Summary:

 Senate Bill 355 (SB 355):  This act creates new requirements and oversight measures related to the Public Finance Accountability Act.  The bill assures state-granted funds will be properly managed and there is a level of accountability related to public finances. 

Legislation Overview:

 Senate Bill 355 (SB 355):  This act recommends more accountability, and grantees must demonstrate sound fiscal management (e.g., audit compliance, robust accounting practices) before receiving new grant funds.  State agencies, under DFA’s guidance, will closely monitor how grant funds are used and perform random field audits.  Publicly available audits and standardized documentation seeks to enhance public trust and ensure state funds are spent responsibly.
Section 1 - The act is called the Public Finance Accountability Act.
Section 2 - Key Definitions:
a.	Department: The Department of Finance and Administration (DFA).
b.	Grant: Any capital outlay or special purpose appropriation awarded by a state agency to a recipient (“grantee”).
c.	Grantee: An entity (e.g., local government or other organization) that receives a grant.
d.	Grant Agreement: A written agreement that formalizes the grant between the state agency and the grantee.
e.	Annual Audit: The audit performed by an independent auditor, required by the Audit Act, on a grantee’s financial statements.
Section 3 - Funding Criteria 
a.	Before a state agency can issue grants for capital projects or special purposes:
1.	Annual Audit Requirement
2.	A grantee must have completed an annual audit for one of the past two fiscal years, and that audit must be a public record.
3.	If the most recent audit revealed material weaknesses or significant deficiencies: The grantee must develop a plan to fix these weaknesses/deficiencies; and
4.	The state agency must support the grantee’s plan.
5.	If repeated deficiencies persist for more than two consecutive years, the agency must find another suitable entity to act as fiscal agent for the grant.
6.	Grantees Not Subject to Annual Audits
7.	Must prove to the state agency that they have adequate accounting methods to manage and safeguard grant funds.
8.	If the state agency finds deficiencies, it must either impose additional conditions (if the agency has the resources to monitor them) or find another fiscal agent.
b.	Compliance with Reporting and Budget Requirements
The grantee must comply with all relevant reporting requirements (e.g., from the Audit Act).
The grantee must have an approved budget for the current fiscal year.
c.	Before Grant Disbursement - DFA will ensure these criteria are met before:
A state agency certifies for the issuance of bonds (severance tax or general obligation) for a project; or
A state agency makes a grant to a grantee.
Section 4 - Grant Management and Oversight 
a.	DFA must set requirements for how state agencies manage and oversee grants. At a minimum, state agencies must:
1.	Ensure Proper Disposal of Capital Assets
2.	Verify that any sale, lease, or license of capital assets acquired with state grant funds is approved as required by law and that the grantee receives adequate value.
3.	Use Standard Grant Agreement Templates
4.	State agencies must use DFA-developed templates for capital outlay grants.
b.	Conduct Field Audits
State agencies are required to perform field audits (on a statistical or stratified basis) of capital outlay projects in line with DFA’s policies.
Section 5 - Duties of the Department - DFA must:
a.	Implement Criteria and Policies
b.	Create procedures, forms, and policies to enforce the funding criteria and oversight requirements described above.
c.	Develop Standard Templates
d.	Provide capital outlay grant agreement templates for consistent use by all state agencies.
e.	Handle Exceptions
f.	Create criteria for approving deviations from the standard templates and oversight requirements.
g.	Monitor Compliance
h.	Oversee state agencies to ensure they follow the act’s funding and grant management rules.
The proposed act takes effect on July 1, 2025.