Treasury Department pressures Montcalm Township over audit

By Kelli Ameling • Last Updated 10:32 am on Thursday, October 27, 2011

MONTCALM TOWNSHIP – The state Treasury Department has questions for Montcalm Township and is coming to get answers.
The township received a letter from the state on Sept. 27 giving the township a month to develop an action plan for resolving problems with the township’s audit prepared by Berthiaume and Co. of Saginaw.

A second letter from the state dated Oct. 20 indicates Treasury Department officials are coming to the township on Monday to perform their own audit.

Sept. 27 letter

The first letter says the township’s fiscal year 2010 audit completed in July uncovered three items that needed to be addressed:

• Actual expenditures exceeded the amounts authorized in the budget.

• Taxes collected for another taxing unit were not distributed timely.

• Six reported deficiencies included in the audit report (see infobox).

Terry Stanton, director of communications for the Treasury Department, said local units of government approve a budget annually. They are limited to spending an amount equal to or less than what is approved unless amendments are made.

“This is a result of the way the software was set up, it is not an indicator that the township spent more than authorized in the budget,” said Township Supervisor Michael Adams.

Adams, a business and accounting professor at Montcalm Community College, said this has caused some line items in the software to affect unrelated fund accounts. He added it does not mean anything is wrong, but it creates some combining of accounts that are better understood being kept separate.

“Regarding the letter from the state, they are pleased that situations had already been identified and we were working to correct the software issues prior to the annual audit,” he said.

Stanton said townships collect taxes for other entities such as schools, the state and other local taxpayer supported entities. Montcalm Township collected taxes for the 2010 fiscal year but did not disperse the money collected for other governmental entities in time.

Township Treasurer Phyllis Shilling is in charge of collecting and dispersing tax funds.

Adams said the Treasury Department had already contacted him and indicated it would be doing an audit because of the undispersed tax funds.

“This is yet another expense the township taxpayers must endure as part of the ongoing conflict with the treasurer’s balances and internal controls,” Adams said. “It bothers me that we are still spending our money to find out where other entities’ money is supposed to go. However, I think that it is good that the state will be here to finally put this conflict to rest.”

He still is trying to determine why there is a tax account balance from 2010 that the township cannot account for and he has been unsuccessful in making sense of the data in the tax software.

“With budget cuts and reduced revenues all over the state, it is very important that the township does everything it can to balance the tax account and get this money to the schools and other entities as quickly as possible.”

Montcalm Township had 30 days to respond with a corrective action plan to resolve each of the problems, which was due on Thursday. Adams said the Treasury Department told him to hold off on submitting the plan because they are coming to do the audit.

Monday audit

The Oct. 20 letter from the Treasury Department says the township has been selected for a financial review.

Stanton said some townships are randomly selected for similar Treasury Department audits each year. However, he said Montcalm Township was targeted based on the audit report findings.

Montcalm Township is the only local government jurisdiction in the state to receive a Treasury Department audit this year.

The township’s internal controls and compliance with state laws, including timely distribution of property taxes, will be included in the review.

Shilling said within her seven years as the township treasurer, she has met with the Treasury Department one other time and have found her office in compliance.

“I will be cooperative with this review and hope we get a positive response from it,” Shilling said.

The state’s field audit manager and an assistant will arrive at the township at 9 a.m. Monday. They may work up to a combined 80 hours at the township next week.

The township will pay $92 per hour for each of the state employees’ work. The cost would be $7,360 if they work all 80 hours combined.

The township must make available all records, documents and other information requested by the office.

Once the audit is done, a report will be issued in 30 days after the last date on the site.

Township officials will be provided with a report of the findings that include problems, recommendations for improvement and commendations for duties performed.

Township officials must submit a corrective action plan to the Treasury Department for any deficiencies found.


Audit problems


Montcalm Township’s audit report for the April 1, 2010, to March 31, 2011, fiscal year listed six material weaknesses, issues and findings:

• 1. Recording, processing and summarizing accounting data because the township relies on external auditor for the process.

However, the audit stated many small and medium-sized entities do this.

• 2. The property tax account had a balance of $713,909 in undistributed taxes. By state law, collected property taxes must be distributed within 10 business days.

• 3. There was an unexplained balance of $1,089 in the tax account at year end. The account should have a zero balance at the end of the fiscal year.

• 4. Property tax revenue in the general fund was about $2,500 more then it should have been compared to the 2010 property tax levy.

Shilling initially couldn’t explain the overage to the auditor, but later provided the source of the difference.

• 5. The township used a single QuickBooks database to handle three governmental funds and an agency fund. The audit highly recommended using separate QuickBooks databases for each fund to provide a separate balance sheet for each fund.

• 6. Revenue from the cemetery perpetual care fund was deposited into the general fund and not a separate perpetual care fund account as required. The audit suggests this has been done in previous years.

The audit recommends the township make a proper analysis and determination of the amount of its perpetual care receipts from this year and prior years.

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