Each city with a population of 2,000 or more must have an annual audit conducted of each financial fund of the city. The auditor of public accounts or a certified public accountant (CPA) must audit the previous fiscal year and present findings to the city's legislative body. The city must send an electronic copy to the Department for Local Government (DLG) within 10 days after the city's legislative body received the report, but no later than March 1 following the close of the previous fiscal year.
Any city with a population of more than 1,000 but less than 2,000 must complete (1) a financial statement for every even-numbered fiscal year and (2) a two-year audit for every odd-numbered year. Cities with less than 1,000 residents must complete (1) a financial statement for every even-numbered fiscal year and (2) a one-year audit for every odd-numbered year. Cities must forward electronic copies of their financial statement to the Department for Local Government by October 1 following the end of the fiscal year.
A few cities may not have to complete an audit for any fiscal year. A city that in a fiscal year receives and expends less than $150,000, from all sources and for all purposes, and has no long-term debt does not need an audit performed. These cities must still prepare a financial statement and send an electronic copy to the Department for Local Government by October 1 following the end of the fiscal year. If a city has been exempted for more than four consecutive fiscal years after July 1, 2022, an auditor must prepare an attestation engagement covering the fourth fiscal year in which the city qualified for this exemption. The attestation engagement must be completed by March 1 following the end of the fiscal year, and an electronic version must be sent to DLG by April 1.
Failure to comply with required financial reporting will result in the state withholding funds such as municipal road aid or grant payments.
The federal government also requires a single or program audit if a city expends $750,000 or more in a single fiscal year. Money provided to cities through the State and Local Fiscal Recovery Fund (SLFRF) in the American Rescue Plan Act (ARPA) does not count toward the $750,000 cap unless the city received at least a $10 million SLFRF allocation.