In accordance with Public Act 140 of 1971, a local unit of government ending its fiscal year in a deficit condition shall formulate and file a deficit elimination plan with the Department of Treasury within 90 days after the beginning of the next fiscal year to correct the condition.

A deficit condition is defined as a fund where the total expenditure for that fund, including an accrued deficit, exceeds total revenues in that fund for the fiscal year.

General Plan Requirements:

• The deficit elimination plan must be approved by the legislative body of the local unit of government and a copy of the resolution must accompany the plan when filed with the Department of Treasury.
• A plan generally should be for one year, but in no case longer than five years.
• An audit firm hired by the local unit of government may provide advice; however, it cannot issue a deficit elimination plan.
• Once approved, the local unit will receive a signed certification letter.

Acceptable Plan Documentation:

• Current trial balances or interim financial statements showing the deficit eliminated.
• Certified copies of board/council resolutions approving operating transfers and a copy of the transfer being made.
• A projected budget approved by the legislative body, itemizing yearly revenues (by source), expenditures/expenses (by activity), and changes in the fund balance deficit until eliminated (usually a five year limit).
• For a tax increment finance or downtown development authority, the ordinance or plan approving their existence is acceptable if it shows the flow of revenues and the priority of expenditures that would support the deficit elimination plan.
• The municipality must provide some evidence that long-term receivables, regardless of type, are for a period longer than 5 years. The resolution or other legal document (assessment contract) that creates the receivable would suffice.

It is extremely important to show the details for all revenue enhancements and likewise for all expenditure cuts. To be considered for approval, a plan must be substantive, quantifiable and realistic.

Contact information for questions or concerns:

Local Audit and Finance Division
Michigan Department of Treasury
P.O. Box 30728
Lansing, Michigan 48909-8228
(517) 373-0660
Treas_MunicipalFinance@michigan.gov

Sample Legislative Body Resolution and Multiple Year Deficit Elimination Plan:

(Sample Legislative Body Resolution and Deficit Elimination Plan)

WHEREAS (Sample Unit)'s Park Fund has a $175,000 deficit fund balance on December 31, 2002; and

WHERAS, Act 275 of the Public Acts of 1980 requires that a Deficit Elimination Plan be formulated by the local unit of government and filed with the Michigan Department of Treasury:

NOW THEREFORE, IT IS RESOLVED that the (Sample Unit)'s legislative body adopts the following as the (Sample Unit) Park Fund Deficit Elimination Plan:

BE IT FURTHER RESOLVED that the (Sample Unit)'s (Official's Title) submits the Deficit Elimination Plan to the Michigan Department of Treasury for certification.

ADD CLERK'S CERTIFICATION