STANTON— After not hearing an audit report for nearly a decade, the Montcalm County Board of Commissioners on Monday night heard an audit report from its new auditing firm and continued to pursue legal action against its former auditing firm.
After meeting in closed session with attorney John Axe from Clark Hill for an hour, commissioners unanimously approved authorizing Clark Hill to continue to pursue legal action being contemplated against the county’s longtime auditing firm Abraham & Gaffney.
Last year, commissioners hired Gabridge & Co. as the county’s new auditing firm after deciding not to renew a contract with Abraham & Gaffney due to alleged errors and irregularities with work performed by Abraham & Gaffney and the county’s former controller-administrator Chris Hyzer. This past January, commissioners took the severed contract a step further by hiring Clark Hill to investigate and possibly bring a lawsuit against Abraham & Gaffney.
Commissioners in August 2016 voted to contract with Clark Hill for legal services, to contract with Municipal Financial Consultants Inc. (MFCI) to assist Clark Hill and to contract with Rehmann Robson for accounting services — all to investigate the county’s troubled financial situation.
On Monday night, commissioners heard a Sept. 30, 2016, audit report from Joe Verlin of Gabridge. After years of late audits for Montcalm County, this year’s audit from Gabridge was issued in a timely manner, having been filed with the state well ahead of its March 31 due date.
Verlin reported Gabridge officials began the county’s audit in February and completed it about seven weeks later. The report gives the county an “unmodified opinion” on its audit.
“It is the highest level of opinion we can render on financial statements,” Verlin noted. “It should always be the county’s goal to achieve this.”
The county’s net position decreased by $1.6 million in the past year, while the county’s general fund increased by $3 million, thanks to a sizable transfer from the county’s delinquent tax revolving fund, decreasing the balance of that tax fund from about $10 million to about $7 million.
County expenditures have consistently been in excess of revenues over the past five years or more, which is why the general fund has been in steady decline.
“On a very short-term basis, the financial condition of the county increased significantly, but when we look at the longer term look there was actually a decrease in the county,” Verlin said. “The county has done a good job of correcting the short term position. Long term, there’s a lot more work that needs to happen. It’s certainly good news to see the increase in the general fund, but it was at the expense of the delinquent tax revolving fund. There is improvement that needs to happen at the county.”
Commissioners had no questions for Verlin after hearing their first audit report in nearly a decade.
Commissioners also heard an update from Kristin Hoogerwerf of Rehmann Robson about the status of corrective action on the 2016 audit. She reported on short-term goals for the county, including the following: Developing procedures to ensure balances remain reconciled; hiring an additional full-time employee to be shared between the controller-administrator’s office and the treasurer’s office to assist with entry level accounting functions (the county is already in the process of this); evaluating internal controls and providing for independent review; paying calendar year 2015 and 2016 pension contributions to the Municipal Employees Retirement System (MERS) trust; recording delinquent tax settlements correctly in the general ledger (this was not being done in previous years, which skewed the county’s entire budget); proposing amendments to the 2017 budget; creating a monthly reporting package of income statements and balance sheets for all funds to be provided to commissioners; setting up separate bank accounts for funds that previously provided “float” for funds with negative cash balances; and developing the fiscal year 2018 budget.
Hoogerwerf also reported on long-term goals for the county, including transitioning to new financial accounting software and developing written policies and procedures to be followed for such actions as interfund borrowing and replacement and general financial processes.
Hoogerwerf’s report made it clear that Rehmann Robson officials would continue to be working to rectify the county’s financial situation for at least another year.
“So when you’re here a year from now … is it realistic to expect when we’re having this conversation a year from now that most of those things that are on Joe’s (audit) report won’t be there?” asked Commissioner Patrick Q. Carr.
“Yes, I certainly think that is realistic, but I would point out … we’re not out of the woods yet,” Hoogerwerf answered.
“If we maintain the level of service that we’re at now … is it realistic to think that our audit a year from now would be — well, go for the gold — no (negative) findings?” Carr clarified.
“I think that would be realistic and I think by 2018 you could scale back Rehmann’s involvement significantly … to more of a higher level of oversight,” Hoogerwerf said.