Beginning July 1, 2016, Indiana Code § 5-11-1-27 (HEA 1264-2015) imposes a number of new requirements on all political subdivisions in Indiana that will significantly change the manner in which these entities operate. It is critical that each unit of local government takes action prior to July 1, 2016 to ensure that it will remain in compliance and receive budget approval from the Indiana Department of Local Government Finance (DLGF) later this year.
Specifically, the new law requires, among other items, the following:
(1) The legislative body of a political subdivision must develop and adopt a “system of internal controls” and ensure appropriate training of all personnel concerning the internal control system.
(2) The fiscal officer of a political subdivision must certify annually that required and procedures are in place and that all personnel with access to funds have received training on the procedures.
(3) The state board of accounts (SBOA) must issue a comment in its examination report if internal controls and procedures are not adopted or personnel have not received training.
(4) The governing board of the entity must self-report uncorrected violations to the DLGF.
(5) The DLGF may not approve the political subdivision’s budget or supplemental appropriations if the political subdivision has failed to adopt internal controls and procedures or train personnel.
(6) Additional reporting and follow up requirements are required upon the discovery of the misappropriation of political subdivision funds.
While the new law makes other changes to the operations of local units of government, the above will have the most immediate and significant impact, and care must be taken to ensure that all political subdivisions are in compliance. Failure to comply will result in non-approval of budgets and any additional appropriations.
Essentially, the governing body of each entity must adopt “minimum internal control standards” as defined by the SBOA and ensure that all personnel receive training concerning the standards and procedures adopted by the political subdivision.
At the time of submission of the annual report through Gateway, the fiscal officer must certify that the minimum internal control standards have been adopted and that all personnel who are not otherwise on leave status have received training regarding these standards and procedures.
In addition to the required certification to be filed by the fiscal officer, a certification signed by each elected official, appointees and each subdivision employee must be maintained on-site as evidence that the individual training requirement has been met.
Navigating the complexities of these requirements, the required internal control standards, and attendant training is critical for all local units of government. Our Government Practice Group would be happy to assist you in ensuring that your entity is compliant with all aspects of Indiana Code § 5-11-1-27. Please contact Brian Bosma, the Chairman of the practice group at firstname.lastname@example.org to learn more about how we can partner with you to ensure compliance.