Township Bulletins
Search for Keywords
- A
Affordable Care Act Penalties, Fines, or Tax
Annual Financial Report
Annual Financial Report and 100-R Not Filed Timely
Annual Financial Report vs Annual Report
We have received inquiries concerning who has the responsibility regarding access and retention of public records such as when a bank/payroll vendor will be serving as an agent for an Indiana governmental unit. An example would be a bank only offers to provide on line access to cancelled checks. We consulted with the Indiana Commission on Public Records and the response we received provided in part "The bank/vendor would thus be required to maintain the checks, bank statements, payroll records, etc. for the same period as the agency. The bank/vendor may well hold the information, but the obligation remains with the agency to provide access upon request, not the bank or vendor. The agency further has the obligation to provide access to the materials throughout the required retention. In the case of cancelled checks/warrants they are currently required to be maintained for 6 (six) years after the completion of the State Board of Accounts Audit. Payroll records are dependent upon the type."
Township Form 1C, Financial and Appropriation Record, has been prescribed to be used as the ledger of Townships. This is a manual system. In lieu of using this ‘ledger book,’ many Townships are switching to some form of computerized accounting systems. We receive quite a few questions asking us what systems we approve and suggest. We do NOT approve systems and cannot suggest which ones to use. If you are thinking of switch to a computerize system (or switching systems), there are a couple of things you need to keep in mind. First, all output forms from the system must be replicas of the forms that we prescribe. A list of those forms can be seen in Chapter 2 of the Township Manual. There is a provision in the March 2014 Bulletin that allows for approval of forms that are not exact replicas.
AFFORDABLE CARE ACT PENALTIES, FINES, OR TAX
The State Board of Accounts has received many questions regarding our audit position with regards to the Affordable Care Act. Most of the questions have inquired specifically about the penalties, fines, or tax associated with this law. While our general audit guidelines prohibit the paying of penalties and interest and states that those payments would be a personal charge to the fiscal officer, administrator, or board, we do not believe this general guideline should apply to this controversial, mandated, and complicated law.
We also believe that the governing boards should be making the fiscal decisions associated with their unit of government and the implementation of this law. Therefore, if the fiscally wise decision of the board is to pay the penalties, fines, or tax instead of the cost of the insurance then we will not personally charge the officials involved. One of the conditions necessary to not charging the penalties, fines, or tax is to have the governing board officially document their decision to not comply with the Affordable Care Act. This could be a motion in the board minutes, a resolution, or an ordinance.
In summary, as long as there is an official action of the board to choose to pay the fines, penalties, or tax, the State Board of Accounts will not personally hold anyone in that unit of government accountable for reimbursing the cost of those penalties, fines, or tax.
IC 5-3-1-3 applies when another statute requires meetings or notices to be published. If the statute that requires the meeting does not mention IC 5-3-1-3, then you would follow the requirements of the open door law (IC 5-14-1.5). Meetings that follow the requirements of the open door law would require notice posted 48 hours in advance and it is not required to publish notice in the newspaper(s).
The dates and the medium of certain notices required by statute are outlined below:
- Notice of meetings not specifically mentioned in statute – 48 hours (Notice by Township Office).
- Elections – 10 days before the date of the election (Newspaper).
- Sale of Bonds – 15 days before the sale and the second publication at least 3 days before the sale (Newspaper).
- Receiving Bids – published twice, with at least 1 week apart and at least 7 days before bids are received (Newspaper).
- Establishment of Cumulative or Sinking fund – published twice, with at least 1 week apart and at least 3 days before hearing (Newspaper).
- Publication of Annual Report – within 4 weeks after the third Tuesday following the first Monday in January (2 Newspapers).
- Indebtedness of Township – first Monday of August (Notice by Township Office).
- Budgets – Refer to the Budget and Tax Rate Calendar provided by the Department of Local Government Finance (DLGF).
If the Officer is charged with the duty of publishing any notice required by law and is unable to procure publication of the notice at either (1) the price fixed by law, (2) because newspapers qualified to publish refuse to publish, or (3) because newspapers qualified to publish refuse to post notice on their respective websites, it is sufficient for the officer to post printed notices in three prominent places in the Township.
IC 5-3-1-2.3 applies to notices containing errors or omissions. Notice is not required to be republished if (1) a reasonable person would not be misled by the error or omission and (2) the notice is in substantial compliance with the time and publication requirements.
When you are required to publish in two newspapers, but you do not have two newspapers published in your Township, then you only have to advertise in one. If you do not have a newspaper published in your Township, then you would advertise in a newspaper that is published in your County and circulates within your Township.
ANNUAL FINANCIAL REPORT AND 100-R NOT FILED TIMELY
We want to remind all Townships that we will continue our practice of issuing subpoenas to the Trustee if the Certified Personnel Report (100-R) and the Annual Financial Report (AFR) are not filed timely in Gateway. The 100-R is due by January 31st and the AFR is due by March 1st.
The Annual Financial Report and 100-R must be filed through Gateway. To login to Gateway, please go to https://gateway.ifionline.org/login.aspx and enter your Gateway User Name (e-mail address) and Password.
Please be aware that any person who fails to file the Annual Financial Report as required by law commits a Class B infraction and forfeits office. Ind. Code § 5-11-1-10.
Indiana Code 5-11-1-4(a) states in part: “The state examiner shall require from every municipality and every state or local governmental unit, entity, or instrumentality financial reports covering the full period of each fiscal year. These reports shall be prepared, verified, and filed with the state examiner not later than sixty (60) days after the close of each fiscal year. The reports must be in the form and content prescribed by the state examiner and filed electronically . . . “
Please be aware that any person who fails to file the 100R Report as required by law commits a Class C infraction and is subject to impeachment or removal from office. Ind. Code § 5-11-13-3. Indiana Code 5-11-13-1 states in part: "Every state, county, city, town, township, or school official . . . shall during the month of January of each year prepare, make, and sign a written or printed certified report, correctly and completely showing the names and addresses of each and all officers, employees, and agents . . . and the respective duties and compensation of each, and shall forthwith file said report in the office of the state examiner of the state board of accounts."
ANNUAL FINANCIAL REPORT VS. ANNUAL REPORT
We have received inquiries about the Annual Financial Report (AFR) and if the incoming Trustee or the outgoing Trustee is required to submit this in Gateway.
The incoming Trustee would be responsible for submitting the Annual Financial Report in Gateway and performing any duties of the Trustee when the office expires. There are three reports commonly referred to as the Annual report:
1. Report required by IC 36-6-4-12 to be presented to the Township Board;
2. Report required by IC 36-6-4-13 to be published in accordance with IC 5-3-1; and
3. Report required by IC 5-11-1-4 to be filed with the State Examiner (AFR in Gateway)
The first report should be presented to the incoming Trustee by the outgoing Trustee required by IC 36-6-4-12 no later than the 3rd Tuesday after the first Monday in February. We have designed the Gateway submission to accomplish all three required reports. The outgoing Trustee can have “edit rights” to the Gateway system and fill out the necessary information to print out a report to fulfill their duties in IC 36-6-4-12. Then the incoming Trustee could go in and verify the information input with the ledger and submit the AFR in Gateway before the deadline on March 1st. The prior Trustee providing this assistance is not required but recommended for a smooth transition if elected officials are changing. If the Gateway report is not submitted by the 3rd Tuesday after the first Monday in February the incoming Trustee can produce a custom report, that would be similar to the “Cash and Investment Combined” report in the AFR, from information recorded in the ledger.
ASSESSING EXPENSES - Bond premium paid by County
The bond premium on the official bond of the township assessor should be paid from county funds and not from township funds.
IC 5-4-1-18 states in part (a)". . . the following . . . individuals shall file and maintain in place an individual surety bond: . . . (4) Township assessors. . . ". We are not aware of any statutory requirements for a deputy assessor to execute a bond: however, such a bond may be required by the elected township assessor. When so required, such bond must be recorded in the office of the county recorder.
IC 6-1.1-3-5 states: "Before the assessment date of each year, the county auditor shall deliver to each township assessor the proper assessment books and necessary blanks for the listing and assessment of personal property."
Inquiries have questioned the correct procedure for accounting for township audit costs.
We find IC 5-11-4-3(b) remains applicable to guide these processes. IC 5-11-4-3(b) states in part: “… Immediately upon receipt of the certified statement, the county auditor shall issue a warrant on the county treasurer payable to the treasurer of state out of the general fund of the county for the amount stated in the certificate. The county auditor shall reimburse the county general fund, except for the expense of examination and investigation of county office, out of the money due the taxing units at the next semiannual settlement of the collection of taxes.”
Therefore, counties shall continue to forward examination of record payments to the Treasurer of State for township audits when billed by the State Board of Accounts. The county general fund shall then be reimbursed from property tax collections of that township at the next semiannual settlement.
To properly account for the township’s audit costs the full amount of property and excise taxes (before audit costs) are to be receipted to the appropriate township funds. A disbursement for the examination of records is to be posted to township funds. The Statement of Engagement Costs should be compared to the amount withheld for the Examination of Records to ensure the amounts agree.
IC 5-11-4-4 provides that all disbursing offices are authorized to make payments required under this chapter without appropriation. Therefore, the examination of records costs would be considered an unappropriated disbursement.
- B
Bonds of Officers and Employees of the Department of Parks and Recreation
The Office of the Attorney General of the State of Indiana provided the following Unofficial Advisory Letter on June 11, 1991 in response to a request for an opinion concerning the following questions:
1. May the Township Board appoint its own attorney?
2. May the Trustee as the authorization officer for Poor Relief funds and the distribution officer for Civil funds compensate a Township Board Attorney?
3. After salaries have been fixed by the Township Board, is the Township Executive compelled to compensate employees to the fullest extent of salaries provided, even though the employee may be deficient when evaluated by written performance appraisal in view of Indiana Code Section 36-4-7-2.
CONCLUSION
1. The Township Board is not authorized to appoint its own attorney.
2. This question is moot. See question 1.
3. The Township Trustee does not have the authority to change the salary of an employee that is fixed by the Township Board. The Township Board may not change the salary of an elected or appointed officer during the fiscal year for which they are fixed. The Township Board may change the salary of any other employee. The Township Trustee may remove any employee who is deficient in the performance of his or her duties. If procedure for removal has been provided, the Township Trustee should follow that procedure.
Subsequent to the issuance of the aforementioned Advisory Letter questions have been raised of whether "Home Rule" would provide authority for a township board to also hire an attorney. IC 36-6-4-4 states in part concerning powers of a township trustee: "The executive may do the following . . . Appoint an attorney to represent the township in any proceeding in which the township is interested." The question was asked in Attorney General Advisory Opinion 98-13 issued July 9, 1998, "Can a school corporation or other unit of government expand the provisions of a statute with "home rule?" The answer provided by the Attorney General’s Office stated in part ". . . those entities may not exercise home rule powers in an area pre-empted by the General Assembly."
IC 36-6-6-10(b) states in part: “The township legislative body shall fix the: (1) salaries; (2) wages; (3) rates of hourly pay; and (4) remuneration other than statutory allowances; of all officers and employees of the township.”
We suggest that this be done in conjunction with the board approval of the Township budget, however, just approving the budget is NOT sufficient to fulfill this statute. The board must fix the sales, wages, rates of pay, etc. of all officers and employees in a public meeting. This can be done through a resolution if the board so chooses. The Township Form 17, as described in Chapter 2 of the Township Manual is an optional form that has been provided for this purpose. A sample of the Form 17 can be seen in the appendix as well.
A couple of other statutes to keep in mind when completing this:
IC 36-6-6-10 states in part: “(c) Subject to subsection (d), the township legislative body may reduce the salary of an elected or appointed official. However, except as provided in subsection (h), the official is entitled to a salary that is not less than the salary fixed for the first year of the term of office that immediately preceded the current term of office.
(d) Except as provided in subsection (h), the township legislative body may not alter the salaries of elected or appointed officers during the fiscal year for which they are fixed, but it may add or eliminate any other position and change the salary of any other employee, if the necessary funds and appropriations are available.
(e) If a change in the mileage allowance paid to state officers and employees is established by July 1 of any year, that change shall be included in the compensation fixed for the township executive and assessor under this section, to take effect January 1 of the next year. However, the township legislative body may by ordinance provide for the change in the sum per mile to take effect before January 1 of the next year.
(f) The township legislative body may not reduce the salary of the township executive without the consent of the township executive during the term of office of the township executive as set forth in IC 36-6-4-2.
(g) This subsection applies when a township executive dies or resigns from office. The person filling the vacancy of the township executive shall receive at least the same salary the previous township executive received for the remainder of the unexpired term of office of the township executive (as set forth in IC 36-6-4-2), unless the person consents to a reduction in salary.
(h) In a year in which there is not an election of members to the township legislative body, the township legislative body may vote to reduce the salaries of the members of the township legislative body by any amount.”
BONDS OF OFFICERS AND EMPLOYEES OF THE DEPARTMENT OF PARKS AND RECREATION
IC 36-10-3-16 provides "(a) Every officer and employee who handles money in the performance of duties as prescribed by this chapter shall execute an official bond for the term of office or employment before entering upon the duties of the office or employment. (b) The fiscal body of the unit may under IC 5-4-1-18 authorize the purchase of a blanket bond or crime insurance policy endorsed to include faithful performance to cover all officers' and employees' faithful performance of duties. The amount of the bond or crime insurance policy shall be fixed by the fiscal body and, in the case of a municipality, must be approved by the executive. (c) All official bonds shall be filed and recorded in the office of the county recorder of the county in which the department is located. (d) The commissioner of insurance shall prescribe the form of the bonds or crime policies required by this section."
OFFICIAL BONDS
The bond amount for a Township Trustee must be thirty thousand dollars ($30,000) for each one million dollars ($1,000,000) of receipts of the Township during the last complete fiscal year before the purchase of the bond. The bond amount must be at least $30,000, but not greater than $300,000 unless approved by the fiscal body. [IC 5-4-1-18(d)(1), (2)]
Employees or contractors of a Township “whose official duties include receiving, processing, depositing, disbursing, or otherwise having access to funds that belong to the federal government, the state, a political subdivision, or another governmental entity” must have a bond of at least $5,000. [IC 5- 4-1-18(a)(7), (e)(2)]
The SBOA may increase minimum bond coverage amounts if an examination report finds malfeasance, misfeasance, or nonfeasance that resulted in the misappropriation of, diversion of, or inability to account for public funds. [IC 5-4-1-18(j), (k), (l)]
Effective January 1, 2016, all bonds must have a one year term. A continuation certificate is not sufficient. Consecutive yearly bonds must provide separate coverage for each year. [IC 5-4-1 18(m)(1), (2)]
We will not take exception to a new calendar year bond term greater than one year if the current bond expires before December 31, 2015. For example, if the current bond expires on September 30, 2015, we will not take exception to a new bond term from October 1, 2015 to December 31, 2016, even though it is greater than one year. Similarly, we will not take exception to a new calendar year bond term less than one year if the current bond expires after December 31, 2015, but before December 31, 2016. For example, if the current bond expires on March 31, 2016, we will not take exception to a new bond term from April 1, 2016 to December 31, 2016, even though it is less than one year.
Term bonds issued on or after January 1, 2016, are not allowable [IC 5-4-1-18(m)(1)] We recommend that all current term bonds be converted to one year bonds starting January 1, 2016, to comply with the spirit of the amended statute and to reduce the risk of financial exposure to the Township.
Blanket bonds are allowable if they are authorized by resolution, endorsed to cover faithful performance, and include aggregate coverage sufficient to cover all officers, employees, and contractors required to be bonded. [IC 5-4-1-18(b)]
We will not take exception to schedule bonds—by name or position—if the bonds are authorized by resolution, endorsed to cover faithful performance, and include aggregate coverage sufficient to cover all officers, employees, and contractors required to be bonded.
Crime insurance policies providing additional coverage for criminal acts or omissions committed by officers, employees, or contractors are permitted if they are authorized by resolution. [IC 5-4 1-18(c)] We will not take exception if a Township purchases a crime insurance policy in lieu of a bond if the crime insurance policy is authorized by resolution, endorsed to cover faithful performance, and includes aggregate coverage sufficient to cover all officers, employees, and contractors required to be bonded.
The aggregate liability for a surety or insurer for a policy year is the sum of the amounts specified in the bonds issued by the surety or insurer for that policy year. [IC 5-4-1-18(m)(2)] For example, if a Trustee has four consecutive yearly bonds for $30,000, the maximum liability of the insurer is $30,000 for each of the four years.
Effective January 1, 2016, all bonds must commence on one of the following: The first day of the calendar year; the first day of the fiscal year of the Township; or the first day of the individual’s service in the office or employment position for which a bond is required. [IC 5-4-1-18(m)(1)]
All official bonds shall be made payable to the State of Indiana. [IC 5-4-1-10] The State is considered an additional named insured on all crime insurance policies. [IC 5-4-1-18(c)]
All bonds must be filed with the county. Beginning July 1, 2015, copies of the bonds must also be filed with the Trustee. [IC 5-4-1-5.1(b)]
Bonds must be filed with the county recorder and the Trustee within ten days after their issuance. [IC 5-4-1-5.1(c)]
The Trustee must submit copies of all bonds to the State Board of Accounts electronically via Gateway with their Annual Financial Report. [IC 5-4-1-5.1(e)]
Current bonds already filed with the county recorder are not required to be re-filed with the Trustee. For example, a bond obtained in January 2015, and properly filed with the county recorder does not need to be filed with the Trustee. However, when the January 2015 bond expires and a new bond is obtained in January 2016, it must be filed with both the county recorder and the Trustee.
Indiana Code 5-4-1-18(a)(7) states that bonds are required for individuals: “(A) who are employees or contractors of a city, town, county, or Township; and (B) whose official duties include receiving, processing, depositing, disbursing, or otherwise having access to funds that belong to the federal government, the state, a political subdivision, or another governmental entity.” It is our position that for the purposes of IC 5-4-1-18(a)(7), a ‘contractor’ is a person or business in a contractual relationship with the Township who has a fiduciary relationship with or performs a fiscal responsibility for the Township, and whose accounts are not otherwise covered by the Federal Deposit Insurance Corporation (FDIC). For example, a contractor providing payroll or billing services for the Township is required to be bonded, but a snow removal contractor or lawn service provider is likely not required to be bonded.
The Township must determine who must be bonded under the statute. The term ‘official duties’ is not defined. It is our position that ‘official duties’ may include duties set forth in a job description, duties that are customary or routinely performed, or duties that are assigned but not frequently performed. For example, if an office has three employees who routinely accept payments in the Townships office, then all three employees must be bonded. If an employee is assigned to accept certain registration fees but only receives funds once every other year, then that employee must be bonded.
There is no dollar threshold or de minimis exception in the statute. However, we will not take exception if employees of the Township who receive, process, deposit, disburse, or otherwise have access to public funds in an amount less than $5,000 are not bonded.
- C
Cash Balance -vs- Appropriation Balance
Establishing the Estimated Cost of Capital Assets
Cemeteries
Attorney General Official Opinion 91-5 – Cemeteries
Certification of Names and Addresses to County Treasurers
Compensatory Time Off Under the Fair Labor Standards Act
When Trustee receives Township Assistance
Cumulative Fire Fund (Building or Remodeling and Fire Equipment Fund)
Cybersecurity Incidents - Reporting
CASH BALANCE -VS- APPROPRIATION BALANCE
We receive numerous questions from Trustees and other Township employees that are confused about the difference between their cash balance and their appropriation (or budget) balance. Your cash balance is the amount of cash you have available to spend. This should be reflected in your ledgers and should be reconciled to your bank on monthly basis.
Each year, you work with the DLGF and get a budget passed for your unit. This is your appropriation balance. Whereas your cash balance is the amount of cash you have available to spend, your appropriation balance is what you are allowed to spend. Most, if not all times, these balances will not be the same.
A couple of things to remember. Receipts increase your cash balance, but do NOT increase your appropriation balance. For funds that have an appropriation (there are some funds that do not require a budget), the most common of which are the Township (General) Fund, Fire Fighting Fund, Township Assistance Fund, and Rainy Day Fund, disbursements decrease both your cash balance and your appropriation balance. There are cases in which a disbursement could be made ‘unappropriated,’ but that is very rare. If you get to a point during the course of a year, where you still have cash available to spend, but no longer have an appropriation balance, you can request an additional appropriation from the DLGF. That process is outlined in Chapter 4 of our Township Manual.
To ensure adequate safeguards over capital assets, townships should maintain proper asset records. The State Board of Accounts has a prescribed Capital Assets Ledger, General Form No. 369. Substitute computerized forms approved by the State Board of Accounts may be used.
Every governmental unit should have a complete inventory of all capital assets owned which reflects their acquisition value. Such inventory should be recorded on the applicable Capital Assets Ledger. A complete inventory should be taken at least every two years for good internal control and for verifying account balances carried in the accounting records.
Land
The records of each governmental unit should reflect land owned, its location, its acquisition date and the cost (purchase price). If the purchase price is not available, appraised value may be used.
Buildings
A capital asset account for buildings should reflect the location of each building and the cost value (being the purchase or construction cost) and the cost of improvements, if applicable. If a building is acquired by gift, the account should reflect its appraised value at the time of acquisition.
Improvements Other Than Buildings
A capital asset account should reflect the acquisition value of permanent improvements, other than buildings, which have been added to the land. Examples of such improvements are fences, retaining walls, sidewalks, gutters, tunnels and bridges. The improvements should be valued at the purchase or construction cost.
Equipment
Tangible property of a permanent nature (other than land, buildings and improvements) should be inventoried. Examples include machinery, trucks, cars, furniture, typewriters, adding machines, calculators, bookkeeping machines, data processing equipment, desks, safes, cabinets, books, etc. The value of such items should be carried in the inventory at the purchase cost. The governing body should establish a capitalization policy that sets a dollar amount as a threshold to be used in determining which equipment items will be recorded.
Construction Work in Progress
Where construction work has not been completed in the current reporting calendar year, the cost of the project should be carried as "construction work in progress." When the project is completed, it will be placed on the inventory applicable to the assigned asset accounts.
ESTABLISHING THE ESTIMATED COST OF CAPITAL ASSETS
When it is not possible to determine the historical cos of capital assets owned by a governmental unit, the following procedure should be followed.
Develop and inventory of all capital assets which are significant for which records of the historical costs are not available. Obtain an estimate of the replacement costs of these assets. Through inquiry determine the year or approximate year of acquisition. Then multiply the estimated replacement cost by the factor for the year of acquisitions from the Table of Cost Indexes. The resulting amount will be the estimated cost of the asset.
In some cases estimated replacement cost can be obtained from insurance policies; however, if estimated replacement costs are not available from insurance policies, you should obtain or make an estimate of the replacement costs.
If the replacement cost is estimated to be $76,000.00 and the asset was constructed about 1946, then the estimated cost of the asset should be reported as $6,080.00.
Township owned cemeteries are considered capital assets and need to be properly recorded on General Form 369 – Capital Assets Ledger. The cemeteries are to be reported on General Form 369 – Capital Assets Ledger at the actual or estimated historical cost based on appraisals or deflated current replacement cost. Contributed or donated assets are reported at estimated fair value at the time received. An article was published in the September 2019 Township Bulletin (Page 3) to assist in determining the estimated historical cost of the capital asset when the actual cost of the capital asset is not known - https://www.in.gov/sboa/files/TwpBULL%20September%202019.pdf. General Form 369 – Capital Assets Ledger does not have a separate classification for cemeteries, so the cemetery ground will be recorded on the capital asset ledger under land, any structures on the cemetery grounds under buildings, and roads and drainage systems will be recorded under infrastructure. There will be no effect on the value of the asset as plots are sold. The purchase of a burial plot is a real estate transaction; however, cemetery plot deeds grant burial rights that create an easement for the specific purpose of burial but do not alter the Township’s ownership of the cemetery as a whole.
Each township is required to adopt a capital asset policy that details the threshold at which an item is considered a capital asset. A complete physical inventory must be taken at least every two years, unless more stringent requirements exist, to verify account balances carried in the accounting records.
A training on properly maintaining capital assets has been added to the SBOA YouTube Channel. To access the SBOA YouTube Channel, there is a link under the Presentations and Training Materials sections of the SBOA website. You may also click on this link to view other training videos - https://www.youtube.com/channel/UC62Ozm0wY81GZHipK2UrjLA.IC 5-11-10.5-2 states: "All warrants or checks drawn upon public funds of a political subdivision that are outstanding and unpaid for a period of two (2) or more years as of the last day of December of each year are void. No individual, bank, trust company, building and loan association, or any other financial institution may honor, cash, or accept for payment or deposit any such warrant or check which may be presented for payment and which has been issued and outstanding for a period of two (2) or more years as of the last day of December of any year."
IC 5-11-10.5-3 states: "Not later than March 1 of each year, the treasurer of each political subdivision shall prepare or cause to be prepared a list in triplicate of all warrants or checks that have been outstanding for a period of two (2) or more years as of December 31 of the preceding year. The original copy of each list shall be filed with the:
- board of finance of a political subdivision; or
- fiscal body of a city or town.
The duplicate copy shall be transmitted to the disbursing officer of the political subdivision. The triplicate copy of each list shall be filed in the office of the treasurer of the political subdivision. If the treasurer serves also as the disbursing officer of the political subdivision, only two (2) copies of each list need be prepared or caused to be prepared by the treasurer."
IC 5-11-10.5-4 states: "Each list prepared under section 3 of this chapter must show:
- the date of issue of each warrant or check;
- the fund upon which the warrant or check was originally drawn;
- the name of the payee;
- the amount of each warrant or check issued; and
- the total amount represented by the warrants or checks listed for each fund. "
IC 5-11-10.5-5 states: "(a) Upon the preparation and transmission of the copies of the list of the outstanding warrants or checks, the treasurer of the political subdivision shall enter the amounts so listed as a receipt into the fund or funds from which they were originally drawn and shall also remove the warrants or checks from the record of outstanding warrants or checks. (b) If the disbursing officer does not serve also as treasurer of the political subdivision, the disbursing officer shall also enter the amounts so listed as a receipt into the fund or funds from which the warrants or checks were originally drawn. If the fund from which the warrant or check was originally drawn is not in existence, or cannot be ascertained, the amount of the outstanding warrant or check shall be receipted into the general fund of the political subdivision."
Therefore, the State Board of Accounts is of the audit position that not later than March 1 of each year, the township trustee shall prepare a list in duplicate showing: (1) the date of issue of each check; (2) the fund upon which the check was originally drawn; (3) the name of the payee; (4) the amount of each check and (5) the total amount presented by the checks listed for such fund. The original copy of such list shall be filed with the local board of finance and the duplicate copy filed with the trustee.
The amounts of such checks shall be receipted into the fund or funds from which originally drawn by writing an official receipt or receipts therefore. If the fund from which the check was drawn is not now in existence or cannot be ascertained, the amount of such check shall be receipted into the township fund. Upon issuing the receipt or receipts the checks shall then be removed from the trustee's list of outstanding checks.
CEMETERIES
Attorney General Official Opinion 91-5
The Attorney General of the State of Indiana, in response to a request for an opinion whether a cemetery may legally deny families the right to use United States government veteran markers provided the following conclusion:
It is, therefore, my Official Opinion that although the owner of every cemetery may make, adopt, and enforce rules and regulations specifying the size and type of markers or monuments under Indiana Code Section 23-14-1-11, no owner of a cemetery may adopt and enforce rules and regulations in violation of Indiana Code Chapter 23-14-11, which prohibits the board of trustees, or other governing body or custodian, controlling any cemetery in the state from refusing to allow the setting up of markers for the graves of deceased soldiers in its grounds provided that such markers shall conform to the standard markers furnished by the United States government for marking the graves of deceased soldiers of the United States army.
Many of the calls we receive regarding cemetery care involve financial-related situations and we are more than happy to provide guidance for these types of questions. However, the Indiana Department of Natural Resources (DNR) has staff that specialize in cemeteries that may have more knowledge about the State’s requirements for the upkeep and maintenance of cemeteries. For these types of questions please visit their website or contact the Indiana Department of Natural Resources.
CERTIFICATION OF NAMES AND ADDRESSES TO THE COUNTY TREASURER
IC 6-1.1-22-14(a) requires the trustee to certify the name and address of each person who has money due the person from the township to the treasurer of the county in which the township is located on or before June 1 and December 1 of each year (or more frequently if the county legislative body adopts an ordinance requiring additional certifications).
This report should not be confused with the Report of Names, Addresses, Duties and Compensation of Public Employees (Annual Personnel Report - Form 100R) required by IC 5-11-13.
USE OF COMPENSATORY TIME OFF UNDER THE FAIR LABOR STANDARDS ACT
The Fair Labor Standards Act (FLSA) is a federal law that sets standards for minimum wage, overtime, and child labor. Pursuant to an agreement with employees or their representatives, state or local government agencies may arrange for their employees to earn comp time instead of cash payment for overtime hours.
As a condition for use of compensatory time off in lieu of overtime payment in cash, an agreement of understanding must be reached prior to performance of the work. Any comp time arrangement must be established pursuant to the applicable provisions of a collective bargaining agreement, memorandum of understanding, any other agreement between the public agency and representatives of overtime-protected employees, or an agreement or understanding arrived at between the employer and employee before the performance of the work. This agreement may be evidenced by a notice to the employee that compensatory time off will be given in lieu of overtime pay (for example, providing the employee a copy of the personnel regulations). The comp time must be provided at a rate of one-and one-half hours for each overtime hour worked. For example, for most state government employees, if they work 44 hours in a single workweek (4 hours of overtime), they would be entitled to 6 hours (1.5 times 4 hours) of compensatory time off. When used, the comp time is paid at the regular rate of pay.
Most state and local government employees may accrue up to 240 hours of comp time. Law enforcement, fire protection, and emergency response personnel, as well as employees engaged in seasonal activities (such as employees processing state tax returns) may accrue up to 480 hours of comp time. An employee must be permitted to use comp time on the date requested unless doing so would “unduly disrupt” the operations of the agency.
When employees reach these ceilings, any additional overtime that is worked must be paid. FLSA compensatory time off stays on the books until the employee uses the time or until it is paid out. Employees cannot "use or lose" compensatory time off.
For answers to other questions on the Fair Labor Standards Act or the Family and Medical Leave Act, contact your nearest U.S. Department of Labor, Wage and Hour office: Indianapolis: (317) 226-6801; South Bend: (574) 236-8331.
The State Board of Accounts hopes all public officials will avoid any situations whereby conflict of interest becomes a question. Due to their position of public trust, public servants should be extremely sensitive to any transactions that may cause concern of the taxpayers that either elected them or caused them to be appointed to or employed in a public office. ]
Please seek the written advice of your township attorney if you have any questions relating to IC 35-44.1-1-4. The Uniform Conflict of Interest Disclosure Statement can be found Gateway.
CONFLICT OF INTEREST STATEMENT REQUIREMENT WHEN TRUSTEE IS ALSO VENDOR TO RECIPIENT RECEIVING TOWNSHIP ASSISTANCE
Instances may arise in which a township trustee may be legally eligible under IC 12-20 to be the direct payee as a vendor of a township resident requesting township assistance through the trustee’s office. Our audit position is that a conflict of interest disclosure is to be filed when the trustee is the direct payee as a vendor of township assistance under IC 12-20. A township trustee that benefits from township assistance received by a township assistance applicant may be requested to repay the township the amount of the benefits received if there has not been proper disclosure of the conflict of interest. We also recommend maintaining a separate file with a copy of the conflict of interest disclosure and the supporting documentation for the township assistance payments.
Per IC 35-44.1-1-4(b) “A public servant who knowingly or intentionally: (1) has a pecuniary interest or (2) derives a profit from; a contract or purchase connected with an action by the governmental entity served by the public servant commits conflict of interest, a Level 6 felony.” A “pecuniary interest” means an interest in a contract or purchase if the contract or purchase will result or is intended to result in an ascertainable increase in the income or net worth of: the public servant; or dependent of the public servant who: is under the direct or indirect administrative control of the public servant; or receives a contract or purchase order that is reviewed, approved, or directly or indirectly administered by the public servant.
IC 35-44.1-1-4(c) “It is not and offense under this section if any of the following apply: ...(6) A public servant makes a disclosure that meets the requirements of subsection (d) or (e) and is: (A) not a member or on the staff of the governing body empowered to contract or purchase on behalf of the governmental entity, and functions and performs duties for the governmental entity unrelated to the contract or purchase; (B) appointed by an elected public servant; (C) employed by the governing body of a school corporation and the contract or purchase involves the employment of a dependent or the payment of fees to a dependent; (D) elected; or (E) a member of, or a person appointed by, the board of trustees of a state supported college or university.
The conflict of interest disclosure must: (1) be in writing; (2) describe the contract or purchase to be made by the governmental entity; (3) describe the pecuniary interest that the public servant has in the contract or purchase; (4) be affirmed under penalty of perjury; (5) be submitted to the governmental entity and be accepted by the governmental entity in a public meeting of the governmental entity before final action on the contract or purchase; (6) be filed within fifteen (15) days after final action on the contract or purchase with: (A) the state board of accounts; and (B) if the governmental entity other than the state or a state supported college or university, the clerk of the circuit court in the county where the governmental entity takes final action on the contract or purchase; and (7) contain, if the public servant is appointed, the written approval of the elected public servant (if any) or the board of trustees of a state supported college or university (if any) that appointed the public servant.
Persons required to file the Conflict of Interest Disclosure with the State Board of Accounts can use the form available at https://forms.in.gov/Download.aspx?id=8264. Once the form has been completed, scan it as a pdf and upload at https://gateway.ifionline.org/sboa_coi/.
Each township board shall adopt a contracting policy that includes, at a minimum, the requirements set forth in IC 36-1-21. The policy may include requirements that are more stringent or detailed. These policies should be retained locally. There is no requirement that a new policy be adopted annually.
When completing the Certified Report of Names, Addresses, Duties and Compensation of Public Employees (Form 100R), the trustee must indicate if a contracting policy has been implemented. If a policy has not been implemented, the Department of Local Government Finance may not approve the township's budget or any additional appropriations for the township. If the township board implements a contracting policy after the trustee has completed the Form 100R, the trustee should send an email to sboaannualreports@sboa.in.gov and ask for the report to be unlocked. After the report is unlocked, the trustee should go back into the report and indicate that a policy has been adopted. The trustee must submit the report again in order for this change to be effective.
IC 36-1-21-4 states: "(a) This chapter establishes minimum requirements regarding contracting with a unit. The legislative body of the unit shall adopt a policy that includes, at a minimum, the requirements set forth in this chapter. However, the policy may:
- include requirements that are more stringent or detailed than any provision in this chapter; and
- apply to individuals who are exempted or excluded from the application of this chapter.
The unit may prohibit or restrict an individual from entering into a contract with the unit that is not otherwise prohibited or restricted by this chapter.
(b) The annual report filed by a unit with the state board of accounts under IC 5-11-13-1 must include a statement by the executive of the unit stating whether the unit has implemented a policy under this chapter."
IC 36-1-21-7 states: "If the state board of accounts finds that a unit has not implemented a policy under this chapter, the state board of accounts shall forward the information to the department of local government finance."
IC 36-1-21-8 states: "If a unit has not implemented a policy under this chapter, the department of local government finance may not approve:
- the unit's budget; or
- any additional appropriations
for the unit; for the ensuing calendar year until the state board of accounts certifies to the department of local government finance that the unit has adopted a policy under this chapter."
BUILDING OR REMODELING AND FIRE EQUIPMENT FUND (CUMULATIVE FIRE)
IC 36-8-14 authorizes townships to provide a cumulative fire fund for the purchase, construction, renovation, or addition to buildings or purchase of land used by the fire department or the volunteer fire department serving the unit and for the purchase of firefighting equipment, for use of the fire department or the volunteer fire department serving the unit including making the required payments under a lease rental with option to purchase agreement made to acquire the equipment. The fund may also be used for the purchase, construction, renovation or addition to a building or the purchase of land or purchase of equipment for use of a provider of emergency medical services under IC 16-31-5 to the township establishing the fund.
IC 36-8-14 limits the tax levy to no more than three and thirty – three hundredths cents ($0.0333) on each one hundred dollars ($100) of assessed valuation in the taxing district. Any tax collected after establishing the tax levy shall be deposited in a special fund to be known as the "Building or remodeling and fire equipment fund." Expenditures may be made only after an appropriation has been made available.
Any questions regarding procedures to establish the fund should be directed to the Department of Local Government Finance, Indiana Government Center North, Room N-1058B, 100 N. Senate, Indianapolis, IN 46204.
REPORTING CYBERSECURITY INCIDENTS
House Enrolled Act 1169 (2021) added IC 4-13.1-2-9 as a new section to the Indiana Code which requires political subdivisions, as defined in IC 36-1-2-13, to report any cybersecurity incident using their best professional judgement to the Indiana Office of Technology (IOT) without unreasonable delay and not later than two business days after discovery of the cybersecurity incident. A cybersecurity incident may consist of one or more of the following categories of attack vectors: (1) Ransomware, (2) Business email compromise, (3) Vulnerability Exploitation, (4) Zero-day exploitation, (5) Distributed denial of service, (6) Web site defacement, (7) Other sophisticated attacks as defined by the chief of information officer and that are posted on the officer’s Internet web site. (IC 4-13.1-1-1.5)
Cybersecurity incidents can be reported on IOT’s web site at the following webpage. https://www.in.gov/cybersecurity/report-a-cyber-crime/
- D
Data Processing Services by a Bank
Disaster Relief Funds - Accounting and Budgeting
Disposition of Old Outstanding Checks
DATA PROCESSING SERVICES BY A BANK
The Indiana Attorney General, in Official Opinion No. 46 of 1966, included the following provisions and conclusions in response to an inquiry concerning a contract between a county hospital and the data processing center of a bank (other than its duly designated depository) for the preparation and use of the bank’s official checks for payroll purposes:
1. Contracts entered into must be in writing. Further, it becomes difficult to conceive how the State Board of Accounts could properly consider and approve accounting systems and procedures established by an oral contract.
2. Accounting forms and procedures established in contracts entered into between banks and local Officials must be approved by the State Board of Accounts by using the form approval process noted under section ‘F’ on this page.
3. Contracts of the nature pursuant to the Opinion need not be bid.
4. Officials and board members are required to be made parties to the contract.
5. The local officials and their sureties are liable for misfeasance by the bank or its employees in handling the accounts. The bank constitutes an agent for the official. The official cannot delegate responsibility when he delegates duties.
6. A bank or trust company is not required to be a depository selected under the Public Depository Act for the officers for whom it is acting.
7. In substance, the bank is acting as a local official in performing his duties. Its work belongs to the public. The checks issued by the bank, signed by it, and drawn on its funds belong to the public and the original must be turned over to the local official in his official capacity. (However, please see below.)
All canceled checks must be returned by the bank to the township. IC 5-15-6-3 states in part “. . . ‘original records’ includes the optical image of a check . . .” The State Board of Accounts is of the audit position both sides of a check are part of the original record. Therefore, both sides of an “optical imaged check” should be available for public inspection and audit. Encoding, printing or bank certification should exist to ascertain that the back side of a check is part of a particular check, ie, endorsements belong to the front side of a check presented.
The contract may provide that the township shall draw a check or checks to the contracting bank and the bank in turn will write checks on its own funds for and on behalf of the township. The funds to pay any checks outstanding and not cashed for a period of time may remain with the funds of the bank until such time as they are to be returned to the township.
On a few occasions we have found that a township has entered into an agreement with data processing centers other than the data processing center of a bank. If such an agreement is for writing checks, such checks must be on township forms, for the signature of the township and drawn on the bank account of the township.
We have received inquiries concerning designating an acting Trustee under certain circumstances.
The State Board of Accounts is of the audit position that IC 36-6-4-18 provides "(a) Within thirty (30) days after taking office, the executive shall designate a person who shall perform the executive's duties whenever the executive is incapable of performing the executive's functions because the executive: (1) is absent from the township; or (2) becomes incapacitated. The executive shall give notice of the designation to the chairman of the township legislative body, the county sheriff, and any other persons that the executive chooses. The designee shall have all the powers of the executive. The executive is responsible for all acts of the designee. The executive may change the designee under this section at any time."
"(b) The designee shall perform the executive's duties until: (1) the executive is no longer absent from the township; or (2) an acting executive is appointed by the county executive under section 16 of this chapter."
We have not received any Official Opinions of the Attorney General of the State of Indiana which would indicate that a trustee could appoint a current township board member to serve as acting trustee in a township. Potential constitutional conflicts could exist concerning the holding of two (2) lucrative offices. However, Official Opinion Number 87-22 issued November 18, 1987 of the Attorney General of the State of Indiana discussed the possibility of designating another trustee and provides: "It is, therefore, my Official Opinion that a township trustee may appoint or designate pursuant to Public Law 105-1986 (HEA 1374), a township trustee of another township to act for him while he is absent from the township or while he is incapacitated. However, if any compensation is paid to the designee for the performance of the duties of the appointing township trustee, there may be a violation of Article 2, § 9 of the Constitution of Indiana." Therefore, we are of the audit position townships should consider appointing someone who is a resident of the township not currently holding another lucrative office. Examples might be the previous township trustee, previous board members, or a current clerk in the office. Finally, we are of the audit position that we are not aware of any provision for payment of compensation to an individual designated in accordance with IC 36-6-4-18.
DISASTER RELIEF FUNDS – ACCOUNTING AND BUDGETING
Based upon language contained in IC 10-14-3-17(j)(5) which states that a political subdivision may waive procedures and formalities otherwise required by law pertaining to the appropriation and expenditure of public funds where a national disaster or security emergency has been declared, the following procedures should be followed when disaster relief funds are received.
Money received or expected to be received form the Federal Emergency Management Agency (FEMA), the State Emergency Management Agency, or the State Lottery Commission for tornado, flood, ice storm, or other types of declared disasters should be accounted for in the following manner:
- If the money is to be used to reimburse funds for expenditures already incurred and paid and the conditions of IC 10-14-3-12 have been met, the amount received may be added back to the appropriation balances from which the expenditures have been previously made.
- If the money is to be used for future expenditures, a separate fund should be set up entitled “Disaster Relief Fund.” Such fund would not require appropriation or additional appropriation prior to spending the money in the fund.
It is recommended that all related expenditures records (claims, minutes, correspondence, contracts, damage survey report, etc.) be maintained in a separate file for future audits required by State and Federal agencies.
DISPOSITION OF OLD OUTSTANDING CHECKS
Pursuant to IC 5-11-10.5, all checks outstanding and unpaid for a period of two years as of December 31 of each are void.
Not later than March 1 of each year, the trustee shall prepare or cause to be prepared a list in duplicate of all checks outstanding for two or more years as of December 31 last preceding year. The original copy shall be filed with the board of finance of the township and the duplicate copy maintained by the trustee.
The trustee shall enter the amounts so listed as a receipt to the fund or funds upon which they were originally drawn and remove the checks from the list of outstanding checks. If the fund on which the checks were originally drawn is not in existence, or cannot be ascertained, the amount of such checks shall be receipted to the township fund.
Each list prepared must show:
- the date of issue of each check;
- the fund upon which the check was originally drawn;
- the name of the payee;
- the amount of each check issued; and
- the total amount represented by the checks listed for each fund.
IC 5-11-10.5-6 formerly provided for the issuance of another check to replace a canceled check, if a claim was properly filed by the vendor or the person to whom the check was issued within seven years after the date of issuance of the original check. The check would have been drawn upon the fund to which the canceled check was receipted and any check outstanding for more than seven years was to be considered void, and no recovery could be made. However, IC 5-11-10.5-6 was repealed in 1999. Therefore, we suggest the township attorney provide written guidance concerning claims that might be presented.
Following is the audit position of the State Board of Accounts concerning townships receiving donations.
- Restricted donations are defined as those to which the donor has attached terms, conditions, and/or purposes.
- Unrestricted donations are defined as those to which the donor has not attached terms, conditions, or purposes.
- The township has the option to accept or reject both restricted and/or unrestricted donations. Approval shall be obtained prior to accepting a donation.
- The Attorney General held in Official Opinion 68 of 1961 that no appropriation is necessary to expend monies donated for a specific purpose by a donor.
- Restricted donations should be receipted into a separate fund and properly titled. Such fund should not be commingled with other funds within the accounting system. An exception would be concerning statutory requirements; i.e., expenditures related to fire protection are required to be from the Firefighting Fund, etc.
- Expenditures may be made for the purpose(s) restricted without appropriation.
- Unrestricted donations should be receipted into the township fund and must be appropriated prior to subsequent expenditure.
TOWNSHIP ASSISTANCE - DONATIONS
It has been our position to not take audit exception to minimal donations received by the Township, for Township Assistance purposes, being receipted into the Township Assistance fund. If donations are not accounted for in a separate fund, then the funds received would assume the characteristics of the Township Assistance fund and shall be used for Township Assistance as provided by IC 12-20 after the funds have been properly appropriated. A township receiving substantial donations would require township officials to consider the impact that their accounting procedures would have on the tax levy of the fund. Any substantial donations are to be accounted for in a separate fund to ensure property tax levies are appropriate and in compliance with any donor restrictions.
- E
Elected Officials - Leave Policy
Electronic Payment of Vendor Claims
Examination of Records and Statement of Engagement Cost
Jury duty is considered to be a civic responsibility which should not be evaded by public employees.
IC 33-37-10-1 states in part "(a) A juror of a circuit, superior, county, or probate court or a member of a grand jury is entitled to the sum of the following: (1) Except as provided in subsection (f), an amount for mileage at the mileage rate paid to state officers and employees for each mile necessarily traveled to and from the court. (2) Payment at the rate of: (A) fifteen dollars ($15) for each day the juror is in actual attendance in court until the jury is impaneled; and (B) forty dollars ($40) for each day the juror is in actual attendance after impaneling and until the jury is discharged. (b) A county fiscal body may adopt an ordinance to pay from county funds a supplemental fee in addition to the fees prescribed by subsection (a)(2). (c) A juror of a city or town court is entitled to the sum of the following: (1) Except as provided in subsection (f), an amount for mileage at the mileage rate paid to state officers and employees for each mile necessarily traveled to and from the court. (2) Fifteen dollars ($15) per day while the juror is in actual attendance. (d) A city or town fiscal body may adopt an ordinance to pay from city or town funds a supplemental fee in addition to the fee prescribed by subsection (c)(2)."
We are of the audit position that a township may pay an employee the difference between the amount of jury duty pay per day to that employee and the amount of a regular day’s pay for that employee as if the employee had worked a regular day (no overtime). The following audit position applies to all employees for which the daily rate is greater than the daily amount paid for jury duty.
- A township employee could receive the full amount of regular salary and not claim compensation for jury duty.
- A township employee could receive the compensation for jury duty and said amount could be deducted from the regular salary.
- A township employee could receive the full amount of regular salary (no overtime) and turn over the warrant for serving on the jury to your office to be receipted into the fund from which the regular salary is paid.
Travel reimbursement belongs to the employee without being considered compensation for purposes of our audit position. We suggest that the trustee and the township board adopt a policy establishing rules and regulations for jury duty by township employees.
ELECTED OFFICIALS – LEAVE POLICY
We have received questions concerning the authority (or need) for elected officials to be included in the township's vacation leave, sick leave, death leave, or other such leave policy.
Our audit position is that an elected official's compensation goes with the office. This means that the elected official receives his (or her) salary as long as the office to which the official was elected performs the duties and responsibilities of this office. Whether the elected official personally does the work, whether the elected official personally maintains office hours, or whether the elected official shows up at the office has no bearing on the official's right to be compensated. Keep in mind this relates only to elected officials. The ghost employee statute, IC 35-44.1-1-3, prohibits payment to other township employees if they did not properly perform township duties assigned and maintain hours as directed by the township board.
In those few instances where elected officials choose to be included in such employee benefit policy (and were included in the authorizing resolution), the officials must maintain proper attendance records (the same as all other township employees) which shall clearly disclose days worked, days missed, type of leave taken, etc. This decision certainly cannot be made just prior to the close of the official's term. A township board is authorized to grant "a vacation with pay, sick leave, paid holidays, and other similar benefits by ordinance" to "employees of the political subdivision" pursuant to IC 5-10-6-1. The term "employees" is not defined.
ELECTRONIC PAYMENT OF VENDOR CLAIMS
Indiana Code 36-1-8-11.5 allows for the governing body of a political subdivision to pass a resolution that allows the fiscal officer to pay claims by electronic funds transfer. The statue also requires compliance with all other requirements of claims payment. Indiana Code 5-11-10-1.6 provides the requirements and procedures to be completed prior to issuing a check. Most of those requirements involve prior approval of a claim and ensuring that bills/invoices have been reviewed. Therefore, we recommend that if a Township is going to make payments electronically, that they complete the claims approval requirements, and then work with their depository for a payment authorization process. Except for INPRS remittances as detailed in IC 5- 10.2-2-12.5, we would suggest not setting up automatic monthly payments or other instances where vendors are giving access to pull money from the Township’s bank account.
With the opening of a new budget year and a new set of ledgers, it is to the advantage of a township to review the unpaid purchase orders and contracts which remain on the ledgers as “encumbered.”
Those items under purchase order or contract are to be added for each appropriation account and the total carried to the new yearly corresponding account. The actual unpaid amount of the purchase orders or contracts should be totaled and shown as a separate amount on the appropriation ledger sheet for the new year, with proper explanation, and added to the new year’s appropriation for the same purpose. By properly carrying out this procedure, the new year’s budget will not be expected to stand any expense not anticipated in making the budget. We suggest the trustee make a listing of these encumbered items and make it part of the township board minutes.
E-1 ENTITY ANNUAL REPORT
Entities are defined as providers of goods, services, or other benefits that are maintained in whole or in part at public expense or supported in whole or in part by appropriations, public funds, or taxation. The definition does not include the state or municipalities but does include for-profit and not-for profit corporations, unincorporated associations and organizations and individuals.
Financial assistance is defined as payments received in the form of grants, subsidies, contributions, aid etc.
Entities are primarily nongovernmental organizations, many of which conduct their business as a not-for-profit corporation. By contract or other form of agreement, these entities provide a service or benefit to the public on behalf of and paid for by government.
IC 5-11-1-9 delegates the “oversight” responsibility of these entities to the State Board of Accounts. Specifically, the State Board of Accounts is to ensure that audits, in accordance with agency guidelines, are performed for all entities receiving financial assistance from state or local government sources. The State Board of Accounts is also required to establish a system of review, follow-up, and resolution of any findings of noncompliance identified during the audit process.
All entities receiving assistance from state and local government, involving federal or non-federal dollars are subject to audit by state law.
IC 5-11-1-9 requires and organization-wide audit of an entity when the public funds disbursed by that organization are equal to or greater than 50% of its total disbursements. The State Examiner may waive the audit requirement if the public funds disbursed are less the 50% of its disbursements or if public funds disbursed are at least 50% of total expenditures but public funds expended are less than $750,000.
Additionally, fee-for-service arrangements with governmental entities are required to be reported on the E-1 report per the Uniform Compliance Guidelines. It will be the determination of the State Board of Accounts and not the entity, as to whether the funding arrangement meets the definition of fee-for-service. Copies of the contracts and other information may be required to be submitted and will be reviewed to determine the proper categorization of funding.
Entities subject to the requirements of IC 5-11-1-9 are required to file an Entity Annual Report (E-1) with the State Board of Accounts annually. The submission is due within sixty days of the entity’s fiscal yearend.
When a township provides financial assistance to non-governmental entities, the township shall communicate the requirement for the entity to file an E-1 through Gateway within sixty days of the entity’s fiscal year-end. The entity may obtain additional information from the State Board of Accounts at notforprofit@sboa.in.gov .
EMERGENCY APPROPRIATIONS PROCEDURE
If the proper officers of any township determine the need for expenditure of more money in the current year than was provided for in the approved annual budget, the following is required:
(1) In all cases of additional appropriations the governing body must meet and determine that they desire to appropriate for the expenditure of more money than was appropriated in the annual budget. When this condition has been determined, notice must be given to taxpayers by publication and posting as required by IC 5-3-1-2(b). Said notice to taxpayers should be made as required by the Department of Local Government Finance.
(2) The governing body determines whether to proceed with the proposal. An approval may not be in excess of the amount advertised, but can be less than requested. The governing body must adopt a resolution of additional appropriations.
(3) If a township proposes an additional appropriation from a fund that receives property tax levied under IC 6-1.1, the additional appropriation must be reported to and approved by the Department of Local Government Finance. A township may make an additional appropriation without the approval of the Department of Local Government Finance if it is from a fund that does not receive property tax, however, those appropriations shall be reported to the Department of Local Government Finance.
After the public hearing, the proper officers of a township shall file a certified copy of the final proposal and any other relevant information to the Department of Local Government Finance.
(4) Upon receipt of the certified copy of a proposal for additional appropriations, the Department of Local Government Finance will, in not less than fifteen (15) days after it receives the certificate, determine (in writing) if sufficient funds are available or will be available. The Department of Local Government Finance shall limit the additional appropriation to revenues available or to be made available, which have not been previously appropriated.
(5) If the Department of Local Government Finance disapproves an additional appropriation under IC 6-1.1-18-5, the Department of Local Government Finance shall specify the reason for its disapproval on the determination sent to the township.
A township may request a reconsideration of a determination of the Department of Local Government Finance under this section by filing a written request for reconsideration. A request for reconsideration must: (1) be filed with the Department of Local Government Finance within fifteen (15) days of the receipt of the determination by the political subdivision; and (2) state with reasonable specificity the reason for the request. The Department of Local Government Finance must act on a request for reconsideration within fifteen (15) days of receiving the request.
EXAMNINATION OF RECORDS AND STATEMENT OF ENGAGEMENT COST
At the end of an audit engagement the State Board of Accounts sends a notice of Statement of Engagement Cost to each political subdivision, including the County. This statement details a summary of the engagement including the number of days spent on the audit, the daily/hourly rate, and any report processing fees. We would like to point out that this statement is not an invoice that is to be paid by the entities.
A separate invoice for payment of these audit costs will be sent to the County for payment in accordance with IC 5-11-4. Immediately upon receipt of the certified statement, the county auditor shall issue a warrant on the county treasurer payable to the treasurer of state out of the general fund of the county for the amount stated in the certificate. The county auditor shall reimburse the county general fund, except for the expense of examination and investigation of county offices, out of the money due the taxing units at the next semiannual settlement of the collection of taxes.
If the county reasonably believes or knows that it does not have on hand or will not have collected enough taxes by the next distribution date for a taxing unit included on the examination of records billing, then the county auditor will send the certified statement to the taxing unit. The taxing unit should then contact the State Board of Accounts for directions on paying for the cost of the examination directly to the State Board of Accounts, instead of using settlement. It is important that the cost be paid off prior to the next audit. If the audit costs, due the State Board of Accounts, are not paid prior to the subsequent audit, it impairs the independence of the State Board of Accounts. This will delay future audits.
As the amount of federal funding to local governments has increased so has the need for single audits and more frequent audits which has helped drive up audit costs. We are now beginning to see this result in semiannual tax distributions that are not sufficient to pay the audit costs. It is important to plan and budget accordingly for these costs. It might be beneficial once an examination of records has been completed for the taxing unit to go directly to the county auditor if sufficient taxes will not be collected to pay the estimated costs of the examination of records. Having this conversation before receiving the certified statement from the county auditor can prepare the taxing unit for the payment of these costs. You can discuss with your field examiner during the exit, how you may best meet the costs. This may involve the use of other funds such as Rainy Day or if there are ARPA funds remaining under the revenue loss category, those can also be used to pay audit costs. If you have questions after the exit, please feel free to reach out to your State Board of Accounts Director for further assistance in looking for funds that can pay the audit costs.
When determining how these costs will be paid, it is also important to plan for the next year. During this determination, take into consideration the amount of federal assistance that you have disbursed during the year. If you have expended $750,000 or more of federal awards (whether the award is direct or passed-through another entity) in a year the taxing unit is required to have a single audit conducted in accordance with the Federal Office of Management and Budget’s Uniform Guidance. Single audits require an annual audit. If your unit does not need a Single Audit, there may be a longer time between your examinations. Since these costs could become an annual expense for the taxing unit, future budgets would need to be adjusted for those costs.
- F
Filing of Annual Report and Vouchers in County Auditor’s Office
Firefighting Fund - Fees and Services Charges
Fire Protection Contracts with Volunteer Fire Departments
Fire Protection Territories (FPT)
FILING OF ANNUAL REPORT AND VOUCHERS IN THE COUNTY AUDITOR'S OFFICE
IC 36-6-6-9(a) requires the township board to meet on or before the third Tuesday after the first Monday in February of each year. At this meeting it shall consider and approve, in whole or in part, the annual report of the executive presented under IC 36-6-4-12.
IC 36-6-4-12(a) requires at the annual meeting of the township board under IC 36-6-6-9 the trustee shall present a complete report of all receipts and expenditures of the preceding calendar year, including the balance to the credit of each fund controlled by the trustee. Most trustees use the State Board of Account's Annual Financial Report required by IC 5-11-1-4 as the report required by IC 36-6-4-12(a) but it is not required.
IC 36-6-4-12(d) requires the trustee to file a copy of the report required by IC 36-6-4-12(a) and its accompanying vouchers, in the county auditor's office within ten (10) days after the township board's action under IC 36-6-6-9.
The township board may, for the benefit of the township, bring a civil action against the trustee if the trustee fails to file the report within ten (10) days after the township board's action. The township board may recover five dollars ($5) for each day beyond the time limit for filing the report, until the report is filed.
IC 36-6-4-13(a) requires that when the trustee prepares the annual report required by IC 36-6-4-12, the trustee shall also prepare, on forms prescribed by the state board of accounts, an abstract of receipts and expenditures. This prescribed abstract of receipts and expenditures is contained in the State Board of Account's Annual Financial Report required by IC 5-11-1-4.
IC 36-6-4-13(b) requires that within four (4) weeks after the third Tuesday following the first Monday in January, the trustee shall publish the abstract prescribed by IC 36-6-4-13(a) in accordance with IC 5-3-1. The abstract must state that a complete and detailed annual report and the accompanying vouchers showing the names of persons paid money by the township have been filed with the county auditor, and that the chairman of the township board has a copy of the report that is available for inspection by any taxpayer of the township.
IC 36-6-4-13(c) states that a trustee who fails to comply with IC 36-6-4-13 commits a Class C infraction.
IC 36-6-4-12(d) requires the filing of the report required by IC 36-6-4-12(a) and the vouchers in the county auditor's office within ten days of the meeting required by IC 36-6-6-9. For 2014, the last day for the meeting required by IC 36-6-6-9 shall be held by February 18, 2014 (on or before the third Tuesday after the first Monday in February) which would require the report and vouchers to be required with the county auditor's office by February 28, 2014. However, IC 36-6-4-13(b) requires the trustee to publish the abstract prescribed by IC 36-6-4-13(a) by February 18, 2014 (within four (4) weeks after the third Tuesday following the first Monday in January). The abstract must state that a complete and detailed annual report and the accompanying vouchers showing the names of persons paid money by the township have been filed with the county auditor.
TOWNSHIP FIREFIGHTING FUND - FEES AND SERVICE CHARGES
IC 36-8-13-4(e) requires all money received for a fee or service charge imposed by the township legislative body to be deposited in the township’s firefighting fund. IC 36-8-13-4.5(d) allows the township trustee to accept donations for the purpose of firefighting and emergency services and requires these donations to be receipted into the township firefighting fund.
It is our audit position that all payments received on behalf of other governmental units for which the township provides fire protection services would be considered a fee-for-service arrangement and is required to be receipted into the township firefighting fund.
FIRE PROTECTION CONTRACTS WITH VOLUNTEER FIRE DEPARTMENTS
IC 36-8-12-3 authorizes townships to enter into agreements with one or more volunteer fire departments that maintain adequate firefighting service for the use and operation of firefighting apparatus and equipment owned by the volunteer fire department, including the service of the operators of the apparatus and equipment.
IC 36-8-12-4 states the contract must provide an amount determined by negotiation between the township and volunteer fire department. The consideration must include the amounts the township is required to pay under IC 36-8-12 for insurance premiums and clothing, automobile, and other allowances. If the contractual agreement is properly drawn, an added benefit gained is the elimination of the problem of the township reporting clothing and auto allowances to the Internal Revenue Service and the Indiana Department of Revenue. Since the contractual payments are lump sum to the volunteer fire department, the volunteer fire department assumes the responsibility for making the payments of allowances to the volunteer firefighters and for reporting of such payments.
Year end is a good time to review existing contracts for fire protection. If renewals or changes in contracts are necessary, such renewals or changes should be made under the guidance of the township attorney. All agreements for fire protection should be in writing and the agreements must be preserved as any other public documents. There is no statutory authority to make contractual payments to volunteer fire departments unless an agreement has been entered into.
FIRE PROTECTION TERRITORIES (FPT)
The Attorney General of the State of Indiana Issued Advisory Letter 04-03 on February 2, 2007, and which stated in part "A township may participate in an FPT by passing a resolution in the manner and with the same statutory formality as required for ordinances under section 36-8-19-6.
The FPT is not a governmental entity or governmental body to which a city, town or township may transfer property to or exchange property with under Indiana Code sections 36-1-11-8 or 5-22-22-10.”
Indiana Code section 36-8-19-8.6 allows a participating unit to adopt an ordinance or resolution to transfer any money belonging to the participating unit for fire protection purposes as long as the ordinance or resolution states the amount of money transferred and the source of the money.
Cities, towns and townships may establish various fire protection related funds in accordance with Indiana Code chapters 36-8-13 (township fire protection and emergency services) and 36-8-14 (cumulative firefighting building and equipment fund).
A municipality or Township is not required to disband its fire department when it participates in an FPT. Ind. Code 36-8-19-10. While section 36-1-8-5 controls the disposition of unused balances of general or special tax levies, a local governmental entity is not precluded from entering into an interlocal agreement with other participating entities or the provider unit of the FPT under IC 36-1-7 in order to facilitate cooperation and use existing equipment and other resources.
APPROVAL OF ACCOUNTING FORMS AND SYSTEMS
The State Board of Accounts is charged by law with the responsibility of prescribing and installing a system of accounting and reporting which shall be uniform for every public office and every public account of the same class and contain written standards that an entity that is subject to audit must observe. The system must exhibit true accounts and detailed statements of funds collected, received, obligated and expended for or on account of the public for any and every purpose. It must show the receipt, use and disposition of all public property and the income, if any, derived from the property. It must show all sources of public income and the amounts due and received form each source. Finally it must show all receipts, vouchers, contracts, obligations, and other documents kept, or that may be required to be kept, to prove the validity of every transaction. [IC 5-11-1-2]
The system of accounting prescribed is made up of the uniform compliance guidelines and the prescribed forms. A prescribed form is one which is put into general use for all offices of the same class.
Computer hardware, software and application systems can now produce exact replicas of the forms prescribed by the State Board of Accounts. An exact replica of a prescribed form is a computerized form that incorporates all of the same information as the manual prescribed form. Prescribed form replication is the preferred approach from the State Board of Accounts’ position. These exact replicas are the equivalent of the prescribed form and require no further action for the Township to install the form within their accounting system.
Governments are required by law to use the forms prescribed by this department. However, if it is desirable to use a form other than the prescribed manual form, that is not an exact replica; the new form must be approved by State Board of Accounts.
All forms previously approved by sending copies to State Board of Accounts and receiving a form approval letter are approved with the conditions contained with the letter.
After April 1, 2014, if a government implements, consistent with the provisions of Indiana Code and Uniform Compliance Guidelines, an automated accounting system that is to be considered for approval, the responsible official is not required to maintain the prescribed forms replaced by the automated system while awaiting the approval. New forms must be in place during at least one (1) State Board of Accounts audit and must not be an element of an audit finding or audit result and comment that is responsible or partially responsible for an exception found during an audit to be considered approved. The government is responsible for placing on new forms the year of installation in the upper right corner. This reference should be similar to “Installed in ______________ Township, (Year).” The Township must maintain and present for audit a log of forms installed after April 1, 2014 with the year installed for all forms that replace forms prescribed by State Board of Accounts.
The government agrees to comply with the following conditions, if applicable, for any new forms installed.
The forms and system installed are subject to review and/or recommendations during audits of the government to ensure compliance with current statutes and uniform compliance guidelines.
The government shall continue to maintain all prescribed forms not otherwise covered by an approval.
All transactions that occur in the accounting system must be recorded and accessible upon proper request. Transactions can be maintained electronically, with proper backups, microfilmed, or printed on hardcopy. These transactions include, but are not limited to, all input transactions, transactions that generate receipts, transactions that generate checks, master file updates, and all transactions that affect the ledgers in any way. The system must be designed so that changes to a transaction file cannot occur without being processed through an application.
The ability must not exist to change data after it is posted. If an error is discovered after the entry has been posted, then a separate correcting entry must be made. Both the correcting entry and the original entry must be maintained.
If the government owns the source code, sufficient controls must exist to prevent unauthorized modification. If the government does not own the source code, the vendor shall provide representatives of the State Board of Accounts with access to all computer source codes for the system upon request for audit purposes. In addition, the vendor shall provide representatives of the State Board of Accounts with a document describing the operating system used, the language that the source code is written in, the name of the compiler used, and the structure of the data files including data file names, data file descriptions, field names, and field descriptions for the system.
Any receipts, checks, purchase orders, or other forms that require numbering shall be either prenumbered by an outside printing supplier or numbered by the government's computer system with sufficient controls installed in the system to prevent unauthorized generation of the form or duplication of numbers.
All receipts must be either in duplicate or recorded in a prescribed or approved register of receipts.
All checks must be either in duplicate or recorded in a register of checks generated by the computer.
Recap sheets for each deposit for deposit advices, if applicable, will be maintained indicating direct deposits. Individual wage assignment agreements will be kept on file to support direct deposit.
"Installed by __________ Township (Year)" shall be printed, in the upper right corner, on each approved form furnished by a printing supplier and, when practical, on those printed from accounting systems at the unit. Upon the installation of a new form the form will be entered on a log for this purpose with the date of installation; and the name and number of the prescribed form replaced. The log must be available for audit.
The government officials are responsible to ensure that forms and accounting systems installed comply with the uniform compliance guidelines for information technology services published in the Township manual. This includes ensuring that customization of the system done by the vendor for implementation at the government is done in such a manner that the system remains compliant.
In the event a change is required due to the passage of a State or Federal law, the government agrees to implement the change in a timely manner.
- G
Garnishment of Salaries and Wages
Guaranteed Energy Savings Contracts
The auditor independence provisions of the U. S. Government Accountability Office (GAO) are contained in its generally accepted government auditing standards (GAGAS).
The GAO issued such standards to better serve the public interest by maintaining a high degree of integrity, objectivity and independence for CPA’s, and other practitioners who audit government entities and organizations receiving government funds.
Compliance with the standard hinges on the auditor’s observance of two overarching principles and seven safeguards. The two overarching principles are critical to understanding the nonaudit service rules:
- Audit organizations should not provide nonaudit services that involve performing management functions or making management decisions.
- Firms should neither audit their own work nor provide nonaudit services in situations where the nonaudit services are significant or material to the subject matter of audits.
If the nonaudit service would violate either of the two overarching principles, then the firm would be required to make a choice between providing the service or performing the audit.
Personal, external, and organizational factors can impair auditor independence, as well as personal impairments relating to nonaudit service.
Therefore, if we arrive on the audit where records, documents, reconciliations, etc., are incomplete, or have not been completed at all, we will not be able to complete the records for you. We will however be able to consult and advise on the completion of the records.
GARNISHMENT OF SALARIES AND WAGES
IC 24-4.5-5-105 limits the maximum amount which may be subjected to garnishment and states in part:
“(5) An employer who is required to make deductions from an individual’s disposable earnings pursuant to a garnishment order or series of orders arising out of the same judgment debt (excluding a judgment for payment of child support) may collect, as a fee to compensate the employer for making these deductions, an amount equal to the greater of twelve dollars ($12) or three percent (3%) of the total amount required to be deducted by the garnishment order or series of orders arising out of the same judgment debt. If the employer chooses to impose a fee, the fee shall be allocated as follows: (a) One-half (1/2) of the fee shall be borne by the debtor, and that amount may be deducted by the employer directly from the employee’s disposable earnings. (b) One-half (1/2) of the fee shall be borne by the creditor, and that amount may be retained by the employer from the amount otherwise due the creditor. The deductions made under this subsection for a collection fee do not increase the amount of the judgment debt for which the fee is collected for the purpose of calculating or collecting judgment interest. This fee may be collected by an employer only once for each garnishment order or series of orders arising out of the same judgment debt. The employer may collect the entire fee from one (1) or more of the initial deductions from the employee’s disposable earnings. Alternatively, the employer may collect the fee ratably over the number of pay periods during which deductions from the employee’s disposable earnings are required.
(6) The deduction of the garnishment collection fee under subsections (5)(a) or subsection
(7) is not an assignment of wages under IC 22-2-6. (7) An employer who is required to make a deduction from an individual’s disposable earnings in accordance with a judgment for payment of child support may collect a fee of two dollars ($2) each time the employer is required to make the deduction. The fee may be deducted by the employer from the individual’s disposable earnings each time the employer makes the deduction for support. If the employer elects to deduct such a fee, the amount to be deducted for the payment of support must be reduced accordingly if necessary to avoid exceeding the maxi- mum amount permitted to be deducted under subsection (3).
(8) A support withholding order takes priority over a garnishment order irrespective of their dates of entry or activation. If a person is subject to a support withholding order and a garnishment order, the garnishment order shall be honored only to the extent that disposable earnings withheld under the support withholding order do not exceed the maximum amount subject to garnishment as computed under subsection (2).”
GUARANTEED ENERGY SAVINGS CONTRACTS
Undocumented Claims
We are still being advised of situations where a Township may not have provided information which would indicate that a contract complies with the Indiana Code provisions referenced below. Examples would include "stipulated savings" that are not documented by "industry engineering standards", items which were "causally connected work" but not documented by "industry engineering standards" in accordance with
IC 36-1-12.5-11, or improvements that are not "causally connected" to an energy conservation measure but are greater than fifteen percent (15%) of the total value of the guaranteed energy savings contract or lack of in compliance with IC 36-1-12.5-10. IC 36-1-12-1(e) of the Public Works Law states in part "As an alternative to this chapter, the governing body . . . may . . . enter into a guaranteed savings contract as permitted under IC 36-1-12.5."
IC 36-1-12.5-1 (a) states in part "As used in this chapter, "conservation measure": (1) means: (A) a facility alteration; (B) an alteration of a structure (as defined in IC 36-1-10-2); (C) a technology upgrade; or (D) with respect to an installation described in subdivision (2)(G) or (2)(H), an alteration of a structure or system; designed to . . . reduce energy . . . or other operating costs. . ."
IC 36-1-12.5-5 states in part "(a) The governing body may enter into . . . a guaranteed savings contract with a qualified provider to . . . reduce the Township's . . . energy . . . or operating costs if, after review of the report described in section 6 of this chapter, the governing body finds: (1) in the case of conservation measures . . . that the amount the governing body would spend on the conservation measures under the contract and that are recommended in the report is not likely to exceed the amount to be saved in energy consumption costs and other operating costs over twenty (20) years from the date of installation if the recommendations in the report were followed; . . . (3) in the case of a guaranteed savings contract, the qualified provider provides a written guarantee as described in subsection (d)(3)."
Repayment of Costs in Excess of Savings
Please note IC 36-1-12.5-5 states in part "(d) An agreement to participate in a . . . guaranteed savings contract under this section must provide that: . . . (3) in the case of the guaranteed savings contract: (A) the: (i) savings in energy and . . . and other operating costs; . . . due to the conservation measures are guaranteed to cover the costs of the payments for the measures; and (B) the qualified provider will reimburse the School Corporation . . . for the difference between the guaranteed savings and the actual savings . . ."
Stipulated Savings and Industry Engineering Standards
IC 36-1-12.5-0.5 states "As used in this chapter, 'actual savings' includes stipulated savings."
IC 36-1-12.5-3.7 states in part "As used in this chapter, 'stipulated savings' are assumed savings that are documented by industry engineering standards."
IC 36-1-12.5-11 states in part "(a) A guaranteed savings contract that includes stipulated savings must specify the methodology used to calculate the savings using industry engineering standards. (b) Stipulated savings may be used for conservation measures including . . . (11) Any work that is causally connected to the energy conservation measures listed in subdivisions (1) through (10). (c) The guaranteed savings contract shall: describe stipulated savings for: (A) conservation measures; and (B) work causally connected to the energy conservation measures; and (2) document assumptions by industry engineering standards."
Non "Causally connected work"
IC 36-1-12.5-0.7 states "As used in this chapter, 'causally connected work' means work that is required to properly implement an energy conservation measure."
IC 36-1-12.5-12 states in part "(a) An improvement that is not causally connected to a conservation measure may be included in a guaranteed energy savings contract if: the total value of the improvement does not exceed fifteen percent (15%) of the total value of the guaranteed savings contract . . ."
Reports
IC 36-1-12.5-10 states in part "The governing body shall: (1) provide to the lieutenant governor not more than sixty (60) days after the date of execution of the guaranteed savings contract: (A) a copy of the executed guaranteed savings contract; (B) the: (i) energy . . . costs; . . . before the date of execution of the guaranteed savings contract; and (C) the documentation using industry engineering standards for: (i) stipulated savings; and (ii) related capital expenditures; and (2) annually report to the lieutenant governor, in accordance with procedures established by the lieutenant governor, the savings resulting in the previous year from the guaranteed savings . . ."
Audit Exceptions
The State Board of Accounts will take audit exception to payments not in accordance with by IC 36-1-12.5-1 et seq. The Township should request repayment for payments not authorized by IC 36-1- 12.5-1 et seq. in accordance with IC 36-1-12.5-5. The State Board of Accounts will request repayment of unauthorized payments which have not been reimbursed to the Township by the end of the contract period.
Additionally, the State Board of Accounts will take audit exception if the Township has not properly filed reports as required by IC 36-1-12.5-10.
The State Board of Accounts is also of the audit position that political subdivisions are required to comply with all grant agreements, rules, regulations, bulletins, directives, letters, letter rulings and filing requirements concerning reports and other procedural matters of federal and state agencies, including opinions of the Attorney General of the State of Indiana, and court decisions. Governmental units should file accurate reports required by federal and state agencies. Noncompliance may require corrective action.
- H
Health Insurance Premiums - Payment by Public Employers of Group Health Insurance
Health Savings Account Payments
Heavy Equipment Rental Excise Tax
PAYMENT BY PUBLIC EMPLOYERS OF GROUP HEALTH INSURANCE PREMIUMS
Official Opinion 2002-5 issued October 11, 2002 by the Attorney General of the State of Indiana states in the Conclusion: "The language of IND. CODE § 5-10-8-2.6 unambiguously states that public employers may pay a part of the cost of group health insurance premiums for their employees. Rules of statutory construction hold that an unambiguous statute must be held to mean what it plainly expresses. N. Miami Educ. Ass'n, 746 N.E.2d at 382. Therefore, because the statute provides that employers may only pay a part of the cost, this language cannot be expanded or construed to allow employers to pay the full amount. The existence of a collective bargaining agreement allowing employers to pay the full amount would not alter this conclusion, as courts will not enforce contract terms that run contrary to statute or public policy. Ahuja, 675 N.E. 2d at 707."
HEALTH SAVINGS ACCOUNTS PAYMENTS
It has come to our attention that some units are not using payroll withholding funds to account for the employee directed Health Savings Account payments. Instead, the units make direct deposits to the Health Savings Accounts in a similar manner to the process of making net pay direct deposits to the employee’s bank account. Historically, our audit position has been to take exception to this accounting practice because all payroll transactions were not being recorded in the financial records. The State Board of Accounts has revised the audit position on this process and we will not take audit exception to amounts approved by employees being deposited directly into Health Savings Accounts without the use of a payroll withholding fund, provided the following criteria are observed:
- Unit is following state and federal guidelines of Health Savings Accounts;
- Reports of amounts deposited into Health Savings Accounts are produced in detail by employee for each individual payroll period and maintained for audit; and
- Amounts deposited into Health Savings Accounts (employee and employer share) are approved by the governing board.
TAX IC 6-6-15-7 provides how to properly account for Heavy Equipment Rental Excise Tax received. Heavy Equipment Rental Excise Tax distributions received prior to January 1, 2020 shall be deposited in the Township’s levy excess fund. Heavy Equipment Rental Excise Tax distributions received after December 31, must be allocated to the amount of the Township’s funds in the same proportion that the Township’s property tax collections are allocated.
The State Board of Accounts has through the years received inquiries and comments concerning the application of home rule. Accordingly, in an attempt to clarify some questions related to usage of home rule, we directed the following questions to the Attorney General’s Office. The Conclusion portion of the response from the Attorney General’s Office follows the questions.
- In order for a school corporation or other unit of government to use home rule for a particular situation, must they enact a specific ordinance or resolution adopting the home rule provisions and stating the policy which is to be enacted as a result?
- Can a school corporation or other unit of government expand the provisions of a statute with home rule?
For example, IC 5-10-1.1-1, regarding public employees deferred compensation plans, specifically allows a school corporation to establish a savings plan that is a defined contribution plan qualified under Section 401(a) of the Internal Revenue Code, and contribute amounts to the plan on behalf of eligible employees to be credited and allocated to an account for each employee. A school corporation claimed that "home rule powers" allowed them to contribute amounts to an employee retirement plan under Section 403(b) of the Internal Revenue Code.
3. Most units of government have the power to enter into contracts. Can a school corporation or other unit of government enter into a contract containing provisions which are not granted by statute without specifically enacting home rule under a separate ordinance or resolution?
For example, a school corporation collectively bargained for wage related benefits under IC 20- 7.5-1 4 and entered into a collective bargaining agreement which included a retirement plan under Section 403(b) of the Internal Revenue Code without first passing a home rule resolution authorizing such a benefit. CONCLUSION It is our opinion that a local unit of government or a school corporation must adopt an ordinance, resolution or written policy before exercising its home rule powers. A local unit of government may not enter into a contract as a substitute for properly adopting an ordinance, resolution or written policy. In addition, those entities may not exercise home rule powers in an area pre-empted by the General Assembly.
- I
Insurance
Group Insurance - Dependents of Employees
Internal Control Standards
IRS Private Letter Ruling – Annuity Savings to Define Contribution
GROUP INSURANCE - DEPENDENTS OF EMPLOYEES
Official Opinion 50 of the Attorney General of the State of Indiana, issued in 1965, concluded that there is no statutory authority for a governmental unit to purchase group hospitalization insurance coverage for dependents of employees. However, the Attorney General issued Official Opinion 44 (1966) as a clarification of the 1965 opinion.
The 1966 opinion concluded that a governmental unit may contribute toward the insurance of legal dependents of the employee. By "legal dependents" the opinion refers to those dependents for whom the employee is required by law to pay their medical expenses, which would include the employee’s wife and minor dependent children. However, not included are those persons, whether or not related, for whom the employee voluntarily assumes liability for such expenses or insurance coverage. IC 5-10-8-2.6(c) states in part "A public employer may pay a part of the cost of group insurance . . ." (Our Emphasis) Therefore, a township may not pay the entire cost of such insurance.
INTERNAL CONTROL STANDARDS
Adoption of Internal Control Standards
Indiana Code 5-11-1-27 requires the state board of accounts define the acceptable minimum level of internal control standards for political subdivision. As a result, we have completed a manual entitled “Uniform Internal Control Standards for Indiana Political Subdivisions”. The manual and the approved training materials were presented and approved by the Legislative Audit Committee. We have posted the manual to the SBOA website on a newly created page under Political Subdivisions called “Internal Control Standards” (http://www.in.gov/sboa/5072.htm). This page has a link to the manual itself and lists the approved training and the certification requirements. It also references other sources of information on internal controls. We have added the same information to each political subdivisions page on the SBOA website. Finally, you can we placed a link to the manual on the SBOA homepage under our mission statement.
Part One of the manual lists the minimum standards which include the five components of internal control and the seventeen principles. Part Two of the manual is called Approved Personnel Training Materials and also contains examples and case studies, which are not part of the minimum level of standards but do provide additional information and examples that can be used in the implementation of internal controls by the subdivision. There is a certification form for internal control training in the appendix to the manual.
We have completed a webinar that will be posted on the SBOA website this month which will provide additional training information that can be used by the political subdivision. In the past few months we have used the information during presentations at meetings we have attended. The webinar will make the information available to all employees of the subdivision. During the training we have done to date at various meetings, we have tried to be very clear that in order to retain our independence to audit political subdivisions; Generally Accepted Government Auditing Standards (the "Yellow Book") prohibits the SBOA from prescribing the actual internal control procedures to be used by a political subdivision.
By statute, after June 30, 2016, the legislative body must ensure that internal control standards are procedures are adopted and that the appropriate personnel receive training on internal controls and procedures. The fiscal officer will file a certification along with subsequent Gateway annual reports.
IC 5-11-1-27 requires all Indiana political subdivisions to adopt the minimum level of internal control standards developed by the state board of accounts as published in the Uniform Internal Control Standards for Indiana Political Subdivisions. Each political subdivision must adopt these standards, train appropriate personnel, and implement policies and procedures consistent with the standards. The following is a guide to fulfilling these requirements and deadlines for action.
Statutory Requirements - Uniform Internal Control Standards for Indiana Political Subdivisions (Statutory Deadline: After June 30, 2016)
Legislative Body – Uniform Internal Control Standards
1. Adopt Standards. The legislative body shall ensure that the Uniform Internal Control Standards for Indiana Political Subdivisions are adopted. We recommend adoption by ordinance or resolution.
The Uniform Internal Control Standards for Indiana Political Subdivisions are available on our website [http://in.gov/sboa/5072.htm].
2. Train Personnel. The legislative body shall ensure that personnel, as defined in statute, receive training concerning the Uniform Internal Control Standards for Indiana Political Subdivisions.
Approved training materials are located in Part Two of the Uniform Internal Control Standards for Indiana Political Subdivisions; the Video Presentation materials in Section One accompany the Internal Control Webinar located on our website at http://in.gov/sboa/5072.htm.
Training by each employee should be documented on the Internal Control Training Certification Form located in the Appendix to the Uniform Internal Control Standards for Indiana Political Subdivisions. Retain this documentation for audit.
Please note that training is an ongoing process as new employees are hired.
Fiscal Officer – Uniform Internal Control Standards
1. Certify Adoption of Standards. The fiscal officer shall certify in writing that the Uniform Internal Control Standards for Indiana Political Subdivisions have been adopted.
2. Certify Training of Personnel. The fiscal officer shall certify in writing that the personnel, as defined in statute, have received the required training.
3. Submit Two Certifications with Annual Financial Report in 2017. Both the Adoption of Standards Certification and the Training of Personnel Certification shall be filed electronically with the state board of accounts at the same time as the annual financial report is filed.
Ongoing Requirements - Implementation of Internal Control Policies and Procedures
Management - Responsibility to Implement Internal Control Policies and Procedures
The term “management” is defined for each unit of government in the Introduction section of the Uniform Internal Control Standards for Indiana Political Subdivisions.
After June 30, 2016, management should document in writing the specific internal control policies and procedures required for use in each department of the unit. Examples of such policies and procedures are contained in Part Two Section 2 of the Uniform Internal Control Standards for Indiana Political Subdivisions.
The implementation of internal control policies and procedures is an ongoing process. We recommend that management start by documenting procedures already in place and evaluating those policies and procedures in light of the five components of internal control. If any of the five components is missing, true internal control is not achieved. An effective implementation of Internal Control is a process and requires regular evaluation and adaptation for changes affecting your office. Over time controls may be added, deleted, or adjusted as necessary.
IC 5-13-9-2 authorizes an investment officer to invest in certain securities that are listed in the statute. It also states in subsection (d) that “The investing officers of the political subdivision are the legal custodians of securities under this chapter. They shall accept safekeeping receipts or other reporting for securities from: (1) a duly designated depository as prescribed in this article; or (2) a financial institution located either in or out of Indiana having custody of securities with a combined capital and surplus of at least ten million dollars ($10,000,000) according to the last statement of condition filed by the financial institution with it government supervisor body.” To determine a duly designated depository, you may review the list of depositories on the Treasurer of State’s website. The definition of a financial institution may be found in IC 5-13-4-10. Investing in Money Market Funds: IC 5-13-9-2.5 authorizes a political subdivision to invest money in money market mutual funds. Again the statute describes the allowable securities for the portfolio of the money market fund. It also requires in subsection (b) “The investment described in subsection (a) shall be made through depositories designated by the state board of finance as depositories for state deposits under 5-13-9.5.”
Some units are investing in securities directly with an investment company that does not meet the definition of a financial institution or a designated depository. Examples of these companies are Morgan Stanley and First Empire Securities, but please be aware that other investment companies exist that would not be designated depositories or financial institutions. The issue we have been seeing, is not the purchase of the securities as long as they are securities allowed by the statute, but rather that the purchase had not been made through a designated depository or statutorily defined financial institution. The investment companies are allowed to work with a political subdivision, however they may not directly sell to the political subdivision or be the custodian of these securities. Some units are correctly working through a designated depository to purchase the securities from the investment companies, however some units are purchasing directly from the investment company. As an example, a unit could purchase a T-Bill from Morgan Stanley, however, the cash for the purchase should be sent to the financial institution and the financial institution would then deliver the cash to Morgan Stanley after Morgan Stanley delivers the T-Bill to the financial institution on behalf of the unit. The financial institution would have custody of the T-Bill.
When a township warrant is lost or for some other reason has not been presented for payment by the depository on which drawn, and evidence of this fact is submitted, the township is authorized to issue a duplicate warrant to replace the original warrant; however, certain safeguards should be exercised before the duplicate warrant is issued, as recommended in the following outline:
- The person, firm, or corporation requesting the duplicate warrant should submit to the township trustee an affidavit setting out all pertinent information with reference to such warrant. A separate affidavit should be furnished by the payee and by each party to whom it was endorsed. A suggested form of affidavit will be found on page 7.
- Immediately upon receipt of the affidavit, the township trustee should issue a stop payment order on the original warrant to the bank on which it was drawn.
- Delay issuing the duplicate warrant until the warrants for the month in which the stop payment order was issued are returned by the bank and the township trustee has verified that the original warrant has not been cashed.
- Issue the duplicate warrant on the next warrant number of the current series, under current date (not the date it was originally issued), bearing the payee's name, amount and other details shown on the original warrant, but clearly indicate thereon that it is "issued to replace warrant number ___, dated ________, 20__." In this manner no problems should arise when the warrant is presented to the bank for payment, which sometimes happens when it is given the date and number of the original warrant on which payment was stopped. It is not permissible to have unnumbered warrants furnished by the printer for this purpose; always use the next warrant number in the current series but show thereon the warrant number it replaces.
- The duplicate warrant is not to be posted to the ledgers since it is issued only for the purpose of replacing the original warrant. To identify it as a duplicate so it will not be posted and added with the disbursements for the month, simply circle the copy in the warrant register or otherwise identify it as a "Duplicate."
A duplicate warrant might, under emergency conditions, be issued within a short time after the stop payment order is given the bank where the bank furnishes a statement that they have checked the paid warrants to date and the warrant in question has not been paid. However, a safe position is to wait until the canceled warrants for the month in which the stop payment order was issued are returned by the bank and the fiscal officer has verified the warrant has not been paid.
IRS PRIVATE LETTER RULING – ANNUITY SAVINGS TO DEFINED CONTRIBUTION
The annuity savings account components of the Teachers Retirement Funds, both the 1996 and Pre-1996 plans, and Public Employees Retirement Fund pension plans were redefined as “defined contribution” effective January 1, 2018. Those governments issuing GAAP financial statements, rather than regulatory/cash basis only financial statements, will need to inform financial statement preparers of this change as it affects the disclosures required by generally accepted accounting principles (GAAP) prescribed by the Governmental Accounting Standards Board (GASB) in the Notes to the Financial Statements. Repeating disclosures about these defined contribution components obtained from prior year’s financial statements without updating them to reflect their new definition may result in a modified Independent Auditor’s Report. Steps to ensure financial statement disclosures meet the minimum requirements prior to auditors requesting them for review during the audit may include:
- Reviewing how these plans are described in the latest State of Indiana’s Comprehensive Annual Financial Report available on the State Board of Accounts’ website taking into account that the local government’s perspective of these plans will be different from the State’s perspective.
- Reviewing the applicable GASB pronouncement (GASB 68) and the codification of all authoritative GAAP for state and local governments via the Governmental Accounting Research System (https://gars.gasb.org/) to identify what disclosures are required.
- Using a publicly available checklist such as one from the Government Finance Officers Association (https://www.gfoa.org/sites/default/files/GFOAGeneralPurposeChecklist.pdf).
- J
- K
- L
Local Income Tax Distributions of Certified Shares
Lucrative Offices - Dual Office Holding
The State Board of Accounts is of the audit position regarding purchasing a computer or any other equipment from public funds, the township has the right to enter into a rental with option to purchase agreement if the rental charge is fair and reasonable.
However, before such an agreement is entered into, there must be a sufficient appropriation balance available for payment of the current year's rental charge. The agreement should not obligate the township for payment of rental beyond the current year's appropriation. Provision may be made in the agreement for renewal for succeeding years by rental payments subject to appropriations being available.
If the original gross cost of the equipment (without consideration of any trade-in) exceeds one hundred fifty thousand dollars ($150,000) the purchasing agency must comply with IC 5-22-7 of the "Public Purchases Law", (certain exceptions exist). IC 5-22-7 includes advertising for the bids and by awarding with reasonable promptness by written notice a contract to the lowest responsible and responsive bidder. Only by awarding a contract pursuant to IC 5-22 would the township have authority to purchase the equipment at a later date. A lease-purchase agreement will often contain an option to purchase at the end of the lease term for nominal consideration or no additional consideration.
The State Board of Accounts is of the audit position specifications should be in accordance with all of the provisions of IC 5-22-5-1 et seq. IC 5-22-5-3 states "A specification must do the following: (1) Promote overall economy for the purposes intended. (2) Encourage competition in satisfying the governmental body's needs."
The specifications for the equipment must be recognized standard specifications to allow competitive bidding and should provide for the bidder to quote the total purchase cost, the rental charge to be made, and the percentage of the amount of the rental charge that will be credited toward the purchase cost should the township exercise the option to purchase. Any interest or carrying charges must be made a part of the original bid price without specific reference made thereto. Compliance with the above requirements will allow the purchasing agency to exercise the option to purchase at any time a sufficient appropriation for equipment is available.
If a proposal is made to trade in used equipment on the new equipment to be purchased under a rental with option to purchase agreement, the trade-in value of the old equipment must be applied on the rental charge to the extent of the amount allowed on the used equipment by the successful bidder. The allowance should not be deducted from the price of the new equipment and the net price used as the basis for determining lease payments. If the trade-in allowance exceeds the current year's rental charge, the township should dispose of the used equipment in the manner required by IC 5-22-22-1 et seq. or by other statutorily authorized procedures.
Each year the Department of Local Government Finance will certify to each township figures which show one hundred percent (100%) of the tax levy for each fund. Property taxes received which exceed one hundred (100%) of levy, will require the excess to be receipted to a levy excess fund. However, if the amount is less than one hundred dollars ($100), no transfer is required.
We have been informed of situations of some townships borrowing money (bonds), the funds being retained at the bank and the bank making all disbursements based on requests from various sources (generally those associated with the debt issuance or a volunteer fire department.) The township has no documentation other than the bank statements which only show the transactions as debits.
The State Board of Accounts is of the audit position a governmental unit may not incur indebtedness unless specifically allowed by statute.
All financial transactions pertaining to the governmental unit should be recorded in the records of the governmental unit.
Supporting documentation such as receipts, canceled checks, tickets, invoices, bills, contracts, and other public records must be available for audit to provide supporting information for the validity and accountability of monies disbursed. Payments without supporting documentation may be the personal obligation of the responsible official or employee.
ACCOUNTING FOR INCOME TAX DISTRIBUTIONS OF CERTIFIED SHARES
The State Board of Accounts (SBOA) is of the audit position that Local Income Tax (LIT) certified shares must be deposited into the Township (General) Fund beginning January 1, 2023. A memo was sent out to all civil taxing units on February 10, 2022 detailing the receipting of LIT certified shares. When certified shares are comingled with other revenue sources, the identity of specific revenue sources are lost. When funds are commingled it becomes difficult to analyze the sufficiency of specific revenue sources, allowable uses of the commingled funds may become restricted, and noncompliance with statutory provisions may result.
For example, if LIT certified shares are placed into the Township Firefighting Fund established by IC 36-8-13-4, it would appear as if the township levy (and other specified revenue sources) is sufficient to pay costs attributable to fire protection and emergency services, when the current levy is not sufficient. Those funds would be restricted to the payment of costs attributable to providing fire protection or emergency services.
For years prior to 2022, the expectation would be that the certified shares were receipted into the Township Fund unless the Township Board had restricted the funds further by resolution. The SBOA will not take audit exception to a township following a DLGF budget order that includes LIT Certified Shares as revenue in a fund other than the Township Fund. No changes are required for Local Income Tax for Property Tax Relief, Economic Development, Public Safety, and Special Legislation as these revenues will continue to be accounted for in separate funds.
If the township determines it is necessary to budget and spend amounts using the Township fund for expenses normally paid for in other funds, such as the Firefighting fund and Township Assistance fund, we will not take audit exception. When working on 2023 budgets, townships may want to discuss with the Department of Local Government and Finance (DLGF) the ability to departmentalize for specific expenses to allow for the collection of expenditure information for transparency and reporting purposes.
LUCRATIVE OFFICES - DUAL OFFICE HOLDING
Under Indiana law, some government officials may not legally serve in more than one public service position at any given time. The holding of two lucrative offices may result in the constitutional violation commonly referred to as "dual office holding."
Article 2, Section 9 of the Indiana Constitution states in part: "…no person may hold more than one lucrative office at the same time, except as expressly permitted.in this Constitution..." Official Opinion No. 13 (June 4, 1970) of the Attorney General points out that dual office-holding involves at least six major questions and three particular sections of the Indiana Constitution. The questions are:
- Is each position a lucrative office within the meaning of the Indiana Constitution? (Article 2, Section 9 of the Indiana Constitution)
- Is such office-holding in violation of the doctrine of the separation of powers? (Article 3, Section 1 of the Indiana Constitution)
- Does such office-holding involve a judicial office, and another office of trust and profit under the State? (Article 7, Section 16 of the Constitution of Indiana)
- Are such offices incompatible with each other?
- Is there a conflict of interest?
- Would such office-holding be against public policy?
The Office of the Indiana Attorney General has created the Dual Office Holding Guide for your information. This Guide provides a four-part legal analysis that public officials may use in order to determine whether accepting a second public service position violates the law.
This guide urges all readers to seek legal advice from an attorney before deciding to accept a second public service position.
The Attorney General’s office has consistently stated in numerous unofficial opinions that trustees and board members hold a lucrative office. Therefore, we are of the audit position that a township trustee or board should not also hold another lucrative office.
- M
Marion County Small Claims Court - SEA 523
Materiality Threshold (IC 5-11-1-27(j) & (l)
Membership Dues in Organizations
MARION COUNTY SMALL CLAIMS COURT - SENATE ENROLLED ACT 523
I. Prior and Continuing Responsibilities for Marion County Township Small Claims Courts
A. Must provide a courtroom and office. Indiana Code 33-34-6-1 requires the Township Trustee to provide a courtroom and office for their Township Small Claims Judge in a convenient location within the Township. The space provided must have the following: adequate access; sufficient parking; a separate courtroom; space for the bailiff, clerk, and other court employees; and adequate room for court files and supplies.
B. Must provide supplies and maintenance. Indiana Code 33-34-6-2 requires the Township to furnish to the Township Court all supplies, furniture, books, and necessary equipment. The Township is further required to maintain the court facilities and equipment.
C. Trustee is the executive of the Township. Indiana Code 36-6-4-3 requires the Trustee to pay out Township funds and examine all accounts and demands chargeable against the Township. It is SBOA’s audit position that the Trustee is the person responsible for paying all claims on behalf of the Township Court. Indiana Code 36-6-4-5 requires the Trustee to maintain the financial and appropriation record of the Township. It is SBOA’s audit position that the Township Court’s financial transactions should be included in the records that are maintained by the Trustee for the entire Township.
II. New Powers and Responsibilities of Marion County Township Small Claims Courts
A. Clerks appointed by Judge. Indiana Code 33-34-6-3 was amended to require the Township to provide a competitive salary for a sufficient number of Court Clerks to operate the court efficiently and to adequately serve the Township citizens. The statute goes on to give the power of filling the clerk positions to the Judge and they are required to serve at the pleasure of the judge. It is SBOA’s audit position that the Township Board work with the Trustee and the Judge to determine the number of clerk positions that are required to serve the court. The Township board has the responsibility to set a salary for each clerk position. The Judge has the responsibility to notify the Township Trustee as to who is to fill each clerk position. Each clerk would be a Township employee under the direction of the Judge, and would report to the Judge for job duties and responsibilities.
B. Court Budget. Indiana Code 33-34-7-4 was added and requires the Judge to prepare and submit a Township Court budget directly to the Township Board. The Township Board will still have the responsibility to approve court appropriations. After, the appropriations are set by the Township Board; the Judge has the responsibility to ensure that court expenses do not exceed the approved court appropriations. SBOA’s audit position is that the Township Trustee continues to be the executive of the Township and will retain the responsibilities for keeping the Township records and processing disbursements for the entire Township. We suggest a system be conceived in which the Trustee provides periodic reports to the Judge to notify them of the amount of Court expenses during the period and the amount of court appropriations remaining for the budget period.
MATERIALITY THRESHOLD (IC 5-11-1-27(J) & (L)
It has come to our attention that there is confusion in regard to the application of IC 5-11-1-27(j) and IC 5-11-1-27(l).
IC 5-11-1-27(j) states in part: “All erroneous or irregular material variances, losses, shortages, or thefts of political subdivision funds or property shall be reported immediately to the state board of accounts. For all material variances, losses, shortages, or thefts, the state board of accounts shall: (1) determine the amount of funds involved and report the amount to the appropriate government and law enforcement officials…”
It is in regard to this section that the State Examiner issued State Examiner Directive 2015-6, which allows Townships to determine their own materiality threshold at which they are to report to us variances, losses, shortages, or thefts.
In addition to subsection (j), IC 5-11-1-27(l) states in part: “A public officer who has actual knowledge of or reasonable cause to believe that there has been a misappropriation of public funds or assets of the public office, including: (1) information obtained as a result of a police report; (2) an internal audit finding; or (3) another source indicating that a misappropriation has occurred; shall immediately send written notice of the misappropriation to the state board of accounts and the prosecuting attorney serving in the area governed by the political subdivision.” For this portion of the statute, there is no materiality threshold.
It is our position that application of the materiality threshold is for those unintentional variances, losses, and shortages that occur in the course of business that are due to misapplication of processes or act as an indicator that the appropriate process is not in place. Either way, upon discovery the township would take corrective action. The materiality threshold would also apply to “theft” by someone outside of the townships employ, with again the appropriate actions taken by the township.
All instances of misappropriation (intentional personal misuse) of the townships funds or assets by an official or employee must be reported to the State Board of Accounts. Materiality thresholds do not apply.
The memo on the following page was issued on January 7, 2016, and offers additional guidance in regards to the materiality threshold:
MEMBERSHIP DUES IN ORGANIZATIONS
IC 36-6-6-12 states: "(a) The legislative body may appropriate money for membership of the township in county, state, or national associations that:
- are of a civic, educational, or governmental nature; and
- have as a purpose the improvement of township governmental operations.
The township representatives may participate in the activities of these associations, and the legislative body may appropriate money to defray the expenses of township representatives in connection with these activities.
(b) Each representative of the township attending any meeting, conference, seminar, or convention approved by the township trustee shall be allowed reimbursement for all necessary and legitimate expenses incurred while representing the township. Expenses shall be paid to each representative in accordance with the township's reimbursement policy, which may include an established per diem rate, as recommended by the township trustee and adopted by the township legislative body."
Please note, personal memberships are not listed.
STATE AND FEDERAL MILEAGE RATES
The State mileage rate is set by the Indiana Department of Administration. You can view the current mileage rate at their website.
The Federal mileage rate is set by the IRS and can be found at their website. Please note that different federal grants may impose additional restrictions.
- N
Nepotism
Certifications - Nepotism and Contracting
NEPOTISM AND CONTRACTING CERTIFICATIONS
Each township board member and the trustee are required to certify in writing under penalties of perjury before December 31 of each year that they have not violated the requirements of IC 36-1-20.2 (Nepotism) and IC 36-1-21 (Contracting). These certifications shall be submitted to the trustee and retained locally.
IC 36-1-20.2-16, concerning the annual certification on nepotism, states: "Each elected officer of the unit shall annually certify in writing, subject to the penalties for perjury, that the officer has not violated this chapter. An officer shall submit the certification to the executive of the unit not later than December 31 of each year."
IC 36-1-21-6, concerning the annual certification on contracting, states: "Each elected officer of the unit shall annually certify in writing, subject to the penalties for perjury, that the officer is in compliance with this chapter. An officer shall submit the certification to the executive of the unit not later than December 31 of each year."
Each township board shall adopt a contracting policy that includes, at a minimum, the requirements set forth in IC 36-1-21. The policy may include requirements that are more stringent or detailed. These policies should be retained locally. There is no requirement that a new policy be adopted annually.
When completing the Certified Report of Names, Addresses, Duties and Compensation of Public Employees (Form 100R), the trustee must indicate if a contracting policy has been implemented. If a policy has not been implemented, the Department of Local Government Finance may not approve the township's budget or any additional appropriations for the township. If the township board implements a contracting policy after the trustee has completed the Form 100R, the trustee should send an email to sboaannualreports@sboa.in.gov and ask for the report to be unlocked. After the report is unlocked, the trustee should go back into the report and indicate that a policy has been adopted. The trustee must submit the report again in order for this change to be effective.
IC 36-1-21-4 states: "(a) This chapter establishes minimum requirements regarding contracting with a unit. The legislative body of the unit shall adopt a policy that includes, at a minimum, the requirements set forth in this chapter. However, the policy may:
- include requirements that are more stringent or detailed than any provision in this chapter; and
- apply to individuals who are exempted or excluded from the application of this chapter. The unit may prohibit or restrict an individual from entering into a contract with the unit that is not otherwise prohibited or restricted by this chapter.
(b) The annual report filed by a unit with the state board of accounts under IC 5-11-13-1 must include a statement by the executive of the unit stating whether the unit has implemented a policy under this chapter."
IC 36-1-21-7 states: "If the state board of accounts finds that a unit has not implemented a policy under this chapter, the state board of accounts shall forward the information to the department of local government finance."
IC 36-1-21-8 states: "If a unit has not implemented a policy under this chapter, the department of local government finance may not approve:
- the unit's budget; or
- any additional appropriations for the unit; for the ensuing calendar year until the state board of accounts certifies to the department of local government finance that the unit has adopted a policy under this chapter."
Each township board shall adopt a nepotism policy that includes, at a minimum, the requirements set forth in IC 36-1-20.2. The policy may include requirements that are more stringent or detailed. These policies should be retained locally. There is no requirement that a new policy be adopted annually.
When completing the Certified Report of Names, Addresses, Duties and Compensation of Public Employees (Form 100R), the trustee must indicate if a nepotism policy has been implemented. If a policy has not been implemented, the Department of Local Government Finance may not approve the township's budget or any additional appropriations for the township. If the township board implements a nepotism policy after the trustee has completed the Form 100R, the trustee should send an email to sboaannualreports@sboa.in.gov and ask for the report to be unlocked. After the report is unlocked, the trustee should go back into the report and indicate that a policy has been adopted. The trustee must submit the report again in order for this change to be effective.
IC 36-1-20.2-9 states: "(a) This chapter establishes minimum requirements regarding employment of relatives. The legislative body of the unit shall adopt a policy that includes, at a minimum, the requirements set forth in this chapter. However, the policy may:
- include requirements that are more stringent or detailed than any provision in this chapter; and
- apply to individuals who are exempted or excluded from the application of this chapter. The unit may prohibit the employment of a relative that is not otherwise prohibited by this chapter.
(b) The annual report filed by a unit with the state board of accounts under IC 5-11-13-1 must include a statement by the executive of the unit stating whether the unit has implemented a policy under this chapter."
IC 36-1-20.2-17 states: "If the state board of accounts finds that a unit has not implemented a policy under this chapter, the state board of accounts shall forward the information to the department of local government finance."
IC 36-1-20.2-18 states: "If a unit has not implemented a policy under this chapter, the department of local government finance may not approve:
- the unit's budget; or
- any additional appropriations for the unit; for the ensuing calendar year until the state board of accounts certifies to the department of local government finance that the unit is in compliance with this chapter."
NEPOTISM AND CONTRACTING (PL 135-2012, HEA 1005)
The following is guidance on the audit position the State Board of Accounts will take related to PL 135- 2012, HEA 1005. It is intended to answer questions for implementing officials and their employees on how the legislation will be applied during an audit and for reporting to State Board of Accounts as required by law. It is based on our review of PL 135 and related Indiana Code but it is not to be construed to be legal advice or opinion.
Chapter 9. Government Employees and Volunteer Firefighters Holding Office
Sec. 1. As used in this chapter, "elected office" refers only to the following:
- The executive or a member of the executive body of a unit.
- A member of the legislative body or fiscal body of a unit.
SBOA Audit Position: The term "elected office" for the purpose of this chapter, depending on the "unit" of government refers to the executive, executive body, legislative body, or the fiscal body of the "unit" of government. Depending on the "unit," this would include county commissioners, county council members, mayors, city or town council members, township board members, and trustees of each "unit."
Sec. 2. As used in this chapter, "government employee" refers to an employee of a unit. The term does not include an individual who holds only an elected office.
SBOA Audit Position: The term "government employee" includes everyone employed by the "unit" that is not a person that holds an "elected office." Therefore, for the purpose of this chapter, county commissioners, county council members, mayors, city and town council members, township board members, and trustees of their respective "units" are not considered a "government employee."
Sec. 3. As used in this chapter, "unit" means a county, city, town, or township.
SBOA Audit Position: The term "unit," for the purpose of this chapter, is any county, city, town, or township in Indiana. All elected or appointed officials and all other employees within a "unit" of government are subject to this chapter. Superior Court Judges, Circuit Court Judges, County Prosecutors, county court employees, and county prosecutor office employees are not included in this definition of a "unit" because Superior Court Judges, Circuit Court Judges, and County Prosecutors are elected to a judicial district and not elected to a specific county; therefore, they are not subject to the direction of the "elected office" of the county. GUIDANCE ON NEPOTISM AND CONTRACTING (PL 135-2012, HEA 1005)
Sec. 4. (a) An individual who is serving as a volunteer firefighter for a volunteer fire department or a fire department that provides fire protection services to a unit:
- under a contract, excluding a mutual aid agreement; or
- as the unit's fire department; may not assume or hold an elected office of a unit that receives fire protection services from the department in which the volunteer firefighter serves.
SBOA Audit Position: An individual who is serving as a volunteer firefighter for a volunteer fire department or a fire department that provides fire protection services to a "unit" under a contract, excluding a mutual aid agreement, or as the "unit's" fire department may not assume or hold the position of a county commissioner, county council member, mayor, city or town council member, township board member, or trustee of a unit that receives fire protection services from the department in which the volunteer firefighter serves.
(b) An individual who:
- is an employee of a unit, serving as a full-time, paid firefighter; or
- serves as a volunteer firefighter;
in a department that provides fire protection services to more than one (1) unit, excluding fire protection services provided under mutual aid agreements, may not assume or hold an elected office of any unit that receives fire protection services from the department.
SBOA Audit Position: An individual who is an employee of a "unit," serving as a full-time, paid firefighter or serves as a volunteer firefighter in a department that provides fire protection services to more than one (1) "unit," excluding fire protection services provided under mutual aid agreements, may not assume or hold the position of a county commissioner, county council member, mayor, city or town council member, township board member, or trustee of any "unit" that receives fire protection services from the department.
Sec. 5. Except as provided in section 7 of this chapter, an individual is considered to have resigned as a government employee when the individual assumes an elected office of the unit that employs the individual.
SBOA Audit Position: Any "government employee" of a "unit" is considered to have resigned their position as a "government employee" when the individual assumes the position of a county commissioner, county council member, mayor, city or town council member, township board member, or trustee within the "unit" that employs the individual. See section 7 for exception.
Sec. 6. This chapter does not prohibit:
- a government employee from assuming or holding an elected office of a unit other than the unit that employs the government employee;
- a full-time, paid firefighter or volunteer firefighter from assuming or holding an elected office of a unit other than a unit that receives fire protection services from the department in which the volunteer firefighter serves; or
- an individual who assumes or holds an elected office from also being appointed to and serving on a board, commission, or committee of the unit.
SBOA Audit Position: A "government employee" may hold an "elected office" of any "unit" where the "government employee" is not employed. A full-time, paid firefighter or volunteer firefighter may not hold an "elected office" of any "unit" that receives fire protection services from the department in which the volunteer firefighter serves. An individual who assumes or holds an "elected office" may also be appointed to or serve on a board, commission, or committee of the "unit" to which they were elected or appointed.
Sec. 7. (a) Notwithstanding sections 4 and 5 of this chapter:
- a volunteer firefighter who assumes or holds an elected office on January 1, 2013, may continue to hold the elected office and serve as a volunteer firefighter; and
- a government employee who assumes or holds an elected office on January 1, 2013, may continue to hold the elected office and be employed as a government employee; until the term of the elected office that the volunteer firefighter or government employee is serving on January 1, 2013, expires.
(b) After the expiration of the term of the elected office that the volunteer firefighter referred to in subsection (a) is serving on January 1, 2013, the volunteer firefighter is subject to section 4 of this chapter with respect to serving as a volunteer firefighter and assuming or holding an elected office of the unit that receives fire protection services from the department in which the volunteer firefighter serves.
(c) After the expiration of the term of the elected office that the government employee referred to in subsection (a) is serving on January 1, 2013, the government employee is subject to section 5 of this chapter with respect to assuming or holding an elected office and being employed by the unit that employs the government employee.
SBOA Audit Position: A volunteer firefighter who assumes or holds the position of a county commissioner, county council member, mayor, city or town council member, township board member or trustee within the "unit" that employs the volunteer firefighter on January 1, 2013, may continue to hold the "elected office" and serve as a volunteer firefighter until the term of the "elected office" that the volunteer firefighter is serving on January 1, 2013, expires.
A "government employee" who assumes or holds the position of a county commissioner, county council member, mayor, city or town council member, township board member, or trustee within the "unit" that employs the "government employee," may continue to hold the "elected office" and be employed as a "government employee" until the term of the "elected office" that the "government employee" is serving on January 1, 2013, expires.
Sec. 1.1. (a) This section applies to a unit (as defined in IC 36-1-2-23).
SBOA Audit Position: This chapter becomes effective July 1, 2012. Therefore, it should be in place and all "units" should be following this section on July 1, 2012.
A "unit" is a county, city, town, and townships in Indiana. All elected or appointed officials within a "unit" of government are subject to this chapter. Superior Court Judges, Circuit Court Judges, County Prosecutors, county court employees, and county prosecutor office employees are not included in this definition of a "unit" as Superior Court Judges, Circuit Court Judges, and County Prosecutors are elected to a judicial district and not elected to a specific county.
(b) A report under section 1 of this chapter that is submitted after December 31, 2012, must include a statement by the executive (as defined in IC 36-1-2-5) of the unit regarding whether the unit has implemented a policy under IC 36-1-20.2 and IC 36-1-21. If a unit does not implement a policy under IC 36-1-20.2 and IC 36-1-21, the Department of Local Government Finance may not approve the unit's budget or any additional appropriations for the unit for the ensuing calendar year.
SBOA Audit Position: In accordance with IC 5-11-13-1 every, county, city, town, township, elective or appointive, who is the head of or in charge of any office, department, board, or commission of any county, city, town, or township, and every, county, city, town, or township employee or agent who is the head of, or in charge of, or the executive officer of any department, bureau, board, or commission of the, county, city, town, or township, and every executive officer by whatever title designated, who is in charge of any, county, or city institution, shall during the month of January of each year prepare, make, and sign a certified report, correctly and completely showing the names and business addresses of each and all officers, employees, and agents in their respective offices, departments, boards, commissions, and institutions, and the respective duties and compensation of each, and shall forthwith file said report in the office of the State Examiner of the State Board Of Accounts. The report must also indicate whether the political subdivision offers a health plan, pension, and other benefits to full-time and part-time employees. The certification must be filed electronically in the manner prescribed under IC 5-14-3.8-7. Any report filed in accordance with IC 5-11-13-1 after December 31, 2012, must include a statement by the board of commissioners, for a county not having a consolidated city; mayor of a consolidated city for a county having a consolidated city; mayor, for a city; president of the town council for a town; trustee for a township of the "unit" regarding whether the "unit" has implemented a policy under IC 36-1-20.2 and IC 36-1-21.
If a "unit" does not implement a policy under IC 36-1-20.2 and IC 36-1-21, the Department of Local Government Finance may not approve the "unit's" budget or any additional appropriations for the unit for the ensuing calendar year.
The Department of Local Government Finance, not the SBOA, will make all determinations as to whether a budget or any additional appropriations shall be denied based on the requirements of this chapter. The SBOA will send to the Department of Local Government Finance a list of those "units" that have not made the required certification under IC 5-11-13-1.1 based upon information obtained from the filing of the "units" year-end personnel report (currently known as the 100R) due to be submitted to the SBOA in January of each year. The SBOA will follow up with those that do not comply with this chapter and will notify the Department of Local Government Finance when the "unit" has complied.
Sec. 3.5. For purposes of Article 2, Section 9 of the Constitution of the State of Indiana, membership on a board is not a lucrative office.
SBOA Audit Position: This chapter becomes effective July 1, 2012. Therefore it should be in place and all "units" should be following this section on July 1, 2012. Article 2, Section 9 of the Constitution of the State of Indiana states: "No person holding a lucrative office or appointment under the United States or under this State is eligible to a seat in the General Assembly; and no person may hold more than one lucrative office at the same time, except as expressly permitted in this Constitution. Offices in the militia to which there is attached no annual salary shall not be deemed lucrative." Therefore membership on a "board" is not a lucrative office. For the purpose of this chapter members of a "board" are appointed positions by members of an "elected office" or an executive of the government "unit."
Sec. 7. (a) For purposes of Article 2, Section 9 of the Constitution of the State of Indiana, notary public is not a lucrative office.
SBOA Audit Position: This chapter becomes effective July 1, 2012. Therefore, it should be in place and all "units" should be following this section on July 1, 2012. Article 2, Section 9 of the Constitution of the State of Indiana states: "No person holding a lucrative office or appointment under the United States or under this State is eligible to a seat in the General Assembly; and no person may hold more than one lucrative office at the same time, except as expressly permitted in this Constitution. Offices in the militia to which there is attached no annual salary shall not be deemed lucrative." This clarifies that a notary public is not a lucrative office.
SBOA Audit Position: This chapter becomes effective July 1, 2012. Therefore, it should be in place and all "units" should be following this section on July 1, 2012.
Chapter 20.2. Nepotism Sec. 1. This chapter applies to all units.
SBOA Audit Position: This chapter becomes effective July 1, 2012. Therefore, it should be in place and all "units" should be following this section on July 1, 2012. A "unit," for the purpose of this chapter, is any county, city, town, or township in Indiana. All elected or appointed officials and all other employees within a "unit" of government are subject to this chapter. Superior Court Judges, Circuit Court Judges, County Prosecutors, county court employees, and county prosecutor office employees are not included in this definition of a "unit" as Superior Court Judges, Circuit Court Judges, and County Prosecutors are elected to a judicial district and not elected to a specific county. Therefore, they are not subject to the direction of the "elected office" of the county.
Sec. 2. An individual who is employed by a unit on July 1, 2012, is not subject to this chapter unless the individual has a break in employment with the unit. The following are not considered a break in employment with the unit:
- The individual is absent from the workplace while on paid or unpaid leave, including vacation, sick, or family medical leave, or worker's compensation.
- The individual's employment with the unit is terminated followed by immediate reemployment by the unit, without loss of payroll time.
SBOA Audit Position: Any individual that is employed by a "unit" on July 1, 2012, is not subject to this chapter and any individual hired on or after July 2, 2012, is subject to this chapter.
At a minimum, "units" must define that an individual absent from the workplace while on paid or unpaid leave, including vacation, sick, or family medical leave, or worker's compensation is not considered a "break in service." If an individual's employment with the unit is terminated, followed by immediate reemployment by the "unit," without loss of payroll time, this is not considered a "break in service." "Units" may adopt within their specific nepotism policy additional specific situations that could qualify as not being a "break in service."
Sec. 3. For purposes of this chapter, the performance of the duties of:
- a precinct election officer (as defined in IC 3-5-2-40.1) that are imposed by IC 3; or
- a volunteer firefighter; is not considered employment by a unit.
SBOA Audit Position: If you are a precinct election officer or volunteer firefighter, for this chapter you are not considered to be an employee of the "unit" and, therefore, are not employed by the "unit" on July 1, 2012.
Sec. 4. As used in this chapter, "direct line of supervision" means an elected officer or employee who is in a position to affect the terms and conditions of another individual's employment, including making decisions about work assignments, compensation, grievances, advancement, or performance evaluation. The term does not include the responsibilities of the executive, legislative body, or fiscal body of a unit, as provided by law, to make decisions regarding salary ordinances, budgets, or personnel policies of the unit.
SBOA Audit Position: The nepotism policy is designed to help prevent occurrences whereby relatives who are employees of the "unit" are in direct supervisory line with respect to each other. In order to guard against these practices the policy should prohibit "unit" full-time, part-time, or temporary employees who are relatives from being placed within the same direct line of supervision where one relative is responsible for directly supervising the job performance or work activity of another relative. In discussions with the author of the bill, it was determined that it was not the authors intent, to the extent possible, to prohibit two or more such relatives from working for the same "unit" or within the same department or office of a "unit." More specifically, "direct line of supervision" for the purpose of this section means the direct next person directly above the employee.
Sec. 5. As used in this chapter, "employed" means an individual who is employed by a unit on a fulltime, part-time, temporary, intermittent, or hourly basis. The term does not include an individual who holds only an elected office. The term includes an individual who is a party to an employment contract with the unit.
SBOA Audit Position: The term "employed" means an individual who is employed by a "unit" on a full-time, part-time, temporary, intermittent, or hourly basis. The term does not include an individual who holds only an elected office. The term includes an individual who is a party to an employment contract with the unit. Elected office for this chapter is any office that is elected within the "unit" of government and is not limited to the definition established in IC 3-5-9.
Sec. 6. As used in this chapter, "member of the fire department" means the fire chief or a firefighter appointed to the department.
SBOA Audit Position: A member of the fire department means the fire chief or a firefighter appointed to the department.
Sec. 7. As used in this chapter, "member of the police department" means the police chief or a police officer appointed to the department.
SBOA Audit Position: A member of the police department means the police chief or a police officer appointed to the department.
Sec. 8. (a) As used in this chapter, "relative" means any of the following:
- A spouse.
- A parent or stepparent.
- A child or stepchild.
- A brother, sister, stepbrother, or stepsister.
- A niece or nephew.
- An aunt or uncle.
- A daughter-in-law or son-in-law.
(b) For purposes of this section, an adopted child of an individual is treated as a natural child of the individual.
(c) For purposes of this section, the terms "brother" and "sister" include a brother or sister by the half blood.
SBOA Audit Position: A relative of an employee is a spouse, parent, stepparent, child, stepchild, brother, sister, stepbrother, stepsister, niece, nephew, aunt, uncle, daughter-in-law, son-in-law, adopted child, half-brother, or half-sister.
Sec. 9. (a) This chapter establishes minimum requirements regarding employment of relatives. The legislative body of the unit shall adopt a policy that includes, at a minimum, the requirements set forth in this chapter. However, the policy may:
- include requirements that are more stringent or detailed than any provision in this chapter; and
- apply to individuals who are exempted or excluded from the application of this chapter.
The unit may prohibit the employment of a relative that is not otherwise prohibited by this chapter.
(b) The annual report filed by a unit with the State Board Of Accounts under IC 5-11-13-1 must include a statement by the executive of the unit stating whether the unit has implemented a policy under this chapter.
SBOA Audit Position: HEA 1005 establishes minimum requirements that must be adopted by the "unit." The "legislative body" of the "unit" has the ability to adopt additional requirements that are more stringent or detailed and that apply to individuals who are exempted or excluded from the application of the new law. A "unit" could fulfill the requirement of adopting a policy by merely adopting the minimum requirements set forth in HEA 1005 (2012).
A report under this chapter that is submitted after December 31, 2012, must include a statement by the executive (as defined in IC 36-1-2-5) of the "unit" regarding whether the "unit" has implemented a policy under IC 36-1-20.2 and IC 36-1-21. If a "unit" does not implement a policy under IC 36-1-20.2 and IC 36-1-21, the Department of Local Government Finance may not approve the "unit's" budget or any additional appropriations for the "unit" for the ensuing calendar year.
Sec. 10. Individuals who are relatives may not be employed by a unit in a position that results in one (1) relative being in the direct line of supervision of the other relative.
SBOA Audit Position: Any individual "employed" by a "unit" may not directly supervise a spouse, parent, stepparent, child, stepchild, brother, sister, stepbrother, stepsister, niece, nephew, aunt, uncle, daughter-in-law, son-in-law, adopted child, half-brother or half-sister.
The term "employed" means an individual who is employed by a unit on a full-time, part-time, temporary, intermittent, or hourly basis. The term does not include an individual who holds only an "elected" office within the "unit." The term includes an individual who is a party to an employment contract with the "unit."
Sec. 11. (a) This section applies to an individual who:
- is employed by a unit on the date the individual's relative begins serving a term of an elected office of the unit; and
- is not exempt from the application of this chapter under section 2 of this chapter.
(b) Unless a policy adopted under section 9 of this chapter provides otherwise, an individual may remain employed by a unit and maintain the individual's position or rank even if the individual's employment would violate section 10 of this chapter.
(c) Unless a policy adopted under section 9 of this chapter provides otherwise, an individual described in subsection (b) may not:
- be promoted to a position; or
- be promoted to a position that is not within the merit ranks, in the case of an individual who is a member of a merit police department or merit fire department; if the new position would violate section 10 of this chapter.
SBOA Audit Position: Section 11 of this chapter applies to an individual who is employed by a "unit" on the date the individual's relative begins serving a term of an elected office of the "unit," and is not exempt from the application of this chapter under section 2 of this chapter. So, if an individual is employed by a "unit" on July 1, 2012, they are not subject to this section unless they have had a break in service between July 1, 2012, and the date of the application of this section.
Unless a policy adopted under section 9 of this chapter provides otherwise, section 11 allows an individual to remain employed by a "unit" and maintain the individual's position or rank even if the individual's employment allows a direct supervisor to be a relative as specified in section 8.
Unless a policy adopted under section 9 of this chapter provides otherwise, an individual whose direct supervisor is a relative may not be promoted to a position if the new position would place a relative as the direct supervisor to the individual being promoted. If the individual being promoted is a member of a merit police department or merit fire department, the individual may not be promoted if the new position would place a relative as the direct supervisor to the individual being promoted.
Sec. 12. This chapter does not abrogate or affect an employment contract with a unit that:
- an individual is a party to; and
- is in effect on the date the individual's relative begins serving a term of an elected office of the unit. SBOA Audit Position: This chapter does not abolish, annul, repeal or affect an employment contract with a "unit" that an individual is a party to, and is in effect on the date the individual's relative begins serving a term of an "elected office" of the "unit."
Sec. 13. Unless the policy adopted under section 9 of this chapter provides otherwise, a sheriff's spouse may be employed as prison matron for the county under IC 36-8-10-5 and the spouse may be in the sheriff's direct line of supervision.
SBOA Audit Position: Unless the "unit" adopts a policy under section 9 of this chapter that states otherwise, the sheriff's spouse may be employed as prison matron for the county under IC 36-8-10-5 and the spouse may be in the sheriff's direct line of supervision.
Sec. 14. Unless the policy adopted under section 9 of this chapter provides otherwise, an individual:
- who served as coroner;
- who is currently ineligible to serve as coroner under Article 6, Section 2(b) of the Constitution of the State of Indiana;
- who, as coroner, received certification under IC 36-2-14-22.3; and (4) whose successor in the office of coroner is a relative of the individual; may be hired in the position of deputy coroner and be in the coroner's direct line of supervision.
SBOA Audit Position: Unless the "unit" adopts a policy under section 9 of this chapter that provides otherwise, an individual who served as coroner, who is currently ineligible to serve as coroner under Article 6, Section 2(b) of the Constitution of the State of Indiana, who, as coroner, received certification under IC 36-2-14-22.3; and whose successor in the office of coroner is a relative of the individual, may be hired in the position of deputy coroner and be in the coroner's direct line of supervision.
Sec. 15. If the township trustee's office is located in the township trustee's personal residence, unless the policy adopted under section 9 of this chapter provides otherwise the township trustee may hire only one (1) employee who is a relative. The employee:
- may be hired to work only in the township trustee's office;
- may be in the township trustee's direct line of supervision; and
- may not receive total salary, benefits, and compensation that exceed five thousand dollars ($5,000) per year.
SBOA Audit Position: Unless the "unit" adopts a policy under section 9 of this chapter that disallows the following: In a township where the trustee's office is located in the township trustee's personal residence, the township trustee may hire only one (1) employee who is a relative. The employee may be hired to work only in the township trustee's office, may be in the township trustee's direct line of supervision and may not receive total salary, benefits, and compensation that exceed five thousand dollars ($5,000) per year. A policy adopted under section 9 may be more restrictive but may not increase total salary, benefits, and compensation allowed under this section.
Sec. 16. Each elected officer of the unit shall annually certify in writing, subject to the penalties for perjury, that the officer has not violated this chapter. An officer shall submit the certification to the executive of the unit not later than December 31 of each year.
SBOA Audit Position: Each locally elected officer is required to certify under penalties of perjury to the "executive" of the "unit" before December 31 of each year that they have not violated the adopted nepotism policy. Depending on the "unit," the "executive" of the unit may be one of the following: president of the county commissioners, mayor, president of the town council, trustee, or chief executive officer.
Sec. 17. If the State Board Of Accounts finds that a unit has not implemented a policy under this chapter, the State Board Of Accounts shall forward the information to the Department of Local Government Finance.
SBOA Audit Position: Any report filed in accordance with IC 5-11-13-1 after December 31, 2012, must include a statement by the president of the board of county commissioners, for a county not having a consolidated city, mayor of a consolidated city for a county having a consolidated city, mayor, for a city, president of the town council for a town, trustee for a township of the "unit" regarding whether the "unit" has implemented a policy under IC 36-1-20.2 and IC 6-1-21. The SBOA will use these reports as the initial verification that a policy has been implemented for a "unit" of government. On February 1, the SBOA will notify the Department of Local Government Finance of any "unit" not submitting this verification by the end of January of each year. The SBOA will also follow up with each "unit" that has not submitted their verification to determine the status. If a "unit" subsequently files the required report, the SBOA will notify the Department of Local Government Finance that they have received verification from the "unit" that a policy has been adopted and has been implemented. During the course of the annual or biennial audit, the SBOA will review the policies that have been implemented as the SBOA field staff determines necessary. If it is found that the policy has not been implemented the report will contain an audit result and comment and forwarded to the Department of Local Government Finance.
Sec. 18. If a "unit" has not implemented a policy under this chapter, the Department of Local Government Finance may not approve:
- the "unit's" budget; or
- any additional appropriations for the "unit"; for the ensuing calendar year until the State Board Of Accounts certifies to the Department of Local Government Finance that the unit is in compliance with this chapter.
SBOA Audit Position: The Department of Local Government Finance, not the SBOA, will make all determinations as to whether a budget or any additional appropriations shall be denied based on the requirements of this chapter. The SBOA will send to the Department of Local Government Finance a list of those "units" that have not certified in accordance with IC 5-11-13-1.1 based upon information obtained from the filing of the "units" yearend personnel report (currently known as the 100R) due to be submitted to the SBOA in January of each year. The SBOA will follow up with those that do not comply with this chapter and will notify the Department of Local Government Finance when the "unit" has complied.
Chapter 21. Contracting With a Unit
Sec. 1. This chapter applies only to a unit.
SBOA Audit Position: This chapter becomes effective July 1, 2012. Therefore, it should be in place and all "units" should be following this section on July 1, 2012.
A "unit," for the purpose of this chapter, is any county, city, town, or township in Indiana. All elected or appointed officials and all other employees within a "unit" of government are subject to this chapter. Superior Court Judges, Circuit Court Judges, County Prosecutors, county court employees, and county prosecutor office employees are not included in this definition of a "unit" as Superior Court Judges, Circuit Court Judges, and County Prosecutors are elected to a judicial district and not elected to a specific county. Therefore, they are not subject to the direction of the "elected office" of the county.
Sec. 2. As used in this chapter, "elected official" means:
- the executive or a member of the executive body of the "unit";
- a member of the legislative body of the "unit"; or
- a member of the fiscal body of the "unit."
SBOA Audit Position: The term "elected official" for the purpose of this chapter, depending on the "unit" of government refers to the executive, executive body, legislative body, or the fiscal body of the "unit" of government. Depending on the "unit," this would include county commissioners, county council members, mayors, city or town council members, township board members, and trustees of each "unit."
Sec. 3. (a) As used in this chapter, "relative" means any of the following:
- A spouse.
- A parent or stepparent.
- A child or stepchild.
- A brother, sister, stepbrother, or stepsister.
- A niece or nephew.
- An aunt or uncle.
- A daughter-in-law or son-in-law.
(b) For purposes of this section, an adopted child of an individual is treated as a natural child of the individual.
(c) For purposes of this section, the terms "brother" and "sister" include a brother or sister by the half blood.
SBOA Audit Position: A "relative" of an employee is a spouse, parent, stepparent, child, stepchild, brother, sister, stepbrother, stepsister, niece, nephew, aunt, uncle, daughter-in-law, son-in-law, adopted child, half-brother, or half-sister.
Sec. 4. (a) This chapter establishes minimum requirements regarding contracting with a "unit." The legislative body of the "unit" shall adopt a policy that includes, at a minimum, the requirements set forth in this chapter. However, the policy may:
- include requirements that are more stringent or detailed than any provision in this chapter; and
- apply to individuals who are exempted or excluded from the application of this chapter.
The "unit" may prohibit or restrict an individual from entering into a contract with the "unit" that is not otherwise prohibited or restricted by this chapter.
(b) The annual report filed by a "unit" with the State Board Of Accounts under IC 5-11-13-1 must include a statement by the executive of the "unit" stating whether the "unit" has implemented a policy under this chapter.
SBOA Audit Position: HEA 1005 establishes minimum requirements that must be adopted by the "unit." The "legislative body" of the "unit" has the ability to adopt additional requirements that are more stringent or detailed and that apply to individuals who are exempted or excluded from the application of the new law. A "unit" could fulfill the requirement of adopting a policy by merely adopting the minimum requirements set forth in HEA 1005 (2012).
A report under this chapter that is submitted after December 31, 2012, must include a statement by the executive (as defined in IC 36-1-2-5) of the "unit" regarding whether the "unit" has implemented a policy under IC 36-1-20.2 and IC 36-1-21. If a "unit" does not implement a policy under IC 36-1-20.2 and IC 36-1-21, the Department of Local Government Finance may not approve the "units" budget or any additional appropriations for the "unit" for the ensuing calendar year.
Sec. 5. (a) A "unit" may enter into a contract or renew a contract for the procurement of goods and services or a contract for public works with:
- an individual who is a relative of an elected official; or
- a business entity that is wholly or partially owned by a relative of an elected official; only if the requirements of this section are satisfied and the elected official does not violate IC 35-44-1-3.
(b) A "unit" may enter into a contract or renew a contract with an individual or business entity described in subsection (a) if:
(1) the elected official files with the "unit" a full disclosure, which must:
(A) be in writing;
(B) describe the contract or purchase to be made by the "unit";
(C) describe the relationship that the elected official has to the individual or business entity that contracts or purchases;
(D) be affirmed under penalty of perjury;
(E) be submitted to the legislative body of the "unit" and be accepted by the legislative body in a public meeting of the "unit" prior to final action on the contract or purchase; and
(F) be filed, not later than fifteen (15) days after final action on the contract or purchase, with:
- the State Board Of Accounts; and
- the clerk of the circuit court in the county where the "unit" takes final action on the contract or purchase;
(2) the appropriate agency of the "unit":
(A) makes a certified statement that the contract amount or purchase price was the lowest amount or price bid or offered; or
(B) makes a certified statement of the reasons why the vendor or contractor was selected; and
(3) the "unit" satisfies any other requirements under IC 5-22 or IC 36-1-12.
(c) An elected official shall also comply with the disclosure provisions of IC 35-44-1-3, if applicable.
(d) This section does not affect the initial term of a contract in existence at the time the term of office of the elected official of the "unit" begins.
SBOA Audit Position: A "unit" may enter into a contract or renew a contract for the procurement of goods and services or a contract for public works with an individual who is a "relative" of an "elected official." A "unit" may also enter into a contract or renew a contract for the procurement of goods and services or a contract for public works with a business entity that is wholly or partially owned by a "relative" of an "elected official" only if the requirements of this section are satisfied and the "elected official" does not violate IC 35-44-1-3.
A "unit" may enter into a contract or renew a contract with an individual or business entity described in the preceding paragraph if the "elected official" files with the "unit" a full disclosure, which must be in writing; describe the contract or purchase to be made by the "unit"; describe the relationship that the "elected official" has to the individual or business entity that contracts or purchases; be affirmed under penalty of perjury; be submitted to the legislative body of the "unit" and be accepted by the legislative body in a public meeting of the "unit" prior to final action on the contract or purchase; and be filed, not later than fifteen (15) days after final action on the contract or purchase, with the SBOA and the clerk of the circuit court in the county where the "unit" takes final action on the contract or purchase.
The appropriate agency of the "unit" must also make a certified statement in writing that the contract amount or purchase price was the lowest amount bid or offered or they must make a certified statement in writing of the reasons why the vendor or contractor was selected. The "unit" must also satisfy any other requirements under IC 5-22 or IC 36-1-12.
An "elected official" shall also comply with the disclosure provisions of IC 35-44-1-3, if applicable. This section does not affect the initial term of a contract in existence at the time the term of office of the "elected official" of the "unit" begins.
Sec. 6. Each elected officer of the "unit" shall annually certify in writing, subject to the penalties for perjury, that the officer is in compliance with this chapter. An officer shall submit the certification to the executive of the "unit" not later than December 31 of each year.
SBOA Audit Position: Each locally elected officer is required to certify under penalties of perjury to the "executive" of the "unit" before December 31 of each year that they have not violated the requirements of this chapter. Depending on the "unit," the "executive" of the unit may be one of the following: president of the county commissioners, mayor, president of the town council, trustee, or chief executive officer.
Sec. 7. If the State Board Of Accounts finds that a "unit" has not implemented a policy under this chapter, the State Board Of Accounts shall forward the information to the Department of Local Government Finance.
SBOA Audit Position: Any report filed in accordance with IC 5-11-13-1 after December 31, 2012, must include a statement by the president of the board of county commissioners, for a county not having a consolidated city, mayor of a consolidated city for a county having a consolidated city, mayor, for a city, president of the town council for a town, trustee for a township of the "unit" regarding whether the "unit" has implemented a policy under IC 36-1-20.2 and IC 36-1-21. The SBOA will use these reports as the initial verification that a policy has been implemented for a "unit" of government. On February 1, the SBOA will notify the Department of Local Government Finance of any "unit" not submitting this verification by the end of January of each year. The SBOA will also follow up with each "unit" that has not submitted their verification to determine the status. If a unit subsequently files the required report, the SBOA will notify the Department of Local Government Finance that they have received verification from the unit that a policy has been adopted and has been implemented. During the course of the annual or biennial audit, the SBOA will review the policies that have been implemented as the SBOA field staff determines necessary. If it is found that the policy has not been implemented the report will contain an audit result and comment and forwarded to the Department of Local Government Finance.
Sec. 8. If a "unit" has not implemented a policy under this chapter, the Department of Local Government Finance may not approve:
- the "unit's" budget; or
- any additional appropriations for the "unit"; for the ensuing calendar year until the State Board Of Accounts certifies to the Department of Local Government Finance that the "unit" has adopted a policy under this chapter.
SBOA Audit Position: The Department of Local Government Finance, not the SBOA, will make all determinations as to whether a budget or any additional appropriations shall be denied based on the requirements of this chapter. The SBOA will send to the Department of Local Government Finance a list of those "units" that have not certified in accordance with IC 5-11-13-1.1 based upon information obtained from the filing of the "units" year-end personnel report (currently known as the 100R) due to be submitted to the SBOA in January of each year. The SBOA will follow up with those that do not comply with this chapter and will notify the Department of Local Government Finance when the "unit" has complied.
ATTORNEY GENERAL OFFICIAL OPINON 90-10 – NOTARIAL ACTS
The Attorney General of the State of Indiana, in response to a request for an opinion on whether a township trustee is required to put an expiration date on an act he performs that a notary public may perform in Indiana, issued Official Opinion 90-10 which provided:
It is therefore, my Official Opinion that a township trustee in not required by statute to put the expiration date of his term on an act he performs that a notary may perform in Indiana.
If a township trustee complied with Indiana Code Chapter 33-16-8 (now IC 33-42-5) by attesting a notarial act with a seal indicating his official character and appends to it his date of election as township trustee, acknowledgments to deeds or other instruments taken by the township trustee shall be recorded in the same manner and way as if they had been acknowledged by a notary public.
Although there is no legal requirement in Indiana that a township trustee include the date upon which the trustee's current term will end, that information might be helpful to anyone reviewing the notarized document. A trustee may voluntarily add the date upon which his current term of office is expected to end.
Authorization Recording
IC 33-42-5-1 states "A township trustee may perform any act that a notary public may perform in Indiana. Acknowledgments to deeds or other instruments taken by a trustee shall be recorded as if the acknowledgments had been acknowledged before a notary public."
Seal Requirements
IC 33-42-5-2 states "Before a trustee may perform a notarial act, the trustee must obtain a seal that can stamp upon paper a distinct impression that indicates the trustee's official character, along with any other information that the trustee chooses. A notarial act of a trustee that is not attested by a seal is void."
Appendage of Trustee's Date of Election
IC 33-42-5-3 states "When signing any certificate of acknowledgment, jurat, or other official document, the trustee must append to it the trustee's date of election as a trustee."
Prohibition on Collecting Fee
IC 33-42-5-4 states "A trustee may not receive a fee for performing a notarial act."
Prohibited Acts
IC 33-42-5-5 states "A trustee may not perform an act that is prohibited to a notary public."
- O
- P
Payment of Funds Due Deceased Person
Payments to Banks of Compensation Due Employees
Penalties and Interest - Ways to Avoid
Public Employee Retirement Fund (PERF) Contributions
Official Opinion 89-19 of the Attorney General of the State of Indiana was issued in response to the following questions:
- Must a partition fence be constructed to hold hogs whether or not the adjoining owner has hogs?
- When a question arises as to the sufficiency of the fence should the trustee decide whether the fence meets the statutory requirements?
The Attorney General provided the following conclusion:
- Indiana Code Section 32-10-9-3 mandates that all partition fences must be sufficiently tight and strong to hold hogs, sheep, cattle, mules and horses regardless of whether the landowners have these animals.
- When a complaining landowner has given an adjoining landowner notice to build, rebuild or repair his proportionate part of a fence and after twenty (20) days it has not been built, rebuilt or repaired to meet the statutory requirements of Indiana Code Section 32-10-9-3, the complaining landowner shall then notify the trustee of the township in which the land is located of the improvement he may desire made on the partition fence to meet the statutory requirements of Indiana Code Section 32-10-9-3 and the trustee has jurisdiction. The trustee should determine whether the partition fence meets the statutory requirements of Indiana Code Section 32-10-9-3. If it does not meet the statutory requirements, the trustee has the duty to see that the statutory requirements are enforced. (Our Emphasis) The trustee shall estimate the cost for such fence, building, rebuilding or repairing the fence and notify the defaulting landowner against whom the complaint was made. If the defaulting landowner against which the complaint was made fails to meet the statutory requirements after twenty (20) days the trustee shall have the fence built, rebuilt or repaired to meet the statutory requirements and, pay the contractor who builds, rebuilds or repairs the fence as provided by Indiana Code Section 32-10-9-5.
The trustee shall follow the procedure provided in Indiana Code Section 32-10-9-4 to receive reimbursement from the county general funds. The amount paid out of the county general funds shall be placed by the auditor on the tax duplicate against lands of the landowner affected by the work and shall be collected as taxes are collected, and when collected shall be paid into the county fund.
PAYMENT OF FUNDS DUE DECEASED PERSON
The State Board of Accounts is often asked the correct method of making payment of money due an official, employee, or other person who has died. The following procedure is authorized by IC 29-1-8-1. IC 29- 1-8-1 states "(a) Forty-five (45) days after the death of a decedent and upon being presented an affidavit that complies with subsection (b), a person: (1) indebted to the decedent; or (2) having possession of personal property or an instrument evidencing a debt, an obligation, a stock, or a chose in action belonging to the decedent; shall make payment of the indebtedness or deliver the personal property or the instrument evidencing a debt, an obligation, a stock, or a chose in action to a person claiming to be entitled to payment or delivery of property of the decedent. (b) The affidavit required by subsection (a) must be an affidavit made by or on behalf of the claimant and must state the following: (1) That the value of the gross probate estate, wherever located (less liens and encumbrances), does not exceed fifty thousand dollars ($50,000). (2) That forty-five (45) days have elapsed since the death of the decedent. (3) That no application or petition for the appointment of a personal representative is pending or has been granted in any jurisdiction. (4) The name and address of each other person that is entitled to a share of the property and the part of the property to which each person is entitled. (5) That the claimant has notified each person identified in the affidavit of the claimant's intention to present an affidavit under this section. (6) That the claimant is entitled to payment or delivery of the property on behalf of each person identified in the affidavit."
PAYMENTS TO BANKS OF COMPENSATION DUE EMPLOYEES
Pursuant to IC 5-10-9, an employee of the township may make a written request that any compensation due them from the township be deposited to their account in a bank or trust company.
IC 5-10-9-2 states "An employee of a municipal corporation may make a written request that any compensation due him from the municipal corporation be deposited to his account in a bank or trust company. Upon receipt of request, the officer responsible for making the disbursements may: (1) draw a check in favor of the bank or trust company set forth in the request for the credit of the employee; or (2) in the event more than one (1) employee of the same municipal corporation designates the same bank or trust company, draw a single check in favor of the bank or trust company for the total amount due the employees and transmit the check to the bank or trust company identifying each employee and the amount to be deposited in each employee's account."
The State Board of Accounts is of the audit position if any employee desires that the fiscal officer transmit his or her compensation to a bank, a written request must be furnished to the fiscal officer. The written request should clearly indicate the bank or trust company and the period of time to be covered.
If the fiscal officer agrees to honor the request and for any continued issuance of individual payroll checks, we suggest the checks be made out: "Pay to the order of the Bank or Trust Company for John Doe." The original check would be delivered to the Bank or Trust Company, the second copy given to the employee as a receipt for deductions, and the third copy retained by the fiscal officer as check register.
PENALTIES AND INTEREST - WAYS TO AVOID
We encounter situations of townships which have paid penalties and interest for either late or nonpayment of amounts owed. Reasons given for not making timely payments vary but often include references to lack of funds because of a multiple of reasons such as late tax distributions. We often have to take audit exception because our audit position is taxpayer dollars should not be used to pay penalties and interest because officials and employees have the duty to pay claims and remit taxes timely. Failure to pay claims or remit taxes in a timely manner could be an indicator of serious financial problems which should be investigated by the governmental unit. Additionally, officials and employees have a responsibility to perform duties in a manner which would not result in any unreasonable fees being assessed against the governmental unit. Any penalties, interest or other charges paid by the governmental unit may be the personal obligation of the responsible official or employee.
Our audit position is with the understanding various mechanisms are available to avoid having to pay penalty and interest payments from taxpayer funds. IC 36-1-8-4 concerning loans between funds provides in part "(a) The fiscal body of a political subdivision may, by ordinance or resolution, permit the transfer of a prescribed amount, for a prescribed period, to a fund in need of money for cash flow purposes from another fund of the political subdivision if all these conditions are met: (1) It must be necessary to borrow money to enhance the fund that is in need of money for cash flow purposes. (2) There must be sufficient money on deposit to the credit of the other fund that can be temporarily transferred. (3) Except as provided in subsection (b), the prescribed period must end during the budget year of the year in which the transfer occurs. (4) The amount transferred must be returned to the other fund at the end of the prescribed period. (5) Only revenues derived from the levying and collection of property taxes or special taxes or from operation of the political subdivision may be included in the amount transferred."
IC 36-6-6-15 concerning tax anticipation warrants states "(a) If the legislative body finds that an emergency requires the borrowing of money to meet the township's current expenses, it may take out temporary loans in an amount not more than eighty percent (80%) of the total anticipated revenue for the remainder of the year in which the loans are taken out. (b) The legislative body must authorize the temporary loans by a resolution: (1) stating the nature of the consideration for the loans; (2) stating the time the loans are payable; (3) stating the place the loans are payable; (4) stating a rate of interest; (5) stating the anticipated revenues on which the loans are based and out of which they are payable; and (6) appropriating a sufficient amount of the anticipated revenues on which the loans are based and out of which they are payable for the payment of the loans. (c) The loans must be evidenced by time warrants of the township stating: (1) the nature of the consideration; (2) the time payable; (3) the place payable; and (4) the anticipated revenues on which they are based and out of which they are payable."
IC 5-13-6-3 concerning tax advances states in part "(b) Every county treasurer who, by virtue of the treasurer's office, is the collector of any taxes for any political subdivision wholly or partly within the county shall, not later than thirty (30) days after receipt of a written request for funds filed with the treasurer by a proper officer of any political subdivision within the county, advance to that political subdivision a portion of the taxes collected before the semiannual distribution. The amount advanced may not exceed the lesser of: (1) ninety-five percent (95%) of the total amount collected at the time of the advance; or (2) ninety-five percent (95%) of the amount to be distributed at the semiannual distribution. (c) Upon notice from the county treasurer of the amount to be advanced, the county auditor shall draw a warrant upon the county treasurer for the amount. The amount of the advance must be available immediately for the use of the political subdivision."
IC 36-6-6-14 concerning borrowing states "(a) At any special meeting, if two (2) or more members give their consent, the legislative body may determine whether there is a need for fire and emergency services or other emergency requiring the expenditure of money not included in the township's budget estimates and levy. (b) Subject to section 14.5 of this chapter, if the legislative body finds that a need for fire and emergency services or other emergency exists, it may issue a special order, entered and signed on the record, authorizing the executive to borrow a specified amount of money sufficient to meet the emergency. (c) Notwithstanding IC 36-8-13-4(a), the legislative body may authorize the executive to borrow a specified sum from a township fund other than the township firefighting fund if the legislative body finds that the emergency requiring the expenditure of money is related to paying the operating expenses of a township fire department or a volunteer fire department. At its next annual session, the legislative body shall cover the debt created by making a levy to the credit of the fund for which the amount was borrowed under this subsection. (d) In determining whether a fire and emergency services need exists requiring the expenditure of money not included in the township's budget estimates and levy, the legislative body and any reviewing authority considering the approval of the additional borrowing shall consider the following factors: (1) The current and projected certified and noncertified public safety payroll needs of the township. (2) The current and projected need for fire and emergency services within the jurisdiction served by the township. (3) Any applicable national standards or recommendations for the provision of fire protection and emergency services. (4) Current and projected growth in the number of residents and other citizens served by the township, emergency service runs, certified and noncertified personnel, and other appropriate measures of public safety needs in the jurisdiction served by the township. (5) Salary comparisons for certified and noncertified public safety personnel in the township and other surrounding or comparable jurisdictions. (6) Prior annual expenditures for fire and emergency services, including all amounts budgeted under this chapter. (7) Current and projected growth in the assessed value of property requiring protection in the jurisdiction served by the township. (8) Other factors directly related to the provision of public safety within the jurisdiction served by the township. (e) In the event the township received additional funds under this chapter in the immediately preceding budget year for an approved expenditure, any reviewing authority shall take into consideration the use of the funds in the immediately preceding budget year and the continued need for funding the services and operations to be funded with the proceeds of the loan."
Additionally, governmental units can contact various creditors to discuss renegotiation of terms to delay payment and change rates, etc., to minimize and help avoid getting into situations that require payments of penalty and interest. Consequently, the State Board of Accounts is of the audit position taxpayer dollars should not be used to pay for penalty and interest which could have been avoided with due diligence.
Please be advised of the availability of a property tax distribution advance to help avoid overdrawn funds and cash flow problems.
IC 5-13-6-3 States in part (b) "Every county treasurer who, by virtue of the treasurer's office, is the collector of any taxes for any political subdivision wholly or partly within the county shall, not later than thirty (30) days after receipt of a written request for funds filed with the treasurer by a proper officer of any political subdivision within the county… advance to that political subdivision a portion of the taxes collected before the semiannual distribution. The amount advanced may not exceed the lesser of: (1) ninety-five percent (95%) of the total amount collected at the time of the advance; or (2) ninety-five percent (95%) of the amount to be distributed at the semiannual distribution. (c) Upon notice from the county treasurer of the amount to be advanced, the county auditor shall draw a warrant upon the county treasurer for the amount. The amount of the advance must be available immediately for the use of the political subdivision. (d) At the semiannual distribution all the advances made to any political subdivision under subsection (b) shall be deducted from the total amount due any political subdivision as shown by the distribution. (e) If a county auditor fails to make a distribution of tax collections by the deadline for distribution under subsection (b), a political subdivision that was to receive a distribution may recover interest on the undistributed tax collections under IC 6-1.1-27-1."
PUBLIC EMPLOYEE RETIREMENT FUND (PERF) CONTRIBUTIONS
IC 5-10.2-3-2 now states in part "(b) Except in cases where: (1) the contribution is made on behalf of the member; or (2) a retired member of the Indiana state teachers' retirement fund may not make contributions during a period of reemployment as provided in IC 5-10.2-4-8(d); each member shall, as a condition of employment, contribute to the fund three percent (3%) of the member's compensation. (c) Except as provided in IC 5-10.2-4-8(d), a member of a fund may make contributions to the member's annuity savings account in addition to the contributions required under subsection (b). The total amount of contributions that may be made to a member's annuity savings account with respect to a payroll period under this subsection may not exceed ten percent (10%) of the member's compensation for that payroll period. The contributions made under this subsection may be picked-up and paid by an employer as provided in subsection (d). (d) In compliance with rules adopted by each board, an employer, under Section 414(h)(2) of the Internal Revenue Code, may pick-up and pay the contributions under subsection (c), subject to approval of the board and to the board's receipt of a favorable private letter ruling from the Internal Revenue Service. The employer shall reduce the member's compensation by an amount equal to the amount of the member's contributions under subsection (c) that are picked-up by the employer. Each board shall by rule establish the procedural requirements for employers to carry out the pick-up in compliance with Section 414(h)(2) of the Internal Revenue Code."
The State Board of Accounts has received inquiries in regards to the maximum possible contributions. Accordingly, we asked the Attorney General of the State of Indiana if the additional contributions provided for in IC 5-10.2-3-2 are limited to ten percent (10%) or thirteen percent (13%). The Conclusion of Advisory Opinion Number 00-36 issued by the Attorney General states "It is our opinion, that the ten percent (10%) limitation provided in Indiana Code § 5-10.2-3-2(c) applies to the sum of mandatory and voluntary contribution amounts. Moreover, the total amount contributed by a member, including mandatory, voluntary, and any amounts contributed on behalf of the member may not exceed ten percent (10%) of the member's compensation."
- Q
Qualifying for Office - Official Bonds
QUALIFYING FOR OFFICE – OFFICIAL BONDS
OBTAIN BOND FIRST
IC 5-4-1-9 states "An officer required to give an official bond shall give the bond before the commencement of his term of office. If the officer fails to give the bond before that time, the officer may not take office."
COUNTY AUDITOR APPROVAL
IC 5-4-1-8 states in part "The official bonds of officers, if sufficient, shall be approved as follows …township trustee . . . by the county auditor."
PAYABLE TO STATE
IC 5-4-1-10 states "All official bonds shall be payable to the state of Indiana; and every such bond shall be obligatory to such state, upon the principal and sureties, for the faithful discharge of all duties required of such officer by any law, then or subsequently in force, for the use of any person injured by any breach of the condition thereof."
AMOUNT OF BOND
IC 5-4-1-18 states in part "(c) Except as provided in subsections (h) and (i), the fiscal bodies of the respective units shall fix the amount of the bond of . . . township trustees . . . as follows: (1) The amount of annual coverage must equal thirty thousand dollars ($30,000) for each one million dollars ($1,000,000) of receipts of the officer's office during the last complete fiscal year before the purchase of the bond, subject to subdivision (2). (2) The amount of annual coverage may not be less than thirty thousand dollars ($30,000) nor more than three hundred thousand dollars ($300,000) unless the fiscal body approves a greater amount of annual coverage for the officer or employee. . ."
FILE BOND
IC 5-4-1-5.1(b) states in part: "Every elected or appointed officer, official, deputy, or employee of a political subdivision who is required by section 18 of this chapter to file an official bond for the faithful performance of duty . . . shall file the bond in the office of the county recorder in the county residence of the officer, official, deputy or employee."
COST OF BOND
The cost on the trustee's bond is payable from the township (General) fund. [IC 5-4-5-2]
OTHER BOND SITUATIONS
We have noted situations where various employees (other than bonded trustees and deputy trustees) are involved in handling cash and cash related transactions (i.e., township community centers, parks, etc.) without the township being afforded bond coverage.
We strongly recommend and encourage township officials to immediately obtain bond coverage for all employees that might be handling cash and related transactions. Township officials should also give consideration to providing crime insurance coverage.
Whenever deemed necessary by the trustee and township board to bond any employees not required by a specific statute to be bonded otherwise, such employees may be bonded by either individual or blanket bonds conditioned upon faithful performance of duties and in amounts and with surety approved by the township board by adopting a resolution in accordance with IC 36-1-3-1 et seq.
The State Board of Accounts is of the audit position continuation certificates or renewals should not be used in lieu of obtaining the required annual bond coverage.
No charge shall be made by the recorder of the county for recording the official bonds of any public officer, deputy, appointee or employee. [IC 36-2-7-10(g)(1)]
When a minimum premium is required for official bonds, the township should make certain maximum coverage is provided for the required minimum premium.
C 5-4-1-1 states in part (a) ". . . every officer and every deputy, before entering on the officer's or deputy's official duties, shall take an oath to support the Constitution of the United States and the Constitution of the State of Indiana, and that the officer or deputy will faithfully discharge the duties of such office."
- R
Receiving Township Property and Records from Predecessor
Records to the County Recorder
Rental Assistance Program - IHCDA
Resolution Establishing Salaries of Township Officials and Employees (Twp Form No. 17)
Pursuant to IC 36-1-8-5.1, a Township can establish a rainy day fund (RDF) through the adoption of a resolution. The resolution must state the following: (1) the purposes of the RDF and (2) the sources of funding for the RDF. The sources of funding can include dormant funds (IC 36-1-8-5), CAGIT (IC 6- 3.5-1.1-21.1), COIT (IC 6-3.5-6-17.3), CEDIT (IC 6-3.5-7-17.3), or any other funding source specified in the resolution and not otherwise prohibited by law.
In addition, a Township can transfer an amount from a fund as long as it is authorized by the resolution, does not exceed 10% of the total annual budget for that fiscal year and is not from a debt service fund.
Our position is that a unit can transfer money from an appropriated fund to the RDF as long as the purpose of the levy has been fulfilled (and the Township Board has stated as such) and the transfer does not exceed 10% of the total annual budget. Also, any fund that has been declared dormant (by the Township Board) under IC 36-1-8-5 can be transferred to the RDF. Please note that Debt Service Funds are explicitly prohibited from being transferred to the RDF. There have been changes to the fire fund statute that now allows a Township to transfer money from the fire fund.
Township funds that cannot be transferred to the RDF:
Township Assistance: IC 12-20-21-3 states: “The funds are continuing funds and do NOT revert to any other fund at the end of the year.”
Fire Protection Territories: IC 36-8-19-8 states in part: “…money in this fund cannot be used for any other expenses.”
Township funds that can be transferred to the RDF:
Township (General): Can be transferred to RDF, subject to max of 10% total annual budget
Fire: Can be transferred to RDF, subject to max of 10% total annual budget
Fire Cumulative: Can be transferred to RDF, subject to max of 10% total annual budget [IC 36-8-14] - NOTE: If money is transferred from a Cumulative fund, the DLGF will probably question if you still need that tax levy.
Park & Recreation: Can be transferred to RDF, subject to max of 10% total annual budget - NOTE: For Townships with a population between 2,000 and 3,000 the following statute would apply and these funds may not be transferred to RDF. [IC 36-10-7-7 states in part: “to be used…for the maintenance and improvement of the park and for no other purpose].”
Township funds that could be in the Township General fund, depending on other information:
Donations: If it is a nonrestricted donation, it would go to the Township General fund. If it is a restricted donation, we would audit to the agreement.
Cemetery: If a cemetery is conveyed to a township, all the assets, funds, cash, etc. may only be used in connection with that cemetery [IC 23-14-64-3], and therefore could not be transferred to the RDF. However, if the township has established a cemetery, the expenses shall be paid out of the Township General fund [IC 23-14-69-9].
RECEIVING TOWNSHIP PROPERTY AND RECORDS FROM PREDECESSOR
IC 36-6-4-14, concerning trustees who do not succeed themselves in office, states "When his term of office expires, the executive shall: (1) immediately deliver to the new executive custody of all funds and property of the township, except records necessary in the preparation of his annual report; (2) deliver to the new executive, not later than the second Monday in the next January, his annual report and any records he has retained; and (3) attend the annual meeting of the township legislative body held under IC 36-6-6-9 and submit to inquiries from the legislative body concerning the operation of the executive's office during the preceding calendar year."
Therefore, the State Board of Accounts is of the audit position the trustee in office on December 31, 2010, is required to turn over to the new trustee all books, township bulletins, the township manual, and records of the township.
The bank accounts should be in the name of the township, for example, "Clay Township, St. Joseph County", not in the name of the trustee. Therefore, if the account is properly in the name of the township, the change can be made at the bank by simply registering the authorized signature of the incoming trustee.
Township business is a continuing one; a change of office need not interrupt that business.
We suggest the outgoing trustee prepare in duplicate an itemized inventory of equipment and other assets owned by the township on December 31, to be signed by the successor and outgoing trustee. One copy is for the outgoing trustee and one copy is to be kept by the incoming trustee as a township record.
Sometimes difficulty exists for a person in office to convey to their successor all of the knowledge gained during a term or terms of office. However, you may be able to give valuable assistance and you are urged to provide information to your successor.
IC 5-11-9-4(b) states in part, “. . . records be maintained showing which hours were worked each day by officers and employees . . . employed . . . in more than one (1) position by the same public agency . . .”
The requirement may be accomplished by preparing an endorsement on the payroll claim form showing the general work schedule and listing those specific employees who worked hours different from that general work schedule. Each person responsible for employees’ attendance at a work station or for forwarding such information to the payroll department will be responsible for preparing such endorsement on the payroll claim for his or her office, department, or other work attendance area.
Another alternative is to add a statement on each Employee’s Service Record, General Form 99A and/or Employee’s Earnings Record, General Form 99B indicating the hours to be worked daily by that employee or official.
Please continue using your current payroll claim, service record and earnings record forms with the foregoing suggested additions.
Please contact the Office of the Indiana Public Access Counselor, if questions regarding the retention of public records.
Responsibility
The responsibility for township records management rests with the Trustee. Records management is defined as a program to apply management techniques to the purchase, creation, utilization, maintenance, retention, preservation, and disposal of records, undertaken to improve efficiency and reduce costs of record keeping, including management of the following:
- Filing and microfilming equipment and supplies.
- Filing and information retrieval systems.
- Records.
- Historical Documentation.
- Micrographic retention programming.
- Critical records protection.
IC 5-15-6 provides the specific duties and responsibilities for the participants in the local government records disposal process. The participants are:
- The local governmental official who is the records custodian;
- The Commission of Public Records of the county in which the local governmental official is located;
- The Indiana State Archives, Indiana Commission on Public Records;
- A county historical or genealogical society.
County Commissions
“(a) A commission is hereby created in each county of the state which shall be known as the county commission of public records of ________________ county. (b) The county commission shall consist, ex officio, of the judge of the circuit court, the president of the board of county commissioners, the county auditor, the clerk of the circuit court, the county recorder, the superintendent of schools of the school district in which the county seat is located and the city controller of the county seat city, and if there is no city controller, then the clerk-treasurer of the county seat city or town shall be a member of such commission. (c) The commission shall elect one (1) of its members to be chairman. The clerk of the circuit court or the county recorder must be secretary of the commission. The person who serves as secretary shall be determined as follows: (1) By mutual agreement of the clerk of the circuit court and the county recorder. (2) If a mutual agreement cannot be reached under subdivision (1), by an affirmative vote of a majority of members of the county commission. The members of the county commission shall serve without compensation and shall receive no disbursement for any expense. (d) The county commission shall meet at least one (1) time in each calendar year." (IC 5-15-6-1)
Duties of County Commission
"(a) It shall be the duty of the county commission to determine the following: (1) Which public records, if any, are no longer of official or historical value. (2) Which public records are of current official value and should be retained in the office where they are required to be filed. (3) Which public records are of official value but are consulted and used so infrequently that they are no longer of appreciable value to the officer with whom they are required to be filed. (4) Which public records are of no apparent official value but which do have historical value. (b) The county commission may request the assistance of the commission on public records established under IC 5-15-5.1 in developing records management programs." (IC 5-15-6-2)
Retention Schedules and Records Not Covered By Retention Schedules
IC 5-15-6-2.5 states in part: "(a) The county commission shall implement retention schedules for use by local government officials as part of a records management program for local government public records not more than thirty (30) days after adoption by the oversight committee on public records as established by IC 5-15-5.1-18. (b) All requests to destroy, transfer, or otherwise dispose of records that are not covered by an approved retention schedule are to be submitted to the county commission according to the procedure established under this chapter. …(e) Whenever a local government includes parts of more than one (1) county, the commission of the county that contains the greatest percentage of population of the local government has jurisdiction over the records of the local government for the purposes of this chapter."
Destruction of Records
IC 5-15-6-3 states in part: "(a) As used in this section, 'original records' includes the optical image of a check or deposit document when: (1) the check or deposit document is recorded, copied, or reproduced by an optical imaging process described in subsection (e); and (2) the drawer of the check receives an optical image of the check after the check is processed for payment or the depositor receives an optical image of the deposit document after the document has been processed for the deposit. (b) All public records which, in the judgment of the commission, have no official or historical value, and which occupy space to no purpose in the offices and storerooms of the local government of a county, shall be destroyed or otherwise disposed of. Except as provided in this section, such records shall not be destroyed until a period of at least three (3) years shall have elapsed from the time when the records were originally filed, and no public records shall be destroyed within a period of three (3) years if the law provides that they shall be kept for a longer period of time, or if the law prohibits their destruction. (c) Subject to this section, records may be destroyed before three (3) years elapse after the date when the records were originally filed if the destruction is according to an approved retention schedule. (d) No financial records or records relating thereto shall be destroyed until the earlier of the following actions: (1) The audit of the records by the state board of accounts has been completed, report filed, and any exceptions set out in the report satisfied. (2) The financial record or records have been copied or reproduced as described in subsection (e).” (Our Emphasis)
State Archives
"Public records having an official value but which are used infrequently by the officer with whom they are filed or maintained shall, on order of the commission, be removed and transferred to the Indiana state archives." (IC 5-15-6-5)
Orders of Commission; Historical or Genealogical Societies
IC 5-15-6-7 states in part: "...A copy of any order to destroy public records shall be delivered to: (1) the state archivist at the Indiana state archives; (2) any active genealogical society of the county; and (3) any active historical society of the county; not later than sixty (60) days before the destruction date, accompanied by a written statement that the state archivist at the Indiana state archives or society may procure at its expense such records for its own purposes...”
Penalties
"A public official or other person who recklessly, knowingly, or intentionally destroys or damages any public record commits a Level 6 felony unless: (1) the commission shall have given its approval in writing that the public records may be destroyed; (2) the commission shall have entered its approval for destruction of the public records on its own minutes; or (3) authority for destruction of the records is granted by an approved retention schedule established under this chapter." (IC 5-15-6-8)
There are two authorized methods to dispose of public records. The first is that of submitting a request to the County Commission of Public Records to authorize the destruction or transfer of listed public records, created by the 1939 law. The second method is to use retention schedules, which was added by the General Assembly in 1991. IC 5-15-6 applies only to nonjudicial public records.
HOW TO SUBMIT A REQUEST TO DESTROY PUBLIC RECORDS
If an official has identified public records that are no longer needed or required to be retained, and no retention schedule exists that covers the record or records involved, that official should:
- obtain a blank PR-1 form ("Request to Destroy/Transfer Public Records") from the Clerk of the Circuit Court of the county. The Clerk is the ex-officio Secretary of the county Commission of Public Records;
- fill out the form, listing the records to be disposed of;
- submit the completed form to the Clerk of the Circuit Court (ie., Secretary of the Commission);
- the Clerk will either call a meeting of the county Commission of Public Records, or add the request to the agenda of the scheduled meeting. At the meeting, the Commission will vote to authorize the disposal of the records;
- if the Commission grants authority to dispose of the records, the requests are reviewed by the Indiana State Archives and the designated historical or genealogical society of the county during the 60 day review period. If either the State Archives or the society wishes to obtain any of the records, those records should be set aside to be picked up by the requestor. NOTE: HISTORICAL AND GENEALOGICAL SOCIETIES MAY NOT OBTAIN CONFIDENTIAL PUBLIC RECORDS;
- if no request is made to obtain the public records within the review period, the records may be destroyed or otherwise disposed of. NOTE: CONFIDENTIAL RECORDS MUST BE DESTROYED IN A MANNER THAT PRESERVES THE CONFIDENTIALITY OF THE INFORMATION (IE., SHREDDING, BURNING, ETC.). (Guide to Preservation and Destruction of Local Government Public Records)
IC 36-6-4-12(d) states: “Within ten (10) days after the legislative body's action under IC 36-6-6-9, the executive shall file a copy of the report and its accompanying vouchers, as adopted by the legislative body, in the county auditor's office. The legislative body may, for the benefit of the township, bring a civil action against the executive if the executive fails to file the report within ten (10) days after the legislative body's action. The legislative body may recover five dollars ($5) for each day beyond the time limit for filing the report, until the report is filed.
IHCDA RENTAL ASSISTANCE PROGRAM
The Indiana Housing and Community Development Authority (IHCDA) has been designated by the State of Indiana to receive, administer, and disburse funds under the Rental Assistance Fund (RAF Program). Some Townships have entered into agreements with IHCDA that enables IHCDA to provide up to $40 per application processed by the Township. SBOA audit position is that this is a fee for service and the revenue received should be receipted into an operating fund of the Township and once properly appropriated may be used for any operating expense of the Township. Any further questions related to the RAF program should be sent to RAF@ihcda.in.gov.
Indiana Code 36-6-8-3(a) states…”The annual appropriations to a township executive for the expenses of renting an office and telephone and telegraph expenses must, as nearly as is possible, be equal to the actual cost of those items. If the township executive uses a part of the executive’s residence for an office, the township legislative body shall appropriate a reasonable sum for that office space.”
The Township Advisory Board needs to determine in writing what is considered a reasonable amount of rent expense. We want to emphasize that only the trustee can receive rent. Other employees, including employees that live in the same residence when the Township office is located in the Trustee’s home, would not be allowed to receive reimbursements for renting an office.
Indiana Code 5-11-1-27(l) requires a public officer who has actual knowledge or reasonable cause to believe that there has been a misappropriation of public funds or assets to immediately send a written notice to the state board of accounts and the prosecuting attorney. Indiana Code 5-11-1-27(l) states:
(l) A public officer who has actual knowledge of or reasonable cause to believe that there has been a misappropriation of public funds or assets of the public office, including:
- information obtained as a result of a police report;
- an internal audit finding; or
- another source indicating that a misappropriation has occurred; shall immediately send written notice of the misappropriation to the state board of accounts and the prosecuting attorney serving in the area governed by the political subdivision.
The State Examiner Directive 2015-6 also addresses this statute.
The policy must also consider Ind. Code § 5-11-1-27(l), which requires public officials who have actual knowledge of or reasonable cause to believe that there has been a misappropriation of public funds to immediately send written notice of the misappropriation to the State Board of Accounts and the prosecuting attorney. There is no materiality threshold applicable to Ind. Code § 5-11-1-27(l). Thus, whenever a political subdivision has actual knowledge or is reasonably certain that a misappropriation of public funds has occurred (regardless of the dollar amount), the political subdivision must send written notice of the misappropriation to the State Board of Accounts and the local prosecuting attorney. Misappropriation occurs when an employee or in-house contractor of the political subdivision wrongly takes or embezzles public funds. When there is a known misappropriation or embezzlement of public funds by an internal actor, materiality is irrelevant. Indiana law requires the political subdivision to report the activity to the State Board of Accounts and the local prosecutor. Ind. Code § 5-11-1-27(l).
We are finding that the requirements of this statute are not being followed consistently. If a public official fails to report the misappropriation of funds or assets in a timely manner, this will result in a finding in the audit report. This may also result in additional audit costs. Also, be aware that reporting the misappropriation to a law enforcement agency does not fulfill the requirements of the statute. Even when you have notified law enforcement officials, you must still notify the board of accounts and the prosecutor. If there are any concerns on the response the board of accounts will take after a report is received or how they will liaison with the law enforcement investigation, you can contact our Director of Special Investigations at (317) 232-2513.
RESOLUTION ESTABLISHING SALARIES OF TOWNSHIP OFFICERS AND EMPLOYEES (FORM 17)
IC 36-6-6-10 requires the Township board to set salaries; wages; rates of hourly pay; and remuneration other than statutory allowances of all Township officials and employees, except assessing officials and employees. However, please remember the Township board should RECORD THE SALARIES SO FIXED IN THE TOWNSHIP BOARD MINUTES. A type of format for recording these salaries should be the existing format of Township Form No. 17. We recommend the board set the salaries of Township officials and employees, in conjunction with the preparation and completion of the Township budget.
Salaries established for any one position should not have multiple classifications (i.e., a clerk position should not be annual and hourly and weekly, etc.).
Township Form No. 17 has been prescribed to fulfill the requirements of the statute.
- S
Supplemental Local Income Tax (LIT) Distributions
SALES TAX - EXEMPTIONS - AUDIT POSITIONS
Following are some general comments pertaining to the State Board of Accounts audit position regarding local governmental unit's exemption from sales tax:
- Items should be purchased through the issuance of purchase orders and paid for by township checks to avoid the problem of reimbursing employees for sales tax paid on materials purchased for the township when the township is exempt from sales tax.
- Sales tax paid on lodging and meals by officials and employees while in travel status on township business of the township may be reimbursed in accordance with an official travel expense reimbursement policy adopted by resolution of the township.
- We have often noted that out-of-state vendors not assessing sales tax on materials purchased out-of-state by a governmental unit for delivery in Indiana.
- The Indiana Department of Revenue has consistently taken a position that the furnishing of food, fuel, drugs, etc., by the township to needy persons (Township Assistance Laws) are exempt from sales tax because the commodities are predominantly for use in the performance of governmental functions. The township would not be exempt, however, from paying sales tax on utility bills because the utility bills of Township Assistance recipients are billed in the name of each individual and not in the name of the township and individuals are not exempt from the payment of sales tax. Therefore, all purchase orders issued directly to a vendor, except for utility bills, are normally, exempt from sales tax.
Should you desire additional information concerning State taxation matters, we suggest you contact the Indiana Department of Revenue.
We often receive inquiries concerning our audit position regarding pubic purchases for unusual situations.
The State Board of Accounts encourages the bidding and quote procedures whenever applicable to help ensure receiving competitive pricing for governmental units. However, IC 5-22-10-1 provides "Notwithstanding any other provision of this article, a purchasing agent may make a purchase under this chapter without soliciting bids or proposals."
Supply purchases are a possibility for consideration of the special purchase provisions of IC 5-22- 10-1 et seq. However, we are of the audit position, townships should obtain the written position of the township attorney as to which section of IC 5-22-10 might be applicable to any particular situation. An example might be the township attorney advises IC 5-22-10-15 is applicable. IC 5-22-10-15 states "(a) A purchasing agent may purchase supplies if the purchase is made from a person who has a contract with a federal agency and the person's contract with the federal agency requires the person to make the supplies available to the state or political subdivisions. (b) A purchasing agent for a political subdivision may purchase supplies if the purchase is made from a person who has a contract with a state agency and the person's contract with the state requires the person to make the supplies or services available to political subdivisions, as provided in IC 4-13-1.6 or IC 5-22-17-9."
The written position of the township attorney should then be attached to the completed Special Purchase Contract File List Form and retained and for audit as a public record.
SUPPLEMENTAL LOCAL INCOME TAX (LIT) DISTRIBUTIONS
Indiana Code 6-3.6-9-15 requires the State Budget Agency to provide the amount of supplemental distributions for qualifying counties to the Department of Local Government Finance before May 2nd. The supplemental distribution is disbursed to counties that have a balance in the county trust account exceeding fifteen percent (15%) of the certified distribution to be made to the county in the year of determination.
It is our understanding that for Townships, LIT distributions will primarily be made up of Certified Shares and possibly Public Safety dollars. We have found Certified Shares are unrestricted in statute and the expectation would be that the distributions are receipted into the Township General Fund unless the Township Board has restricted the funds further by resolution. The Public Safety distributions are restricted in statute and must be receipted into the Fire or Cumulative Fire fund. The Department of Local Government Finance (DLGF) has requested that we notify taxing units that these supplemental distributions should be tracked separately and provided to the DLGF for budgeting purposes. These supplemental distributions are in addition to the normal LIT distributions. Only two Counties have been provided these supplemental LIT distributions this year (Kosciusko and Owen County).
- T
Telephone, Cellular, and Internet Expenses
TOWNSHIP TELEPHONE, CELLULAR, AND INTERNET EXPENSES
We have received numerous inquiries about the reimbursement of telephone, cellular, and internet expenses. Our prior audit position stated that these services should only be reimbursed up to 50% of the cost of the services if the services were not strictly restricted to Township use. Effective October 5, 2017, we have modified our position that we will take into consideration a personal phone and internet reimbursement policy that is approved by the Township Board. If there is a policy adopted by the Township Board and presented to us that allows the Trustee a full reimbursement of these expenses, even though the use of these services was not restricted to Township use, we would not take exception.
IC 36-6-8-3 states in part: “The annual appropriation to a township executive for the expenses of renting an office and telephone…expenses must, as nearly as possible, be equal to the actual cost of those items. If the township executive uses a part of the executive’s residence for an office, the township legislative body shall appropriate a reasonable sum for that office space.”
IC 12-20-5.5-3 states in part: “The township trustee shall ensure adequate access to township assistance services, including a published telephone number in the name of the township.”
IC 36-1-8-4 states in part (a) "The fiscal body of a political subdivision may, by . . . resolution, permit the transfer of a prescribed amount, for a prescribed period, to a fund in need of money for cash flow purposes from another fund of the political subdivision if all these conditions are met: (1) It must be necessary to borrow money to enhance the fund that is in need of money for cash flow purposes. (2) There must be sufficient money on deposit to the credit of the other fund that can be temporarily transferred. (3) Except as provided in subsection (b), the prescribed period must end during the budget year of the year in which the transfer occurs. (4) The amount transferred must be returned to the other fund at the end of the prescribed period. (5) Only revenues derived from the levying and collection of property taxes or special taxes or from operation of the political subdivision may be included in the amount transferred."
IC 36-6-8-3(b) states in part: “The township executive is entitled to a sum for mileage in the performance of official duties equal to the sum per mile paid to state officers and employees. However, this subsection does not apply when the township executive uses a township vehicle in the performance of official duties.”
The current mileage rate can be found on the Indiana Department of Administration’s website.
IC 36-6-6-12(b) states: “Each representative of the township attending any meeting, conference, seminar, or convention approved by the township trustee shall be allowed reimbursement for all necessary and legitimate expenses incurred while representing the township. Expenses shall be paid to each representative in accordance with the township's reimbursement policy, which may include an established per diem rate, as recommended by the township trustee and adopted by the township legislative body.”
A township trustee and township board should determine whether parking fees and toll charges are included in the rate or, on the other hand, whether such expenses are to be reimbursed separately based on the submission of receipts.
Reimbursed mileage should not include travel to and from the officer's or employee's home and regular place of employment. If more than one person rides in the same vehicle, only one mileage reimbursement is allowable. General Form 101 (or an approved substitute) should be used for claiming mileage. The odometer reading columns on this form are to be used only when the distance between points cannot be determined by fixed mileage or official highway maps.
When traveling outside the local unit's boundaries on official business, officers and employees may also be reimbursed for meals, lodging, and incidental expenses as defined in the travel policy. The claim for reimbursement should be supported by itemized receipts from hotels, restaurants, and taxi cabs used by the officer or employee while traveling on official business.
If a fixed per diem rate is established by policy, the policy should clearly indicate which type of expenses, in addition to meals, are included in the rate and which expenses are to be reimbursed on the basis of actual receipts being submitted by the officer or employee. The policy should also define the local unit's boundaries for purposes of reimbursing travel; i.e., outside a 50-mile radius of the office, outside of the county, etc. The policy should cover a proportionate reduction in the per diem rate when meals are provided by an outside party.
When State statutes govern the amounts of allowable travel reimbursements, those statutes supersede local policy.
We continue to receive inquiries concerning trustees receiving compensation from funds other than the township fund.
IC 36-6-6-10(b) defines compensation as the total of all money paid to an elected township office for performing duties as a township officer, regardless of the source of funds from which the money is paid. The term includes all employee benefits paid to an elected township office, including life insurance, health insurance, disability insurance, retirement benefits, and pension benefits. For purposes of determining an increase or decrease in compensation of an elected township officer, the term does not include any of the following: (1) payment of an insurance premium. (2) Payments in recognition of (A) longevity; (B) professional certifications; or educational advancements that are separately identified on a salary ordinance or resolution. (3) Payment of a stipend or per diem allowed by statue. IC 36-6-6-10(c) states in part: “the township legislative boy shall fix the compensation of all officers and employees of the township.” Compensation shall be established using an annual, monthly, or biweekly salary schedule. IC 36-6-6-10(e) states: “ Except as provided in subsection (i), the township legislative body may not alter the salaries of elected or appointed officers during the fiscal year for which they are fixed, but it may add or eliminate any other position and change the salary of any other employee, if the necessary funds and appropriations are available."
The township board should record the salaries so fixed in the township board minutes. A type of format for recording these salaries should be the existing format of Township Form No. 17. We recommend the board set the salaries of township officials and employees, in conjunction with the preparation and completion of the township budget.
The trustee’s salary may be paid from multiple township funds. The breakdown should mirror the estimated time spent for each duty and must be clearly stated in the salary resolution. The trustee cannot receive any compensation in excess of what is noted on the salary resolution for the trustee. It is very important that the township board makes it clear what that total salary of the trustee will be and for what duties he/she will perform on the salary resolution.
The State Board of Accounts is of the audit position that the compensation provided by a township board in accordance with IC 36-6-6-10 on the salary resolution is all inclusive for all duties performed. We will request reimbursement for any payments received above the compensation established for the trustee, board members or other employees.
- U
Uniform Electronic Transactions Act
Uniform Guidance - 2 CFR Part 200
UNEMPLOYMENT CLAIMS
Each unemployment claim received should be carefully reviewed to make sure that the claim is proper. Protests should be filed when considered necessary.
According to the Indiana Department of Workforce Development Unemployment Insurance Employer Handbook (Revised 1/10/2020), page 47 and 48:
“Whenever an individual files an initial claim for benefits, their last employer and all of their base period employers are notified and asked to verify the reason for the claimant’s unemployment. This notifies the organization that its experience account may be charged. Employers that have elected to participate in the State Information Data Exchange System (SIDES) or SIDES E-Response can respond to these notices electronically. SIDES allows employers to exchange UI separation information with DWD electronically...If the organization is not signed up for electronic notice and response (SIDES), it may then use state form 640P to protest a claimant’s eligibility for benefits. The information the organization provides on this form could affect the claimant’s eligibility or any charges to the employer’s experience account for benefits paid. Form 640P is available online at www.in.gov/dwd/2465.htm.
Employers have a duty to prevent unemployment benefits from being paid if the claimant is not entitled to receive benefits. To prevent benefits from being paid in error, the organization must respond electronically, or submit Form 640P, if a former employee seeking unemployment benefits is unemployed because that person:
- Quit voluntarily or was absent for unknown reasons
- Was discharged for just cause (see Section VII)
- Was discharged for gross misconduct (see Section VII)
- Is not entitled to ANY pay or benefits from the organization;
- Is ineligible for any reason listed in this handbook.”
For purposes of the Unemployment Compensation System, IC 22-4-8-2(i)(1) and (2) defines employment to include service performed -
“(1)…by an individual in the employ of this state or any of its instrumentalities (or in the employ of this state and one (1) or more other states or their instrumentalities) for a hospital or eligible postsecondary educational institution located in Indiana.
(2)… by an individual in the employ of this state or a political subdivision of the state or any instrumentality of the state or a political subdivision, or any instrumentality which is wholly owned by the state and one (1) or more other states or political subdivisions…
However, service performed…as the following is excluded:
(A) An elected official.
(B) A member of a legislative body or of the judiciary of a state or political subdivision.
(C) A member of the state national guard or air national guard.
(D) An employee serving on a temporary basis in the case of fire, snow, storm, earthquake, flood, or similar emergency.
(E) An individual in a position which, under the laws of the state, is designated as: (i) a major nontenured policymaking or advisory position; or (ii) a policymaking or advisory position the performance of the duties of which ordinarily does not require more than eight (8) hours per week.”UNIFORM ELECTRONIC TRANSACTIONS ACT
The Uniform Electronic Act IC 26-2-8 allows governmental units to determine the extent that the entity will create and retain electronic records and convert written records to electronic records. In addition, the Act allows the governmental unit to send and accept electronic records and electronic signatures to and from other persons and otherwise create, generate, communicate, store, process, use and rely upon electronic records and signatures.
The State Board of Accounts’ Accounting and Uniform Compliance Guidelines Manuals (now found in our Accounting and Uniform Compliance Guidelines Manual for Indiana Political Subdivisions – Information Technology) document the requirements for computerized accounting systems and storage of accounting information on electronic media.
These requirements are documented in the chapter on computer systems and within the section of Information Technology Services Controls (information now found in our Accounting and Uniform Compliance Guidelines Manual for Indiana Political Subdivisions – Information Technology).
The required areas of control include:
- Disaster Recovery Output Controls
- Back Up Processing Interface Controls
- Physical Security Internal Processing
- Logical Security Error Correction
- Change Controls Programming Documentation
- Audit Trails Operations Documentation
- Input Controls User Documentation
- Segregation of Duties Computer Output
If a governmental unit is utilizing only electronic records with no supporting documentation and deficiencies are noted in the required areas of computer controls, an audit result and comment and a federal finding could be included in the audit report for this governmental unit.
Severe deficiencies could also adversely affect the audit opinion provided for the governmental unit. If there are questions on the application of required computer controls related to electronic records or transactions, please contact the State Board of Accounts.
UNIFORM GUIDANCE 2 CFR PART 200
The Uniform Guidance (combined parts previously referred to as A-87 and A-133) provides that audits which include federal funds under certain requirements be performed under the guidelines provided by the Office of Management and Budget (OMB) 2 CFR Part 200. Grants currently being issued are included. Requirements exist for the recipients of federal awards. Each recipient of federal awards will be required to identify all federal awards received and expended and the federal programs under which they are received. The federal program and award identification shall include, as applicable, the CFDA title and number, award number and year, the name of the federal agency, and name of the pass-through agency. These requirements are in part designed to make each recipient of federal awards more aware of the federal programs received and disbursed.
Situations have occurred in some audits where auditors have been known to spend significant amounts of audit time sorting through accounting records and federal files in order to obtain the required information concerning federal awards. The new requirements place the responsibility upon the recipient to provide that information upon request. The requirements also apply to pass-through recipients of federal awards. Therefore, townships that receive federal awards passed through state agencies or other pass-through entities will also be required to provide appropriate CFDA titles and numbers, award numbers, and name of the federal agency providing the award. Townships which then in turn pass-through federal awards to subrecipients will also be required to provide the information to each subrecipient.
- V
Historically in audits of governmental units with vending machines, the State Board of Accounts has formed and followed the following audit positions.
- There should be a clearly defined procedure adopted by the township concerning placement, use, maintenance, and commissions of vending machines on their property. As with all township policies and procedures, we recommend trustees and township boards work together to establish these policies.
- All revenues generated and costs incurred in operating vending machines located on the township premises should be accounted for through the township's records.
- If vending machines are located in restricted areas (areas other than those available to the public) and if the township board and trustee wish for those revenues to be restricted for the use and benefit of those employees who use the machines and generate the revenues, the State Board of Accounts takes no exception to such action in an audit. The decisions must be authorized by resolution of the township board.
- If vending machines are located in areas where the public makes use of the machines and of the general public, the machine users. Any alternative procedure(s) would be reviewed and evaluated on a case by case basis during our audits. As stated in number 3, any alternative procedure should be authorized by resolution of the township board.
- We do not take audit exception to payment to personnel other than the township's personnel for maintaining, stocking, and cleaning up around vending machines. A written agreement should be entered into listing the services to be rendered, the amount to be paid for such services, timing of payments, and any other areas deemed necessary by the township board and trustee
- W
We have received questions recently regarding Township’s requirements as they pertain to worker’s compensation. These questions should be directed to the Worker’s Compensation Board (WCB) (http://www.in.gov/wcb/). You can also refer to Indiana Code 22-3-2 for more information about worker’s compensation.
- X
- Y
STATE BOARD OF ACCOUNTS YEAR END REPORTING
Report of Names, Addresses, Duties and Compensation of Public Employees (Annual Personnel Report - Form 100R)
Every township shall during the month of January of each year prepare, make, and sign a certified report, correctly and completely showing the names and business addresses of each and all officers, employees, and agents in their respective offices, and the respective duties and compensation of each with the state board of accounts.
The report must indicate whether the township offers a health plan, a pension, and other benefits to fulltime and part-time employees. The report must be filed electronically through the State Gateway.
The department of local government finance may not approve the budget of a township or a supplemental appropriation for a township until the township files the report for the preceding calendar year. (5-11-13-1)
A report that is submitted after December 31, 2012, must include a statement by the trustee regarding whether the township has implemented a policy under IC 36-1-20.2 (nepotism) and IC 36-1-21 (contracting). If a township does not implement a nepotism and a contracting policy, the department of local government finance may not approve the unit's budget or any additional appropriations for the township for the ensuing calendar year. For the report due January 2015, each Township will be required to upload their policies if they indicate they have passed them.
This report is a public record which shall be open to public inspection and examination. A trustee who fails to file this report commits a Class C infraction and is subject to removal for neglect of duty. (IC 5-11-13-2) (IC 5-11-13-3)
The total compensation paid to all employees of the township for the previous year should be reported. This includes part time, temporary, and seasonal employees. If a W2 was required to be issued, that person should be listed on the report. IRS Publication 15 has guidelines for determining if someone is an employee or a contractor. Elected officials, including board members, should be included.
The trustee must print and sign an Attestation Statement that certifies that the data is accurate to the best of their knowledge and belief. This must be mailed to our office within five days of submitting your report via Gateway. If you resubmit your report, you must print, sign and mail a new attestation form.
Correspondence regarding the report will be sent to the email address on file in the State Gateway. If there has been a change in trustee or email address please send an email to annualreport@sboa.in.gov requesting an update of the township's contact information.
Annual Financial Report
The state examiner shall require from every local governmental unit a financial report covering the full period of each fiscal year. These reports shall be prepared, verified, and filed with the state examiner not later than sixty (60) days after the close of each fiscal year. The reports must be in the form and content prescribed by the state examiner and filed electronically in the State Gateway.
The department of local government finance may not approve the budget of a township or a supplemental appropriation for a township until the township files an annual report for the preceding calendar year. (IC 5-11-1-4)
A trustee who fails to file this report commits a Class B infraction and forfeits office. (IC 5-11-1-10)
Beginning in 2013, IC 5-11-20 required that governmental entities include pension information on their employee retirement plans as part of the Annual Financial Report. If your township offers only the Public Employees Retirement Fund (PERF) pension you will not need to provide any additional information on the Annual Financial Report. If your township has any other pension plans where the township makes contributions to the plan or funds any part of the benefits, you will need to provide additional information on the Annual Financial Report.
The trustee must print and sign an Attestation Statement that certifies that the data is accurate to the best of their knowledge and belief. This must be mailed to our office within five days of submitting your report via Gateway. If you resubmit your report, you must print, sign and mail a new attestation form.
Correspondence regarding the report will be sent to the email address on file in the State Gateway. If there has been a change in trustee or email address please send an email to annualreport@sboa.in.gov requesting an update of the township's contact information.
- Z