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Gratiot County auditors issue clean opinion but flag control weaknesses and a fictitious vendor
Summary
An independent audit found a clean (unmodified) opinion for fiscal year ending Sept. 30, 2024, but identified material audit adjustments, more than 30 proposed adjustments, and a fictitious vendor scheme of roughly $23,000. Auditors recommended strengthening vendor controls, segregation of duties and considering a separate finance director.
Gratiot County commissioners on Tuesday accepted the county's 2024 financial audit, which carried an unmodified ("clean") opinion but included a string of internal control findings and a vendor fraud discovery.
Ally, the CPA who presented the audit for the county's accounting firm, told the board the audit produced a clean opinion even though it identified internal control issues: "The county has received an unmodified or clean audit opinion," Ally said, and then warned that the opinion does not eliminate the need to address control gaps uncovered during the review.
The audit found a material audit adjustment tied to a new financing arrangement that required a gross-up of revenue and expenditures by about $3.3 million, mostly a timing issue tied to a contract that was entered into in September rather than October. The auditors also proposed more than 30 other adjusting entries across the financial statements.
In surprise testing for fictitious vendors, auditors identified a vendor created by a county employee and invoices paid to that nonexistent vendor. "We did find a vendor that was not an actual vendor," Ally said. The invoices identified in the audit totaled just over $23,000; the county has opened a forensic review and is pursuing follow-up steps.
Ally urged the board to tighten vendor controls and segregation of duties. She recommended the county consider separating the finance director functions from the county administrator role to improve oversight and internal review: "If you put that all on one person, you just open yourself up for issues," she said.
The auditor's single-audit work on federal awards found roughly $3.3 million in federal dollars during the year, including about $2.3 million in ARPA spending; the single-audit portion produced no federal award findings for the audited programs.
Commissioners pressed for next steps and more frequent financial monitoring. Ally said the board should consider targeted third-party internal control reviews and suggested quarterly reporting to the commission so elected officials can "smell test" numbers before year-end adjustments accrue.
The board voted to accept the audit as presented.
