Arizona Revised Statutes (A.R.S.) §41-1279.07 states that “The auditor general shall prescribe a uniform expenditure reporting system for all political subdivisions subject to the constitutional expenditure limitations prescribed by article IX, sections 20 and 21, Constitution of Arizona.” The Annual Expenditure Limitation Report is applicable to counties, community college districts, and cities and towns, each with different limitations prescribed. In this article, we will focus on the Annual Expenditure Limitation Report requirements for cities and towns.
Part I begins with the expenditure limitation established for the reporting fiscal year by the Economic Estimates Commission (EEC) and, if applicable, the voter approved alternative expenditure limitation.
The reconciliation begins with total expenditures, by governmental, enterprise, internal service and fiduciary activities for the reporting fiscal year. This is somewhat the starting point, as the reconciliation considers the initial subtractions and additions, and the total is carried forward to Part II. The initial subtractions and additions in the reconciliation include items such as depreciation, loss on disposal of capital assets and pension expenses, along with other allowable items. The additions include principal payments on long-term debt, capital asset acquisitions and other items.
Part II shows the total exclusions from local revenues for the reporting fiscal year or, if applicable, the total exclusions from the voter approved alternative expenditure limitation. These are subtracted from the amount reported on the reconciliation to come up with total amounts of expenditures subject to the expenditure limitation for the reporting fiscal year. The EEC or voter approved limitation should be greater than the total amount subject to expenditure limitation calculated.
Also required is a reconciliation of the total expenditures reported within the financial statements to the total expenditures reported within the ELR.
The auditor general provides detailed instructions for completion and submission of the reports. The auditor general prescribes definitions for terms used in and the form of the reports. The reports are required of cities and towns beginning with the fiscal year the political subdivision is subject to the expenditure limitation. The reports must be filed with the auditor general within nine months after the close of each fiscal year. The auditor general may provide assistance to individuals, CPA’s or public accountants responsible for attesting to the expenditure limitation reports and financial statements.
The auditor general or a certified public accountant performing the annual audit required shall attest to the expenditure limitation reports and financial statements.
The governing body of each political subdivision shall provide to the auditor general by July 31 each year the name of the chief fiscal officer designated by the governing body of the political subdivision to officially submit the current fiscal year’s expenditure limitation report on behalf of the governing body. The governing body of the political subdivision shall notify the auditor general of any changes of individuals designated to file the required reports. The designated chief fiscal officer shall certify to the accuracy of the annual expenditure limitation report.
More information can be found at FAQs—Cities and Towns | Arizona Auditor General (azauditor.gov). If you have any questions, please contact your Henry+Horne advisor.