Legislative committee orders bill draft to withhold taxes after repeated audit noncompliance; auditors, WAM urge training and technical help

The Management Audit Committee directed staff to draft a bill that would withhold an entity’s sales, use and lodging tax distributions if the entity remains noncompliant on audit requirements for three consecutive years.

The move followed a review of a fact sheet on municipal and special‑district reporting and a panel of practitioners and auditors who described how different states tier reporting based on population and revenue. Mr. Petrie presented the memo, walking members through Wyoming thresholds and a comparison of neighboring states' approaches.

Why it matters: lawmakers said the change is aimed at producing real compliance rather than repeating missed deadlines. Justin Chavez, director of the Wyoming Department of Audit, told the committee that Wyoming’s enforcement authority is limited: statute currently allows the Department of Revenue to withhold funds when entities fail to file required reports, but there is no automatic penalty tied to the substance of audit findings. “We’re largely a reporting entity,” Chavez said, adding that withholding statutory distributions is a statutory mechanism for missed reporting deadlines but not a remedy for all audit findings.

Chavez also emphasized auditing standards: “They’re required to perform the audit in accordance with Yellow Book,” he said, referring to generally accepted government auditing standards (GAGAS), and noted there is no special CPA license for government audits though firms can join the AICPA Government Audit Quality Center.

WAM and local officials urged caution about one‑size solutions and called for more technical assistance. Ashley Hartshute of the Wyoming Association of Municipalities described WAM’s new municipal finance program and told the committee that many small towns lack dedicated accounting staff: “Many of our smallest communities simply don't have the staff capacity or specialized accounting expertise to keep pace with the day‑to‑day service delivery alongside increasingly complex financial reporting requirements,” she said. WAM proposed training, regional support, and shared software or templates as alternatives that could reduce noncompliance without immediately moving to punitive measures.

Committee action: Representative Lien moved and the committee approved a bill draft request asking LSO to prepare language that would withhold sales, use and lodging taxes from entities with three consecutive years of audit noncompliance until they come into compliance. LSO summarized the request and the motion carried on a voice vote.

What's next: LSO will prepare the draft language for the committee, and the Department of Audit and WAM officials said they will continue supplying data and implementing training pilots. The committee also directed staff to research how other states handle repeated failed audits.

The committee’s vote establishes a policy path for the upcoming session; supporters say it creates leverage to compel compliance, while critics warned withholding public funds risks harming residents who rely on local services.