HB 248: Auditor, Procurement, and Governance Changes

Ohio House Bill No. 248, as introduced in the 136th General Assembly, proposes significant amendments and repeals to numerous sections of the Revised Code primarily concerning the Auditor of State’s duties, the financial management of public offices, and procurement procedures for various governmental entities in Ohio. The bill aims to streamline certain processes, modify auditing requirements, adjust procurement thresholds and exceptions, and alter specific responsibilities related to financial oversight and historical preservation. Key themes include the frequency and methods of public office audits, changes to competitive bidding requirements and exemptions, amendments to the functions of the Ohio History Connection and other state entities, and modifications to the roles of fiscal officers in various local governments and educational institutions.

Main Themes and Important Ideas/Facts:

1. Auditing Requirements and Procedures (Sections 117.11, 117.38, 117.44):

• Audit Frequency: The bill reinforces the requirement for public offices to be audited at least once every two fiscal years, unless auditing standards or procedures dictate otherwise. Audits conducted biennially must cover both fiscal years. (Page 4, lines 84-87)
• Auditor’s Initiative Audits: The Auditor of State retains the authority to conduct audits at any time upon request from a public office or “upon the auditor of state’s own initiative if the auditor of state has reasonable cause to believe that an additional audit is in the public interest.” (Page 4, lines 90-94)
• Failure to Audit: The Auditor of State is required to identify public offices that cannot be audited at least every two years and provide immediate written notification. (Page 5, lines 100-104)
• Contracting with Independent Accountants: The bill outlines the process for authorizing a public office’s legislative authority or governing board to engage an independent certified public accountant to conduct required audits if the Auditor of State is unable to. The scope of these audits must be approved by the Auditor of State. (Page 5, lines 105-113)
• Payment for Independent Audits: “The independent accountant conducting an audit under division (C)(1) or (2) of this section shall be paid by the public office.” (Page 5, lines 117-119)
• Binding Arbitration in Contracts: Contracts for attest services with independent accountants employed for audits “may include binding arbitration provisions, provisions of Chapter 2711. of the Revised Code, or any other” mechanisms for dispute resolution. (Page 5, lines 125-128)
• Financial Reporting Content: Financial reports are required to include, among other items, the amount of public debt for each taxing district, the purpose of the debt, and provisions for its payment, as well as budgetary comparison information. (Page 6, lines 169-177)
• Penalty for Late Filing: Public offices (other than state agencies) that fail to file their financial reports on time are subject to penalties, including a forfeiture of twenty-five dollars for each day the report is late. (Page 8, lines 199-201)

1. Procurement and Competitive Bidding (Sections 127.16, 306.43, 307.86, 308.13, 731.14, 731.141, 735.05, 749.31, 3381.11):

• State Agency Purchase Thresholds: State agencies are generally prohibited from making purchases from a single supplier that would amount to fifty thousand dollars or more cumulatively within a fiscal year (including disbursements and outstanding encumbrances) unless made through competitive selection. (Page 10, lines 265-271)
• Liability for Violation: “Any person who authorizes a purchase in violation of division (B) of this section shall be liable to the state for any state funds spent on the purchase, and the attorney general shall collect the amount from the person.” (Page 11, lines 283-285)
• Exemptions from State Agency Competitive Bidding: A comprehensive list of exemptions exists for state agency purchases, including but not limited to investment transactions, purchases from correctional industries, purchases for youth services, membership dues, utility services, certain motor vehicle/aviation/watercraft purchases, air transportation tickets, public notifications, purchases by the judicial branch, liquor for resale, motor courier/freight services, USPS services/stamps, published materials, purchases from other state agencies, and specific purchases by the departments of veterans services and medicaid, and payments to the FBI and Ohio History Connection. (Page 11, lines 298-316, Page 13, lines 343-373, Page 14, lines 402-410)
• Cumulative Purchase Threshold Calculation: Purchases made through competitive selection or with federal funds are excluded when determining if a state agency has reached the cumulative purchase thresholds. (Page 14, lines 414-417)
• Regional Transit Authority Procurement (Section 306.43): The bill details competitive bidding processes for regional transit authorities (RTA). RTAs can use sealed bidding, two-step competitive bidding (technical proposal followed by price bid), or competitive proposals depending on the nature of the procurement. Public notice is generally required for bids exceeding a certain threshold. (Page 28, lines 754-766, Page 28, lines 780-783, Page 30, lines 814-822)
• Negotiation with Single Responsive Bidder: For RTAs, where fewer than two responsive bids are received, negotiation with the sole responsive bidder or rescinding the solicitation is permitted. (Page 28, lines 784-789, Page 29, lines 810-813)
• RTA Exemptions from Competitive Bidding: Exemptions for RTAs include emergencies, single source availability, renewal of leases for certain technology, purchases from other governmental entities, services of a personal, professional, highly technical, or scientific nature, services/supplies from qualified nonprofit agencies (with updated code references), and public utility products/services. (Page 43, lines 1235-1247, Page 44, lines 1248-1260, Page 45, lines 1261-1278) Notably, the references to sections 4115.31 to 4115.35 of the Revised Code regarding qualified nonprofit agencies are changed to sections 125.60 to 125.6012. (Page 44, lines 1271-1273)
• County Competitive Bidding (Section 307.86): Purchases, leases, or construction by or on behalf of a county or contracting authority exceeding a specified amount (referenced as section 9.17 of the Revised Code) generally require competitive bidding. The bill clarifies numerous exceptions to this rule. (Page 36, lines 998-1009)
• County Exemptions from Competitive Bidding: Exemptions for counties include services of specific professionals (accountant, architect, attorney, physician, engineer, etc.), purchases from other governmental entities, purchases for job and family services, and certain leases of property. (Page 36, lines 1001-1005, Page 38, lines 1077-1081, Page 39, lines 1086-1094, Page 41, lines 1150-1157) Similar to RTAs, the references to qualified nonprofit agencies are updated. (Page 37, lines 1013-1015)
• Regional Airport Authority Competitive Bidding (Section 308.13): Regional airport authorities are subject to competitive bidding for contracts exceeding the amount specified in section 9.17 of the Revised Code, with public notice required. (Page 42, lines 1183-1188) Exemptions similar to those for RTAs and counties are listed, including emergencies, single source availability, and purchases from qualified nonprofit agencies (with updated code references). (Page 43, lines 1235-1247, Page 44, lines 1271-1273)
• Village Procurement (Sections 731.14, 731.141, 735.05, 749.31): Contracts made by village legislative authorities exceeding a certain expenditure amount generally require competitive bidding with public advertising. Exemptions include purchases from specific state programs or qualified nonprofit agencies (with updated code references). Village administrators also follow a similar process for authorized expenditures. (Page 58, lines 1674-1688, Page 60, lines 1728-1742) Again, the references to qualified nonprofit agencies are updated. (Page 59, lines 1684-1686, Page 60, lines 1738-1740)
• Arts and Cultural Affairs Procurement (Section 3381.11): Competitive bidding requirements apply to arts and cultural affairs districts for construction contracts and the sale/lease of property exceeding a certain term, with public notice. Exemptions include single source supplies, lease renewals for certain technology, and services/supplies from qualified nonprofit agencies (with updated code references). (Page 80, lines 2295-2304, Page 81, lines 2323-2328) The references to qualified nonprofit agencies are updated. (Page 81, lines 2329-2331)

1. Financial Officers and Training (Sections 317.06, 733.81):

• County Recorder Training: Newly elected county recorders are required to complete twelve hours of continuing education training provided by the Auditor of State within one year of taking office. Similar training may be provided to appointed or special election winners. (Page 9, lines 210-215)
• Fiscal Officer Training: The Auditor of State is mandated to develop and provide training programs for municipal fiscal officers (city auditors, city treasurers, village fiscal officers, clerks) covering government accounting, budgeting, financial report preparation, cybersecurity, and other relevant topics. (Page 9, lines 217-221, Page 63, lines 1800-1806)

1. Ohio History Connection (Section 149.30):

• Continuance of Duties: The bill maintains the core duties of the Ohio History Connection, including preserving historical structures, serving as the archives administration for the state and political subdivisions, administering a state historical museum, establishing a historical marking system, and encouraging local historical societies. (Page 18, lines 495-501, Page 19, lines 514-515, Page 20, lines 549-551)
• Specific Document Custody: The list of specific original historical documents under the care and custody of the Ohio History Connection remains extensive and detailed, including various state constitutions, patent documents, and legislative resolutions. (Page 19, lines 519-548, Page 20, lines 549-551)

1. Unclaimed Funds (Section 169.13):

• Invalid Agreements: Agreements to locate, deliver, or recover unclaimed funds reported within two years of the report date are invalid. (Page 22, lines 659-662)
• Required Disclosures for Agreements: Any agreement to locate, deliver, or recover unclaimed funds entered into two years or more after the report date must include specific disclosures to the owner, such as the nature and value of the property, the name and address of the holder, that the information is available from the Director of Commerce, that the Director is not a party to the agreement, and the service provider’s certificate of registration details. (Page 22, lines 663-667, Page 23, lines 675-680)

1. Village Dissolution (Section 703.34):

• Conditions for Dissolution: The bill increases the population threshold for potential dissolution from one hundred fifty persons or less to five hundred fifty persons or less. It also maintains the other conditions: consisting of less than two square miles, being unauditable in at least two consecutive audits, not providing at least two typical municipal services, failing to adopt a tax budget, or having an elected official convicted of theft in office at least two times in ten years. (Page 56, lines 1603-1627, Page 57, lines 1636-1639)
• Auditor of State’s Role: If the Auditor of State finds in an audit report that a village meets at least two conditions for dissolution, including the increased population threshold and size requirement, the Auditor must send a written notice to specific officials and file a petition for dissolution in the court of common pleas. (Page 57, lines 1635-1641)
• Court Ordered Dissolution: The court is required to order dissolution if it finds the village meets the population and size requirements and at least two dissolution conditions. (Page 57, lines 1660-1664)

1. School District Fiscal Officers (Sections 3314.011, 3328.16):

• Community School Fiscal Officers: Community schools are prohibited from permitting individuals to serve as fiscal officers without a license as required by law. (Page 68, lines 2011-2013)
• Waiver of Governing Authority Responsibility: The governing authority of a community school, with sponsor approval, may adopt a resolution waiving the requirement that they employ or contract with the fiscal officer. This waiver is valid for one year. (Page 68, lines 2014-2019)
• College-Preparatory Boarding School Fiscal Officers: The bill shifts the authority to require a fiscal officer bond from the Auditor of State to the Department of Education and Workforce. (Page 75, lines 2169-2173) These fiscal officers are also required to be licensed as treasurers under section 3301.074 of the Revised Code. (Page 75, lines 2180-2182)

1. Repealed Sections (Sections 117.113, 117.251, 117.441, 117.51, 501.03, 3314.50, 4115.31, 4115.32, 4115.33, 4115.34, 4115.35, 4115.36):

• The bill explicitly repeals several sections of the Revised Code. Notably, sections 4115.31 to 4115.36, which concern the state use committee and the purchase of services and supplies from qualified nonprofit agencies serving individuals with disabilities, are repealed. This repeal aligns with the changes in procurement sections that now reference sections 125.60 to 125.6012 for these purchases.

Significant Quotes:

• “Except as otherwise provided in this division or where auditing standards or procedures dictate otherwise, each audit shall cover at least one fiscal year. If a public office is audited only once every two fiscal years, the audit shall cover both fiscal years.” (Page 4, lines 84-87)
• “In addition to the annual or biennial audit provided for in division (A) of this section, the auditor of state may conduct an audit of a public office at any time when so requested by the public office or upon the auditor of state’s own initiative if the auditor of state has reasonable cause to believe that an additional audit is in the public interest.” (Page 4, lines 88-94)
• “The independent accountant conducting an audit under division (C)(1) or (2) of this section shall be paid by the public office.” (Page 5, lines 117-119)
• “Any person who authorizes a purchase in violation of division (B) of this section shall be liable to the state for any state funds spent on the purchase, and the attorney general shall collect the amount from the person.” (Page 11, lines 283-285)
• “Agreements to pay a fee, compensation, commission, or other remuneration to locate, deliver, recover, or assist in the recovery of unclaimed funds reported under section 169.03 of the Revised Code, entered into within two years immediately after the date a report is filed under division (D) of section 169.03 of the Revised Code, are invalid.” (Page 22, lines 659-662)
• “If the auditor of state finds, in an audit report issued under division (A) or (B) of section 117.11 of the Revised Code of a village that has a population of five hundred fifty persons or less and consists of less than two square miles, that the village meets at least two conditions for the dissolution of a village, the auditor of state shall send a written notice of that finding…and shall file a petition…” (Page 57, lines 1635-1641)
• “Beginning on that date and thereafter, no community school shall permit any individual to serve as a fiscal officer without a license as required by this section.” (Page 68, lines 2011-2013)

Potential Impacts:

This bill has the potential to impact a wide range of public offices and governmental entities in Ohio. The changes to auditing requirements may affect how and when audits are conducted and the responsibilities for engaging independent auditors. The modifications to procurement rules and exemptions will influence how various entities purchase goods and services, potentially affecting relationships with suppliers and the use of competitive bidding. The updated references to qualified nonprofit agencies serving individuals with disabilities reflect a legislative shift in how these services are procured. The increased population threshold for village dissolution could impact the future of smaller municipalities. Finally, the training requirements for fiscal officers underscore a focus on financial competency in public service.

Next Steps:

Further analysis of the specific changes to each referenced section of the Revised Code is necessary to fully understand the implications of this proposed legislation. Tracking the bill’s progress through the legislative process will be crucial to monitor any amendments or modifications.