MI 48909 Phone: (517) 373-1580
Motor Vehicle Fuel  Tax Refunds	Cities, Townships, Villages & Counties	Various	Department of Treasury Motor Fuel Tax Section Statutory Refund Section 2nd Floor, Treasury Building Lansing, MI 48922 Phone: (517) 373-3180
Trunkline--Maintenance	Cities, Villages Counties	Quarterly	Department of Transportation Financial Operations Division Financial Analysis Section P.O. Box 30050 Lansing, MI 48909 Phone: (517) 335-2501
Motor Vehicle Highway Funds (Major & Local Street)	Counties Cities & Villages	Quarterly	Department of Transportation Financial Operations Division Budget and Reports Unit P.O. Box 30050 Lansing, MI 48909 Phone: (517) 373-0417
Liquor License Refunds	Cities, Townships, Villages & Counties	Quarterly	Consumer and Industry Services Liquor Control Commission 7150 Harris Drive P.O. Box 30005 Lansing, MI 48909 Phone: (517) 322-1383
Secondary Road Patrol & Law Enforcement Grants	Counties	Various	Department of State Police Office of Highway Safety 4000 Collins Road P.O. Box 30633 Lansing, MI 48909-8133 Phone: (517) 333-5305
State Revenue Sharing	Cities, Townships, Villages	Bi-Monthly	Information to be obtained for state  revenue sharing at the Department of  Treasury Office of Revenue and Tax  Analysis web site. www.treasury.mi.us/revedata/reveindx Phone: (517) 373-2864
Land & Water	Cities, Villages, Townships & Counties	Various	Department of Natural Resources Internal Audit P.O. Box 30028 Lansing, MI 48909 Phone: (517) 373-0755
Fire	Cities, Villages, Townships	Tri-annually	Department of Natural Resources Internal Audit P.O. Box 30028 Lansing, MI 48909 Phone: (517) 373-0755
Recreation Bonds	Cities, Villages, Townships & Counties	Various	Department of Natural Resources Internal Audit P.O. Box 30028 Lansing, MI 48909 Phone: (517) 373-0755
Snowmobile Grants	Counties	Yearly	Department of Natural Resources Internal Audit P.O. Box 30028 Lansing, MI 48909 Phone: (517) 373-0755
Grants for Marine Safety	Counties	Yearly	Department of Natural Resources Internal Audit P.O. Box 30028 Lansing, MI 48909 Phone: (517) 373-0755
Family Planning Services			Community Health Community Public Health Accounting Division Expenditure Operations Section Lewis Cass Building P.O. Box 30270 Lansing, MI 48909-8220 Phone: (517) 241-5546
Family Independence  Agency			Family Independence Agency Accounting Division P.O. Box 30037 Lansing, MI 48909 Phone: (517) 373-2021
Labor Grants			Consumer and Industry Services Finance Services Division P.O. Box 30004 Lansing, MI 48909 Phone: (517) 335-1976
School Aid			Department of Education State Aid & School Finance Services P.O. Box 30008 Lansing, MI 48909 Phone: (517) 335-0524
Probate Court			Michigan Supreme Court Financial Department 2nd Floor, Law Building P.O. Box 30052 Lansing, MI 48909 Phone: (517) 373-0369
Drug & Alcohol Abuse  Programs  All Other Community  Health Programs			Community Health Department Accounting Division Expenditure Operations Section Lewis Cass Building, 2nd Floor 320 South Walnut Street P.O. Box 30270 Lansing, MI 48909-8220 Phone: (517) 241-5546

An act to provide for the formulation and establishment of uniform charts of accounts and reports in local units of government; to define local units of government; to provide for the examination of the books and accounts of local units of government; to provide for annual financial reports from local units of government; to provide for the administration of this act; to prescribe the powers and duties of the state treasurer, the attorney general, the library of Michigan and depository libraries; and other officers and entities; to provide penalties for violation of certain requirements of this act; to provide for meeting the expenses authorized by this act; to provide a uniform budgeting system for local units; and to prohibit deficit spending by a local unit of government.

The People of the State of Michigan enact:

Sec. 1 (1) The state treasurer shall prescribe uniform charts of accounts for all local units of similar size, function, or service designed to fulfill the requirements of good accounting practices relating to general government. Such chart of accounts shall conform as nearly as practicable to the uniform standards as set forth by the governmental accounting standards board or by a successor organization that establishes national generally accepted accounting standards and is determined acceptable to the state treasurer. The official who by law or charter is charged with the responsibility for the financial affairs of the local unit shall insure that the local unit accounts are maintained and kept in accordance with the chart of accounts. The state treasurer may also publish standard operating procedures and forms for the guidance of local units in establishing and maintaining uniform accounting.
(2) A local unit may request the state treasurer to provide assistance, advice, or instruction in establishing or maintaining the uniform chart of accounts required by subsection (1).
(3) The state treasurer may provide assistance, advice, or instruction to a local unit to establish or maintain the uniform chart of accounts required by subsection (1) based on information from 1 or more of the following sources:

(a) Disclosure by the certified public accountant or the department of treasury in an audit report required by section 5 or 6 that the local unit has failed to establish or maintain the uniform chart of accounts required by subsection (1).
(b) Disclosure by the department of treasury in a special examination report that the local unit has failed to establish or maintain the uniform chart of accounts required by subsection (1).
(c) Disclosure in an audit report issued under section 5 or 6 that the records of the local unit are not auditable because the local unit has failed to establish or maintain the uniform chart of accounts required by subsection (1).
(d) Disclosure from another state agency.
(e) Department of treasury records indicate that the audit required under section 5 has not been performed or filed and is delinquent, and that the local unit is subject to the provisions of section 21 of the Glenn Steil State Revenue Sharing Act of 1971, 1971 PA 140, MCL 141.921.

Sec. 1a This act shall be known and may be cited as the "uniform budgeting and accounting act."

Sec. 2 For the purposes of this act, the words and phrases defined in sections 2a to 2d have the meanings ascribed to them in those sections.

Sec. 2a (1) "Administrative officer" means an individual employed or otherwise engaged by a local unit to supervise a budgetary center.
(2) "Allotment" means a portion of an appropriation which may be expended or encumbered during a certain period of time.
(3) "Appropriation" means an authorization granted by a legislative body to incur obligations and to expend public funds for a stated purpose.
(4) "Budget" means a plan of financial operation for a given period of time, including an estimate of all proposed expenditures from the funds of a local unit and the proposed means of financing the expenditures. Budget does not include any of the following:
(a) A fund for which the local unit acts as a trustee or agent.
(b) An internal service fund.
(c) An enterprise fund.
(d) A capital project fund.
(e) A debt service fund.

Sec. 2b (1) "Budgetary center" means a general operating department of a local unit or any other department, institution, court, board, commission, agency, office, program, activity, or function to which money is appropriated by the local unit.
(2) "Capital outlay" means a disbursement of money which results in the acquisition of, or addition to, fixed assets.
(3) "Chief administrative officer" means any of the following:

(a) The manager of a village or, if a village does not employ a manager, the president of the village.
(b) The city manager of a city or, if a city does not employ a city manager, the mayor of the city.
(c) The superintendent of a local school district or, if the school district does not have a superintendent, the person having general administrative control of the school district.
(d) The superintendent of an intermediate school district or, if the school district does not have a superintendent, the person having general administrative control of the school district.
(e) The manager of a township or, if the township does not employ a manager, the supervisor of the township.
(f) The elected county executive or appointed county manager of a county; or if the county has not adopted an optional unified form of county government, the controller of the county appointed pursuant to section 13b of 1851 PA 156, MCL 46.13b; or if the county has not appointed a controller, an individual designated by the county board of commissioners of the county.
(g) The official granted general administrative control of an authority or organization of government established by law that may expend funds of the authority or organization.
(h) A person granted general administrative control of public school academy by the board of directors of a public school academy established under part 6a of the revised school code, 1976 PA 451, MCL 380.501 to 380.507, or other person designated by the board of directors of the public school academy.

Sec. 2c (1) "Expenditure" means the cost of goods delivered or services rendered, whether paid or unpaid, including expenses, debt retirement not reported as a liability of the fund from which retired, or capital outlay.
(2) "General appropriations act" means the budget as adopted by the legislative body or as otherwise given legal effect pursuant to a charter provision in effect on the effective date of this section.

Sec. 2d (1) "Depository library" means a depository library designated under section 10 of the library of Michigan act, 1982 PA 540, MCL 397.20.
(2) "Legislative body" means any of the following:

(5) "Revenue" means an addition to the assets of a fund which does not increase a liability, does not represent the recovery of an expenditure, does not represent the cancellation of a liability without a corresponding increase in any other liability or a decrease in assets, and does not represent a contribution of fund capital in enterprise or in internal service funds.
(6) "Surplus" means an excess of the assets of a fund over its liabilities and reserves.

Sec. 3 The state treasurer, before the adoption of a uniform chart of accounts, shall provide for advance publication and for hearings thereon with an advisory committee selected by the state treasurer from the local units and from other interested or concerned groups. The uniform chart of accounts, when finally adopted, shall be published and made readily available to all interested persons.

Sec. 4 (1) The chief administrative officer of each local unit shall make an annual financial report (local unit fiscal report) which shall be uniform for all local units of the same class.
(2) The annual financial report shall contain for each fiscal year, all of the following:

Sec. 4a (1) If a local unit fails to report investments in derivative instruments or products as required by section 4, the state treasurer may determine that the local unit cannot report the investments without assistance, advice, or instruction from the state treasurer. The state treasurer shall submit a written statement of the findings and recommendations to the legislative body of the local unit. Within 90 days after receipt of this statement, the local unit shall retain a certified public accountant or the state treasurer to report the investments in the manner required in section 4 and shall notify, by resolution of the legislative body, the state treasurer of the action. Upon failure of the local unit to respond within the 90-day period, the state treasurer shall report the investments.
(2) The state treasurer shall charge reasonable and necessary expenses, including per diem and travel expenses, to the local unit for services performed pursuant to subsection (1) and the local unit shall pay the state treasurer for these expenses. For payment of the expenses, the state treasurer shall either execute a contract with the local unit or bill the local unit on a monthly basis.

Sec. 4b (1) The state treasurer shall promptly file with the library of Michigan copies of a schedule of derivative instruments and products described in section 4(2)(c) or (e) and obtained under section 4 or section 4a. The treasurer shall file a sufficient number of copies to deposit 1 copy in the library of Michigan and 1 copy in each depository library.
(2) The library of Michigan and depository libraries shall serve as depositories for schedules of derivative instruments and products described in section 4(2)(c) or (e) in the manner required by sections 9 and 10 of the library of Michigan act, Act No. 540 of the Public Acts of 1982, being sections 397.19 and 397.20 of the Michigan Compiled Laws. The library of Michigan and each depository library shall promptly make a schedule of derivative instruments and products described in section 4(2)(c) or (e) available to the public.
(3) A local unit shall obtain and retain a copy of an annual financial report submitted under this act. A local unit or the state treasurer shall make an annual financial report prepared, owned, used, in the possession of, or retained by the local unit or state treasurer available for public inspection under the freedom of information act, Act No. 442 of the Public Acts of 1976, being sections 15.231 to 15.246 of the Michigan Compiled Laws.

Sec. 5 (1) A local unit having a population of less than 4,000 shall obtain an audit of its financial records, accounts, and procedures not less frequently than biennially. However, if any audit under this subsection discloses a material deviation by the local unit from generally accepted accounting practices or from applicable rules and regulations of a state department or agency or discloses any fiscal irregularity, defalcation, misfeasance, nonfeasance, or malfeasance, the department of treasury may require an audit to be conducted in the next year.
(2) A local unit having a population of 4,000 or more shall obtain an annual audit of its financial records, accounts, and procedures.

Sec. 6 Local units may retain certified public accountants to perform such audits. If any unit fails to provide for an audit, the state treasurer shall either conduct the audit or appoint a certified public accountant to perform it. The entire cost of any such audits will be borne by the local unit.

Sec. 7 (1) The state treasurer shall prescribe minimum auditing procedures and standards and these shall conform as nearly as practicable to generally accepted auditing standards established by the American Institute of Certified Public Accountants.
(2) A report of the auditing procedures applied in each audit shall be prepared on a form provided for this purpose by the state treasurer. The state treasurer may require that the audit report, or the report of auditing procedures, or both, that are required by this subsection to be filed with the state treasurer be filed in an electronic format prescribed by the state treasurer.
(3) One copy of every audit report and 1 copy of the report of auditing procedures applied shall be filed with the state treasurer.
(4) The copy of the audit report and the copy of the report of auditing procedures applied required by subsection (3) shall be filed with the state treasurer within 6 months after the end of the fiscal year of a local unit for which an audit has been performed pursuant to section 5. The chief administrative officer of a local unit may request an extension of the filing date from the state treasurer, and the state treasurer may grant the request for reasonable cause. A chief administrative officer who requests an extension under this subsection shall, within 10 days of making the request, inform the governing body in writing of the requested extension.

Sec. 8 Every audit report shall do all of the following:

Sec. 10 In connection with any audit and examination conducted under the provisions of this act, the state treasurer, or a deputy state treasurer, may issue subpoenas, direct the service thereof by any police officer, and compel the attendance and testimony of witnesses, may administer oaths and examine such persons as may be necessary, and may compel the production of books and papers. The orders and subpoenas issued by the state treasurer or by a deputy state treasurer, in pursuance of the authority in them vested by provisions of this section, may be enforced upon their application to any circuit court by proceedings in contempt therein, as provided by law.

Sec. 11 If any audit or investigation conducted under this act discloses statutory violations on the part of any officer, employee or board of any local unit, a copy of such report shall be filed with the attorney general who shall review the report and cause to be instituted such proceeding against such officer, employee or board as he deems necessary. The attorney general, within 60 days after receipt of the report, may institute criminal proceedings as he deems necessary against such officer or employee, or direct that the criminal proceedings be instituted by the prosecuting attorney of the county in which the offense was committed. The attorney general or the prosecuting attorney shall institute civil action in any court of competent jurisdiction for the recovery of any public moneys, disclosed by any examination to have been illegally expended or collected and not accounted for; also for the recovery of any public property disclosed to have been converted and misappropriated.

Sec. 12 (1) For purposes of verifying any transactions disclosed by an audit or investigation, any person or firm authorized to conduct an audit under this act may ascertain the deposits, payments, withdrawals and balances on deposit in any bank account or with any contractor or with any other person having dealings with the local unit.
(2) A bank, contractor or person shall not be held liable for making available any of the information required under this act.

Sec. 13 (1) Not withstanding the confidentiality provisions of any tax laws, any authorized employee of the state treasurer, certified public accountant or firm of certified public accountants conducting an audit under this act shall have access to and authority to examine all books, accounts, reports, vouchers, correspondence files and other records, bank accounts and moneys or other property of any local unit excepting any records which were obtained from the United States internal revenue service under the federal state cooperative exchange agreement.
(2) An officer of a local unit upon demand of persons authorized under this act, shall produce all books, accounts, reports, vouchers, correspondence files and other records, bank accounts and moneys or other property of the local unit under audit or investigation and shall truthfully answer all questions related thereto.
(3) The liabilities and penalties provided by all specific confidentiality statutes for divulging confidential information shall be applicable to all persons authorized to make an audit under this act.

Sec. 14 (1) Unless otherwise provided by law, charter, resolution, or ordinance, the chief administrative officer shall have final responsibility for budget preparation, presentation of the budget to the legislative body, and the control of expenditures under the budget and the general appropriations act.
(2) Unless another person is designated by charter, the chief administrative officer in each local unit shall prepare the recommended annual budget for the ensuing fiscal year in the manner provided sections 15 to 20a. The budgetary centers of the local unit shall provide to the chief administrative officer information which the chief administrative officer considers necessary and essential to the preparation of a budget for the ensuing fiscal period for presentation to the local unit's legislative body. Each administrative officer or employee of a budgetary center shall comply promptly with a request for information which the chief administrative officer makes.
(3) The chief administrative officer shall transmit the recommended budget to the legislative body according to an appropriate time schedule developed by the local unit. The schedule shall allow adequate time for review and adoption by the legislative body before commencement of the budget year. The recommended budget, when transmitted by the chief administrative officer, shall be accompanied by a suggested general appropriations act to implement the budget. The suggested general appropriations act shall fulfill the requirements of section 16.
(4) The recommended budget transmitted by the chief administrative officer shall be considered by the legislative body.
(5) The chief administrative officer shall furnish to the legislative body information the legislative body requires for proper consideration of the recommended budget. Before final passage of a general appropriations act by the legislative body, a public hearing shall be held as required by 1963 (2^nd Ex Sess) PA 43, MCL 141.411 to 141.415; and the Open Meetings Act, 1976 PA 267, MCL 15.261 to 15.275.

Sec. 15 (1) The recommended budget shall include at least the following:

Sec. 16 (1) Unless another method for adopting a budget is provided by a charter provision in effect on April 1, 1980, the legislative body of each local unit shall pass a general appropriations act for all funds except trust or agency, internal service, enterprise, debt service or capital project funds for which the legislative body may pass a special appropriation act.
(2) The general appropriations act shall set forth the total number of mills of ad valorem property taxes to be levied and the purposes for which that millage is to be levied. The amendatory act that added this subsection shall be known and may be cited as "the truth in budgeting act."
(3) The general appropriations act shall set forth the amounts appropriated by the legislative body to defray the expenditures and meet the liabilities of the local unit for the ensuing fiscal year, and shall set forth a statement of estimated revenues, by source, in each fund for the ensuing fiscal year.
(4) The general appropriations act shall be consistent with uniform charts of accounts prescribed by the state treasurer or, for local school districts and intermediate school districts, by the state board of education.
(5) This act shall not be interpreted to mandate the development or adoption by a local unit of a line-item budget or line-item general appropriations act.
(6) The legislative body shall determine the amount of money to be raised by taxation necessary to defray the expenditures and meet the liabilities of the local unit for the ensuing fiscal year, shall order that money to be raised by taxation, within statutory and charter limitations, and shall cause the money raised by taxation to be paid into the funds of the local unit.
(7) Except as otherwise permitted by section 102 of the state school aid act of 1979 PA 94, MCL 388.1702 or by other law, the legislative body shall not adopt a general appropriations act or an amendment to that act which causes estimated total expenditures, including an accrued deficit, to exceed total estimated revenues, including an available surplus and the proceeds from bonds or other obligations issued under the fiscal stabilization act, 1981 PA 80, MCL 141.1001 to 141.1011, or the balance of the principal of these bonds or other obligations.

Sec. 17 (1) Except as otherwise provided in section 19, a deviation from the original general appropriations act shall not be made without amending the general appropriations act. Subject to section 16(2), the legislative body of the local unit shall amend the general appropriations act as soon as it becomes apparent that a deviation from the original general appropriations act is necessary and the amount of the deviation can be determined. An amendment shall indicate each intended alteration in the purpose of each appropriation item affected by the amendment. The legislative body may require that the chief administrative officer or fiscal officer provide it with periodic reports on the financial condition of the local unit.
(2) If, during a fiscal year, it appears to the chief administrative officer or to the legislative body that the actual and probable revenues from taxes and other sources in a fund are less than the estimated revenues, including an available surplus upon which appropriations from the fund were based and the proceeds from bonds or other obligations issued under the fiscal stabilization act 1981 PA 80, MCL 141.1001 to 141.1011, or the balance of the principal of these bonds or other obligations, the chief administrative officer or fiscal officer shall present to the legislative body recommendations which, if adopted, would prevent expenditures from exceeding available revenues for that current fiscal year. The recommendations shall include proposals for reducing appropriations from the fund for budgetary centers in a manner that would cause the total of appropriations to not be greater than the total of revised estimated revenues of the fund, or proposals for measures necessary to provide revenues sufficient to meet expenditures of the fund, or both. The recommendations shall recognize the requirements of state law and the provisions of collective bargaining agreements.

Sec. 18 (1) A member of the legislative body, chief administrative officer, administrative officer, or employee of the local unit shall not create a debt or incur a financial obligation on behalf of the local unit unless the debt or obligation is permitted by law.
(2) The chief administrative officer may cause the appropriations made by the legislative body for the local unit and its budgetary centers to be divided into allotments if the allotments are based upon the periodic requirements of the local unit and its budgetary centers.
(3) Except as otherwise provided in section 19, an administrative officer of the local unit shall not incur expenditures against an appropriation account in excess of the amount appropriated by the legislative body. The chief administrative officer, an administrative officer, or an employee of the local unit shall not apply or divert money of the local unit for purposes inconsistent with those specified in the appropriations of the legislative body.
(4) No duties shall be delegated to the chief administrative officer that diminishes any charter or statutory responsibilities of an elected or appointed official.

Sec. 19 (1) A member of the legislative body, the chief administrative officer, an administrative officer, or an employee of a local unit shall not authorize or participate in the expenditure of funds except as authorized by a general appropriations act. An expenditure shall not be incurred except in pursuance of the authority and appropriations of the legislative body of the local unit.
(2) The legislative body in a general appropriations act may permit the chief administrative officer to execute transfers within limits stated in the act between appropriations without the prior approval of the legislative body.

Sec. 20 A violation of sections 17 to 19 by the chief administrative officer, an administrative officer, employee, or member of the legislative body of the local unit disclosed in an audit of the financial records and accounts of the local unit in the absence of reasonable procedures in use by the local unit to detect such violations shall be filed with the state treasurer and reported by the state treasurer to the attorney general. For local and intermediate school districts, the report of a violation shall be filed with the state superintendent of public instruction instead of the state treasurer. The attorney general shall review the report and initiate appropriate action against the chief administrative officer, fiscal officer, administrative officer, employee, or member of the legislative body. For the use and benefit of the local unit, the attorney general or prosecuting attorney may institute a civil action in a court of competent jurisdiction for the recovery of funds of a local unit, disclosed by an examination to have been illegally expended or collected as a result of malfeasance and not accounted for as provided in sections 17 to 19, and for the recovery of public property disclosed to have been converted or misappropriated.

Sec. 20a (1) The department of treasury shall publish suggested manuals, forms, and operating procedures, which may be used by local units in complying with this act. These manuals, forms, and procedures shall be designed to account for the various kinds and sizes of local units, except that the suggested manuals, forms, and operating procedures which may be used by intermediate school districts and local school districts shall be developed by the superintendent of public instruction and shall be promulgated by the superintendent of public instruction pursuant to Act No. 306 of the Public Acts of 1969, as amended, being sections 24.201 to 24.315 of the Michigan Compiled Laws.
(2) The suggested manuals, forms, and operating procedures described in subsection (1) shall be developed by an advisory committee selected by the department of treasury composed of persons from the department of education, other interested state agencies, local units, associations of local units, and other interested or concerned groups.
(3) The department of treasury shall provide or cooperate in the provision of training and educational programs to assist local units to comply with this act.

Sec. 21. (1) If a city, village, township or county fails to provide an annual financial report or audit which conforms with the minimum procedures and standards prescribed by the state treasurer and is required under Act No. 2 of the Public Acts of 1968, as amended, being sections 141.421 to 141.440a of the Michigan Compiled Laws, or Act No. 71 of the Public Acts of 1919, being sections 21.41 to 21.53 of the Michigan Compiled Laws, the payments required under this act may be withheld until the financial report or audit is submitted as required by law.
(2) For a fiscal year of a unit of local government ending on or after October 1, 1980 or any year thereafter, if a local unit of government ends it fiscal year in a deficit condition, the local unit of government shall formulate and file a financial plan within 90 days after the beginning of the fiscal year to correct this condition. Upon request of a local unit of government the department of treasury may assist that local unit in the formulation of the financial plan to correct the deficit condition. The local unit of government shall file the financial plan with the department of treasury for evaluation and certification that the plan ensures that the deficit condition is corrected. Upon certification by the department of treasury, the local unit of government shall institute the plan. An amount equal to 25% of each payment to a local unit of government entitled to payments under this act may be withheld until requirements of this subsection are met.
(3) The department of treasury shall notify each house of the legislature of any local unit of government that fails to provide a financial report or an audit required by subsection (1) and of any local unit of government required to file a financial plan under subsection (2).
(4) As used in this section, "deficit condition" means a situation where, at the end of a fiscal year, total expenditures, including an accrued deficit, exceeded total revenues for that fiscal year, including any surplus carried forward.

This act is ordered to take immediate effect.

Section 8(b) of PA 2 of 1968, as amended, provides as follows:

Every audit report shall:

"State that financial statements in such reports have been prepared in accordance with generally accepted accounting principles and with applicable rules and regulations of any state department or agency. Any deviations from such principles, rules or regulations shall be described."

To assure uniform reporting, the state treasurer shall prescribe a uniform reporting format for the preparation of financial statements.

For purposes of this bulletin, generally accepted accounting principles are as follows:

1) (a) GASB Statements and Interpretations, as well as AICPA and FASB pronouncements specifically made applicable to state and local governmental entities by GASB Statements or Interpretations.

(b) GASB Technical Bulletins and, if specifically made applicable to state and local governmental entities by AICPA and cleared by the GASB, AICPA Industry Audit and Accounting Guides and AICPA Statements of Position.

(c) AICPA AcSEC Practice Bulletins, if specifically made applicable to state and local governmental entities and cleared by the GASB, as well as consensus positions of a group of accountants organized by the GASB that attempts to reach consensus positions on accounting issues applicable to state and local governmental entities.

(d) Implementation guides ("Qs and As") published by the GASB staff, as well as practices that are widely recognized and prevalent in state and local government.

(e) Statements issued by the Michigan Committee on Governmental Accounting and Auditing.

2) Other accounting literature

GASB Pronouncements, exposure drafts, and discussion memorandums may be ordered from:

Governmental Accounting Standards Board
Order Department
401 Merritt 7
P.O. Box 5116
Norwalk, CT 06856-5116
Telephone: (203) 847-0700
 

Statement Name	Name	Codification Number
1	Authoritative Status of NCGA Statements and AICPA Industry Audit Guide
2	Financial Reporting of 457 Deferred Compensation Plans Adopted under the Provisions of Internal Revenue Code Section 457	Superseded by GASB 32 D25
3	Deposits with Financial Institutions, Investments (including Repurchase Agreements), and Reverse Repurchase Agreements	I50
4	Applicability of FASB Statement No. 87, "Employers' Accounting for Pensions," to State and Local Governmental Employers	Superseded by GASB 25 & 27 P20
5	Disclosure of Pension Information by Public Employee Retirement Systems and State and Local Governmental Employers	Superseded by GASB 25 & 27 Pe6
6	Accounting and Financial Reporting for Special Assessments	S40
7	Advance Refundings Resulting in Defeasance of Debt	D20
8	Applicability of FASB Statement No. 93, "Recognition of Depreciation by Not-for-Profit Organizations," to Certain State and Local Governmental Entities	Superseded by GASB 35 1400
9	Reporting of Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting	2450
10	Accounting and Financial Reporting for Risk Financing and Related Insurance Issues	Po20 & C50
11	Measurement Focus and Basis of Accounting--Governmental Fund Operating Statements	Rescinded
12	Disclosures of Information on Post-Employment Benefits Other Than Pension Benefits by State and Local Governmental Employers	P50
13	Accounting for Operating Leases with Scheduled Rent Increases	L20
14	The Financial Reporting Entity	2100
15	Governmental College and University Accounting and Financial Reporting Models	Superseded by GASB 35
16	Accounting for Compensated Absences	C60
17	Measurement Focus and Basis of Accounting--Governmental Fund Operating Statements: Amendment of the Effective Dates of GASB Statement No. 11 and Related Statements	Rescinded
18	Accounting for Municipal Solid Waste Landfill Closure and Post Closure Care Cost	L10
19	Governmental College and University Omnibus Statement	Superseded by GASB 35
20	Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities That Use Proprietary Fund Accounting	P80
21	Accounting for Escheat Property	E70
22	Accounting for Taxpayer--Assessed Tax Revenues in Governmental Funds	1600
23	Accounting and Financial Reporting for Refunding of Debt Reported by Proprietary Activities	D20
24	Accounting and Financial Reporting for Certain Grants and Other Financial Assistance	G60
25	Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans	Pe5
26	Financial Reporting for Post-Employment Healthcare Plans Administered by Defined Benefit Pension Plans	Po50
27	Accounting and Financial Reporting for Securities Lending Transactions	I60
28	The Use of Not-for Profit Accounting and Financial Reporting Principles by Governmental Entities	N80
29	Risk Financing Omnibus--an amendment of GASB No. 10	C50 & Po20
30	Accounting and Financial Reporting for Certain Investments and for External Investment Pools	I50
31	Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans
33	Accounting and Financial Reporting for Nonexchange Transactions
34	Basic Financial Statements--and Management's Discussion and Analysis--for State and Local Governments
35	Basic Financial Statements--and Management's Discussion and Analysis--for Public Colleges and Universities--an amendment of GASB Statement No. 34
36	Recipient Reporting for Certain Shared Nonexchange Revenues--an amendment of GASB Statement No. 33
37	Reporting Model Omnibus
38	Note Disclosure
Interpretation
1	Demand Bonds Issued by State and Local Governmental Entities	D30
2	Disclosure of Conduit Debt Obligations	C65
3	Financial Reporting for Reverse Repurchase Agreements	I55
4	Accounting and Financial Reporting for Capitalization Contributions to Public Entity Risk Pools	C50 & Po20
5	Property Tax Revenue Recognition in Governmental Funds
6	Recognition and Measurement of Certain Liabilities and Expenditures in Governmental Fund Financial Statements
Technical  Bulletin
84-1	Purpose and Scope of GASB Technical Bulletins and Procedures for Issuance
87-1	Applying Paragraph 68 of GASB Statement No. 3	I50
92-1	Display of Governmental College and University Compensated Absences Liabilities	Superseded by GASB 35
94-1	Disclosures About Derivatives and Similar Debt and Investment Transactions	D30
96-1	Application of Certain Pension Disclosure Requirements for Employers Pending Implementation GASB 27	P20
97-1	Classification of Deposits and Investments into Custodial Credit Risk Categories for Certain Bank Holding Company Transactions	I50
98-1	Disclosures about Year 2000 Issues	Rescinded
99-1	Disclosures about Year 2000 Issues--an amendment of Technical Bulletin 98-1	Rescinded
2000-1	Disclosures about Year 2000 Issues--a rescission of GASB Technical Bulletins 98-1 and 99-1
Concepts
1	Objectives of Financial Reporting	Appendix B
2	Service Efforts and Accomplishments Reporting	Appendix B

The above listing provided is current as of the date of publication of this manual in August 2001, however, it may not be all-inclusive. The auditor is responsible for maintaining a current library and reference material relating to governmental accounting and auditing.

Chapter 3, paragraphs 3.14 summarizes background information useful in planning an audit of a unit of government. The following are selected items from the list that relate to statutory authority and that are necessary to perform the compliance portion of the audit:

• The form of government
• Laws, statutes, and regulations governing the general operations of the governmental unit
• The nature of any joint ventures
• Primary sources of revenue
• The nature of any compliance auditing requirements

The forgoing information generally can be obtained from authorizing statutes, charters, budget documents, recent official statements, prior comprehensive annual financial reports, the request for proposal, other documents, and discussions with key members of management.

• The existence of laws, rules, and regulations that may have a direct and material effect on the amounts reported in the financial statements.

Chapter 5, paragraphs 5.15 through 5.28 provide the reporting standards for the statutory portion of a financial audit.

Paragraph 5.15 states: The third additional reporting standard for financial statement audits is: The report on the financial statements should either: (1) describe the scope of the auditors' testing of compliance with laws and regulations and internal controls and present the results of those tests; or (2) refer to separate reports containing that information. In presenting the results of those tests, auditors should report irregularities, illegal acts, other material noncompliance, and reportable conditions in internal controls. In some circumstances, auditors should report irregularities and illegal acts directly to parties external to the audited entity.

Act 2 PA 1968, as amended, (MCL 141.428) and the Bulletin for Audit of Local Units of Government requires that:

Every audit report shall:

Based on the previous requirements, the following list of compliance matters must be considered in planning a financial audit of a local unit of Government in Michigan?
 

Authority for the primary governments
Authority for separate special purpose governments
Powers of the government
Authority for taxes being levied by the government
Accounting and auditing requirements
Investment provisions
Credit card provisions
Use of funds of the government
Requirements for the payment of bills (claims)
Requirements for budgeting
Requirements for borrowing
Authority for the activity being paid for by the government

Constitutional and statutory provisions specify that a local government unit and the officials of local governments have only those duties specifically granted to them by the Michigan Constitution and applicable statutes. Those provisions highlight the basic restrictive authority granted to Michigan's local units of government. If the action to be taken is not specifically authorized by the Constitution, a statute, court decision or Attorney General opinion that action can not be legally executed.

Provisions specified in a local unit's charter or ordinance, legally adopted by vote of the electorate or approved by the legislative body after publication, must be followed when those procedures are more restrictive than the general statute.

AUTHORITY FOR THE PRIMARY GOVERNMENTS

Constitutional Provisions, Michigan Constitution of 1963

(Art 7, Sec 1) Each organized county shall be a body corporate with powers and immunities provided by law.

(Art. 7, Sec. 17) Each organized township shall be a body corporate with powers and immunities provided by law.

(Art. 7, Sec. 21) The legislature shall provide by general laws for the incorporation of cities and villages.

AUTHORITY FOR SEPARATE SPECIAL PURPOSE GOVERNMENTS

Constitutional Provisions, Michigan Constitution of 1963

(Art. 7, Sec. 27) Notwithstanding any other provision of this constitution, the legislature may establish in metropolitan areas additional forms of government or authorities with the powers, duties and jurisdictions as the legislature shall provide. Wherever possible, such additional forms of government or authorities shall be designed to perform multipurpose functions rather than a single function.

(Art. 7, Sec. 28) The legislature by general law shall authorize two or more counties, townships, cities, villages or districts, or any combination thereof among other things to: enter into contractual undertakings or agreements with one another or with the state or with any combination thereof for the joint administration of any of the functions or powers which each would have the power to perform separately; share the costs and responsibilities of functions and services with one another or with the state or with any combination thereof which each would have the power to perform separately; transfer functions or responsibilities to one another or any combination thereof upon the consent of each unit involved; cooperate with one another and with state government; lend their credit to one another or any combination thereof as provided by law in connection with any authorized publicly owned undertaking . . .

For additional authority for joint operations, see AUTHORITY FOR THE ACTIVITY BEING PAID FOR BY THE GOVERNMENT on pages 57 through 60 of this document.

POWERS OF THE GOVERNMENT

Constitutional Provisions, Michigan Constitution of 1963

Constitutional Provisions, Michigan Constitution of 1963

(MCL 211.1) General Property Tax Act

(MCL 141.501) Uniform City Income Tax

Opinions of the Attorney General

EXAMPLES
 

Tax	Authority	Levying Unit
Police and Fire Protection	MCL 41.801	Township
Fire Authority	NONE (see above)
Joint Fire Authority	NONE or see Urban Cooperation  Act Agreement
Services to Senior Citizens	MCL 400.576	County, Township City or Village
Senior Center (nonprofit)	NONE (see above)
Conservation District	MCL 46.22	County
Port District	MCL 120.24	Port District
Recreation Authority	MCL 123.1141	Authority
District Library	MCL 397.183	District Library

ACCOUNTING AND AUDITING REQUIREMENTS

Constitutional Provisions, Michigan Constitution of 1963

(Art. 9, Sec. 21) Audit of . . . units of government as provided by law

(Art. 9, Sec. 21) Uniform accounting systems for local units of government as provided by law

General Statutory Provisions

General Statutory Provisions

General Statutory Provisions

Opinions of the Attorney General

REQUIREMENTS FOR THE PAYMENT OF BILLS (CLAIMS)

Paying Claims--Vendor Bills

COUNTIES

REQUIREMENTS FOR BUDGETING

Constitutional Provisions, Michigan Constitution of 1963

(MCL 141.412) Requires that a public hearing be held on the proposed budget prior to the legislative body formally adopting the budget. The time, date and location of the public hearing must be published at least six days prior to the hearing. Copies of the proposed budget must be available for public inspection from the date the notice of the public hearing is published and thereafter.

Specific budget procedures for charter townships are required by MCL 42.24 through 42.27. Charter township budgets must be adopted at least 60 days prior to the start of their fiscal year and after a public hearing notice published at least 7 days prior to the date of the public budget hearing. Cities and villages may have charter provisions or local ordinances requiring specific budgetary procedures. The local procedures must be followed when they are more restrictive than the general statute.

(MCL 141.436) of the "Uniform Budgeting and Accounting Act" requires a local unit governing body to adopt a General Appropriation Act after a public hearing.

(MCL 141.434) The "Chief Administrative Officer" must prepare a recommended budget for the general fund and all special revenue funds for the ensuing fiscal year.

(MCL 141.435) The recommended budget must include:
a) Revenue and expenditures for the prior fiscal year;
b) Estimated revenue and expenditures for the current fiscal year;
c) An estimate of revenue and expenditures for the next fiscal year;
d) The amount of surplus or deficit at the beginning of each fiscal year; and
e) The amount of surplus or deficit at the end of each fiscal year.

REQUIREMENTS FOR BORROWING

Constitutional Provisions, Michigan Constitution of 1963

Advertising the Agricultural, Industrial, Commercial, Educational or Recreational Advantages of the State, County or Local Unit

COUNTIES (MCL 46.161) by special tax levy or general fund appropriation

CITIES & VILLAGES (MCL 123.881) from a specific tax levy

TOWNSHIPS (MCL 41.110c) by appropriation

Places of Recreation, Parks

COUNTIES

Community College Maintained by a School District

CITY, TOWNSHIP OR VILLAGE--(MCL 397.201 et al.) may establish and maintain a public library.

CITY--may, without vote of the electorate, levy one mill for the library.

CITY, TOWNSHIP OR VILLAGE--after voter approval, may levy up to two mills to establish, operate and maintain a library.

COUNTY LIBRARY--(MCL 397.301)

SCHOOL LIBRARIES--Under boards of education (MCL 397.261 et al.)

REGIONAL LIBRARIES (MCL 387.151 et seq.)
DISTRICT LIBRARIES (MCL 397.171 et seq.)
LIBRARY NETWORK ACT (MCL 397.131 et seq.)

Hospitals

COUNTY (MCL 331.151) May establish and operate a county hospital after vote of the electorate.

PROHIBITED from contributing to a private, nonprofit corporation operating a hospital. (AGO 4851 dated Nov. 4, 1974)

May contract for services (AGO 5083) with a private, nonprofit corporation to provide health or welfare services to persons who are the proper concern of the county pursuant to guidelines and where final authority to take discretionary action remains with the public body.

COUNTY, CITY, VILLAGE (MCL 331.1101) Municipal Health Facilities Corporations Act--County board, city or village council may incorporate 1 or more corporations under this act. NOTE: A health care corporation established under this act is a discretely presented component unit of the incorporating unit.

Joint Municipal (Community) Hospitals-- (MCL 331.1 et seq.) Two or more CITIES, TOWNSHIPS AND VILLAGES, or any combinations may incorporate a hospital authority to establish, expand and/or operate a hospital or health care facilities.

The purchase of coffee, donuts and sandwiches must be for a public, not an individual or private group or purpose. These expenditures for use at a regular or special meeting, for fire fighters, volunteer or full time employees, when working an extended period of time or when dedicating public buildings are normally considered expenditures for a public purpose.

Coffee and donuts for employees use during normal working hours is considered personal, not for a public purpose, and improper unless specifically provided for in a collective bargaining agreement or duly adopted employment policy of the governmental unit (fringe benefit).

RETIREMENT/RECOGNITION FUNCTIONS

Retirement functions, gifts or plaques for employees or officials, recognition dinners for volunteer fire fighters or ambulance staff are usually not for a public purpose, therefore not an allowable expense. Travel and meals as part of the cost of training volunteers to perform emergency services within the township are deemed a public purpose, payable as an expense when properly budgeted, authorized and approved.

A governmental unit is not authorized to expend public money to assist residents with legal costs in defending the homeowners from possible civil action by a neighboring city to condemn their property for public use by the city. We are unable to see a "public purpose" for the township in this expenditure. Also this expenditure may be prohibited under the provisions of Article 9, Section 18 of the 1963 Michigan Constitution that prevents a governmental unit from lending its credit to the aid of any person, association or corporation, public or private, except as authorized in the Constitution.

Other Lawful Expenditures

Contracts with public or private, profit or nonprofit organizations for a specific public service or benefit that the unit can legally perform, and money is available within the budgeted appropriations. These may include contracts for fire protection, ambulance service, assessing and tax collections, trash/rubbish collections, employee benefits, etc. Contracts should address financial reporting, auditing, review of records and related matters.

Membership dues to governmental associations as MTA, MML, MAC, and similar organizations that advise, inform and educate officials and employees. (See court decision Hayes v City of Kalamazoo, 316 Mich. 443).

Meals and refreshments during extended working hours for emergency services by firefighters, police officers and for authorized seminars of an educational nature to officials and employees.

Registration fees, lodging and travel for attendance at useful public informational or educational workshops and seminars.

UNLAWFUL EXPENDITURES BY A GOVERNMENTAL UNIT

Contributions or appropriations, which are not specifically authorized by the Constitution or State statute, cannot be authorized regardless of the worthiness of the cause. Examples of such prohibited expenditures where there is no contract for specific services to lawful wards or functions of the local unit have been negotiated are as follows:

Contributions to churches, veterans, non-profit organizations.

Payment of funeral expenses for a person injured on government property.

Donations to a private ambulance or EMS service not under contract with the governmental unit.

Donations, including use of property or equipment to Little League, Scouts, Big Brothers/Sisters.

Donations to community organizations.

Expenses for private road construction or maintenance.

Office refreshments, picnics.

Presents to officials and employees or retirement recognition events.

Flowers to the sick or departed (AGO 2346 dated July 18, 1956).

Mileage of officials (except county finance committee and board of commissioners. See MCL 46.52 and 46.62) and employees to and from their residence to the city, township or village hall, county building or meeting rooms. (Mileage paid to county commissioners must, of course, be included on their W-2 as taxable income.)

Per diem compensation to township supervisor, clerk and treasurer on a salary basis for attending township board meetings. (Check city and village charters for their compensation procedures or restrictions.) Extra compensation for summer tax collections unless part of the initial salary resolution or is authorized within statutory procedures for an increase in salary.

Extra compensation for special elections unless part of initial salary resolution or is authorized under statutory procedures for an increase in salary.

The May 1996 Michigan Township News contains articles relating to this subject.

This information addresses legal citations concerning governmental expenditures. It is intended for training purposes and should not be considered a legal interpretation of the matters presented. Please consult your legal advisor if a legal opinion is needed.
 

COMPLIANCE CHECKLIST
	YES	NO
1) Is the unit of government a county, city, village or township?
2) Is the unit of government a special purpose government?
If yes, formed in accordance with MCL
3) Does the unit of government levy a property tax?
If yes, is the total for the unit of government within its statutory limit?
If no, levied in accordance with MCL
4) Does the unit of government have any other taxes?
If yes, what is the statutory authority for the tax? MCL
5) Are the accounting records maintained in accordance with the Uniform Accounting Procedures Manual, Chart of Accounts and other requirements of the Department of Treasury?
As a minimum, this would include; Detail receipts journal; Detail disbursements journal; and  Cash balance journal, which includes all funds.
6) Does the unit of government invest only in accordance with MCL 129.91?
Bonds, securities, and other obligations of the United States or an agency; CDs and other accounts of a financial institution; Commercial paper rated appropriately; Repurchase agreements consisting of instruments listed in subdivision (a); Bankers' acceptances of United States banks; Obligations of this state or its political subdivisions rated appropriately; Mutual funds which meet the requirements of the Act;  Obligations above if purchased through an urban cooperation act; Investment pools under the surplus funds investment pool act; Investment pools under the local government investment pool act.
7) Has the local unit of government adopted an investment policy in accordance with MCL 129.91?
Are all required provisions included in the policy?
8) Does the unit of government use credit cards?
If yes, is there a policy for the use of the credit cards?
Are all required provisions included in the policy?
9) Does the board or council approve all bills for payment prior to the payment?
10) Has the "Chief Administrative Officer" transmitted a recommended budget to the legislative body?
Does the recommended budget include all items required by the Budget Act?
If not, What items are missing?
Has a general appropriations act been adopted prior to the beginning of the local government's fiscal year?
11) Has the local unit of government borrowed money or issued bonds or notes?
If yes, have the procedures required by the Municipal Finance Act or the Revised Municipal Finance Act been adhered to?
If the borrowing is authorized in other statutes, what statutes? MCL ____________________________  MCL ___________________________________
12) Are there any violations of the citations on pages 53 and 57 through 60 of this document?
If yes, what are the violations?
13) Are there any other statutory violations noted during the tests of transactions?
If yes, what are the violations?

NOTE: Number 13 and 14 do not require additional testing to be performed by the auditor unless a matter comes to the auditor's attention and, in the auditor's professional judgement, additional testing is needed. The attributes included in the auditor's testing should include statutory considerations.

Materiality should not be a consideration in reporting violations to the Department of Treasury, however, materiality should be used to determine the effect on the financial statements.

The school code has been amended to require the filing with the Department of Treasury of audited financial statements for certain school districts.

In addition to a balance sheet and revenue and expenditure statement, the audit report notes must also include a positive statement that the school district is in compliance with the provisions of that section of the school code and with Department of Treasury letter no. 01-95.

In addition to a balance sheet and revenue and expenditure statement, the audit report notes must also include a positive statement that the school district is in compliance with the provisions of that section of the school code.

Please note the following web site location for the Bulletin for School District Audits of Bonded Construction Funds and of Sinking Funds in Michigan: Bulletin for School District Audits of Bonded Construction Funds and of Sinking Funds in Michigan

June 28, 1995

Letter No. 01--95
SCHOOL DISTRICT
SINKING FUND

To:    School Districts; Intermediate School Districts and Bond Attorneys

From:    Nick Khouri, Chief Deputy State Treasurer
             Michigan Department of Treasury

Regarding:    School Code Sinking Fund Requirements

Act 312 of the Public Acts of 1993 included an amendment to section 1212 of the School Code (PA 451 of 1976, as amended). This section allows school districts to create a sinking fund to be used "for the purchase of real estate for sites for, and the construction or repair of, school buildings." The Department of Treasury is required under this section to make a determination from the independent annual audit report that a sinking fund was used for authorized purposes. Guidance has been requested from the education community regarding appropriate sinking fund usage. We have determined that school district sinking funds may be used for purposes for which bonds (section 1351a) may be issued including:

This fund may be used for repair, but not for maintenance. It will exclude routine custodial and janitorial services; preventative maintenance activities; minor handyman activities; and individual repair type activities costing less than the amounts defined in Section 1267 of the School Code (currently $14,335).

Activities performed by school district employees will be presumed, unless otherwise approved, to be maintenance activities with the exception of an employee or employee group successfully bidding for repair work to be performed on weekends and during nonworking hours.

There may be some expenditures that do not conveniently fit these definitions or that may cost less than the $14,335 repair threshold. In those instances an opinion may be requested of the Department of Treasury regarding that specific expenditure. Any opinion received will relate only to that requested and may not be carried forward for future similar expenditures or for authorization for other school districts expenditures.