Detroit Violates Uniform Budget and Accounting Act

Detroit statue
The city of Detroit has failed to produce its annual audit within the time frame required by law.

The Mackinac Center for Public Policy recently confirmed with officials at the Michigan Department of Treasury that the city of Detroit was delinquent in filing its annual audit for 2000.

Failure to file the audit violates the state's Uniform Budget and Accounting Act. According to a provision of another law, the local Government Fiscal Responsibility Act, the city's delinquency should automatically trigger a review by the state treasurer.

In a Jan. 2 letter to [then] state treasurer Mark Murray, this author pointed out that the city was delinquent in filing its audit and asked whether the state would be conducting a review of the city's finances as provided by law. On Feb. 1, Murray confirmed that Detroit "has failed to timely file its audit for FY ending 2000."

Murray also stated, however, that his office would not be conducting a review of Detroit's finances even though it is required to do so under Public Act 72 of 1990. "Missing the audit deadline is not as clear an indication of a financial problem as are some other triggers provided" in the law, Murray wrote. "Hence, in the case of a late audit, we would only proceed with a formal preliminary review if there were other indicators of financial problems present."

But the Mackinac Center disagreed with Murray's characterization of the law. "Public Act 72 offers the state treasurer no explicit discretion in this matter. The conditions that constitute city financial problems are clearly spelled out, and one of those is failure to file an audit as required," he said.

The state should adhere to the laws of its own creation and investigate Detroit's financial situation in greater detail-using P.A. 72 as its guide. Such an investigation would give the city an added incentive to keep its books in order and mitigate against charges that the state enforces P.A. 72 in an arbitrary and lackadaisical way.

Michael LaFaive is Managing Editor of Michigan Privatization Report.