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Adrian receives clean audit; commission adopts audited statements and discusses pension shortfall
Summary
City auditors gave the City of Adrian an unmodified (clean) opinion on the FY2025 financial statements and reported no audit findings; the commission approved the audited statements and discussed the city’s fund balance and a pension plan funded at about 59.4%.
Adrian — Auditors from Clark Schafer Hackett told the Adrian City Commission on Dec. 1 that the city’s fiscal 2025 financial statements received an unmodified, or "clean," opinion and that the audit produced no material weaknesses, significant deficiencies or noncompliance findings.
"The opinion is unmodified, which is a clean audit," auditor Amar Lascari said during the presentation, adding that management cooperated fully. Cody Mitchell, the engagement manager, told commissioners that the city spent below the $750,000 threshold that would require single‑audit federal program testing this year, so no federal program testing was necessary.
The auditors and staff highlighted several year‑over‑year changes. Cody Mitchell said cash and investments increased by about $1.3 million, while capital assets decreased on the books by about $1.5 million because depreciation exceeded additions. Mitchell also identified an increase in the city’s net pension liability of roughly $470,000, driven primarily by lower investment performance in the pension portfolio.
Finance Director Nathan Owens and auditors noted the general fund balance remained strong: "For 2025, it looks like we're making a little bit more than what we're spending," Amar Lascari said, and the city’s reserve was reported in the presentation at about 67% of one year’s expenses. The auditors recommended the commission consider policy around an appropriate reserve level; the firm said a 20% general‑fund minimum is a practical benchmark while noting bond raters use higher thresholds.
Commissioners moved to adopt R25‑068, the resolution approving the FY2025 audited financial statements, authorization of year‑end encumbrances and carryforwards, and designations of the general fund balance. Commissioner Behnke moved the resolution and Commissioner Cheshire seconded; the roll call vote was unanimous and the motion carried.
Discussion touched on the pension funding level. Lascari said the city’s pension plan was funded at about 59.4% on the actuary’s 6/30 snapshot and noted Michigan treats plans below 60% as underfunded. Staff noted the city is meeting actuarially‑determined contributions and that recovery depends in significant part on market returns and MERS’ actuarial assumptions.
Next steps noted by staff included continuing work with the state retirement system and monitoring actuarial updates; staff will also return to commission discussion about reserve policy when preparing the budget.
