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HomeMy WebLinkAboutLansing Brownfield Redevelopment Authority 2022 Audit LANSING BROWNFIELD REDEVELOPMENT AUTHORITY REPORT ON FINANCIAL STATEMENTS (with required supplementary information) YEAR ENDED JUNE 30, 2022 Ma n e r Costerisan TABLE OF CONTENTS Page INDEPENDENT AUDITOR'S REPORT.........................................................................................................................................1-3 MANAGEMENT'S DISCUSSION AND ANALYSIS....................................................................................................................4-6 BASIC FINANCIAL STATEMENTS...................................................................................................................................................7 Government-wide Financial Statements Statementof Net Position..........................................................................................................................................................8 Statementof Activities................................................................................................................................................................9 Governmental Fund Financial Statements BalanceSheet................................................................................................................................................................................10 Reconciliation of the Governmental Fund Balance Sheet to the Statement of Net Position.......................11 Statement of Revenues,Expenditures,and Changes in Fund Balance.................................................................12 Reconciliation of the Statement of Revenues,Expenditures,and Changes in Fund Balance of the Governmental Fund to the Statement of Activities......................................................................................13 Notesto Financial Statements................................................................................................................................................14-24 REQUIRED SUPPLEMENTARY INFORMATION......................................................................................................................25 BudgetaryComparison Schedule.............................................................................................................................................26 Note to Required Supplementary Information..................................................................................................................27 INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENTAUDITING STANDARDS.....................................................................................................................28-30 2425 E.Grand River Ave., (00*M a n e r Suite 1,Lansing,MI 48912 2 517.323.7500 CosterisanED 517.323.6346 INDEPENDENT AUDITOR'S REPORT The Honorable Mayor,Members of the City Council, and Members of the Board of Directors of the Lansing Brownfield Redevelopment Authority Lansing,Michigan Report on the Audit of the Financial Statements Opinions We have audited the accompanying financial statements of the governmental activities and the major fund of the Lansing Brownfield Redevelopment Authority (the "Authority"), a discretely presented component unit of the City of Lansing, Michigan,as of and for the year ended June 30, 2022, and the related notes to the financial statements, which collectively comprise the Authority's basic financial statements as listed in the table of contents. In our opinion,the financial statements referred to above present fairly,in all material respects,the respective financial position of the governmental activities and the governmental fund of the Lansing Brownfield Redevelopment Authority,as of June 30,2022,and the respective changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America. Basis for Opinions We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in GovernmentAuditing Standards,issued by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of Lansing Brownfield Redevelopment Authority and to meet our other ethical responsibilities,in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Emphasis of Matter As discussed in Note 1,the financial statements present only the Lansing Brownfield Redevelopment Authority and do not purport to,and do not present fairly the financial position of the City of Lansing,Michigan,as of June 30, 2022, and the changes in its financial position for the year then ended, in conformity with accounting principles generally accepted in the United States of America.Our opinion is not modified with not modified with respect to this matter. 1 Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement,whether due to fraud or error. In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Authority's ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter. Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that,individually or in the aggregate,they would influence the judgment made by a reasonable user based on the financial statements. In performing an audit in accordance with generally accepted auditing standards and Government Auditing Standards,we: ➢ Exercise professional judgment and maintain professional skepticism throughout the audit. ➢ Identify and assess the risks of material misstatement of the financial statements,whether due to fraud or error,and design and perform audit procedures responsive to those risks. Such procedures include examining,on a test basis,evidence regarding the amounts and disclosures in the financial statements. ➢ Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Authority's internal control. Accordingly,no such opinion is expressed. ➢ Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management,as well as evaluate the overall presentation of the financial statements. ➢ Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Authority's ability to continue as a going concern for a reasonable period of time. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit. 2 Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis and budgetary comparison information, as identified in the table of contents, be presented to supplement the basic financial statements. Such information is the responsibility of management and,although not a part of the basic financial statements,is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America,which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements,and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards,we have also issued our report dated December 20, 2022, on our consideration of the Lansing Brownfield Redevelopment Authority's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements, and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing,and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with GovernmentAuditing Standards in considering the Authority's internal control over financial reporting and compliance. December 20,2022 3 LANSING BROWNFIELD REDEVELOPMENT AUTHORITY MANAGEMENT'S DISCUSSION AND ANALYSIS The Lansing Brownfield Redevelopment Authority(the"Authority")was established by the City of Lansing(the "City") on August 17, 1997, pursuant to Public Act 381 of 1996. The Authority presents this management discussion and analysis of its financial performance as an overview of financial activities for the fiscal year ended June 30,2022. Using this Annual Report The discussion and analysis is intended to serve as an introduction to the Authority's basic financial statements. The basic financial statements are comprised of the following: ➢ The statement of net position presents information on all of the Authority's assets and liabilities,with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the Authority is improving or deteriorating. ➢ The statement of activities presents information showing how the Authority's net position changed during the most recent fiscal year. ➢ The governmental fund balance sheet presents information on the Authority's assets, liabilities, and deferred inflows of resources,with the residual reported as fund balance. ➢ The statement of revenues,expenditures,and change in fund balance-general fund presents information showing the Authority's actual revenues and expenditures for the most recent fiscal year on the fund level perspective. ➢ The notes to financial statements provide additional information that is essential to a full understanding of the data provided in the basic financial statements. Government-wide Financial Statements. The net position of the Authority is summarized for the purpose of determining the overall fiscal position. As shown in the table below, the Authority's liabilities exceeded assets by$30.5 million at the end of the fiscal year. Governmental Activities 2022 2021 Assets Current and other assets $ 20,966,927 $ 10,583,944 Liabilities Other liabilities 12,065,494 3,181,290 Noncurrent liabilities 39,457,798 28,319,617 Total liabilities 51,523,292 31,500,907 Net Position (deficit) Restricted 3,791,897 3,040,193 Unrestricted (deficit) (34,348,262) (23,957,156) Total net position (deficit) $ (30,556,365) $ (20,916,963) 4 Governmental Activities 2022 2021 Revenues Program revenue Operating grants and contributions $ 194,444 $ 1,355,689 General revenues Property taxes 7,585,284 4,544,753 Investment earnings 7,926 7,055 Total revenues 7,787,654 5,907,497 Expenses Community and economic development 16,754,400 18,675,836 Interest and fees on long-term debt 672,656 81,589 Total expenses 17,427,056 18,757,425 Change in net position (9,639,402) (12,849,928) Net position (deficit),beginning of year (20,916,963) (8,067,035) Net position(deficit),end of year $ (30,556,365) $ (20,916,963) When comparing the current fiscal year to the previous fiscal year,net position has decreased by approximately $9.6 million, as compared to a decrease of approximately$12.8 million in the prior year. The primary reason for this decrease is disbursements related to the Red Cedar project that was funded by bond proceeds that commenced in the current year. Since the bond proceeds are reported in the statement of net position as a liability, there is not a revenue reported to offset the expenses related to redevelopment projects that are not capitalizable by the Authority. The Authority hopes to recoup these costs in the future in the form of increased tax captures related to this property. Property tax revenues as well as redevelopment expenses increased for the year ended June 30,2022 due to an increase in amounts captured related to project plans that were initiated during the year,as well as continued capture on previously existing plans. In addition,operating grants and contribution revenue decreased this year mainly due to a decrease due to less state and federal grants. General Fund Financial Analysis At the end of the current fiscal year,the Authority's governmental fund (the general fund) reported an ending fund balance of approximately$9 million,an increase of approximately$1.7 million in comparison to the prior year. The reasons for changes in activity for the general fund are substantially the same as discussed for the government-wide financial statements above as the bond issuance shows as an other financing source at the fund level and these bond proceeds, along with prior year's bond proceeds,are being expended in the current year (approx. $16.9 million) on the noted community development projects and increase in property taxes resulted in an overall fund balance increase. 5 General Fund Budgetary Highlights In accordance with State statute,the Authority adopts a budget annually prior to the commencement of the fiscal year. The budget may be amended during the year by formal resolution of the Board of Directors. Accordingly, the budget was amended during the year for Brownfield plan amendments and additional intergovernmental grants received,as well as unexpended multi-year grants not included in the original budget. The Authority did not amend their budget for the Red Cedar project that had substantial expenditures in the current year, along with not amending the budget for the current year bond issuance and related expenditures for those community development projects. Additional variances between the final budget and the actual were the result of multi-year grants received in prior and current years that were spent in the current fiscal year. Capital Assets. The Authority has no capital assets at this time. Long-term Obligation Administration At the end of the current fiscal year,the Authority had total long-term obligations outstanding of$39,457,798. Proceeds from Limited Obligation Tax Increment Revenue Bonds were received in fiscal year 2021-2022 for use on the Dual Flag Hotel. Principal Principal Balance Debt Principal Balance June 30,2021 Proceeds Payments June 30,2022 Revenue bonds $ 28,390,000 $ 11,330,000 $ - $ 39,720,000 Loan payable 476,820 - - 476,820 Unamortized premium/ (discount) on bonds (547,203) (214,385) 22,566 (739,022) $ 28,319,617 $ 11,115,615 $ 22,566 $ 39,457,798 Additional information on the Authority's long-term obligations can be found in Note 5 of the financial statements. Economic Factors Lansing Brownfield Redevelopment Authority expenses are governed by the laws of the State of Michigan and bond indenture covenants. These laws and covenants determine how bond proceeds are spent and how and when debt retirement payments are made. Requests for Information This financial report is designed to provide a general overview of the Lansing Brownfield Redevelopment Authority finances and to show accountability for the money it receives and expends. Additional information on the Authority can be found on the City of Lansing's website at www.lansingmi.gov. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to: Finance Department-8th Floor, 124 W.Michigan Avenue,Lansing,Michigan 48910. 6 BASIC FINANCIAL STATEMENTS LANSING BROWNFIELD REDEVELOPMENT AUTHORITY STATEMENT OF NET POSITION JUNE 30,2022 Governmental Activities ASSETS Current assets Cash and cash equivalents $ 17,029,019 Cash and cash equivalents-restricted 3,791,897 Current portion of loans receivable 45,410 Due from other governmental units 114 Total current assets 20,866,440 Noncurrent assets Long-term loans receivable 100,487 TOTAL ASSETS 20,966,927 LIABILITIES Current liabilities Accounts payable 3,754,884 Accrued interest payable 269,576 Due to other governmental units 8,041,034 Current portion of long-term obligations 673,913 Total current liabilities 12,739,407 Noncurrent liabilities Long-term obligations,net of current portion 38,783,885 TOTAL LIABILITIES 51,523,292 NET POSITION (DEFICIT) Restricted for Red Cedar Project 3,791,897 Unrestricted (34,348,262) TOTAL NET POSITION (DEFICIT) $ (30,556,365) See accompanying notes to financial statements. 8 LANSING BROWNFIELD REDEVELOPMENT AUTHORITY STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30,2022 Program Revenues Net(Expense) Operating Revenues and Grants and Change in Functions/Programs Expenses Contributions Net Position Governmental activities Community and economic development $ 16,754,400 $ 194,444 $ (16,559,956) Interest and fees on long-term debt 672,656 - (672,656) $ 17,427,056 $ 194,444 (17,232,612) General revenues Property taxes 7,585,284 Investment earnings 7,926 Total general revenues 7,593,210 Change in net position (9,639,402) Net position (deficit),beginning of the year (20,916,963) Net position (deficit),end of the year $ (30,556,365) See accompanying notes to financial statements. 9 LANSING BROWNFIELD REDEVELOPMENT AUTHORITY GOVERNMENTAL FUND BALANCESHEET JUNE 30,2022 General ASSETS Cash and cash equivalents $ 17,029,019 Cash and cash equivalents-restricted 3,791,897 Due from other governmental units 114 Loans receivable 145,897 TOTAL ASSETS $ 20,966,927 LIABILITIES Accounts payable $ 3,754,884 Due to other governmental units 8,041,034 TOTAL LIABILITIES 11,795,918 DEFERRED INFLOWS OF RESOURCES Unavailable revenue-loans receivable 145,897 FUND BALANCE Restricted for Red Cedar Project 3,791,897 Committed-revolving fund B 966,095 Unassigned 4,267,120 TOTAL FUND BALANCE 9,025,112 TOTAL LIABILITIES,DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCE $ 20,966,927 See accompanying notes to financial statements. 10 LANSING BROWNFIELD REDEVELOPMENT AUTHORITY RECONCILIATION OF THE GOVERNMENTAL FUND BALANCE SHEET TO THE STATEMENT OF NET POSITION JUNE 30,2022 Total fund balance-governmental fund $ 9,025,112 Amounts reported for the governmental activities in the statement of net position are different because: Long-term loans receivables are not available to pay for current period expenditures and are therefore unavailable in the funds. 145,897 Long-term obligations and related liabilities are not due and payable in the current period and therefore are not reported in the governmental funds balance sheet. Long-term obligations and related liabilities at year-end consist of: Accrued interest payable $ (269,576) Bonds and loans payable (39,457,798) (39,727,374) Net position of governmental activities $ (30,556,365) See accompanying notes to financial statements. 11 LANSING BROWNFIELD REDEVELOPMENT AUTHORITY GOVERNMENTAL FUND STATEMENT OF REVENUES,EXPENDITURES,AND CHANGES IN FUND BALANCE YEAR ENDED JUNE 30,2022 General REVENUES Property taxes $ 7,585,284 Intergovernmental-Federal/State 179,474 Investment earnings 7,926 TOTAL REVENUES 7,772,684 EXPENDITURES Current Community and economic development Administrative 201,417 Community development projects 16,552,983 Debt service 464,383 TOTAL EXPENDITURES 17,218,783 EXCESS OF REVENUES (UNDER) EXPENDITURES (9,446,099) OTHER FINANCING SOURCES (USES) Issuance of long-term debt 11,330,000 Bond discount (214,385) TOTAL OTHER FINANCING SOURCES (USES) 11,115,615 NET CHANGE IN FUND BALANCE 1,669,516 Fund balance,beginning of year 7,355,596 Fund balance,end of year $ 9,025,112 See accompanying notes to financial statements. 12 LANSING BROWNFIELD REDEVELOPMENT AUTHORITY RECONCILIATION OF THE STATEMENT OF REVENUES,EXPENDITURES,AND CHANGES IN FUND BALANCE OF THE GOVERNMENTAL FUND TO THE STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30,2022 Net change in fund balance-governmental fund $ 1,669,516 Amounts reported for governmental activities in the statement of activities are different because: Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. Change in loans receivable 14,970 Repayment of long-term debt and borrowings of long-term debt are reported as expenditures and other financing sources in governmental funds,but the repayment reduces long-term liabilities and the borrowings increase long-term liabilities in the statement of net position. In the current year,these amounts consist of: Issuance of long-term debt (11,330,000) Change in deferred issuance discounts on long-term debt 191,819 Some items reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds. These activities consist of: Change in accrued interest payable (185,707) Change in net position of governmental activities $ (9,639,402) See accompanying notes to financial statements. 13 LANSING BROWNFIELD REDEVELOPMENT AUTHORITY NOTES TO FINANCIAL STATEMENTS NOTE 1-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES These financial statements present the activities of the Lansing Brownfield Redevelopment Authority (the "Authority"). The Authority was established August 17, 1997,pursuant to Public Act 381 of 1996. The primary purpose of the Authority is to revitalize environmentally distressed areas in the City of Lansing. The Authority's activities are primarily funded through tax increment financing. The Authority is a component unit of the City of Lansing, Michigan (the "City") because the City appoints the Authority's Board of Directors, it has the ability to significantly influence the Authority's operations, and it is financially accountable for the Authority as defined under GASB Statement No. 61, The Financial Reporting Entity:Omnibus-An Amendment of GASB Statements No. 14 and No.34. Accordingly,the Authority is presented as a discrete component unit in the City's financial statements and is an integral part of that reporting entity. Government-wide and Fund Financial Statements The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the non-fiduciary activities of the Authority. The statement of activities demonstrates the degree to which the direct expenses of a given function or identifiable activity are offset by program revenues. Direct expenses are those that are clearly identifiable activities with a specific function or identifiable activity. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a function or identifiable activity and 2)grants and contributions that are restricted to meeting the operational requirement of a particular function or identifiable activity. Property taxes not properly included among program revenues are reportable instead as general revenues. Measurement Focus.Basis of Accounting.and Financial Statement Presentation The government-wide financial information is reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred,regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Governmental fund financial information is reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose,the Authority considers revenues to be available if they are collected within three months of the end of the current fiscal period or one-year for expenditure-driven grants. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However,debt service expenditures are recorded only when payment is due. Property taxes, intergovernmental revenue, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. All other revenue items are considered to be measurable and available only when cash is received by the government. The Authority reports a single major governmental fund-the general fund. The general fund is the Authority's primary operating fund. It accounts for all financial resources of the Authority,except those accounted for and reported in another fund,if any. 14 LANSING BROWNFIELD REDEVELOPMENT AUTHORITY NOTES TO FINANCIAL STATEMENTS NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Assets,Liabilities,Deferred Inflows of Resources,and Equity Cash and Cash Equivalents The Authority's cash and cash equivalents are considered to be demand deposits and amounts held by the City of Lansing,Michigan for the benefit of the Authority. Restricted cash consists of amounts required to be maintained separately in accordance with bond covenants. Brownfield Loans The Authority is party to loan agreements which amount to funds advanced to local corporations 1) under the Brownfield Cleanup Revolving Loan Fund program of the U.S. Environmental Protection Agency and 2) under the Brownfield Local Sight Remediation Revolving Loan Fund (LSRLF). The LSRLF consists of certain local tax captures. Due from/to Other Governmental Units Amounts due from other governments include amounts due from grantors for specific programs and capital projects and for captured property tax revenues not received by the Authority as of year end. Program grants and capital grants for capital assets are recorded as receivables and revenues at the time reimbursable project costs are incurred. Amounts received in advance of projects costs being incurred are reported as unearned revenue,when applicable.Amounts due to other governments are negative pooled cash amounts the Authority has in the common cash account at the City of Lansing.While cash in total is positive,the Authority's component of pooled cash is negative creating a short-term liability of the Authority. Accounts Payable The Authority's accounts payable primarily relate to tax captures due to developers. Deferred Inflows of Resources In addition to liabilities, the fund level balance sheet will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of fund balance that applies to one or more future periods and so will not be recognized as an inflow of resources (revenue) until that time. The governmental funds report unavailable revenues,which arise only under a modified accrual basis of accounting,from loans receivable. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available. 15 LANSING BROWNFIELD REDEVELOPMENT AUTHORITY NOTES TO FINANCIAL STATEMENTS NOTE 1-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Assets.Liabilities,Deferred Inflows of Resources.and Equity(continued). Fund Balances Governmental funds report nonspendable fund balance for amounts that cannot be spent because they are either (a) not in spendable form or (b) legally or contractually required to be maintained intact. Restricted fund balance is reported when externally imposed constraints are placed on the use of resources by grantors, contributors, or laws or regulations of other governments. Committed fund balance, if any, is reported for amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the government's highest level of decision-making authority, the Board of Directors. A formal resolution of the Board of Directors is required to establish,modify,or rescind a fund balance commitment. The Authority reports assigned fund balance for amounts that are constrained by the government's intent to be used for specific purposes but are neither restricted nor committed. The Authority currently has no assigned fund balance, as the Board of Directors has not yet given the authority for the making of such assignments. Unassigned fund balance is the residual classification for the general fund. When the government incurs an expenditure for purposes for which various fund balance classifications can be used, it is the government's policy to use restricted fund balance first, then committed, assigned, and finally unassigned fund balance. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. NOTE 2 -BUDGETARY INFORMATION The Authority has established the following procedures for determining the budgetary data presented in the accompanying required supplementary information to the financial statements: a. The secretary of the Authority's Board of Directors submits to the City Council of the City of Lansing a proposed operating budget for the fiscal year commencing the following July 1. The budget includes proposed expenditures and the means of financing them. b. A public hearing is conducted to obtain taxpayer comments. c. Prior to July 1, the budget is legally adopted by City Council resolution, pursuant to the Uniform Budgeting and Accounting Act(P.A.621). This act requires that the budget be amended prior to the end of the fiscal year when necessary to adjust appropriations if it appears that revenues and other financing sources will be less than anticipated or to allow expenditures in excess of original estimates. Expenditures shall not be made or incurred unless authorized in the budget and shall not exceed the amount appropriated. d. Formal budgetary integration is employed as a management control device during the year for the funds. 16 LANSING BROWNFIELD REDEVELOPMENT AUTHORITY NOTES TO FINANCIAL STATEMENTS NOTE 2 -BUDGETARY INFORMATION(continued) e. Budgets are adopted on a basis consistent with generally accepted accounting principles. f. Expenditures may not exceed budget at the activity level. NOTE 3 -DEPOSITS AND INVESTMENTS Following is a reconciliation of deposit balances as of June 30,2022: Statement of Net Position Cash and cash equivalents $ 17,029,019 Cash and cash equivalents-restricted 3,791,897 $ 20,820,916 Deposits Cash and cash equivalents in checking/savings and in uncategorized pooled investment accounts. $ 20,820,916 Custodial Credit Risk-Deposits Custodial credit risk is the risk that in the event of a bank failure,the Authority's deposits may not be returned. State law does not require,and the Authority does not have a policy for deposit custodial credit risk. As of year- end, $9,273,788 of the Authority's bank balance of$9,773,788 was exposed to custodial credit risk because it was uninsured and uncollateralized for the accounts that were specifically held in the Authority's name. The carrying amount of total cash and cash equivalents as of June 30,2022 was$20,820,916. A portion of the Authority's deposits throughout the year are held by the City of Lansing, Michigan. Those specific deposit accounts are not held in the name of the Authority. The amount of federal depositary insurance and custodial credit risk of investments is determined for the City of Lansing, Michigan as a whole,and cannot be separately identified for the Authority related to these accounts. The Authority has a negative balance in pooled cash with the City at year-end. As a result, this short-term liability is not shown as negative cash but instead shown as a due to other governmental units. The Authority's investment policy does not specifically address this risk, although the Authority believes that due to the dollar amounts of cash deposits and the limits of FDIC insurance,it is impractical to insure all bank deposits. As a result,the Authority evaluates each financial institution with which it deposits Authority funds and assesses the level of risk of each institution; only those institutions with an acceptable estimated risk level are used as depositories. 17 LANSING BROWNFIELD REDEVELOPMENT AUTHORITY NOTES TO FINANCIAL STATEMENTS NOTE 3 -DEPOSITS AND INVESTMENTS (continued) Credit Risk State law limits investments to specific government securities, certificates of deposit and bank accounts with qualified financial institutions, commercial paper with specific maximum maturities and ratings when purchased,bankers acceptances of specific financial institutions, qualified mutual funds and qualified external investment pools as identified in the list of authorized investments in the summary of significant accounting policies. The Authority's investment policy does not have specific limits in excess of state law on investment credit risk. The Authority's amounts in the uncategorized pooled investment of$3,791,897 had a S&P rating of AAAm and a weighted average maturity of 27 days. Interest Rate Risk State law limits the allowable investments and the maturities of some of the allowable investments as identified in the summary of significant accounting policies. The Authority's investment policy does not have specific limits in excess of state law on investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of the Authority's investment in a single issuer. State law limits allowable investments but does not limit concentration of credit risk as identified in the list of authorized investments in the summary of significant accounting policies. The Authority's investment policy does not have specific limits in excess of state law on concentration of credit risk. All investments held at year-end are reported above. Fair Value Measurements The Authority categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs. As of June 30,2022,the Authority's uncategorized pooled investment was classified as Level 2 fair value. State statutes authorize the Authority to invest in: a. Bonds, securities, other obligations and repurchase agreements of the United States, or an agency or instrumentality of the United States. b. Certificates of deposit,savings accounts,deposit accounts or depository receipts of a qualified financial institution. c. Commercial paper rated at the time of purchase within the two highest classifications established by not less than two standard rating services and that matures not more than 270 days after the date of purchase. d. Bankers'acceptances of United States banks. 18 LANSING BROWNFIELD REDEVELOPMENT AUTHORITY NOTES TO FINANCIAL STATEMENTS NOTE 3 -DEPOSITS AND INVESTMENTS (continued) e. Obligations of the State of Michigan and its political subdivisions,that,at the time of purchase are rated as investment grade by at least one standard rating service. f. Mutual funds registered under the Investment Company Act of 1940 with the authority to purchase only investment vehicles that are legal for direct investment by a public corporation. g. External investment pools as authorized by Public Act 20 as amended through December 31, 1997. The Authority follows the investment policy of the City of Lansing. NOTE 4-RECEIVABLES Receivables of governmental activities are comprised of loans receivable which consist of amounts funded by the U.S. Environmental Protection Agency (EPA) revolving loan funds, consisted of the following at June 30, 2022: EPA Brownfield Revolving Loan Fund loan receivable from Sam Eyde Management, Inc. for cleanup related to the property located at 4000 N. Grand River Avenue in the City. Interest is accreted at 3.0%per annum. All unpaid principal and accreted interest is due in full on March 12,2026. $ 100,487 EPA Brownfield Revolving Loan Fund loan receivable from the City of Lansing Economic Development Corporation. Interest is stated at 0%. Repayment is due in an amount of$45,410 on January 1,2023. 45,410 $ 145,897 Of the above loans,approximately$100,487 is not expected to be collected within one year. The Authority is also party to loan agreements,some funded by EPA revolving loan funds and others funded by local tax captures,in which the associated loans are expected to be repaid by future collections of tax increment revenues related to the properties being cleaned up. The liability of the local corporations is limited to any shortfalls in future collection of tax increment revenues. Because the balances that may eventually be collected from outside parties is not reasonably estimable due to the uncertainty of future tax captures, no balance is reported in either the government-wide or fund financial statements. 19 LANSING BROWNFIELD REDEVELOPMENT AUTHORITY NOTES TO FINANCIAL STATEMENTS NOTE 4-RECEIVABLES (continued) The outstanding balance of such loans at June 30,2022,consisted of the following: EPA Brownfield Revolving Loan Fund loan to Brownfield Development Specialists, LLC for cleanup related to the"Dard Building"in the City. Interest is stated at 0%. $ 208,797 Locally funded Brownfield Revolving Loan Fund loan to the High Grade Material Company for demolition and cleanup related to a single parcel of property in the City. Interest is accreted at 5.0%per annum. 23,420 EPA Brownfield Revolving Loan Fund loan to the City of Lansing Economic Development Corporation related to property formerly owned by the City of Lansing Board of Water and Light. Interest is stated at 0%. 368,187 Locally funded Brownfield Revolving Loan Fund loan receivable to the City for cleanup related to a redevelopment of the former Potter Mill property. Interest is stated at 0%. 148,861 Locally funded Brownfield Revolving Loan Fund loan receivable to 515 Ionia, LLC for cleanup related to redevelopment of the Company's property. Interest is stated at 3%. 243,865 MDEQ Revitalization Revolving Loan to 2200 Block, LLC for development of the Provident Place property. Interest is stated at 1.5% and does not begin accruing until five years from the loan effective date. 375,563 Locally funded project by debt issuance, secured solely by tax increments from the development of the Red Cedar project. Initial interest rate at 3.59%. 31,274,816 Locally funded Brownfield Revolving Loan Fund loan receivable to the City for cleanup related to a redevelopment of the former Temple Lofts property. Interest is stated at 1%. 252,535 $ 32,896,044 20 LANSING BROWNFIELD REDEVELOPMENT AUTHORITY NOTES TO FINANCIAL STATEMENTS NOTE 5 -LONG-TERM OBLIGATIONS The following is a summary of long-term obligation transactions of the Authority for the year ended June 30,2022: Amounts Balance Balance Due Within July 1,2021 Additions Deletions June 30,2022 One Year Revenue bonds $ 28,390,000 $ 11,330,000 $ $ 39,720,000 $ 625,000 Direct borrowings and direct placements Loan payable 476,820 - - 476,820 48,913 Unamortized premium/ (discount) on bonds (547,203) (214,385) 22,566 (739,022) - $ 28,319,617 $ 11,115,615 $ 22,566 $ 39,457,798 $ 673,913 Revenue Bonds $9,660,000 Limited Obligation Tax Increment Revenue Bonds Series 2020-1A,due in annual installments of $210,000 to $530,000 beginning in June 2023 and through June 2050,with interest ranging from 3.590%to 4.800%,payable annually. $ 9,660,000 $9,600,000 Limited Obligation Tax Increment Revenue Bonds Series 2020-113,due in annual installments of $205,000 to $525,000 beginning in June 2023 and through June 2050,with interest ranging from 3.590%to 4.800%,payable annually. 9,600,000 $9,1300,000 Limited Obligation Tax Increment Revenue Bonds Series 2020-2,due in annual installments of $210,000 to $425,000 beginning in June 2023 and through June 2050,with interest ranging from 3.450%to 4.650%,payable annually. 9,130,000 $10,065,000 Limited Obligation Tax Increment Revenue Bonds Series 2021A, due in annual installments of $35,000 to $960,000 beginning in June 2024 and through June 2051,with interest ranging from 3.650%to 4.900%,payable annually. 10,065,000 $1,265,000 Limited Obligation Tax Increment Revenue Bonds Series 2021B, due in annual installments of $35,000 to $165,000 beginning in June 2026 and through June 2035,with interest at 5.000%,payable annually. 1,265,000 Total revenue bonds $ 39,720,000 Direct Borrowings and Direct Placements $500,000 Revitalization Revolving Loan, due in annual installments of $25,011 to $48,913 beginning in December 2022 and through December 2033,with interest of 1.50%,payable annually.No interest accrues before the date of the first payment. $ 476,820 21 LANSING BROWNFIELD REDEVELOPMENT AUTHORITY NOTES TO FINANCIAL STATEMENTS NOTE 5 -LONG-TERM OBLIGATIONS (continued) Pledged Revenues The Authority has pledged certain tax increment revenue to repay the $39,720,000 in tax increment revenue bonds issued in previous years. Proceeds from the bonds provided financing for the construction costs of eligible activities and infrastructure improvements in accordance with a Brownfield Redevelopment Plan. The bonds are payable solely from tax capture and are payable through 2051. The total principal and interest paid for the current year and total tax capture revenue were$0 and$5,994,061,respectively. Annual debt service requirements to maturity for the Authority's bonds payable and direct borrowing and direct placements are as follows: Direct Borrowings Year Ending Revenue Bonds and Direct Placements June 30, Principal Interest Principal Interest 2023 $ 625,000 $ 1,373,791 $ 48,913 $ - 2024 730,000 1,358,414 42,147 - 2025 895,000 1,325,146 42,779 6,766 2026 1,000,000 1,558,929 43,421 6,134 2027 1,125,000 1,320,396 44,072 5,492 2028-2032 5,930,000 6,917,291 230,477 4,841 2033-2037 7,270,000 5,728,340 25,011 14,089 2038-2042 8,800,000 4,296,712 - 723 2043-2047 7,060,000 2,479,598 - - 2048-2051 6,285,000 728,630 - - $ 39,720,000 $ 27,087,247 $ 476,820 $ 38,045 NOTE 6-PROPERTY TAXES Property tax revenue is derived pursuant to a tax increment financing agreement between the Authority and various applicable taxing districts. Real and personal property taxes are levied and attach as an enforceable lien on properties located within the boundaries of the tax increment financing district. The City of Lansing bills and collects the taxes on behalf of the Authority. Delinquent taxes on ad valorem real property are purchased by Ingham County. Property tax revenue is recognized when levied in the government-wide financial statements and in the fund financial statements to the extent that it results in current receivables. NOTE 7-RELATED PARTY TRANSACTIONS The Economic Development Corporation of the City of Lansing (the "Corporation") provides administrative services to the Authority. Administrative services, consisting of operating costs and reimbursement of project expenses,charged to the Authority by the Corporation totaled$193,917 for the year ended June 30,2022. 22 LANSING BROWNFIELD REDEVELOPMENT AUTHORITY NOTES TO FINANCIAL STATEMENTS NOTE 8-TAX ABATEMENTS The Authority provides tax abatements under the following program: The Authority encourages environmental cleanup and economic development through its Brownfield Redevelopment Plan under Public Act 318. A developer performs redevelopment and cleanup activities at a site that is obsolete or blighted. The increased tax revenues resulting from the increase in taxable value are captured by the City and used to repay the developer for qualifying expenses. There is no provision for recovery of abated taxes because the developer is only paid for eligible expenses on a reimbursement-basis. Property taxes abated by the Authority under this program for fiscal year 2022, through direct reimbursement to developers from current tax captures amounted to$2,920,680. In addition,there are reserve liabilities reported in the financial statements as a component of accounts payable that represent tax captures set aside for future developer reimbursements. Property taxes abated by the Authority under this program for fiscal year 2022,amounted to$937,287. NOTE 9-RISK MANAGEMENT The Authority,as a discretely presented component unit of the City of Lansing,is exposed to various risks of loss that are covered by the City's policies, including losses related to issues of cyber security, liability, errors and omissions,flood,boiler and machinery,property,employee bonding,crime,and workers'compensation which is covered through the Authority's insurance policies. The Authority carries commercial insurance to cover these risks. Settled claims relating to the commercial insurance have not exceeded the amount of insurance coverage during the past three years. NOTE 10-NET POSITION/FUND BALANCE The statement of net position shows an unrestricted deficit of$(34,348,262) which is due to the full accrual accounting of all long-term debt,without reflecting a corresponding receivable for tax captures to be received in future periods(which cannot be accrued in accordance with generally accepted accounting principles). Total fund balance amounts to a positive balance of$9,025,112. Fund balance at year end was$3,791,897 restricted for unspent bond proceeds,committed for revolving fund B of$966,095,and unassigned fund balance amounts $4,267,120. NOTE 11-UPCOMING ACCOUNTING PRONOUNCEMENTS In May 2019,the GASB issued Statement No.91,Conduit Debt Obligations. This Statement will improve financial reporting by eliminating the existing option for issuers to report conduit debt obligations as their own liabilities, thereby ending significant diversity in practice. The clarified definition will resolve stakeholders'uncertainty as to whether a given financing is, in fact, a conduit debt obligation. Requiring issuers to recognize liabilities associated with additional commitments extended by issuers and to recognize assets and deferred inflows of resources related to certain arrangements associated with conduit debt obligations also will eliminate diversity, thereby improving comparability in reporting by issuers. Revised disclosure requirements will provide financial statement users with better information regarding the commitments issuers extend and the likelihood that they will fulfill those commitments. That information will inform users of the potential impact of such commitments on the financial resources of issuers and help users assess issuers' roles in conduit debt obligations. The Authority is currently evaluating the impact this standard will have on the financial statements when adopted during the 2022-2023 fiscal year. 23 LANSING BROWNFIELD REDEVELOPMENT AUTHORITY NOTES TO FINANCIAL STATEMENTS NOTE 11-UPCOMING ACCOUNTING PRONOUNCEMENTS (continued) In May 2020,the GASB issued Statement No.96,Subscription-based Information Technology Arrangements. This Statement provides guidance on the accounting and financial reporting for subscription-based information technology arrangements (SBITAs) for government end users (governments). This Statement (1) defines a SBITA; (2) establishes that a SBITA results in a right-to-use subscription asset -an intangible asset -and a corresponding subscription liability; (3) provides the capitalization criteria for outlays other than subscription payments,including implementation costs of a SBITA; and (4) requires note disclosures regarding a SBITA. To the extent relevant,the standards for SBITAs are based on the standards established in Statement No.87,Leases, as amended. The Authority is currently evaluating the impact this standard will have on the financial statements when adopted during the 2022-2023 fiscal year. NOTE 12 - CHANGE IN ACCOUNTING PRINCIPLE For the year ended June 30, 2022, the Authority implemented the following new pronouncement: GASB Statement No.87,Leases. Summary: Governmental Accounting Standards Board(GASB)Statement No.87,Leases,was issued by the GASB in June 2017. The objective of this Statement is to increase the usefulness of governments' financial statements by requiring recognition of certain lease assets and liabilities for leases that previously were classified as operating leases and recognized as inflows of resources or outflows of resources based on the payment provisions of the contract. It establishes a single model for lease accounting based on the foundational principle that leases are financing of the right to use the underlying asset. Under this Statement, a lessee is required to recognize a lease liability and an intangible right-to-use lease asset,and a lessor is required to recognize a lease receivable and a deferred inflow of resources,thereby enhancing the relevance and consistency of information about governments'leasing activities. There was no material impact on the Authority s financial statement after the City's adoption of GASB Statement No.87. 24 REQUIRED SUPPLEMENTARY INFORMATION 25 LANSING BROWNFIELD REDEVELOPMENT AUTHORITY GENERALFUND BUDGETARY COMPARISON SCHEDULE YEAR ENDED JUNE 30,2022 Variance with Final Final Budget Original Amended Positive Budget Budget Actual (Negative) REVENUES Property taxes $ 6,847,840 $ 6,441,104 $ 7,585,284 $ 1,144,180 Intergovernmental-Federal/State - - 179,474 179,474 Investment earnings - - 7,926 7,926 TOTAL REVENUES 6,847,840 6,441,104 7,772,684 1,331,580 EXPENDITURES Current Community and economic development Administrative 224,293 224,293 201,417 22,876 Community development projects 6,623,547 6,216,811 16,552,983 (10,336,172) Debt service 35,488 35,488 464,383 (428,895) TOTAL EXPENDITURES 6,883,328 6,476,592 17,218,783 (10,742,191) EXCESS OF REVENUES (UNDER) EXPENDITURES (35,488) (35,488) (9,446,099) (9,410,611) OTHER FINANCING SOURCES(USES) Issuance of long-term debt 35,488 35,488 11,330,000 11,294,512 Bond discount - - (214,385) (214,385) TOTAL OTHER FINANCING SOURCES (USES) 35,488 35,488 11,115,615 11,080,127 NET CHANGE IN FUND BALANCE - - 1,669,516 1,669,516 Fund balance,beginning of year 7,355,596 7,355,596 7,355,596 - Fund balance,end of year $ 7,355,596 $ 7,355,596 $ 9,025,112 $ 1,669,516 26 LANSING BROWNFIELD REDEVELOPMENT AUTHORITY NOTE TO REQUIRED SUPPLEMENTARY INFORMATION YEAR ENDED JUNE 30,2022 NOTE 1 -EXCESS OF EXPENDITURES OVER APPROPRIATIONS The approved budget of the Authority has been adopted at the activity level for the General Fund. During the year ended June 30,2022,the Authority incurred expenditures in excess of the amounts appropriated as follows: Amounts Amounts Appropriated Expended Variance General Fund Current Community and Economic Development $ 6,441,104 $ 16,754,400 $ (10,313,296) Debt Service 35,488 464,383 (428,895) Other financing uses - 214,385 (214,385) 27 2425 E.Grand River Ave., (00*M a n e r Suite 1,Lansing,MI 48912 2 517.323.7500 CosterisanED 517.323.6346 INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS The Honorable Mayor,Members of the City Council,and Members of the Board of Directors of the Lansing Brownfield Redevelopment Authority Lansing,Michigan We have audited,in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States,the financial statements of the governmental activities and the major fund of the Lansing Brownfield Redevelopment Authority(the Authority),a discretely presented component unit of the City of Lansing,Michigan,as of and for the year ended June 30,2022,and the related notes to the financial statements,which collectively comprise the Authority's basic financial statements and have issued our report thereon dated December 20,2022. Internal Control over Financial Reporting In planning and performing our audit of the financial statements,we considered the Authority's internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements,but not for the purpose of expressing an opinion on the effectiveness of the Authority's internal control. Accordingly,we do not express an opinion on the effectiveness of the Authority's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency,or a combination of deficiencies,in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented or detected and corrected on a timely basis. A significant deficiency is a deficiency, or combination of deficiencies, in internal control that is less severe than a material weakness,yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. We identified a certain deficiency in internal control, described below as item 2022-001, that we consider to be a material weakness. 28 2022-001 MATERIAL JOURNAL ENTRIES Condition: Material journal entries for the proper recognition of various financial statement amounts within the City's accounting records were recorded after year end, some of which were proposed by the auditors. In addition,we received several revisions to the City's trial balance (the final version coming in early December 2022), each of which contained material corrections to previous trial balances. A similar issue was noted and reported last year as 2021-001. Criteria: Management is responsible for establishing,maintaining,and monitoring internal controls,and for the fair presentation in the financial statements of financial position,results of operations,and cash flows,including the recording of all appropriate journal entries to assure the trial balance from which the financial statements are prepared,reflect amounts that are in conformity with U.S.generally accepted accounting principles. Cause: Over the past several years, the Cit/s Finance Department, who prepares the reconciliations of all accounts,has reduced in size due to budget reductions, staffing reductions, and staffing turnover. In addition, the Finance Department relies significantly on other Departments providing information to them for proper recording of transactions in the financial statements. A number of these Departments were behind in getting this information to the Finance Department. These issues have placed a significant burden on the month and year end close processes and have contributed to journal entries not being completed in a timely manner. We noted that this process did improve in the current fiscal year,however this was still a systemic issue for the City. Effect: The accounting records were initially misstated by amounts material to the financial statements. Certain applicable adjustments were brought to the attention of management and were subsequently recorded in the general ledger. Recommendation: We recommend that the City take steps to assure that material journal entries are not necessary at the time future audit analysis is performed. Corrective Action Response: The Finance Team will continue the efforts begun this year regarding the identification and correction of potential errors in the financial statements prior to the beginning of future audits. The Finance Team will meet to review adjustments made to this year's financial statements and bottlenecks that were encountered and will develop a plan to address the most significant issues in a more timely manner going forward. Within budget constraints, Management will look to increase staffing levels and/or obtain temporary assistance earlier in the fiscal year,both within the Finance Department as well as other key departments, in order to perform more timely analyses of the various account balances. In FY23, Finance will also begin working on the implementation of a new General Ledger software package,which ultimately will also help to resolve this issue. Report on Compliance and Other Matters As part of obtaining reasonable assurance about whether the Authority's financial statements are free from material misstatement, we performed tests of its compliance with certain provision of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. However,providing an opinion on compliance with those provisions was not an objective of our audit,and accordingly,we do not express such an opinion. The results of our tests disclosed the following instance of noncompliance or other matters that is required to be reported under Government Auditing Standards. 29 2022-002 UNFAVORABLE BUDGET VARIANCES Condition: During our review of the Authority's compliance with the budgeting act,we noted that expenditures had exceeded the amounts appropriated for various areas. Criteria: The Uniform Budgeting and Accounting Act requires the Authority to amend the original adopted budget"as soon as it becomes apparent that a deviation from the original general appropriations act is necessary and the amount of the deviation can be determined." The Act also states that"an administrative officer of the local unit shall not incur expenditures against an appropriation account in excess of the amount appropriated by the legislative body." Cause: The City did not adequately monitor expenditures in relation to budgeted amounts in the areas where the overages occurred. Effect: Having unfavorable budget variances as described above,the Authority is not in compliance with Public act 621 of 1978,as amended. Recommendation: We recommend the City monitor expenditures against adopted budgets in all applicable funds and make appropriate budget amendments as needed. Correction Action Response: The City will continue to make improvements in control of revenue and expenditures and budget conservatively in order to maintain the City's fiscal health. The Finance Department recently added a new Budget Director and Budget Analyst as part of its team and is working with departments to be more proactive and responsive to City needs and to identify necessary changes during the fiscal year. Correcting this issue will be one of their principal tasks. We will continue to work with the various departments to be more aware of the status of their actual vs budget status throughout the year. A decision was made to implement a new ERP system,which will also help with this in the future. Authority's Responses to Findings The Authority's responses to the findings identified in our audit are described above. The Authority's responses were not subject to the auditing procedures applied in the audit of the financial statements and,accordingly,we express no opinion on them. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing,and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly,this communication is not suitable for any other purpose. December 20,2022 30