Today is the deadline for cities with populations under 2,500 to file two items with the Office of the State Auditor (OSA): financial statements and annual reporting forms.
The clerk or chief financial officer must provide the council with a financial statement in February. Then, city councils and staff must make sure the OSA receives that financial statement and an annual reporting form by March 31.
Just like failing to file your personal taxes on time, there are penalties for cities that file late—or fail to file. If a city does not file the financial statement and the annual reporting form on time with the OSA, the city’s summer payment of local government aid (LGA) may be delayed until it is filed. Or, if a city fails to file the required information altogether, the city may permanently lose its LGA payments for that year.
Accounting methods are the basis of the statements and reports. There is no requirement that accounting standards for small cities conform to national standards, but they must meet the OSA’s requirements. So, small cities must use one of four different accounting standards. According to the OSA, the differences between these accounting methods relate to when, what, and where assets, liabilities, revenues and expenditures are reported in financial statements.
The types of accounting small cities may use are; a “cash basis of accounting” that recognizes financial transactions when cash changes hands, or when money, in any form, is received or paid out by the city for any reason. Or, a small city may use a “modified-cash basis of accounting” or a third method, called a “regulatory basis” of accounting. Small cities may also decide to follow state law that applies to reporting financial information in larger cities (population over 2,500) commonly known as “generally accepted accounting principles” or GAAP. If a small city chooses to use GAAP, the deadline to submit financial information to the OSA is June 30 instead of March 31.
Remember, the state auditor’s office works with small cities to use appropriate accounting, and to fill out and file the required financial information. Small cities may contact the OSA at (651) 296-2551.
NOTE: This article does not cover all financial information cities must document. See the Handbook for Minnesota Cities, Chapter 26 for more information.
(651) 281-1228 or (800) 925-1122