New Audit Choices Could Cut Costs in Half

One in Four Ohio Villages, Townships and Special Districts Could Be Eligible

Tuesday, September 18, 2012

Taxpayers want their governments to live as frugally as they do, and that means when you spend a dollar, you make sure you get your dollar’s worth.

When it comes to audits, we have found a way to make it easier for local governments to do just that—save a little money—and get a better product. A new policy announced in September offers two ways for smaller Ohio governments to qualify for lower-cost audits. Our auditors estimate that as many as one in four governments could save up to half their traditional audit costs.

The Auditor of State’s office performs nearly 4,000 financial audits every year to make sure that Ohio’s more than 5,700 governments are following the law, protecting the public purse and delivering the services Ohioans expect.

Some of the smaller governments with less complicated books and a track record of good audits present low audit risk. For such governments, we think it’s fair to offer special procedures that cost less than a full audit, but still provide assurance that the governments are doing what they are supposed to do.

Under the new policy, the first option is a basic audit that consists of an on-site limited review. Qualifying governments must spend less than $100,000 annually, and could include small villages, townships and special districts for fire and ambulance, parks and recreation, solid waste or other services. Our preliminary estimate is that as many as 300 governments could be eligible.

Another low-cost alternative is “agreed-upon procedures,” or AUP audits. We are raising the maximum threshold for AUP audits from $1 million in annual disbursements to $5 million. This means that as many as 1,300 governments could qualify, more than double the number that qualify now.

We’re also making it a little easier to qualify for AUP audits. It used to be that any public office with a new treasurer was not eligible, because having someone new on the job is riskier than having someone who knows the ropes. But with the experience we have gained doing AUP audits since 2009, we have found better ways than mere time on the job to determine whether fiscal officers are on top of things. If they are, their governments should be eligible to qualify for lower cost audit options.

Since taking office, I have been working to help ‘skinny down’ Ohio governments. Enabling local governments to spend scarce tax dollars where they do the most good gives us all a better bang for our buck. That’s what skinny government is all about.

Auditor of State Bulletin 2012-007, Eligibility of Entities for Reduced Auditor of State Audit Procedures, provides options for lowering audit costs.