Washtenaw Now
newsFriday, February 6, 2015
2014 audit report shows city of Milan on sound financial footingBy Lori Maranville
Special to The Milan News-LeaderMILAN -- The Milan City Council accepted its audit report for the fiscal year ending June 30, 2014. The report reflected the city is financially in good condition, but also showed some challenges ahead and “deficiencies in internal controls.” “The city ended up in a very strong financial position,” said David Williamson, a certified public accountant for Post, Smythe, Lutz, and Ziel, LLP, an accounting firm based in Plymouth. Williamson said the city had an unassigned fund balance in its governmental general fund that was almost 35 percent of operating revenues pointing to the figure as evidence of the city’s sound financial footing. He said the recommended amount by the Government Finance Officers Association is around 5 to 10 percent, which puts Milan’s general fund reserves far above that threshold. According to the report, the assets of the city exceeded its liabilities by about $20.6 million at the close of the fiscal year 2014. There was also a combined ending fund balance of $3.1 million, an increase of $165,662 over the previous year. The city has kept pace with its water and sewer operations, attempting to set appropriate rates to bring in revenue to pay debt service obligations for the facility. Cash flow of about $1.2 million went primarily toward debt service payments of about $1 million. Although the city is meeting its debt service obligations for the system, Williamson said, ideally operating revenues currently at $3 million should be much higher at about $6.5 million. The challenges in the water and sewer fund originated with the loss of property tax revenue back in 2010 and the closure of the Automotive Components Holdings, LLC, plant in 2011. The water and sewer plant is now underutilized running at about 45 percent of capacity at its peak and needs to generate additional revenue for its size. City leaders have attempted to address some of the problem by a gradual increase in water and sewer rates. Other budgeting challenges going forward include legacy costs, Williamson said, as the city continues to grapple with the spectre of unfunded liabilities. He said the city has helped its financial situation with more long-term budget planning, conducting rate studies for setting water fees, tightening up accounting procedures and investing in new accounting software to help give city leaders real time information about the budget. Milan’s full 2013-2014 audit report is available on the city’s website, milanmich.org. The report includes details of deficiencies in accounting procedures including one such weakness which led to embezzlement charges against the former Milan city clerk/treasurer, Sherry Steinwedel. She is accused of using a city credit card for personal use. The audit firm noted city credit card charges were not subject to a formal review process, allowing personal charges to be made on a city-issued credit card without oversight. The discovery led to the subsequent criminal charges. Other noted accounting shortfalls in the audit include: failing to reconcile bank statements in a timely manner; insufficient audit trails to track deposits and withdrawals from funds; bank deposits checks being held; and property tax payments to other government entities being paid late during 2013 and 2014. According to city officials, all of the deficiencies are being addressed. City staff now use software to track deposits to each fund and make deposits immediately through automated processes. Review and approval procedures are required for all city credit card purchases. They also separated the offices and duties of city clerk and treasurer, more clearly defining their roles. They are in the process of reorganizing and developing formal procedures to make sure financial reports are filed on time and property tax payments are also made on time. Williamson said the audit report was filed on time with the state and he praised city manager Jade Smith and city staff for their work in helping to get the audit completed. Lori Maranville is a freelance writer for the MIlan News-Leader. She can be reached at lorimaranville@att.net.
Special to The Milan News-LeaderMILAN -- The Milan City Council accepted its audit report for the fiscal year ending June 30, 2014. The report reflected the city is financially in good condition, but also showed some challenges ahead and “deficiencies in internal controls.” “The city ended up in a very strong financial position,” said David Williamson, a certified public accountant for Post, Smythe, Lutz, and Ziel, LLP, an accounting firm based in Plymouth. Williamson said the city had an unassigned fund balance in its governmental general fund that was almost 35 percent of operating revenues pointing to the figure as evidence of the city’s sound financial footing. He said the recommended amount by the Government Finance Officers Association is around 5 to 10 percent, which puts Milan’s general fund reserves far above that threshold. According to the report, the assets of the city exceeded its liabilities by about $20.6 million at the close of the fiscal year 2014. There was also a combined ending fund balance of $3.1 million, an increase of $165,662 over the previous year. The city has kept pace with its water and sewer operations, attempting to set appropriate rates to bring in revenue to pay debt service obligations for the facility. Cash flow of about $1.2 million went primarily toward debt service payments of about $1 million. Although the city is meeting its debt service obligations for the system, Williamson said, ideally operating revenues currently at $3 million should be much higher at about $6.5 million. The challenges in the water and sewer fund originated with the loss of property tax revenue back in 2010 and the closure of the Automotive Components Holdings, LLC, plant in 2011. The water and sewer plant is now underutilized running at about 45 percent of capacity at its peak and needs to generate additional revenue for its size. City leaders have attempted to address some of the problem by a gradual increase in water and sewer rates. Other budgeting challenges going forward include legacy costs, Williamson said, as the city continues to grapple with the spectre of unfunded liabilities. He said the city has helped its financial situation with more long-term budget planning, conducting rate studies for setting water fees, tightening up accounting procedures and investing in new accounting software to help give city leaders real time information about the budget. Milan’s full 2013-2014 audit report is available on the city’s website, milanmich.org. The report includes details of deficiencies in accounting procedures including one such weakness which led to embezzlement charges against the former Milan city clerk/treasurer, Sherry Steinwedel. She is accused of using a city credit card for personal use. The audit firm noted city credit card charges were not subject to a formal review process, allowing personal charges to be made on a city-issued credit card without oversight. The discovery led to the subsequent criminal charges. Other noted accounting shortfalls in the audit include: failing to reconcile bank statements in a timely manner; insufficient audit trails to track deposits and withdrawals from funds; bank deposits checks being held; and property tax payments to other government entities being paid late during 2013 and 2014. According to city officials, all of the deficiencies are being addressed. City staff now use software to track deposits to each fund and make deposits immediately through automated processes. Review and approval procedures are required for all city credit card purchases. They also separated the offices and duties of city clerk and treasurer, more clearly defining their roles. They are in the process of reorganizing and developing formal procedures to make sure financial reports are filed on time and property tax payments are also made on time. Williamson said the audit report was filed on time with the state and he praised city manager Jade Smith and city staff for their work in helping to get the audit completed. Lori Maranville is a freelance writer for the MIlan News-Leader. She can be reached at lorimaranville@att.net.