Council receives FY2024-25 audit; auditors flag off-books DDA PayPal account

Clawson City Council on Tuesday received the fiscal year 2024-25 financial audit and was told the city's financial statements earned an unmodified opinion, the highest level of assurance from independent auditors.

"Our opinion this year is what is called an unmodified opinion," said Mike Rolka of Yo and Yo CPAs, who presented the audit to the council. Rolka said the firm obtained sufficient audit evidence to conclude the statements were materially correct for the year ending June 30, 2025.

The audit packet showed a sharp increase in governmental fund balances for 2025, Rolka said, driven by bond proceeds that are reported as other financing sources under governmental accounting. Property taxes remain the largest single revenue source, about 60 percent, followed by state and federal grants and other charges.

Despite the clean opinion, Rolka told the council the auditors identified one material weakness: a prior-period omission tied to the Downtown Development Authority (DDA). "During the turnover in management at the DDA, somebody became aware of a PayPal account that was off books," Rolka said. "The actual cash balance of around $10,000 was never recorded." The error was restated to 2024 net position and has been corrected, he said.

Rolka also summarized federal compliance work: the city expended roughly $1.8 million in federal awards this year, with the ARPA program tested as the major program (about $893,000). "We have an unmodified opinion on compliance over that program," he said.

Council members asked about internal controls and whether a separate internal-control study was warranted after the PayPal finding. Rolka said auditors review internal controls for risk assessment as part of the audit but do not issue an opinion on controls, and he did not recommend an expensive, separate control audit unless council asked for one. "I don't think it is necessary but I would never stop you all from doing that if you believe it is important to you," Rolka said.

Resident Jamie Gills Takanocchi had earlier asked the council to direct staff to apply an inflation factor to long-term infrastructure bond project cost projections and to clarify the $400,000 carryover for the city hall reconfiguration. City Manager Joe Reicher said the bond project list used rates current when the bond proceeded and that staff expects to update projections after a series of near-term projects are complete.

After discussion, Council moved to receive and file the audit. The motion passed by roll call.

The audit will be posted with the council packet; auditors said GASB standards scheduled for fiscal 2026 will change some presentation and footnote requirements, including a renamed reporting model and additional variance columns in budget schedules.