News Story

Flint’s Bookkeeping Was A Mess Before Water Crisis — And Still Is

Not knowing how much the city has or owes contributes to all kinds of problems

Ten years ago, Flint’s broken finances led to officials raiding some city funds to shore up other funds, and then a state takeover. It all contributed to a health crisis involving the city water system, and since that time, there has been little improvement in Flint’s bookkeeping.

Auditors’ notes from the accounting firm Rehmann portray a city whose financial records for public funds were still a mess in 2019 and 2020.

The audit for 2020 revealed mistakes made by city staff and officials — in one case, a mistake so large as to create a $12.7 million misstatement. This item was corrected through a recommended audit adjusting entry and correct amounts are reported in the final audit report.

“This condition was a result of lack of management oversight,” the auditor wrote about the series of accounting mistakes the city made last year.

Among the issues highlighted in the 2020 audit:

The city recorded money in its water and sewer revenue accounts — $469,511, specifically — that should have been recorded as a liability owed to the county.

The auditor found a lack of oversight in the city’s employee credit card program. Workers who used the cards approved their own purchases, and the purchasing manager did not approve the issuance of each card, as was required by a written city policy.

“This is not a proper level of independent review,” the auditor stated.

The city recorded $4.2 million of property taxes for distribution to other local units of government. The auditor stated, “The city was not able to provide detail or an explanation for” this money and could not provide support of who they expected to collect the $4.2 million from and who it would be owed to.

The city initially misstated investments by $1 million because it failed to record the change in fair-market value of an investment. That was corrected in the final audit report.

The claims that were due to be paid out of the city’s self-insurance fund were understated by $543,565.

The auditor noted similar problematic accounting practices in 2019.

Flint Mayor Sheldon Neeley did not respond to an email seeking comment.

Editor's note: This story had changes made for clarification purposes.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.