Cities

The Minnesota Legislature recently changed the Audit and Agreed-Upon Procedures Engagement (AUP) reporting requirements for cities. These changes, enacted during the 2025 legislative session, amend Minnesota Statutes, sections 412.02, subdivision 3 and 412.591, subdivision 3, and are effective August 1, 2025. They raise the audit threshold in 2025, and state it will be adjusted for inflation annually thereafter.[1] Please refer to 2025 Minn. Laws, ch. 39, art. 6, §§ 10 and 13.

To receive distributions under sections 477A.011 to 477A.03, cities must submit all the financial reports to the state auditor by the reporting deadline. This requirement applies to all aid distributions to be paid on or after August 1, 2025. These reports include:

  • Local Government Financial Reporting Form: This Excel form is required to be completed by all cities and is available in SAFES. If submitting annual financial reports through CTAS, this document is titled the State Auditor Data File. The due date is March 31 for cities that are not required to submit audits or AUPs and use a cash basis of accounting. Cities that do not have to submit audits or AUPs are required to submit unaudited financial statements along with the financial reporting form.
  • GAAP or Cash Audit or Agreed-Upon Procedures Engagement (AUP): If a city needs to have a cash audit or AUP, both the audit and financial reporting form must be completed and submitted to the OSA by June 15. Cities reporting on a GAAP basis must submit both the audit and financial reporting form to the OSA by June 30.

Revenue Threshold Updates:

    • The annual audit threshold will increase to $1 million starting in 2025.[2]
    • This threshold will be adjusted annually for inflation.

Cities over 2,500 in population, according to the latest census, are still required to have an annual audit in accordance with Generally Accepted Accounting Principles (GAAP) regardless of their revenues.

Cities 2,500 or less, where there are separate offices of Clerk and Treasurer, are not generally required by Minnesota law to have an audit regardless of their revenues.

Cities with Population 2,500 or less with Combined Clerk/Treasurer Offices:

  • If total annual revenues for all governmental and enterprise funds combined exceed the threshold, an annual audit is required.
  • If revenues for all governmental and enterprise funds combined are at or below the threshold, an AUP is required once every five years.

Procedural Requirements Based on Revenue: Please refer to 2025 Minn. Laws, ch. 39, art. 6, §§ 10 and 13

  • If the clerk and treasurer offices are combined and revenues for all governmental and enterprise funds exceed the annual threshold, the City Council must provide for an annual cash audit by the state auditor or a certified public accountant, following procedures prescribed by the state auditor.[3]
  • If revenues for all governmental and enterprise funds combined are at or below the threshold, the City Council must arrange for an AUP once every five years, conducted for a randomly selected one-year period.[4]

Local Government Aid Distribution: Please refer to 2025 Minn. Laws, ch. 39, art. 6, § 16

  • To receive distributions under sections 477A.011 to 477A.03, cities must submit all the financial reports to the state auditor by the reporting deadline. This requirement applies to all aid distributions to be paid on or after August 1, 2025.[5]

 

[1] See 2025 Minn. Laws, ch. 39, art. 6, §§ 10 and 13.

[2] Id.

[3] Id.

[4] Id.

[5] See 2025 Minn. Laws, ch. 39, art. 6, § 16.