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March 2024 Progress Report / Update for 2022 Audit 

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The 2022 audit highlighted several material weaknesses, significant deficiencies, and issues of non-compliance relating to financial reporting, statutory timelines, and internal controls for the City of Ishpeming. The specific causes named, in the report, for these conditions consisted of staffing shortfalls related to turnover and limited functional knowledge of finance and accounting.

It is crucial for the City of Ishpeming to take these findings seriously, applying immediate and methodical measures to rectify the concerns. Since receiving the audit in summer 2023, City administrators have been hard at work to do just that: addressing the specific issues raised, and strengthening the City Finance Office and its outputs. 

The update below includes a reminder of findings presented in August 2023, as well as a new, most recent, update as of March 6, 2024. 

Update as shared on August 16, 2023 

The City plans to take action to address the financial staffing and functional knowledge concerns that were highlighted in the audit in the following ways:

  • Enhanced staffing expertise, especially with the development of Grant Getschow
  • Enhanced financial reporting to city council 
  • Ongoing training and development for all employees working within the City finance department
  • Strengthened internal controls related to budgets and banking including bank account reconciliations and more sophisticated invoice processing
  • Development of an internal control system to reconcile property tax collections and disbursements
  • Collaboration with external experts including accounting firms, other local governments, and Michigan Treasury 
  • Pursue deficit elimination plans with the council and support of Michigan Treasury 

March 6, 2024 Update

The City is continuing to provide ongoing training and development, strengthen internal controls, and collaborate with external experts. Additionally, the City continues to methodically address the 2022 audit concerns and is taking additional action(s) in the following ways:

  • Achieved a fully staffed and highly qualified office of financial professionals including a new city treasurer through internal promotion, two new account clerks (DPW and assistant/deputy treasurer), and the reassignment of account clerk (utility billing). 
  • Segregation of Duties has been strengthened specifically in the accounts payables process where one employee now enters payables into the system, a separate employee journalizes and reviews the invoices, and yet a different employee issues the checks. 
  • We are continuing to look for ways to strengthen checks and balances, which can be a challenge in a small office. As our new Utility Biller, Treasury Clerk, and DPW Clerks are trained in, the New Treasurer is stepping into their role more. As this happens duties and workflow are being split up between the Finance Director and the Treasurer to separate key functions like data entry and reconciliation and create checks and balances regarding cash disbursement and cash deposits. 
  • Completed an initial review of all financial policies, procedures, and workflows, with plans to update as necessary. 
  • Clearly communicating with City residents the results of the water billing internal investigation and what they can expect as the City moves forward with proper billing procedures in place. 

One of the main concerns brought to light in the 2022 audit was a lack of timely tax disbursements and an orphaned balance left in the tax collection account that would eventually need to be identified and distributed to the proper entities. As of February 28th, City has successfully reconciled tax disbursements from the 2021 and 2022 tax years and in doing so has identified the undistributed funds in question. Roughly $24k will be distributed to the City’s general fund, $38k to the DDA, $9k to the Cities Utility Funds, and $26k of Delinquent personal property tax receipts from previous tax years collected in 2022 has been distributed to the community. The City is working to calculate interest spreads on the delinquent personal property receipts and has disbursed the funds (completed the week of February 26, 2024). This is a huge benchmark for the rebuilding of the city finance offices and combined with timely disbursements carried out throughout the 2023 tax year puts the city back in excellent standing as a steward of public resources.  

The City of Ishpeming will continue to provide relevant updates to the 2022 audit rectifications periodically and expects all concerns raised in the 2022 audit to be fully resolved by summer 2024. 

 

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Permalink URL: https://ishpemingcity.org/2024/03/march-2024-progress-report-update-for-2022-audit/





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