On November 27 Governor Tom Wolf signed into law Act 99 of 2019 (HB 1203), which updates the auditing standards for municipal authorities under the Municipal Authorities Act, 53 Pa.C.S. §5612, as well as strengthening municipalities’ right to review the books and accounts of authorities. The passage of Act 99 follows on the heels of Act 4 of 2019, which was signed into law earlier this year.

As we previously discussed on this blog, Act 4 of 2019 primarily focused on improving the minimum required fiscal controls and procedures for a municipal authority,. Act 99 builds on the reforms approved in Act 4 and revises the auditing standards for authorities under the Authorities Act.

Act 99 mandates that the audit obtained by each municipal authority comply with each of the following, as applicable:

• Generally accepted government auditing standards, including the standards published by the Government Accountability Office;
• The Single Audit Act of 1984, 31 U.S.C. §7501;
• The uniform administrative requirements, cost principles and audit requirements for federal awards under 2 C.F.R. Pt. 200 and;
• Any other federal or state requirements for an audit relating to the finances of a municipal authority.

In addition, Act 99 grants to municipalities a new and useful oversight tool for municipal authorities. Under prior law in effect before the passage of Act 99, if an authority failed to obtain an audit, then the municipality had the option of conducting its own review of the books and accounts of the authority, at the authority’s expense. An authority that had obtained an audit of its books and accounts was somewhat protected from further review requests – although the municipality could take the step of referring the matter to the Attorney General’s office for review.

With the passage of Act 99, a municipality’s right to review the books and accounts of the authority now will extend to situations in which the authority has obtained an audit. A municipality that questions the audit will be able to review the books and accounts of the authority, although the municipality will have to pay for the expense of such review. In addition, an authority that undergoes such a review will be exempted from the annual audit requirement in the year following the review.

In addition, Act 99 clarifies that the review by the municipality may include each of the following points:

• the authority’s billing systems;
• transparency of contracts and how such contracts are awarded; and
• compliance with relevant state and federal laws, including laws governing conflicts of interest.

While each of these items was arguably within the scope of the review under current law, Act 99’s explicit references to them removes all doubt that they may be included in the subject of the review by the municipality.

Act 99 will go into effect on January 26, 2020. For additional information, please contact Tim Horstmann at 717.237.5462, or by e-mail at thorstmann@mcneeslaw.com.