Does a Mississippi regional railroad authority have to get a full CPA audit each year, or is a CPA 'review' enough?

Plain-English summary

The Rail Authority of East Mississippi, a local government entity created under § 19-29-9, asked the AG about a CPA "review" rather than a full CPA audit, any financial threshold for an audit, and sending a review to participating partners. The AG addressed annual reporting and State Auditor examination, declined to opine on what to send partners, and treated the third question as moot.

The clean answer: Mississippi law does not require a regional railroad authority to obtain a CPA audit at all. The only annual reporting duty in the statutory chapter is in § 19-29-45, which requires the authority to file with the clerk of the board of supervisors of each member county and with the Governor's office of planning and coordination "a report of its activities for the preceding year." That is a general activity report. The statute does not specify that the report must be a financial audit, and it does not require that the report be prepared by a CPA.

Separately, § 19-29-18(4) says "each railroad authority shall be subject to examination by the State Auditor." The AG said this makes the Rail Authority subject to audit under § 7-7-211(e), which authorizes postaudits and, when deemed necessary, preaudits and investigations. The opinion quotes that statute's cost provisions, including a $35.00 per man-hour charge for staff services.

The AG found no statute requiring the Rail Authority to provide either an audit or a review to its participating partners and declined to opine on that issue. It treated the third question as moot. It suggested contacting the State Auditor about financial criteria if that office conducts an audit.

Currency note

This opinion was issued in 2020. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Q: What is a regional railroad authority in Mississippi?
A: The opinion describes the Rail Authority of East Mississippi as a local government entity created under § 19-29-9. It does not detail the authority's formation or financing powers.

Q: What is the difference between a CPA audit and a CPA review?
A: The request describes them as different CPA services. The AG did not explain their accounting standards; it answered that § 19-29-45 does not require an annual CPA financial audit and does not say the annual activity report must be prepared by a CPA.

Q: When does the State Auditor get involved?
A: The opinion says § 19-29-18(4) makes each railroad authority "subject to examination by the State Auditor." It also quotes § 7-7-211(e)'s postaudit and preaudit powers. It does not condition this examination on the authority's funding mix or specify when an examination will occur.

Q: What does the annual § 19-29-45 activity report have to include?
A: A "report of its activities for the preceding year," filed with the clerk of the board of supervisors of each member county and with the Governor's office of planning and coordination. The statute does not prescribe format or required contents. The AG opinion notes that the report does not have to include a financial audit and does not have to be prepared by a CPA.

Q: Could the authority's participating partners require a CPA audit by contract?
A: The AG found no statute requiring the Rail Authority to provide an audit or review to participating partners and declined to opine on what it could send them. The opinion does not interpret any partner agreement.

Q: How does the $35-per-man-hour rate in the State Auditor billing actually work?
A: The opinion quotes § 7-7-211(e) as charging an audited entity $35 per staff-hour plus the actual cost of any independent specialist firm. It does not explain how a particular audit would be billed.

Q: Are there penalties for not filing the annual activity report?
A: The opinion does not discuss penalties for nonfiling. It quotes § 19-29-45's requirement to file an annual report of activities and separately cites § 19-29-18(4)'s State Auditor examination rule.

Background and statutory framework

The opinion addresses the Rail Authority of East Mississippi, which the request identifies as a local government entity created under § 19-29-9. Its answer focuses on annual activity reporting and examination by the State Auditor.

The opinion identifies two separate requirements:

• Operational reporting: § 19-29-45 requires an annual activity report.
• State Auditor access: § 19-29-18(4) makes the authority subject to State Auditor examination.
• State Auditor powers: § 7-7-211(e) authorizes postaudits and, when deemed necessary, preaudits and investigations.

The AG said the annual report statute does not require a financial audit or CPA preparation. It did not compare railroad authorities with other local government bodies.

The AG declined to opine on providing a financial review to participating partners after finding no statute requiring either an audit or review for them. It treated the third question as moot.

Citations and references

Statutes: Miss. Code Ann. § 19-29-9 (creation of regional railroad authorities); § 19-29-18(4) (authority subject to State Auditor examination); § 19-29-45 (annual activity report); § 7-7-211(e) (State Auditor postaudit authority).

Prior AG opinions referenced: None specifically.

Source

• Landing page: https://attorneygenerallynnfitch.com/divisions/opinions-and-policy/recent-opinions/
• Original PDF: https://attorneygenerallynnfitch.com/wp-content/uploads/2020/07/L.Gandy_January-3-2020-Financial-Audit-of-a-Regional-Railroad-Authority.pdf

Original opinion text

STATE OF MISSISSIPPI

JIM HOOD
ATTORNEY GENERAL

OPINIONS DIVISION

January 3, 2020

Larry Gandy, Executive Director
Rail Authority of East Mississippi
610 Azalea Drive
Waynesboro, Mississippi 39367

Re: Financial Audit of a Regional Railroad Authority

OFFICIAL OPINION

Attorney General Jim Hood is in receipt of your opinion request and has assigned it to me for research and response. In your letter, you explain that the Rail Authority of East Mississippi is a local government entity that was created pursuant to Section 19-29-9 of the Mississippi Code Annotated.

Questions Presented

1. Whether or not a local governmental agency, such as ours, can lawfully rely on a Certified Public Accountant "review" of its books as opposed to a full-scale audit. To our understanding, audits and reviews are two different services that a Certified Public Accountant can provide involving financial statements. A review of an organization's financial statements provide a report issued by the Certified Public Accountant that expresses the financial statements are free from material misstatements.

2. Is there any financial threshold or criteria in Mississippi law for an agency such as ours that must be met for an audit?

3. If a review is sufficient, would it be lawful to send this report to participating partners in the process in a similar fashion as has been done with our audits in the past?

In response to your first question, the only requirement regarding an annual report is found in Section 19-29-45 of the Mississippi Code Annotated. This section provides that at least once a year the regional railroad authority shall file with the clerk of the board of supervisors of each county, and the Governor's office of planning and coordination, a report of its activities for the preceding year. This requirement does not specify that the report include a financial audit, nor is there any mention that the report be performed by a certified public accountant. However, although there is no requirement that the District prepare an annual financial audit by a certified public accountant, Section 19-29-18(4) provides that each railroad authority shall be subject to examination by the State Auditor. Thus, the District is subject to being audited by the State Auditor's office under Section 7-7-211(e), which authorizes the State Auditor:

To postaudit and, when deemed necessary, preaudit and investigate separately the financial affairs of (i) the offices, boards and commissions of county governments and any departments and institutions thereof and therein; (ii) public school districts, departments of education and junior college districts; and (iii) any other local offices or agencies which share revenues derived from taxes or fees imposed by the State Legislature or receive grants from revenues collected by governmental divisions of the state; the cost of such audits, investigations or other services to be paid as follows: Such part shall be paid by the state from appropriations made by the Legislature for the operation of the State Department of Audit and the operation of the sum of Thirty-five Dollars ($35.00) per man-hour for the services of each staff person engaged in performing the audit or other service plus the actual cost of any independent specialist firm contracted by the State Auditor to assist in the performance of the audit, which sum shall be paid by the county, district, department, institution or other agency audited out of its general fund or any other available funds from which such payment is not prohibited by law. Costs paid for independent specialists or firms contracted by the State Auditor shall be paid by the audited entity through the State Auditor to the specialist or firm conducting the postaudit.

An internal audit by an independent auditor/Certified Public Accountant (CPA) could be of assistance when being audited by the State. You may wish to contact the State Auditor regarding financial criteria that may be required if an audit is done by the State Auditor.

Your second question asks whether it is lawful for the Rail Authority to send a financial review, rather than a financial audit to participating partners. We are unable to find any statute that requires the Rail Authority to provide either a financial audit or a review to participating partners. Thus, we are unable to opine upon this issue.

Based upon our response to your first question, your third question is moot.

If this office may be of any further assistance to you, please let us know.

Sincerely,

JIM HOOD, ATTORNEY GENERAL

Avery Mounger Lee
Special Assistant Attorney General