Auditor issues unmodified opinion on Dearborn Heights 2024 financials; flags thin fund balance and repeat control issues

Jay Wild, lead auditor for Plante Moran, told the Dearborn Heights City Council at a March 18 study session that Plante Moran issued an unmodified opinion on the city’s financial statements for the fiscal year ended June 30, 2024, and that the report was issued in February after a state-granted extension caused by a delayed OPEB actuarial valuation.

That unmodified opinion, Wild said, means that “in our opinion, the information in the statements and the disclosures is fairly stated.” He told the council the firm provided the opinion after completing its procedures and that the report’s timing reflected receipt of an outside actuarial valuation, not other accounting problems.

The audit highlights presented to council show the city’s total assets declined from about $44.4 million at June 30, 2023, to $42.7 million at June 30, 2024, while liabilities rose from about $20.9 million to $26.4 million. Wild said one material timing driver of the liability increase was a delayed transfer of captured tax dollars to the city’s TIFA (Tax Increment Finance Authority); the report shows a $5.8 million due-to-component-unit balance that represented roughly two years’ tax captures at the time of the audit.

Wild also summarized corporate-fund activity: cash and cash equivalents were reported at about $27.6 million at year end; receivables were roughly $3.04 million; due-from-pension and due-from-other-funds items were each reported around $3.9 million; and the general fund balance fell from about $17.8 million to $12.8 million. Revenues declined from about $58.7 million in 2023 to $49.5 million in 2024, a drop the auditor attributed largely to one-time ARPA receipts in the prior year. Expenditures increased to roughly $54 million in 2024.

On the practical implications, Wild pointed out the city’s unrestricted portion of fund balance was only a bit over $4 million — about 8% of annual expenditures — and emphasized that this is a slim margin for a municipal general fund. “Eight percent is not a significant amount,” Wild said; a council member added, “Eight percent is not safe.”

Public-safety costs rose materially year over year; the audit presentation showed public-safety spending increasing from about $28.8 million to $32.8 million, which council members tied to recent police and fire contract increases. Wild said he could not opine on policy decisions that created the expense increases, only on how they appear in the financial statements.

The auditor reported two findings in the fiscal 2024 report, both repeats: (1) procurement policy issues and (2) cost allocation between funds. Wild said an outside party has been contracted to review cost-allocation practices and that administration has been working on procurement revisions; he noted the procurement issues partly reflect inconsistencies between the city charter and drafted policies. Wild also said management provided a representation letter dated 02/03/2025 and that the letter could be made available to council and is also accessible via the state website.

Wild told the council the audit provided reasonable — not absolute — assurance and that auditors test transactions but do not review every item. He said the firm found no disagreements with management on accounting matters and no unauthorized expenditures that came to the auditors’ attention during their procedures.

Council members pressed for more timely delivery of the audit in future years; Wild said the February issuance was a one-time extension tied to the external OPEB valuation and that, with cooperation from city staff, the target is earlier issuance (late November to early December) in future cycles. Council members also requested monthly reporting on certain funds and further detail on specific line items mentioned in the presentation.

The audit presentation closed with Wild thanking city staff for cooperation and reiterating that while the opinion was unmodified, the council should treat the thin unrestricted fund balance and repeat procurement/cost-allocation items as priorities for follow-up.