Leelanau County’s independent auditing firm, Rehmann, found some errors in the county’s financial statements for 2023.
Rehmann’s findings were posted on the county website on June 20 and will be reviewed by the county board of commissioners at their next meeting, the July 9 executive session.
The county’s interim administrator, Richard Lewis, explained that Rehmann presented a “clean audit,” and the firm didn’t identify major issues with their financial reporting.
However, they did find misstatements and weaknesses that the county is already working to address through a corrective action plan.
During their audit, Rehmann identified misstatements in the county’s financial journal entries for the drain commission component unit. According to the audit report, these errors were caused by “an oversight in recording adjustments” and the county’s reliance on independent, external auditors to assist in its financial reporting.
The county reviewed and accepted Rehmann’s proposed material audit adjustments to correct their initial misstatements. But relying on external auditors like this is not in accordance with generally accepted accounting principles, the auditing firm says, and is a “material weakness” in their internal controls.
According to the report, a material weakness means there is a reasonable chance that more mistakes like these will not be prevented, detected, and corrected on a timely basis. Another material weakness identified in the report is a lack of segregation of duties within the county’s finance department.
“During 2023, there were periods of the year in which the county did not have a finance director in place, and during these times duties were not fully segregated and related independent reviews were not consistently taking place,” the report says.
Indeed, the county did not have a permanent finance director for most of last year. The last finance director, Sean Cowan, was only with the county from June 5 to Oct. 20. In his resignation letter to the county board, Cowan cited insufficient “resources, authority, staff (and) executive support” as reasons for leaving.
Cowan isn’t the first department head to leave the position. In fact, the department has passed through four sets of hands since it was formed in January 2022. Catherine Hartesvelt has been interim finance director between the vacancies.
And Hartesvelt may continue serving in this capacity through the end of 2024, as the county board of commissioners previously said that their next county administrator should choose the next finance director. Commissioner comments suggest they may not hire a new administrator until December 2024.
The county board has been paying Clerk Michelle Crocker and Deputy Clerk Jennifer Zywicki $250 stipends per week since December 2023 to prepare the county budget, manage payroll, and work with Rehmann on the 2023 audit. Crocker and Zywicki managed county finances before the creation of a separate finance department. They will continue receiving stipends until the county hires a new administrator.
Another material weakness in internal controls was reported when the auditor found at least one instance of a check from the Brownfield Redevelopment Authority was not deposited into the bank or recorded in the accounting records for several months after receipt.
Other weaknesses in the recording and accounting for Brownfield transactions included an instance of grant expenditures being incurred and not recorded in a timely manner; cash receipting being recorded into the general ledger by journal entry rather than by each actual cash receipt, and certain reconciliations not taking place or being subject to independent review and approval.
In a corrective action plan attached to the audit report, it says that the county’s finance director and administrator will implement policies and procedures to allow the timely recording of Brownfield transactions, cash receipts to be recorded in the ledger, and independent reviews and approvals take place and be evidenced in writing.
The audit found significant deficiencies in internal controls in spending American Rescue Plan Act (ARPA) funds. According to the report, significant deficiencies are “less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.”
Non-federal entities like Leelanau County are required to have written policies in various areas, including payments, procurement, and allowability of costs charged to federal programs. The audit report says that the county does not have policies for these areas, although they do have processes in place to cover them.
The Rehmann audit says this “appears to be the result of a time lag in identifying the requirement and developing a plan for compliance” and recommends that the county draft the required policies before the end of the year. The county administrator plans to work with legal counsel and auditors to bring the county into compliance in these areas by Dec. 31.
Another significant deficiency related to the county’s ARPA funds is that the county has not verified that its vendors have not been suspended or disbarred. The county is required to verify this when it disburses at least $25,000 to a vendor. To address this, the county will create a certificate of suspension/ debarment status form for vendor certification.
