HomeMy WebLinkAbout2025 ACFR CAFR Comprehensive Financial Report Audirt Fiscal Year end June 2025 Internal Control Letter 2425 E.Grand River Ave.,
(rwManer Suite 1,Lansing,MI 48912
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Costerisan CD 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
To the Honorable Mayor and
Members of the City Council
City of 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,the business-
type activities, the aggregate discretely presented component units, each major fund, and the aggregate
remaining fund information of the City of Lansing, Michigan (the City), as of and for the year ended June 30,
2025, and the related notes to the financial statements, which collectively comprise the City's basic financial
statements and have issued our report thereon dated December 19,2025.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements,we considered the City'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 opinions on the financial statements,but not for the purpose of
expressing an opinion on the effectiveness of the City's internal control. Accordingly, we do not express an
opinion on the effectiveness of the City'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 a 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 certain deficiencies in internal control,described below as items 2025-001 and 2025-
002,that we consider to be material weaknesses.
2025-001 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 2025), each of which contained material corrections to previous trial balances. A similar issue
was noted and reported last year as 2024-001.
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: 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. The City also went through a financial software conversion in the current year.
During the transition to the new system,certain transaction data did not migrate accurately which required
material journal entries through the year end close process.
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. With a full year being completed under the new financial software,processes
and procedures are being put in place within the new software to address the areas that have had material
journal entries during the previous audit.
2025-002 TIMELINESS OF BANK RECONCILIATIONS
Condition: The reconciliation of cash and investment accounts for June 2025 were not completed until early
December 2025.
Criteria: The purpose of reconciliations is to ensure that general ledger account balances are supported by
underlying transaction detail or third-party information. They also provide an important internal control,
in that any differences identified between the underlying detail and an account balance through the
reconciliation process may be indicative of an erroneous entry having been posted or inappropriate activity
within the account.
Cause: The City went through a financial software conversion in the current year. During the transition to
the new system,certain transaction data did not migrate accurately which required material journal entries
through the year end close process and an adjustment to the bank reconciliation process.
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2025-002 TIMELINESS OF BANK RECONCILIATIONS (concluded.
Effect: Without timely reconciliations and review procedures,there is an increased risk of misstatement of
assets or errors that might go undetected.
Recommendation: We recommend that bank reconciliations be completed,including review and approval,
in a timely manner.
Corrective Action Response: The Finance Team will continue to work on improving processes and
procedures including understanding and utilizing the new finance software automation in order to complete
the bank reconciliations more timely.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the City'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 are required to be reported under Government Auditing Standards.
2025-003 UNFAVORABLE BUDGET VARIANCES
Condition: We noted that expenditures had exceeded the amounts appropriated for various areas of the
General Fund and certain Special Revenue Funds.
Criteria: The Uniform Budgeting and Accounting Act requires the City 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 City 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.
Corrective Action Response: Final budget adjustments consisted of amounts within the limits of
administrative budget authority as the legislative body did not take up a final budget amendment prior to
fiscal year end. Additional challenges in transitioning to the City's new financial software contributed to
significant corrections. System improvements will contribute toward more timely review of expenditures
throughout the year while also working with the various departments to be aware of their actual vs budget
status throughout the year.
City of Lansing's Responses to Findings
Government Auditing Standards requires the auditor to perform limited procedures on the City's responses to
the findings identified in our audit and described above. The City's responses were not subjected to the auditing
procedures applied in the audit of the financial statements and,accordingly,we express no opinion on them.
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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 City'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 City's internal control and compliance. Accordingly, this communication is not
suitable for any other purpose.
December 19, 2025
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