(A) The auditor of state shall develop guidelines for identifying fiscal practices and budgetary conditions of municipal corporations, counties, and townships that, if uncorrected, could result in a future declaration of a fiscal watch or fiscal emergency.

(B) If the auditor of state determines that a municipal corporation, county, or township is engaging in any of those practices or that any of those conditions exist, the auditor of state may declare the municipal corporation, county, or township to be under a fiscal caution.

(C) When the auditor of state declares a fiscal caution, the auditor of state shall promptly notify the municipal corporation, county, or township of that declaration and shall request the municipal corporation, county, or township to provide written proposals for discontinuing or correcting the fiscal practices or budgetary conditions that prompted the declaration and for preventing the municipal corporation, county, or township from experiencing further fiscal difficulties that could result in a declaration of fiscal watch or fiscal emergency.

(D) The auditor of state, or a designee, may visit and inspect any municipal corporation, county, or township that is declared to be under a fiscal caution. The auditor of state may provide technical assistance to the municipal corporation, county, or township in implementing proposals to eliminate the practices or budgetary conditions that prompted the declaration of fiscal caution and may make recommendations concerning those proposals.

(E) If the auditor of state finds that a municipal corporation, county, or township declared to be under a fiscal caution has not made reasonable proposals or otherwise taken action to discontinue or correct the fiscal practices or budgetary conditions that prompted the declaration of fiscal caution, and if the auditor of state considers it necessary to prevent further fiscal decline, the auditor of state may determine that the municipal corporation, county, or township should be in a state of fiscal watch.