Leelanau Township trustees unanimously approved the 2023-24 audit conducted by the accounting firm based in Cadillac, UHY LLP, Aug. 13.
The presentation given to the board from Michael Cool, UHY Advisors managing director, gave trustees and the public an overview of the financial statements of the township’s governmental activities, each major fund, and aggregate remaining fund information for the fiscal year ended March 31, 2024.
Cool went over the audit in detail, highlighting different points in his analysis regarding current funds and local government practices, the factors they had to overcome including working around a software change, and recommendations for the township going forward.
“It was a lot more than we thought it would be to get to this point to have it (the audit) finished,” Cool said at the meeting. “... As you were coming to the end of your year, everything software related kind of got thrown up in the air and some balls had to be juggled to get it to where we could start with the audit… So now I do think you guys are on the right track.”
While the audit states that there were no significant difficulties in dealing with management and performing their review, Cool made sure to inform those present about the biggest concerns he had and other relevant findings about the budget.
One of the first township “liabilities” addressed by Cool was regarding the American Rescue Plan Act (ARPA) revenue of $140,000 that the township has yet to spend as of March 31. Considered “unearned revenue,” the audit explained in subsequent periods and when both revenue recognition criteria are met, or when the government has a legal claim to the resources, revenue is recognized. In addition, the audit shows that the township has unearned revenue related to a potential development, Timber Shores escrow, that has not been spent and thus not earned. Cool said if the township does not find a way to obligate the ARPA money before December 31, the government would be able to take the funds back, suggesting that the board consider taking action on project priorities in the next four months.
Within the general fund, fund balance, Cool also pointed out that $360,000 was committed for debt service, which is related to an anticipated shortfall with the sewer debt. This debt, which has required principal payments since April 2009, will be repaid from special assessments recorded in the Debt Service Fund. The Township is responsible for 19.9% of the amount borrowed and the Village of Northport is responsible for the repayments of the remaining 80.1% until April 2028.
“I want to point that out because I think that is important,” he said. “You can earmark some of that general fund, fund balance for that potential future use if you come up short on payment.”
The Leelanau Township Library fund was another point of concern. Cool was unaware at the time of his Tuesday presentation that the library millage was brought to the voters in 2022 due to a petition, rather than the township, and suggested the township levy the millage going forward if they are to assess the millage through December 2027.
Before residents voted to approve a proposal in 2022 of .5 mills to fund the library for six years from 2022 to 2027, the township board operated the library and monitored its funds with General Fund tax revenues.
Once informed about the library possibly possessing its own L4029 tax form, Cool agreed that the new library board and township need to get together to figure out who will be levying the .5 mill approved by the voters.
“Only one entity needs to do it (levy the .5 mills), that’s the kinds of things that need to be cleared up…” he said. “If it’s the township’s millage, then you need to adopt a budget, which is again just two lines… if it’s their (the library’s) millage, then you don’t need to do anything.”
Cool discussed some of the material weaknesses identified in the audit as well. Lack of controls to produce financial statements was the first touched on, with Cool noting that any auditor would say a small unit of government like Leelanau Township would have this considered as a material weakness. A lack of segregation of incompatible duties, another very common weakness found in small governments, was identifi ed. Cool said the township has several accounting functions that are performed by the same individual and are not subject to a documented independent review and approval. In addition, a lack of adequate controls to timely record, process, and summarize accounting data was noted as being caused by data input into the official recordkeeping system in an incorrect and timely manner.
“We should in theory come in and audit your books and say this looks good, so this is a communication to say there was an auditor post material weakness,” he said.
The township ultimately ended the fiscal year in better condition than when the year began. According to the audit, at the end of the current fiscal year, the township reported positive balances in all categories of net position for the government and as a whole, with its total net position increasing by $355,650 this fiscal year. The township’s governmental funds reported combined fund balances of $5,213,921, an increase of $212,877 in comparison with the prior year, with 20% of this amount ($1,036,499) available for spending at the township’s discretion. The unrestricted fund balance, which is the total of committed, assigned, and unassigned components of fund balance, for the general fund was $1,416,270.
To view the full 47 page-long audit, go to leelanautownshipmi. gov.
