All local governments including counties, cities, school districts and educational service districts, many special districts, and municipal corporations are subject to the Oregon Municipal Audit Law. Organizations formed under Oregon Revised Statute 190
, including councils of government, are also subject.
The Oregon Secretary of State – in cooperation with the Oregon Board of Accountancy, and in consultation with the Oregon Society of Certified Public Accountants – prescribes the minimum standards for conducting audits and reviews of municipal corporations. Those minimum standards are provided for in ORS Chapter 297
and by administrative rules issued by the Audits Division of the Secretary of State’s office. Oregon Administrative Rules (OAR) Chapter 162, Division 10
(for audits) and OAR Chapter 162, Division 40
Special districts as defined in ORS 198 must designate a registered agent. The registered agent is a person authorized by a board to conduct business and receive official communication on behalf of the board.
The registered agent should be an Oregon resident whose address is identical with the registered office of the district. The registered office may be, but need not be, the same as the place of business of the special district. The address should be a physical address and not a post office box.
The Notice of Designation of Special District Registered Office and Registered Agent form must be filed with the Secretary of State Archives Division. This form must be completed each time a change is made in either the registered agent or the registered office. There is no fee for filing this form.
All municipalities must file an annual financial report. Use the decision tree below to determine which type of report is required.
An SRE is the annual Summary of Revenues and Expenditures form; find instructions on page 2 of the SRE form.
* To remain eligible for these reporting avenues, the municipality must 1) file timely and 2) maintain adequate fidelity or faithful performance bond coverage.
** Auditor communicated deficiencies are filed with the Secretary of State by the auditor. The plan of action is the responsibility of the municipal governing body.
Annual reports must be filed with the Audit Division of the Secretary of State’s office within six months after the close of the municipality’s fiscal year. For governments with a fiscal year ending on June 30, the filing deadline is December 31.
For in lieu filers, the in-lieu report is due no later than 90 days after the end of the municipality’s fiscal year. For governments with a fiscal year ending on June 30, the filing deadline for their report in lieu of audit is no later than September 30.
Yes. A municipality filing an audit or review report may request a filing extension up to one year after the close of the fiscal year under audit for good cause shown. Good cause might include significant staff turnover or illness, change in accounting software, or weather-related incidents and are situations that are unusual and cannot be planned. Work with your contracted auditor to determine realistic timelines of how long it will take to complete the annual report for filing prior to seeking an extension request.
The Secretary of State may grant an extension beyond one year only if the Secretary finds that extraordinary circumstances justify a longer extension. Extension requests are unlikely to be granted for multiple consecutive years as it demonstrates a pattern of poor planning or unpreparedness.
Extensions are not permitted for in-lieu report filers.
Make the request using the Secretary of State’s Extension Request online form
. To have the request processed timely, complete the entire form, including the reason for the delay and the name of the licensed municipal auditor. The licensed municipal auditor might be different from the main auditor contact.
The request is received and a decision will be emailed to the municipality and auditor listed on the form within 3 business days.
For All Municipalities
Periodically, notices of incomplete filings are mailed to each municipality. If filing fees are unpaid, invoices are also mailed.
A list of delinquent filers
is maintained on our website.
Additionally, for Counties and Cities
Counties and cities that do not file timely are subject to withholding of 10% of certain state funding from the State Treasury, Oregon Department of Revenue, Oregon Department of Transportation, and Oregon Department of Administrative Services. (ORS 297.446)
Additionally, for special districts formed under ORS 198
If a special district does not file required reports for three years, the Secretary of State must send a dissolution notice to the respective County. The County will proceed to dissolve the municipality.
Additionally, for School Districts and ESD’s
Annual financial reports must comply with rules established by the Oregon Department of Education
. Failure to provide the required reports could result in actions taken by the Department of Education.
A municipality is not exempt from the audit requirement if the Secretary of State receives a petition requesting an audit from the municipality’s residents. The petition for a municipality with a population of less than 150 residents must contain the signatures of at least 10 residents. A petition for a municipality with a population of 151 or more residents must contain the signatures of at least 30 residents. The petition must be submitted to the Secretary of State within six months of the end of the fiscal year end. The municipality will bear the cost of the audit.
Where can I find a petition and where do I mail it once completed?
Please contact the Secretary of State’s office, Municipal Audit Law program manager at 503-986-2255 prior to initiating a petition.
Yes. Annual filing is required for every municipality, including municipalities with no receipts or expenses in the year. If the municipality is newly formed during the year, a filing for the initial partial year is also required.
The accounts and fiscal affairs of every municipality must be audited and reviewed at least once each calendar or fiscal year unless specifically exempt. The audits and reviews shall be completed by an independent accountant who is listed on a roster maintained by the Oregon Board of Accountancy (see next question for explanation of licensed municipal auditors). In addition to the annually required audit, the governing body or executive officer of the municipality may call for additional audits.
The Oregon Board of Accountancy (BOA) oversees the licensure of municipal auditors. A listing of all licensed municipal auditors is listed on the BOA website in two lists: Municipal Auditor Roster and the Mobility Municipal Roster. https://www.oregon.gov/boa/Pages/index.aspx
Compensation for audits and reviews performed by accountants should be agreed upon between the governing body or management of the municipality and the accountant, and should be paid in the same manner as other claims against the municipal corporation are paid. The compensation amount, timelines, and other terms should be documented in an executed contract and might also be referenced in the engagement letter.
Audits are required to inquire into (ORS 297.425
- The principles of accounting and methods followed by the municipal corporation in recording, summarizing and reporting its financial transactions and financial condition
- The accuracy and legality of the transactions, accounts, records, files and financial reports of the officers and employees of the municipal corporation as they relate to its fiscal affairs
- Compliance with requirements, orders and regulations of other public officials which pertain to the financial condition or financial operations of the municipal corporation
- The municipality’s compliance with the legal provisions of federal laws, state laws, charter provisions, court orders, ordinances, resolutions, and rules and regulations issued by any governmental entity; and
- The municipality’s compliance with programs wholly or partially funded by federal, state or other local government agencies, if applicable.
At a minimum, the Secretary of State requires the following to be included in any municipality audit report (OAR 162-010-0020
- The names and mailing addresses of officers of the municipal corporation and members of its governing body;
- The name and address of the registered agent, if applicable
- An individual schedule of receipts/revenues, expenditures/expenses, and changes in fund balances/net position, budgeted and actual, for each fund of the municipality for which budgets are legally required;
- A comparison between the estimated budget schedule with the actual revenues or receipts, transfers in, expenditures or disbursements, transfers out and ending balances on the basis of the legally adopted budget;
- If the municipality has made appropriations in a manner which differs materially from the presentation of estimated expenditures in the budget document, a separate schedule must be included which compares actual expenditures/expenses with the legally adopted appropriations;
- Although uncommon, if an independently elected official is collecting or receiving money on behalf of the municipality, then a schedule of accountability should be included;
- Appropriate comments and disclosures relating to the independent auditor’s review of fiscal affairs and compliance with legal requirements;
- A separately issued by-product report, that in planning the audit, the auditor followed generally accepted auditing standards in obtaining an understanding of the municipality and its internal control over financial reporting containing that includes comments over all relevant aspects of the minimum standards.
Start by engaging a municipal auditor well in advance. Auditors typically have multiple engagements so they schedule their work months in advance. Once you have contracted with an auditor, communicate clearly about expectations and timelines for the audit.
Understand what the auditor will need, and when, in order to satisfy the filing needs of the municipality; auditors typically have lists of required items needed to begin their work.
Clarify what the auditor will file with the Secretary of State’s office on your behalf (and when they will file it) and what the municipality is responsible for filing.
Maintain adequate accounting records and documentation throughout the year. Timely fulfillment of audit requests is critical in maintaining audit timelines. Being prepared with documentation when the auditor schedules fieldwork will also help to maintain established timelines.
Lastly, ask clarifying questions of your auditor when needed.
Deficiencies noted during the course of the audit fall into three broad categories:
- Accounting errors and misstatements
- Internal control weaknesses
- Instances of non-compliance with rules and regulation
The auditor will determine if any identified deficiencies rise to the level of a significant deficiency or a material weakness. These more serious issues are defined by professional auditing standards:
- A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis.
- A significant deficiency is a deficiency, or combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit the attention of those charged with governance.
Audit deficiencies are communicated to the municipality and a copy of the communication must be submitted to the Secretary of State’s office. The municipality must also submit their board-approved plan to correct any material weaknesses and significant deficiencies reported.
The auditor can communicate deficiencies noted during the audit in a variety of ways, depending on the nature of the audit. Auditors may report material weaknesses or significant deficiencies:
- within the audit report in a report on internal control and compliance in accordance with Generally Accepted Government Auditing Standards,
- in a management letter or communication issued in accordance with AICPA audit standards (AU-C 265),
- or in a Schedule of Findings and Questioned Costs related to an audit of federal programs.
Less common, but also acceptable, is communicating deficiencies in the auditor's report on compliance in accordance with State Regulation (Minimum Standards comments).
When deficiencies reported in a financial statement audit, the municipality is required to prepare a plan for correcting, or otherwise addressing, the deficiencies. The plan must:
- Address all material weaknesses and significant deficiencies communicated by the auditor.
- Include the estimated period of time necessary to complete the planned actions.
- Be adopted by the governing body.
- Be filed with our office within 30 days of filing the audit report.
See the Plan of Action Resource
If the Secretary of State disagrees with the city’s plan, it can reject it. Should a rejection occur, the city can request a conference with the Secretary of State.
A plan of action is documentation of the municipality governing body’s intention for planned actions and timelines for addressing and correcting the financial audit deficiencies noted by the auditor.
An optional template is available on the Secretary of State’s website. However, a municipality can prepare any document for submission of the plan of action so long as it contains all required elements and is signed and dated by the governing body.
Plan of Action Resource
Plan of Action Template
The Secretary of State reviews all required submissions and sends notices requesting compliance with municipal audit law. Municipalities that do not file the required plan of action are reported in a public summary report to the legislature.
No. A plan of action is only required for financial audit findings that rise to the level of a material weakness or a significant deficiency. If you are not sure, clarify with your auditor how they have categorized the deficiency.
A fidelity bond is a type of insurance that protects the municipality against losses caused by acts of fraud or dishonesty of the named insured.
Contact your insurance agent to get a fidelity bond.
If the municipality has filed an in-lieu or review report the principal responsible official of the municipality must have been covered by a fidelity or faithful performance bond.
Review report filers – coverage equal to 10% of revenues or no less than $10,000.
In-lieu filers – coverage equal to the amount of revenues received.
No. Proof of coverage should be made available upon request, but does not need to be filed. The report in lieu of audit requires coverage amounts to be reported, but the certificate is not needed unless specifically requested.
Business registry numbers are not typically needed for governmental entities and are not required by municipal audit law.
However, a municipality may be asked for an Oregon business registry number in order to open a bank account, secure a line of credit, or conduct other business.
For more information see
Assumed Business Name for Government resource and the Register a Business page
for details on business registry numbers and governments.
The Secretary of State’s office receives each report and archives them for at least 10 years.
Periodically, the Secretary of State selects a sample of reports to review for compliance with accounting and reporting requirements and state rules. After the review, a letter is sent to the municipality and auditor summarizing comments from the review. The review is intended to be educational and help improve financial reporting and compliance for future reporting periods. If an amended report is required, it will be clearly asked for.
Local Budget Law is overseen by the Oregon Department of Revenue.