SF564 (Legislative Session 94 (2025-2026))
Revenue threshold requiring cities to perform annual audits modification
Related bill: HF2083
AI Generated Summary
Purpose
This bill changes when cities must have annual audits or audits at longer intervals, based on how much money the city collects in total from government and enterprise funds, and whether the city’s clerk and treasurer offices are combined.
Main provisions
- Audit trigger based on revenue
- If a city has combined annual revenue from all governmental and enterprise funds that exceeds a specified threshold, the city must have an annual audit of its financial affairs conducted by the state auditor or a certified public accountant, using minimum procedures set by the state auditor.
- If the same revenue is at or below that threshold, the city must have an audit by the state auditor or a certified public accountant at least once every five years, with each five-year audit covering a one-year period randomly chosen by the auditor.
- Audit entities and standards
- Audits must be performed by the state auditor or a certified public accountant.
- Audits must follow minimum procedures prescribed by the state auditor.
- How the threshold works
- The bill lists the dollar amounts used to determine which audit schedule applies. These amounts are set in the statute and are adjusted over time for inflation using the implicit price deflator for state and local expenditures, as published by the U.S. Department of Commerce.
- The base amounts referenced include specific figures (e.g., around 150,000 and 500,000) and then an ongoing inflation adjustment starting after the year 2005.
Significant changes to existing law
- Introduces a revenue-based test for how often city audits must occur, replacing a one-size-fits-all audit cycle.
- Ties audit frequency to the combined revenues of government and enterprise funds.
- Requires that the clerk and treasurer offices be considered in determining audit requirements.
- Applies inflation indexing to the revenue threshold so the requirement adjusts over time.
Practical impact
- Smaller cities with lower combined governmental and enterprise fund revenues may be audited less frequently (every five years).
- Larger cities with higher combined revenues must undergo annual audits.
- City financial oversight becomes more scalable based on city size and revenue, rather than a uniform audit requirement for all cities.
Relevant Terms - audit - annual audit - five-year audit - state auditor - certified public accountant - minimum procedures - audit standards - clerk and treasurer - government funds - enterprise funds - combined revenue - inflation adjustment - implicit price deflator - United States Department of Commerce
Actions
| Date | Chamber | Where | Type | Name | Committee Name |
|---|---|---|---|---|---|
| January 23, 2025 | Senate | Action | Introduction and first reading | ||
| January 23, 2025 | Senate | Action | Referred to | State and Local Government | |
| Senate | Action | See |
Citations
[
{
"analysis": {
"added": [
"Requires an annual audit of a city's financial affairs by the state auditor or a certified public accountant when the city's combined governmental and enterprise fund revenue exceeds the threshold.",
"Keeps or establishes an audit at least once every five years when the city's combined governmental and enterprise fund revenue is at or below the threshold.",
"Sets threshold amounts for 2004–2025 (two amounts) and for 2005 and after (150,000), with annual inflation adjustments using the implicit price deflator for state and local expenditures as published by the United States Department of Commerce."
],
"removed": [],
"summary": "This bill amends Minnesota Statutes 2024 section 412.591 subdivision 3 to modify city audit requirements based on combined governmental and enterprise fund revenues, introducing an annual audit option for higher-revenue cities and a five-year audit requirement for lower-revenue cities, with inflation-adjusted threshold amounts.",
"modified": [
"Amends Subd.3 to implement an audit standard based on revenue thresholds, introducing an annual audit requirement for higher-revenue cities and a five-year audit cycle for lower-revenue cities.",
"Specifies inflation-adjusted thresholds rather than fixed amounts, referencing the implicit price deflator published by the U.S. Department of Commerce."
]
},
"citation": "412.591",
"subdivision": "Subdivision 3"
}
]Progress through the legislative process
In Committee