Auditors give Detroit a clean opinion on financial statements but flag repeat weaknesses in housing programs

Auditor General Laura Goodspeed and external auditors Plante Moran presented the City of Detroit's Annual Comprehensive Financial Report (ACFR) and single-audit results to the Budget, Finance and Audit Committee, reporting a clean, unmodified opinion on the financial statements while also identifying internal-control weaknesses that need attention.

"We get the pleasure of sharing with you the audit results which is, a clean, unmodified opinion on the financial statements," Plante Moran partner Ali Hejazi told the committee, describing the highest level of assurance auditors can issue.

Why it matters: an unmodified opinion indicates the ACFR is materially accurate and conforms with financial reporting standards, but auditors also listed two material weaknesses that could allow misstatements or improper payments if not addressed. Those findings — a repeat issue involving timely and accurate financial reporting (noted as finding 2025-1) and a new component-unit control weakness — were discussed at length with committee members.

What auditors reported: Plante Moran flagged (1) a repeat material weakness related to insufficient controls for timely, accurate financial reporting, which rolls up multiple adjusting journal entries and accounting items, and (2) a new finding involving insufficient segregation of duties or other controls at a component unit that led to improper payments (auditors identified the Detroit Transportation Corporation as the affected component). The auditors said none of the individual journal entries this year were material on their own.

The single-audit review covered about $508 million in federal expenditures for the year, including $291 million of ARPA (state and local fiscal recovery) funds. Auditors rendered unmodified opinions on six major programs tested but reported findings in three programs: two repeat material weaknesses and material noncompliance items in the HOME housing program (inspection and eligibility-review controls), a material weakness and noncompliance in the Ryan White program (three late subrecipient reimbursements), and a material weakness in the WIC program's indirect-cost allocation and certification documentation.

"These areas require management judgment, so we focus on testing the significant inputs and assumptions," Veronica Tuazon of Plante Moran said while describing how auditors examined estimates such as accrued claims, pension balances and revenue recognition.

Financial highlights: auditors and staff showed General Fund revenues increased about 3.7% to $1.45 billion (property tax up 14%), while expenditures rose about 3.4% to $1.381 billion and the General Fund balance declined about 7.7% to $1.029 billion. Auditors noted a $52 million drawdown from a retiree-protection fund for pension contributions and a $42 million increase to a corporate income-tax reserve.

On repeated housing findings, committee members pressed for specifics and remedies. "Why do these keep coming back despite corrective action plans?" Council Member Mary Waters asked. Amanda Ward of Plante Moran said timing often explains repeats: corrective actions can start after an audit is issued, leaving part of the audited period noncompliant even if remediation is under way.

On the Ryan White finding, auditors said three payments were slightly outside the 30-day reimbursement window (around 31—3 days) due to a system feature that permitted marginal delays; auditors characterized the issue as timing rather than evidence of misused funds.

Next steps and oversight: the Auditor General said her office will review corrective-action plans and resume follow-up audits. Members asked the Office of the Chief Financial Officer to provide corrective-action details and the Auditor General said her office will continue internal follow-ups and begin targeted follow-up audits to help reduce repeat findings.

What the committee will watch for: members requested that OCFO and relevant departments present corrective-action plans and timelines for resolving the HOME, WIC and component-unit issues; the committee noted potential downstream effects on service delivery and federal monitoring if findings are not fully remediated.

The committee opened, questioned and took the presentation under advisement; no formal vote was required on the audit presentation itself.