Audit office recommends filing Wayne County Detroit CDE financials; notes missing MD&A and low activity

The Office of the Auditor General recommended the Wayne County Commission receive and file the limited review of the Wayne County Detroit Community Development Entity(CDE) audited financial statements for the year ended Aug. 31, 2024, at a meeting of the Wayne County Commission Audit Committee.

The recommendation followed a limited review by OAG staff that found the CDEreceived an unmodified auditor opinion but omitted a management discussion and analysis (MD&A) and a budgetary comparison schedule that the Governmental Accounting Standards Board and generally accepted accounting principles (GAAP) expect to accompany government financial statements.

Erica Jones, principal senior auditor with the Office of the Auditor General, said the CDE's external auditor, Allen Young and Associates, issued an unmodified opinion on the audited financial statements for the year ended Aug. 31, 2024, and that "based on our limited review, nothing came to our attention that caused us to believe that the financial report, including the audited financial statements of the Wayne County Detroit Community Development Entity, are not presented in conformity with the generally accepted accounting principles." Jones recommended the report be forwarded to the full commission for receipt and filing.

The OAG review summarized the CDE's 2024 results as largely inactive. Total assets, made up almost entirely of cash and bank deposits, declined by about $8.9 million (2.2%) from 2023, the report says, a change the auditors attributed mainly to reductions in loan fund receivables and microloan funds due from the bank. Total liabilities declined by roughly $19,000 (about 1%), and unrestricted net position declined by about $28,000 (1.1%). The CDE reported no operating revenues for fiscal years 2023 and 2024; OAG staff said a $77 million allocation was moved to subsidiaries before fiscal 2024 and the subsidiary allocations were closed out in 2020, producing no subsequent operating revenue. The entity's operating expenses for 2024 were roughly $30,000, primarily professional fees, an increase of $7,851 (about 35%) compared with 2023. Net receipts from the small-business loan program fell from about $23,000 in 2023 to $6,491 in 2024 (a decline of roughly 73%).

Yogesh Kuzani, deputy chief financial officer for management and budget, told the committee the CDE is a discretely presented component unit whose accounting is handled by an outside vendor. Kuzani said he has not seen an MD&A prepared since he assumed his role about eight to nine years ago but that staff will work with the outsourced accounting firm to ensure an MD&A and the budgetary comparison schedule are prepared for next year.

Commissioner Killeen asked whether the CDE had any revenue outside microloan repayments. Kuzani and Hassan Jake, director of economic development, said the entity has been largely inactive in recent years but that staff have reapplied for New Markets Tax Credits in the most recent cycle and are reviewing past applications and processes to be more competitive. Jake said the commission had previously received reports showing loans made through the small-business loan program and that staff would reissue a loan activity report for the commission.

The committee moved to accept the OAGrecommendation and forward the limited review to the full Wayne County Commission for receipt and filing. Commissioner Garza moved the action; Commissioner Wilson supported it. The committee recorded the motion as carried.