Wednesday, January 14th, 2015

New Changes to Audit Transparency for Local Governments

The arrival of the New Year has brought about a variety of changes to Illinois laws. In particular, one of these changes brings added transparency to the audit process under the Illinois Counties and Illinois Municipal codes. Specifically, the law now requires that an auditor, within 60 days of the close of an audit, provide management letters and any audited financial statements to each member of the county board or the municipality’s corporate authorities. Additionally, this information must also be posted to the local government’s website. Finally, the auditor must also present the audit information during a public meeting, either in person, by phone, or by a web connection.

In passing this law, the Illinois Senate defined “management letters” as documents presenting “significant deficiencies and material weaknesses” in audit reports. Additionally, the posting requirement does not necessitate the disclosure of internal control weaknesses or deficiencies. Such information would be redacted so as to not “open the floodgates of material weakness in a governmental organization’s internal controls.”

Further, based on statements on the floor during the adoption of these changes, the bill’s sponsor Senator Michael Connelly (R) out of Wheaton’s 21st District, indicated that the change in legislation does not require that the auditor present the audit to the entire “county board.” Such a requirement could also be satisfied by presenting the audit to the “county finance or audit committee.”  Senator Connelly added that presenting to either will “generally” satisfy audit standards.  Because Senator Connelly’s statements were specific to counties, it is unclear whether they apply to municipalities.  However, it is reasonable to interpret that the amendment requirements would be satisfied if the audit result were presented to a municipality finance or audit committee as long as such a subsidiary body exists in a municipality corporate structure under its code.

Ultimately, the added transparency will provide further information to elected officials and the public regarding the audit process.


Carlos S. Arevalo

Author: Carlos S. Arevalo, Jacob Caudill