At its Dec. 7, 2011 meeting, the board of the Ann Arbor Downtown Development Authority voted to accept its annual audit for the year ending June 30, 2011.
The report from the auditing firm Abraham & Gaffney, P.C. notes an instance of expenditures exceeding the amount of funds appropriated that is inconsistent with Michigan’s Uniform Budgeting and Accounting Act (UBAA) of 1968. Auditor Alan Panter presented the report to a subset of DDA board members at a Nov. 30 meeting of the DDA’s operations committee. At that meeting, the $337,478 overage was attributed by DDA staff to the submission of a bill forwarded to the DDA in June by its construction management consultant (Park Avenue Consultants Inc.) for the underground parking garage and streetscape improvement projects currently under construction.
Ordinarily, the DDA’s budget is adjusted to match actual expenditures just before the close of the fiscal year, which the DDA board also did this year at its June 1, 2011 meeting. Estimates are given for invoices anticipated to be received before the end of the year. The bill submission prompting the auditor’s notation came after the June 1 adjustment.
At the Ann Arbor city council’s Dec. 5 meeting, Stephen Kunselman (Ward 3) complained about the violation noted in the DDA audit report and called for the report to be forwarded to the state as described in the UBAA. At the DDA board’s Dec. 7 meeting, the problem was characterized as a “technical violation.”
For the fiscal year 2011, the DDA showed $18,806,765 in revenues against $20,796,665 in expenses, drawing $1,989,900 from fund balance reserve. The planned draw on fund balance is related to the underground parking garage construction payments as well as a new contract, signed this year, under which the DDA operates the city’s public parking system. That contract assigns 17% of gross parking revenues to the city of Ann Arbor. At the Nov. 30 committee meeting, DDA board member Newcombe Clark was keen to confirm the inclusion of the new contract as a note in the audit.
In his verbal presentation to the board on Nov. 30, Panter had highlighted fund balances in two ways. First, he noted that the DDA’s housing fund no longer meets the definition of a special revenue fund under the Government Accounting Standards Board (GASB) Statement No. 54. The money in the housing fund, which is allocated from the DDA TIF (tax increment financing) fund, is thus included as “assigned” funds within the DDA’s general fund (aka TIF fund).
Second, Panter noted that the DDA’s parking fund balance as a percentage of parking expenditures for the year ($104,821/$15,998,564 = 0.6%) is “on the edge of deficit.” As DDA board members explained to Panter, the DDA operates its funds essentially as one fund. In that context, Panter described the fund balance as roughly 25%. He gave 15-20% as a recommended level. He cautioned, however, that allowing any individual fund to go into deficit is a violation of the UBAA.
This brief was filed from the DDA offices at 150 S. Fifth Ave. A more detailed report will follow: [link]