St. Clair Shores audit yields sound assessment

ST. CLAIR SHORES — Members of the St. Clair Shores City Council received the city’s fiscal year 2024 audit at their meeting on Dec. 2.

According to the presentation presented by Ali Barnes, managing principal of the firm Yeo & Yeo, the city’s audit received an unmodified opinion, which is the highest level of assurance that everything was filed correctly.

For the fiscal year spanning July 1, 2023, to June 30, 2024, the city had $45,769,325 in total revenue and transfers into their general fund. The revenue came from the following sources: $21,179,726 (46%) in taxes, $8,064,982 (18%) in state grants and shared revenue, $7,045,751 (15%) in other revenue, $5,410,674 (12%) in charges for services, $2,108,162 (5%) in licenses and permits and $1,960,030 (4%) in fines and forfeitures. Barnes said the total is up about $1.4 million from the year prior.

The city’s Parks and Recreation Department activity was moved from an enterprise fund back into the general fund, which explains the increase in the charges for the services fund, Barnes said.

The city also had $46,552,864 in expenditures and transfers from their general fund. The expenses were recorded as follows: $21,909,941 (47%) for public safety, $8,665,417 (19%) for general government, $8,267,844 (18%) for recreation and culture, $2,962,241 (6%) for judicial, $3,917,762 (8%) in other expenses and $829,659 (2%) in transfers out.

The fund balance decreased a bit this year. Barnes said it experienced around a $784,000 decrease, but it still left the city with around $17.6 million in cash reserves.

The sanitary sewer, water and stormwater funds all experienced “revenues in excess of expenses” for the year, Barnes said.

“Which we would generally expect for this fund because that’s what allows you to have money to do capital improvements,” he said.

The city spent $2,525,676 in federal money. Of that, $766,305 came from the American Rescue Plan Act and $1,215,660 came from the Community Development Block Grant Program.

An extra single audit is needed for expenditures over a certain amount. These two accounts accounted for around 78% of the total expenditures of federal money.

“And we have to go through a risk assessment and determine which of your federal programs need additional auditing,” Barnes said.

Barnes said they did not find any material weaknesses, significant deficiencies or material noncompliance in the two programs.

The city had a material weakness or material noncompliance item that was present last year. In 2023, the police and fire pension millage fund ended in a deficit. Barnes said this deficit was around $1.2 million.

“That was the result of an error in calculating how much needed to be levied in that levy and then paid into the system and that’s what caused the deficit,” Barnes said.

At the end of last year, the city was required to file a deficit elimination plan. Barnes said while the finding is still present, significant progress has been made. The deficit this year is just over $573,000.

“You were actually about a year ahead of what your corrective action plan said you were going to be at,” Barnes said.

Barnes thanked the finance team for the work they did to complete the audit.

Mayor Pro Tem and Councilman Dave Rubello commended Barnes for her work and told City Manager Dustin Lent that he did a good job. He asked what the process for the audit was.

Lent thanked Rubello for his compliment.

“But the compliment, as you mentioned, as well goes to each one of the department heads for really watching over their own individual department,” Lent said. “But the major kudos goes to the finances department. I mean, we really have tried to watch the internal controls.”

Councilman Chris Vitale asked what categories fit into the “other” fund listed in the audit.

“There are general costs that your general fund incurs, and then other funds pay back in indirect rate to the general fund so the majority of that is what’s collected for that indirect cost process,” Barnes said.

With similar numbers between the tax revenue and public safety expenditures, Vitale said they’re pretty close. He explained further there is no charge for police or fire to come to residents’ houses but there are for permits, water and others.

“It seems like we’re kind of running where we should be in terms of the money that we’re bringing in and taxes paying for the one thing that we can’t directly bill out,” Vitale said.

Councilwoman Candice Rusie asked what constitutes a low-risk auditee. Barnes explained the city is considered high risk because there were material weaknesses found in the previous year.

“Going forward for next year, you will still be high risk because of that material weakness that we talked about,” Barnes said.

Councilman John Caron pointed out several mistakes within the audit document including what he called “simple” mistakes where numbers were said to be listed on a certain page but were not there. He asked how Barnes and Yeo & Yeo are making these corrections and what they’re looking at to give the city assurance that they have a good audit.

Barnes said she cannot speak to a memo she did not see. She also said they look at the areas with the most risk and implement basic audit procedures. They find these risky areas multiple ways including looking at new hires and other things.

“I can’t tell you that an audit means there are zero errors. That’s not the point of an audit. The point of an audit is to say when we factor in materiality, ‘Are there issues?’” Barnes said.

She added that they look at analytics and source documentation including invoices and many other things to complete the audit.