According to city of Ann Arbor CFO Tom Crawford, the city’s response to the letter would not require any city council action. The city staff would be explaining to the state how the city’s internal financial procedures mitigate against what Crawford characterized as a “minor issue.”

A note in the city’s own audit report called attention to the fact that:

An excess of expenditures over appropriation were reported in the local street nonmajor special revenue fund (final budget of $1,582,562 and actual of $1,623,495); this excess of $40,933 was absorbed by available fund balance. No other expenditures in excess of appropriations were reported.

The city’s local street fund receives Act 51 money from the state and is used primarily for street repair and maintenance.

If expenditures exceed the appropriations for any fund, it violates state statute, and thus triggers a letter from the Department of Treasury. The letter notes the violation and requires the city to file a corrective action plan (CAP) within 30 days. The CAP, according to Crawford, would not require any city council action, and would include an explanation of the city’s internal procedures. Crawford observed in an emailed answer to a Chronicle question that “They note expenses over by $40K but did not note transfers out that were under budget by $60K.”

Terry Stanton, with the state’s treasury department, responded to a Chronicle inquiry with an email that explained how common such letters are:

Letters, such as the one sent to the City of Ann Arbor, are not rare, with approximately 400 sent to local units in 2012 (there are about 1,800 cities, villages, townships and counties in Michigan).

Essentially, the letter acknowledges certain conditions which have been noted in a local unit’s audit report and informs a city (or village, township, county) that it needs to submit a corrective action plan. They are expected to indicate to the department how they plan to fix any deficiencies noted in the audit report.

To help ensure the local unit submits a corrective action plan in a timely fashion, there can be consequences if a plan isn’t submitted. Those consequences are outlined in the letter.

The audit of Ann Arbor’s FY 2013 financial statements was recently reviewed by the city council’s audit committee.

[.pdf of Nov. 22 state of Michigan Dept. of Treasury letter to city of Ann Arbor] [.pdf of final audit report released on Nov. 15, 2013]