LANSING – The Michigan Strategic Fund did not have sufficient internal control in place to ensure it properly recorded and reported its financial activity in accordance with generally accepted accounting principles, an audit by the Office of the Auditor General released Thursday concluded.

As a result, the MSF could not ensure the accuracy of accounting records or draft financial statements and had to prepare numerous revisions to its financial statements, the audit concluded.

In specific instances, the MSF did not record a liability related to tribal gaming revenue due to the Michigan Economic Development Corporation. Payments to MEDC and amounts due to component units were understated and fund balance was overstated by $16.5 million in the General Operations Fund, and payments to MEDC and amounts due to component units were understated and net position overstated by $16.5 million in the entity-wide financial statements, the audit found.

MSF maintained a schedule listing activities and transactions to record at the end of the fiscal year, but did not track the status to ensure the recording of these transactions.

Within that same finding, MSF did not record the proper fair value of its investments accounted for in an external investment pool in its Jobs for Michigan Investment Fund. As such, investments, net decrease in fair value of investments and fund balance were understated by $11.1 million in the Jobs for Michigan Investment Fund, and investments, net decrease in fair value of investments and net position were understated by $11.1 million in the entity-wide financial statements.

The audit recommended MSF improve its internal control to ensure it properly records and reports MSF financial activity in accordance with generally accepted accounting principles, and the MSF agreed.

“We totally agree with the auditor’s findings and are establishing better internal controls and processes to ensure all Michigan Strategic Fund transactions are properly recorded as quickly as possible and that draft statements are accurate and delivered on time,” said MEDC CEO Steve Arwood in a statement.

The audit also criticized the MSF’s internal control over financial reporting to ensure it adhered to established deadlines for recording and reporting its financial activity, resulting in its audited financial statements not being finalized until February 25, 2015.

Specifically, MSF did not adhere to the completion dates of finalizing accounting entries 25 days after established deadlines and providing draft and final financial statements and required supplementary information up to 20 days and 19 days, respectively, after established deadlines.

Again, the Strategic Fund agreed with the recommendation.

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