Cordell is about 100 miles west of Oklahoma City.
The audit, which was requested by the Cordell City Council, revealed Damon collected as much as $30,500 between 2007 and 2012 by working as acting city manager in addition to collecting his mayoral salary.
He also received as much as $230,000 in his capacity as general manager of the city's utilities trust during the same time.
State law prohibits an elected official from collecting a salary from a government position beyond the scope of his elected duties.
Smith said he hoped the investigation could be completed within the next 30 to 60 days.