Oddly, only Counties with a population of 350,000 or more required to have an independent audit, although most Counties do have an annual independent audit performed. State Statutes with respect to Counties appear to be pretty dated. Chapter 115 of the Texas Local Government Code outlines the audit provision of a County. These statutes contain a number of unusual provisions including allowing audits by a committee and requiring an audit by citizen position. Our managing partner performed a citizen petition audit at the request of the District Judge for San Jacinto County. Prior to this audit, the County was on a two year independent audit cycle and citizens lost confidence as fund balance declined in unaudited years.
Sec. 115.045. ANNUAL INDEPENDENT AUDIT IN COUNTIES WITH POPULATION OF 350,000 OR MORE.
(a) A county with a population of 350,000 or more shall conduct an annual independent audit of all books, records, and accounts of each district, county, and precinct officer, agent, or employee, including the regular county auditor, and of all governmental units of the county hospitals, farms, and other institutions. The audit shall cover all matters relating to the fiscal affairs of the county.
(b) The commissioners court of the county shall employ a disinterested, competent, experienced public accountant or certified public accountant to perform the audit. The court shall contract for the audit at the regular January meeting of the court. The consideration specified in the contract shall be paid from the general fund of the county.
Most Counties originally had calendar year ends. A calendar year does not coincide with the property tax calendar set out in the Texas Property Tax Code of October 1 making the tax setting and budgeting process difficult based on the 90 day difference in year ends. In addition, accounting rules result in a higher fund balance, the primary indicator of financial health for a government, for a September year end than a calendar year end. Accordingly, many Texas Counties have converted to a September year end to ease the process of setting the tax rate and budgeting and to reflect fund balance consistent with other governments. We have assisted several counties in changing their fiscal year by adopting one short year.
Audit Filing Deadline
There is no statutory due date for a County audit. However, most grantor agencies have filing requirements. Similarly, many debt issues have continuing disclosure requirements which normally require financial statements to be filed with the repository within six months of the fiscal year end. In addition, recipients of the GFOA’s Certificate of Achievement in Excellence in Financial Reporting must submit within six months after their fiscal year end or request an extension.