News Story

Latest Audit Finds Detroit Schools Budget Is Solid

District has 20% reserve, state average is 14.5%

In 2011, the firm that audited the Detroit school district’s finances cited major missing or improper accounting procedures related to tens of millions of dollars in district transactions. The auditor’s notes laying out the details filled 40 pages.

Examples of the problems cited in what then was called the Detroit Public Schools included a $12.2 million overstatement of interest payments payable. In another account, the amount interest payable on district bonds was understated by $1.5 million. Auditors routinely found that balances in the 2011 ledger accounts were off by millions of dollars.

Now, the district’s recent 2018-19 audit came with just five pages of notes on accounting issues. The auditing firm Plante Moran used the words “significant improvement” to describe accounting practices at what is now called the Detroit Public School Community District.

On Nov. 21, district Superintendent Nicolai Vitti tweeted: “We took another big step forward to gain financial independence from the state with a clean audit. We have improved from 15 audit exceptions to 0 material weaknesses with no questionable costs that requires funds to be returned!”

One problem noted in the 2019 audit was a lack of controls on a deposit account with a balance of $500,000, which allowed district employees to “unilaterally maintain and approve transactions.” That account was also not recorded as part of the General Fund general ledger.

The district has closed that specific account.

The audit noted that General Fund expenditures exceeded revenue by $1.5 million, but the district still had $139.5 million in reserve funds.

The auditor stated that the amount of money a district has in reserves is calculated as a percentage of the district’s expenditures. The average reserve fund balance held by Michigan school districts statewide was 14.5% of expenditures in 2018. The Detroit Public School Community District had 20% in reserves in 2019.