City receives clean audit; auditors flag internal-control weaknesses and water-fund concerns

Plante Moran auditors presented the City of Lincoln Park’s financial statements and single audit and issued an unmodified (clean) opinion, while noting several material weaknesses in internal controls and compliance.

The auditors told the council they issued “an unmodified opinion,” meaning the financial statements “can be relied upon.” James Hapla of Plante Moran said the city’s general fund “did add $334,000 to fund balance this year,” moving general‑fund reserves from about $7.9 million to roughly $8.2 million. The auditors also reported an operating gain of about $1.2 million in the Water and Sewer Fund but said the fund still shows a negative unrestricted net position.

Why it matters: a clean audit opinion affirms the accuracy of the city’s reported results, but material weaknesses signal deficiencies the city must address to reduce risk of error or noncompliance. The auditors identified both operational items (timing of reconciliations, segregation of duties) and a compliance lapse linked to American Rescue Plan Act (ARPA) requirements.

Key findings and figures

- Audit opinion: unmodified (clean) for both the financial statements and the federal single audit (Plante Moran). Tim St. Andrew, the firm’s managing partner on the account, told the council the single audit also received an unmodified opinion.

- Pension grants: the city received roughly $29 million in pension grant funding during the year; auditors said that produced a marked improvement in plan funded ratios reported in the statements.

- Federal awards: the auditors reported Lincoln Park spent about $7.7 million in federal awards during the year, of which about $6.6 million related to ARPA. Because ARPA was the major program tested, auditors reviewed compliance with ARPA procurement and vendor‑screening requirements.

- Material weaknesses disclosed: (1) audit‑identified journal entries requiring adjustment, (2) insufficient segregation of duties for some IT and reconciliation tasks, (3) bank reconciliations not prepared/reviewed in a timely manner, and (4) missing documentation that a required suspension-and‑debarment check was performed before awarding certain ARPA‑funded contracts. Tim St. Andrew said evidence of the debarment check “was not maintained by the city” and that this produced a compliance finding.

- Water and sewer specifics: auditors and staff reported the water‑loss rate remained high at about 41% (a slight improvement from the prior year). Working capital in the water and sewer fund was reported as a negative $2.8 million as of June 30, 2024; auditors recommended the city consider rates and long‑term plans to rebuild reserves.

Council discussion and next steps

Auditors recommended management consider tighter review controls where staffing allows, ensure reconciliations are completed on a timely basis, and retain documentation of ARPA vendor screenings. The auditors offered to assist with booking audit‑identified journal entries and with improvement recommendations.

The presentation concluded with councilmembers asking clarifying questions about the size and timing of the pension grants, the treatment of depreciation in water‑fund results, and how the city might build working capital. Staff and auditors said they will provide follow‑up information and noted several of the recommendations relate to resource and staffing choices.

Ending: The audit will be filed as the city’s official audited financial statements for the year ended June 30, 2024, and the council directed staff to work with the auditors on corrective steps for the disclosed weaknesses.