As the second half of the spring legislative session moves forward, I wanted to provide you with an update on the legislative remedy to the Comptroller’s Local Government Division change of practice of no longer recognizing local government audited financial statements using cash basis accounting as compliant.

While the Comptroller’s Office has not changed their legal interpretation of the respective audit statutes, they have walked back their position and have been working with various stakeholder organizations to craft a legislative remedy to statutorily authorize the use of cash basis accounting. HB 4104 (HA-1) and SB 2638 (SA-1) contain the agreed upon legislative language which would grandfather governmental agencies covered by the Local Government Financial Statement Act, the Counties Audit Act, and the Municipal Audit Act to use cash basis accounting as of their 2016 submitted audits. 2016 was identified as the benchmark since that was the year audits were submitted prior to the Comptroller’s change in practice.

ICPAS Government Relations has worked closely with the Comptroller’s staff and other stakeholder organizations to reach an agreed upon legislative remedy. Aside from the legislative language provided above, ICPAS through the Government Audit Committee has provided the Comptroller with technical language to reflect contemporary accounting and auditing terms, concepts, and standards. The Comptroller’s office has committed to trailer legislation at a later date that will include our suggested technical corrections and updates.

Practitioners and governmental entities should be mindful of the Comptroller’s change of position and pending legislative remedy with regards to the previous belief of the necessity to convert to accrual basis accounting.

ICPAS Government Relations will continue to keep you informed of developments with this issue. Please contact the Government Relations office at [email protected] if you have questions on this communication.

Vice President Government Relations