'Serious problems' found in state's preliminary review of Detroit's finances

(WXYZ) - State officials say a preliminary review of Detroit's finances has uncovered serious financial problems in the city.

Terry Stanton, spokesperson for the Michigan Department of Treasury, says that State Treasurer Andy Dillon has informed Governor Snyder that serious financial problems exist due to several issues.

The state outlined the following issues: 

-The City has violated the Uniform Budgeting and Accounting Act, which requires that the legislative body of a local unit amend its general appropriations act (budget) as soon as it becomes apparent that such an amendment is necessary.

-The City continues to experience significant cash flow problems, as it has in recent fiscal years, and projects a cash flow shortage to end its 2013 fiscal year (6-30-12). Due to financial reporting problems, city projections change from month to month, making it difficult to make informed decisions regarding its fiscal health. A cash flow estimate in August, 2012 projected a cash deficit of $62 million by June 30, 2013, but estimates for October and November projected deficits of $84 million and $122 million respectively.

-The City has not filed an adequate or approved deficit elimination plan with the Department of Treasury, for the fiscal year which ended June 30, 2011.

The state says the next step is to appoint a review team to further examine the city's finances.
 

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