Council receives FY2024 audit; auditors flag pension millage deficit as ongoing material weakness

St. Clair Shores’ external auditors told the City Council on Dec. 2 that the city’s fiscal year 2024 financial statements received an unmodified (clean) audit opinion, but the audit identified a continuing material weakness tied to a deficit in the police and fire pension millage fund.

The city’s audit partner, Allie Barnes, said general fund revenues for FY2024 were about $45.8 million and that property taxes were the largest revenue source, roughly 46 percent of general fund revenues. “Your city has received an unmodified or clean audit opinion,” Barnes said. She also told council that the general fund’s total fund balance at year-end was about $17.6 million, and unassigned fund balance stood just under $15.3 million.

Barnes and city staff walked the council through other highlights: the city’s utility funds had revenues in excess of expenses, enabling capital asset additions; pension net liabilities remain significant (roughly $112 million total across plans); and OPEB liabilities total about $80 million, with funding ratios below pension levels. Barnes said the audit included single-audit work for federal programs (noting audited ARPA and CDBG spending) and that the auditors did not identify material noncompliance within those programs.

The one written finding carried forward from FY2023 concerns the police and fire pension millage fund. Barnes said an error in calculating the levied amount had produced a deficit; the FY2024 deficit had been reduced to about $573,000 after corrective action and was “about a year ahead” of the city’s deficit elimination plan. Barnes characterised the overall audit as strong but cautioned that the pension/OPEB legacy costs will remain a multi-year issue.

Council members asked for clarifications on pension funding thresholds and whether the city would need to seek a waiver from the state because different actuarial reports show slightly different funded ratios. Barnes explained how audit timing and market volatility affect those year-end percentages and said the state has in the past granted waivers when year-end actuarial results were close to thresholds.

Councilmember Rebello thanked the auditors and finance staff and moved to receive and file the FY2024 ACFR and related reports. The motion was seconded and adopted by voice vote.

What it means: The city’s financial statements are presented fairly in accordance with accounting rules (clean opinion). However, the audit documents an ongoing material weakness that requires continued corrective action (deficit elimination for the police/fire pension millage fund) and notes large long-term pension and OPEB liabilities that the city is working to address.

Council action: Council voted to receive and file the FY2024 Annual Comprehensive Financial Report and related audit reports.