ALPENA — Alpena County has completed its response to the state over issues that the state government found in the county’s most recent audit.

Earlier this month, the county received a letter from the state with a list that seeks clarification and plans to address concerns.

Most of the issues pertaining to internal control over financial reporting including preparation of financial statements in line with generally accepted accounting principles, segregation of duties for finances, and internal control over financial reporting and Noncompliance with Laws and Regulations for failure to comply with budgeting statutes.

The state also wanted to know why the county’s budget has had its expenses exceed revenues for the last three years. The state wanted the county to provide an explanation for the continual deficit.

The county is currently facing a budget shortfall in access of $1 million but is allowed to run a budget deficit if it has enough money in savings to cover the revenue shortage.

In its response to the state, the county explained the challenges small local governments face and laid out potential solutions to balance future budgets. The plan includes a reduction in services and employee layoffs if the upcoming property tax increase to replace lost tax money due to the Headlee rollback fails.

The Headlee rollup, as the commissioners call it, would allow every township in the county to bump its tax rate from about 1 mill to 1.29 mills — costing the owner of a $100,000 house about $14.50 per year in additional taxes — and the Alpena-Montmorency-Alcona Educational Service District levy would climb from 0.2113 mills to 0.25 mills, costing the owner of a $100,000 house about $2 in additional taxes per year.

The increased tax would remain in place until voters remove or change it.

Despite the large budget shortfalls, the county often reduces the deficit at the end of each fiscal year, and in some cases comes out ahead and adds money to its savings.

As the deficit grows, however, the likelihood of that happening becomes slim.

The response tells the state that one major factor for the budget shortfall is inflation and rising costs. In addition, the response says, many long-term financial commitments were made by prior boards of commissioners that still exist today.

The county said at the end of 2021 and 2022, the budgets ended up with expenditures exceeding revenues within the General Fund and because of that, it experienced an increase in savings.

“During 2024, the board has formulated a New Separate Tax Limitations ballot proposal for consideration in the August election,” the response says. “Furthermore, as the board and management begin preliminary work on developing the budget for the year ending December 31, 2025, expenditures are being evaluated and may lead to cuts to services and staff, and other reforms or adjustments as needed.”

As far as the segregation of duties for finances, the response says low staffing is part of the cause of the lack of oversight from multiple departments or employees.

“To the extent possible, duties are allocated between accounting personnel and administration to mitigate the risks of material misappropriation of assets. The County has put in as many internal control measures as fiscally able and as possible for an organization of this size,” the letter says. In addition, the county’s board of commissioners provide a review of all expenditures and transactions to further mitigate risks related to the level of segregation of duties.”

Several of the other financial oversight concerns expressed by the state will be outsourced to an independent auditor, the county response says.

Steve Schulwitz can be reached at 989-358-5689 or sschulwitz@thealpenanews.com. Follow him on Twitter @ss_alpenanews.com.