By Megan Kelley
Clarkston News Editor
mkelley@mihomepaper.com
INDEPENDENCE TWP. — At its meeting on June 4, the Independence Township Board of Trustees received a presentation from Yeo & Yeo, P.C. on the township’s annual audit which resulted in an ‘unmodified opinion,’ or ‘clean opinion,’ the highest form of assurance that can be earned in an audit.
Giving the presentation was Alan Panter, CPA for Yeo & Yeo.
“The audit went well this year. It was our first year as auditors for Independence Township and we did have a couple of difficulties but nothing that we couldn’t handle. Most of the information was provided when we requested it and we were able to complete our procedures efficiently,” Panter said.
The audit itself included an examination of the financial reporting process, internal controls and certain aspects of legal compliance, said Panter.
“The purpose of an audit is to give you an opinion on your financial statements. Not to detect fraud and not to give assurance on internal control,” Panter said. “We’re giving what is called an unmodified or clean opinion, that is the best opinion you can get and it means a couple of things. It means, first of all the statements are formatted in accordance with generally accepted accounting principles. So, in other words, everything that is supposed to be in the statements is there. And also based on the procedures that we perform, the numbers are good.”
Panter presented several graphs to highlight elements of the general fund. Data from the graphs presented showed a steady increase in total fund balance over the last five years and an increase in other financing sources like taxes and charges for services with a slight decrease in intergovernmental sources.
“You can see that the property tax revenue has trended upwards with the assessed valuation in the township. Intergovernmental revenue is the largest source of revenue so that’s mostly state shared revenue, there are some federal dollars in there as well. But you can see that that has gone up significantly in the last couple years as the state has increased its commitment to funding local government,” Panter said. “You can also see charges for services are a significant source of revenue for the township. And also there is ‘other’ so that’s basically the way we did this graph which is everything else. You can see that it’s up significantly this year and that’s due to some very good investment income this year.”
Additionally, the charts show an increase in expenditures and other financing uses across the board (general government, public safety, public works, recreation and culture, and transfers and others).
Panter also noted that Yeo & Yeo had one finding throughout the audit process that was necessary to discuss.
“We did have one finding. We called it a ‘significant deficiency.’ That’s a pretty intimidating term but I have another one called ‘material weakness’ that’s even worse. So, what I want you to take away from that is a significant deficiency is a condition in internal control that is important enough for us to communicate it to the board. For you to know about it,” Panter said.
According to Panter, the ‘significant deficiency’ involved bank reconciliations and year-end closing procedures.
“One of the things that we do during our audit is we look at bank reconciliations. The state wants us to look and make sure that bank reconciliations are being done on a timely basis. The township did experience some turnover this year in some key positions in both the treasurer’s and the clerk’s office where those reconciliations got behind and the year end reconciliations were completed just before audit. So, we came out for audit in April and those reconciliations didn’t get done on time. I would recommend that those get done within each month end. Also, the property tax reconciliations did not get submitted to us until after audit fieldwork so that caused a little bit of disruption to the team and we had to push pretty hard to make the deadline that I’m here satisfying.”
Treasurer Paul Brown spoke to give a little clarification on what he felt led to the finding Panter had presented.
“Ten years ago we started to take transactions for payments electronically, we started to push that. Prior to that we would have stacks of checks and we would be opening them with an opener and doing that. So, over the past 10 years, the volume that we now take in of electronic payments, especially when utility bills are due, went from a tiny number to, in this past May, a deposit or small group of deposits totaling almost $430,000 and over 2,000 transactions,” Brown said. “That was not so hard to post those and the process for doing that – we’re able to post the transactions electronically, its a data file and we’re able to put it in and we then have to match up those transactions in the treasurer’s department and group them together to match the deposits that are hitting the bank.”
Brown added that depending on the type of credit card used, the bank the transaction is done through, the time of day the transaction is processed, the matching of electronic imports has slowly become more difficult. Because of this, the department stopped importing the data files until they knew the exact amount that would be going through.
“By waiting for the deposit to hit the bank, then my staff imports the transactions. When you go to do the match up and create what we call ‘deposit creation’ in our system, it’s (quick),” Brown said.
“The bank reconciliations, while they weren’t completed, we knew what the problem was. We knew all the checks had cleared, we knew all the deposits had cleared at the bank. Our problem was getting the data from our electronic transactions matching up with those deposits,” said Brown.
Brown clarified that while it was an issue this past year, he does not anticipate it being a problem again next year because he and his staff have worked out how to efficiently process electronic payments.