Independent auditors report Petoskey's 2024 finances presented as ‘fairly stated’; auditors note recurring documentation tasks

An independent audit of Petoskey’s financial statements for the year ended Dec. 31, 2024, found the city’s consolidated statements were presented fairly in accordance with generally accepted accounting principles, auditors told the City Council on Monday.

Trina Oakes of Dennis, Gartland and Nebergall (auditing firm) reported the city’s total net position increased by roughly $3.3–4.1 million depending on the line items reported; auditors showed total assets near $108 million and a net position of about $94.2 million. The general fund ended 2024 with a fund balance of about $6.7 million, roughly 62% of annual expenses, which auditors said is “very strong” compared with peer governments.

Oakes told council that the firm issues a recurring communication each year about internal-control matters: because many smaller governments do not prepare audited financial statements in-house, auditors often assist by preparing statements and disclosures. Under current auditing standards this practice creates a reportable deficiency — the auditors flagged the item again as a recurring communication but stressed the firm remains independent to issue its opinion.

The audit presentation reviewed several accounting changes the city adopted in 2024, including a new standard for compensated absences (accrued paid time off) that required an additional accrual. Auditors also recorded adjustments to convert component units and proprietary funds to full-accrual presentations and to recognize GASB items such as lease liabilities (GASB 87) and pension liabilities (GASB 68).

Key figures auditors cited: - Total revenues and transfers: about $36.0 million (program and general revenues combined reported variously in sections as $32.5m or $36.0m depending on subtotals presented). - Total expenses: about $31.8 million (auditors reported $29.6m and $31.8m in different schedules, consistent with tabular subtotals). - Net increase in net position: $3.3 million to $4.1 million depending on the statements reviewed. - General fund ending balance: $6.7 million (approximately 62% of annual general fund expenses).

Council members asked about the city’s current ratio and whether it is unusually strong. Oakes said the net position and liquidity metrics are strong and the city ranks near the top of the firm’s municipal clients. The audit also shows the city’s net pension liability decreased to about $4.5 million from roughly $5.0 million the prior year, with a current funded ratio of about 88% for the MERS pension plan.

Auditors posted a small number of audit adjustments during the review; most related to new accounting standards and reclassifications among funds. Oakes also explained upcoming reporting changes under GASB that will affect future disclosure requirements and the threshold for federal single-audit requirements tied to federal grant spending.

Council and staff asked clarifying questions about budget amendments that appeared in the audit and about the time-and-materials cost of the audit, with auditors saying they were slightly over budget primarily because of investment-classification questions and some fixed-asset reclassifications.

City Manager Horn and finance staff said they would follow up with the city attorney and auditors as needed on any technical matters; staff also confirmed the audit-related communication letter was sent to the governing body. Council took no separate formal vote beyond acceptance of the audit presentation; auditors concluded by offering to provide more detailed benchmarking data if council wanted comparative metrics for other municipal clients.