Auditors find problems with reporting procedures
Jan. 5, 2015 PLYMOUTH EAGLE.
Plymouth Michigan News
By: Don Howard
Auditors from Plante Moran found several problem areas in preparing the audit of Plymouth Township financial records finally submitted in December, five months past the June 30 deadline.
In a letter to township officials dated Dec. 1, Martin J. Olejnik and Kari L. Shea, auditors from Plante Moran, said that while there were no significant material weakness in the township accounting practices, auditors encountered consider- able delay in receiving information and necessary documents. Auditors urged officials to submit all year-end journal entries and audit schedules by May 1 of each year to meet government the filing requirement. Noting internal flaws in accounting practices, the auditors said there was “…an opportunity for the Township to further strengthen internal control to increase operating efficiencies.”
During the Plante Moran audit presentation at the Dec. 9 board of trustees meeting, Olejnik said, “These are weaknesses in your procedures-that are not in place.”
Olejnik and Shea noted that the township accounting was insufficient having only one person to prepare bank reconciliations and another to review the same. They said bank reconciliations were often void of signatures and dates to show when they were prepared or reviewed.
Township officials said that the five-month delay in the required financial audit was caused by a lack of documentation from the City of Plymouth regarding amounts owed to the township for legacy costs in the Plymouth Community Fire Department, a figure hotly disputed by the City of Plymouth.
“We wouldn’t have this problem if it hadn’t been for the City of Plymouth,” said Township Treasurer Ron Edwards during the December audit discussion.
The Plante Moran audit shows that the township submitted Other Post Employment Benefits (OPEB) as the legacy costs for the Community Fire Department based on an actuary report and not reported as a fund liability. Examination of the audit reveals that accounting practices and OPEB are negatively affecting solvency as the township’s net position that dropped 63 percent from $15.3 million in 2006 to a low $5.6 million, a negative sum of $9.7 million. The auditors’ reconciliation of the township balance sheet reflecting the OPEB funds shows the Net Position of Governmental Activities now equals $5,620,113.
“The most sensitive estimate affecting the financial statements was the other post employment benefits liability. Management’s estimate of the OPEB liability is on an actuary report. We evaluated the key factors and assumptions used to develop the OPEB liability in determining that it is reasonable in relation the financial statements taken as a whole,” Olejnik and Shea said in their letter to township officials.
It would appear from the audit report that the township is in a negative net position of approximately $6 million for governmental activities.
No provision was made in the audit for the new pension reporting standards which could place the township in a further negative net position without some action.
The General Fund of the filed audit reports an “intra-governmental service charge” of $636,089. Other sections of the audit indicate this money may be charged to the users of the Water and Sewer Fund to offset General Fund operations. Page four of the audit, the Management’s Discussion and Analysis, states the “remaining net position of nearly $14.5 includes $.06 restricted for drug enforcement and $13.9 million may be used to meet the Township’s ongoing obligations to its citizens and creditors,” an indication that the township may have used or is considering using Water and Sewer Fund money to meet ongoing obligations.