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FRASER — Alan Panter, a partner at Yeo & Yeo, presented the city of Fraser with its audit for the 2023-24 fiscal year at the City Council’s Jan. 9 meeting.
The audit was presented on time for the first time since 2021.
“The audit went very well this year,” Panter said. “The city was well prepared when we arrived and able to complete our procedures efficiently.”
Panter said the city had one internal control issue and Yeo & Yeo provided comments for management. However, he made sure to say the issues were less severe than they were over the last couple of years.
Panter explained that an audit gives the city an opinion on its financial statements. It is not a mechanism to detect fraud or give assurance on internal controls. The firm gave the city an unmodified or “clean” opinion.
“The statements are formatted with generally accepted accounting principles,” Panter said. “So, in other words, everything that should be there is there and also, based on the procedures we perform, the numbers are good.”
The audit detected an internal control issue with the pension grant the city received. Panter said funds collected from the state grant never went to the city itself but were funneled directly into the Municipal Employees Retirement System. This was required to be recorded as a revenue and expenditure for the city. While the transaction was recorded by the finance director, it was after the year’s end and the budget wasn’t amended.
“You have about $3 million over budget for money that you never got in your hand,” Panter said.
However, he said the city’s budget was well managed and that it shouldn’t be concerned about the internal control issue.
“Sitting in your seat I would not be concerned about this,” Panter said. “This was a one-time, very unusual transaction.”
The audit includes three management letter comments. Following the meeting, Panter explained these are suggestions for things the city could improve on and aren’t required to be reported on.
“These are not major issues,” Panter said.
One issue was with deficiencies with the city following Michigan escheat laws. Panter said the city has outstanding checks that need to be reissued to the payee or turned over to the state as unclaimed property.
“They’re supposed to make an attempt to find the person or the business that the payments are due to and reissue the payment,” Panter said. “Failing all of that, they’re supposed to turn the money over to the state as unclaimed property.”
There are old items on the city Building Department’s accounts receivable list, according to Panter. He said the city also needs to update its capital asset list, removing some assets the city no longer has or has any use for.
In a graph showing the city’s revenues vs. expenditures over five years, Panter showed expenditures exceeding revenues in only 2022. The general fund balance is shown to be trending up following a dip in that same year. This upward trend in revenues and expenditures is due to the $3.9 million pension grant, according to Panter. He expects this to change by next year.
“I would expect to see that come down because that’s a one-time grant,” Panter said.
For water and sewer, the city invested $1.7 million into its system for this fiscal year. The city paid $1.8 million in debt and the system depreciated by about $1.7 million. In a five-year graph, revenues exceeded expenditures for each year.
“You guys are putting more into your system in terms of ongoing investments in the system and debt payments than what the depreciation is taking away every year,” Panter said.
Councilman Patrick O’Dell questioned whether there were procedures in place to ensure any new employees maintain the internal controls previously in place. City Manager Elaine Leven said those procedures are written down in some cases but are always changing. Finance Director Anjlee Bansal agreed with the assessment, saying there’s still room for improvement in some areas.
“This is the shortest audit presentation we’ve had in a while,” Fraser Mayor Michael Lesich said.
