Report: Oregon’s Municipal Audit Program Saw the Highest Amount of Delinquent Filers Since 2017

Persistent issues around staffing and resources caused a record number of municipal corporations to delay filing required reports to Oregon’s Municipal Audit Program, according to a summary report released by the Secretary of State.

“These financial reports are a critical way we hold local governments accountable to the public,” said Secretary of State Tobias Read. “When municipalities fail to submit these reports on time, it hurts public trust in their ability to be effective stewards of public funds.”

Under Municipal Audit Law, Oregon’s municipal corporations are required to submit annual reports with key financial information to the Secretary of State’s Office. For most entities, this report must be a financial audit conducted by a certified public accountant; for other, smaller entities, they may self-report expenditure information. These municipal corporations include all counties, cities, school districts, special districts, and public corporations subject to control by local governments.

The law then requires the Secretary of State prepare an annual summary report of municipal audit and report filings and dictates what information the report shall include.

This year’s report identifies a concerning trend. Auditors noted 106 municipal corporations are more than a year late in filing their audit reports — the highest number of non-filers since 2017, when this summary report was first published; only 19 entities were delinquent then.

Not all municipal corporations are required to undergo an audit. Governments spending less than $500,000 a year may be exempt from the audit requirement. Of the 1,840 municipal corporations in Oregon, 1,197 are expected to file audit reports with the Secretary of State.

Auditors note a major reason for the delinquent filings is a lack of adequate resources. Staffing is one of the most commonly cited reasons by local governments for filing late audit reports. The number of available certified auditors is also declining due to firm mergers, retirements, and firms leaving the government auditing space.

The Secretary of State’s Office takes an educational approach, rather than a punitive one, to encourage municipalities to submit their filings on time.

There are limited mechanisms to enforce compliance. However, there may be consequences for municipalities that are delinquent. Entities that don’t file a report may jeopardize their ability to service debt, obtain new debt, comply with grant requirements, or obtain new grants. School districts may have state school funds withheld by the Oregon Department of Education.

Special districts may be subject to dissolution if they don’t file reports for three consecutive years. Per ORS 198.345, the Secretary of State’s Office notifies a county of the special district’s delinquency and requests they start the dissolution process. It is then up to the county to follow through on their statutory responsibility.

Municipalities may request an extension for good cause or due to extraordinary circumstances; these requests must be approved by the Secretary of State’s Office. For fiscal year 2023, the office received 308 extension requests and granted 82% of them — on par with the average for the last five years.

Read the full report on the Secretary of State’s website.