SPECIAL ASSESSMENT FUNDS*

The Illinois Municipal Auditing Law is both complete and specific with regard to the scope of audit reports prepared in compliance with its provisions. Section 5 of that act reads as follows:

Sec. 5. What audit report shall include.) The audit report shall contain statements that are in conformity with generally accepted municipal accounting principles, and that shall set forth, insofar as possible, the financial position and results of financial operations for each fund of the municipality. The audit report shall also include the professional opinion of the accountant or accountants with respect to the financial statements or, if an opinion cannot be expressed, a declaration that the accountant is unable to express such opinion and an explanation of the reasons he cannot do so.

In the process of reviewing audit reports submitted under the provisions of the Illinois Municipal Auditing Law, it has been noted that a substantial number of reports appear to omit certain special funds. It is felt that such omissions may be due, at least in part, to a misunderstanding of statutory requirements and so it is the purpose of this bulletin to discuss this point as it relates to one specific type of fund.

The particular subject to be considered here is the special assessment fund. The office of the Auditor of Public Accounts and the members of the Municipal Audit Advisory Board recognize that these funds present some very difficult problems to many municipal officials and to their independent auditors. In an effort to be of assistance, it is felt that the policy as outlined below will bring about minimum compliance with the statute and at the same time avoid an unreasonable burden upon municipal officials.

Existing Special Assessment Accounts

Both municipal officials and independent accountants engaged by them for municipal audit work must accept the responsibility for assuring that special assessment funds are covered by the audit reports. It is, as indicated, recognized that the problems encountered in connection with special assessment records of prior years are in some cases so difficult as to make an audit an impossibility. This, however, is not a sufficient basis for completely ignoring the statutory requirement on this point. In such cases, the minimum that would be accepted, would be statements and a report of the audit of special assessment funds each receipts and disbursements for the year under examination and the allocation of such year's cash receipts and disbursement by funds. In addition, the report shall contain an explanation of the condition of special assessment fund records relating to prior years and a statement as to why a complete report is not supplied for such funds.

New Special Assessment Accounts

When new special assessment fund projects are initiated, they must be included in the audit and the audit report as required by statute. Municipal audit reports will be considered deficient if the report does not contain statements covering special assessment funds, presented in accordance with generally accepted municipal accounting principles, in general as outlined at pages 54 to 72, inclusive, of Bulletin No. 14, Municipal Accounting and Auditing, (September 1951) issued by the National Committee on Municipal Accounting, 1313 East 60th Street, Chicago 37, Illinois, including the professional opinion of the accountant or accountants, or a disclaimer of an opinion and the reasons therefor, if no opinion can be expressed. If there are no special assessment funds, such circumstance shall be specifically noted in the opinion or disclaimer of opinion.

•EDITOR'S NOTE: This is the third of a series of periodic bulletins issued by the Municipal Audits Division in the Office of the State Auditor, Elbert S. Smith, which will be published from time to time in the Review. These informative articles should prove of interest to all municipal officials.

Page 102 / Illinois Municipal Review / May 1958