Annual audit requirements

State law (Section 5-7-240) requires all municipalities, regardless of population or budget size, to submit a financial audit to the state Treasurer's office within 13 months of the end of that municipality's fiscal year.

An audit must include all financial records and transactions of the municipality and any agency funded in whole by the municipality plus a report that includes the recording, collection and distribution of applicable court fines.

Any municipality missing its audit submission deadline may have all of its state payments (including Local Government Fund dollars) withheld by the Treasurer's office until the audit is received. The Treasurer's office posts on its website a list of municipalities with late audits.

While the Treasurer's office isn't required to evaluate the audit for accuracy, it is required to verify the appropriate collection and submission of court assessments and fines for cities with courts.

State law requires that all audits must be performed by a CPA, public accountant or an accounting firm with no direct or indirect connection to the municipality. Auditors can be hired annually or for up to four years. While the city may retain an auditor for consecutive four-year terms, it must bid the contract at least every four years.

The auditor must be selected within 30 days of the beginning of the municipality's fiscal year. A council may release a Request for Proposal to hire an auditor, but this is not a requirement.

According to Larry Finney, partner in Green, Finney and Horton accounting firm, "The goal of the audit process is to gather the evidence necessary for the appropriate opinion to be issued as to whether the financial statements are materially correct. The audit should provide a reasonable assurance to financial statements users that they can make decisions using these statements because they are materially correct."