Stories indexed with the term ‘audit’

Ann Arbor Local Development Finance Authority board meeting (June 17, 2014): The LDFA board’s meeting convened around 8:20 a.m. – about seven hours after the city council’s meeting adjourned the previous evening. And the council’s meeting was the topic of small talk among LDFA board members as they waited for their meeting to convene.

The council’s meeting was of more than just passing interest to the LDFA board members – because the council voted at that meeting to table a $75,000 contract for business development services with Ann Arbor SPARK, a local nonprofit economic development agency. Ann Arbor SPARK is also the LDFA’s contractor – but not for the same kind of services that SPARK delivers under its contract with the city. The council will likely take up its contract with SPARK again at a future meeting, possibly as soon as July 7.

The city’s annual contract with SPARK, which is paid for with general fund money, is meant to cover the attraction and retention of mature companies to the Ann Arbor area. In contrast, the LDFA contracts with SPARK for entrepreneurial support services – for companies that are in some phase of starting up.

On the LDFA board’s June 17 agenda was the annual contract with Ann Arbor SPARK for entrepreneurial support services – which the board voted to approve. This year that contract is worth nearly $2 million – $1,891,000 to be exact.

An unsuccessful bid by councilmembers made during the city’s FY 2015 budget deliberations would have reduced the total LDFA expenditures by $165,379. The goal of that expenditure reduction would have been to increase the fund balance that was available for infrastructure improvements in the LDFA district – specifically, for high-speed telecommunications. At the LDFA’s June 17 meeting, city CFO Tom Crawford indicated that sometime in the FY 2015 fiscal year, the city would be making a proposal to install fiber throughout Ann Arbor.

The contract between the LDFA and SPARK covers a range of items, with the top two line items consisting of staffing for the business incubator ($420,000) and provision of services to start-up companies in Phase III of their development ($550,000). SPARK classifies its engagement with companies in terms of phases: preliminary screenings (Phase I); due diligence (Phase II); intensive advising (Phase III); and accelerating opportunities (Phase IV). [.pdf of FY 2015 budget line items] [.pdf of LDFA-SPARK FY 2015 contract]

At its June 17 meeting, the LDFA board also approved a routine annual $42,600 contract with the city of Ann Arbor – for administrative support services. Those include items like the preparation of meeting minutes, stewardship of public documents, and preparation of budgetary analyses. [.pdf of FY 2015 LDFA contract with city of Ann Arbor]

The final voting item for the board was approval of its meeting schedule for the next fiscal year. The LDFA board meets in eight out of 12 months, with the next meeting taking place on July 15, 2014, starting at 8:15 a.m. in the city council chambers. [.pdf of 2014-2015 meeting schedule]

These voting items did not, however, generate the majority of the board’s discussion at its June 17 meeting.

The board focused most of its discussion on issues surrounding its application for an extension of the LDFA past its current 15-year lifespan, which ends in 2018. Legislation passed in 2012 allowed for either a 5-year or a 15-year extension – with different criteria for those time periods. The 15-year extension requires an agreement with a satellite LDFA, with two communities currently under consideration to partner with Ann Arbor’s LDFA: Brighton and Adrian. Flint had also been a possibility, but is no longer on the table.

With an extension, the LDFA would continue to capture school operating millage money, which would otherwise go to the state’s School Aid Fund. At least some of the school taxes subject to capture by LDFAs statewide are required to be reimbursed to the School Aid Fund by the state. Questions about how that applies to Ann Arbor’s LDFA have been raised – and a review of the state statute appears to support the conclusion that the key clause requiring reimbursement is inapplicable to the Ann Arbor SmartZone LDFA. That understanding was confirmed to The Chronicle by the Michigan Dept. of Treasury communications staff in a telephone interview on June 23.

The exact nature of that tax capture arrangement and possible reimbursement was also the subject of LDFA board discussion on June 17 – because the LDFA board is being pressed by city councilmembers to account for how the LDFA tax capture impacts the state’s School Aid Fund. Board member Stephen Rapundalo expressed some frustration about that – based on his perception that this material had been well explained in the past: “What’s it take – for them to understand unambiguously how that works? I mean, we have told them. Why is the onus on the LDFA to have to show them that?”

Besides the tax capture mechanism, two other issues raised by city councilmembers are factoring into the LDFA board’s approach to seeking an extension of its term. Board chair Carrie Leahy told her colleagues that she took away two main messages from recent appearances in front of the Ann Arbor city council. Some councilmembers, she said, would like to see: (1) an independent audit of job creation numbers; and (2) a provision for infrastructure investments as part of an LDFA extension.

On the infrastructure side, the LDFA board’s discussion focused on the existing TIF (tax increment finance)/development plan, which provides for investments in high-speed telecommunications (fiber) networks, but not for projects like street construction, sewer construction and streetlight installation. The question was raised as to whether the LDFA could use its school tax capture to pay for a fiber network in the whole geographic district of the LDFA – or if school taxes could only be used to fund a fiber network to an business incubator.

The Ann Arbor LDFA’s district covers the geographic areas of the Ann Arbor and Ypsilanti downtown development authorities – although Ypsilanti’s DDA area does not generate any LDFA tax capture. As a consequence, money captured by the LDFA is not spent in the Ypsilanti portion of the district. But that could change under an extension of the LDFA – based on board discussion at the June 17 meeting.

On the job creation numbers audit, the June 17 board discussion indicated that the LDFA will now be looking possibly to incorporate a job numbers audit as part of an upcoming financial audit. The financial auditing firm will be asked to provide some explanation of how it might be able to incorporate a jobs audit as part of its scope of work for the upcoming financial audit. The board appears to understand that some type of jobs audit would be important for winning ultimate city council support for a 15-year extension of the LDFA.

The city council’s representative to the LDFA board, Sally Petersen, made that explicit more than once during the June 17 meeting, saying that “taking the lead on establishing an independent audit would go a long way towards getting city council support for an extension.”

The LDFA’s deliberations and other agenda items are reported in more detail below. [Full Story]

Ann Arbor District Library board meeting (Dec. 16, 2013): The board’s main action item was to accept the 2012-13 audit, which was briefly reviewed by Dave Fisher of the accounting firm Rehmann. It was a clean report, he said.

There was no discussion among board members on that item, though Fisher noted the audit had been discussed at the board’s budget and finance committee in November.

Also approved was a one-year lease extension with Green Road Associates for storage of newspaper archives. The library has leased the Plymouth Park facility – an office park owned by First Martin Corp. on Green Road, north of Plymouth – since January 2010. That’s when AADL took possession of the Ann Arbor News archives, a few months after the owners of that publication decided to cease operations. The library is digitizing the Ann Arbor News archives, along with material from other local newspapers, as part of a project called Old News.

Much of the meeting focused on two staff presentations: A report on library statistics for November in five categories (collections, users, visits, usage and participation); and an update on the Washtenaw Library for the Blind and Physically Disabled (WLBPD).

One person, Donald Salberg, addressed the board during public commentary. Part of his remarks focused on the board’s decision – at its Nov. 11, 2013 meeting – to approve a tax-sharing agreement with Pittsfield Township and the State Street corridor improvement authority. He told trustees that they hadn’t identified any real benefit that the CIA would bring to the library.

At the end of the meeting, board president Prue Rosenthal read a statement that defended the board’s decision to participate in the CIA, outlining its benefits to the library and the broader community. She said that although the board vote had not been unanimous, she thought that all trustees were comfortable that the decision was made with a great deal of care. [Full Story]

The city of Ann Arbor’s FY 2013 audit report – which received an “unmodified” or clean opinion from the firm that conducted the audit – has triggered a standard letter from the office of the State of Michigan Department of Treasury. The letter, dated Nov. 22, 2013 and received by the city on Dec. 4, resulted from a note in the audit report on the city’s local street fund.

According to city of Ann Arbor CFO Tom Crawford, the city’s response to the letter would not require any city council action. The city staff would be explaining to the state how the city’s internal financial procedures mitigate against what Crawford characterized as a “minor issue.”

A note in the city’s own audit report called … [Full Story]

In action taken at its Dec. 4, 2013 meeting, the Ann Arbor Downtown Development Authority board voted to accept the authority’s FY 2013 audited statements. The overall opinion was that the DDA’s records are a fair and accurate statement of the authority’s finances – an “unmodified” or clean opinion.

The DDA’s audit firm is the same one used by the city of Ann Arbor – Rehmann. [.pdf of DDA FY 2013 audit]

This brief was filed from the DDA offices at 150 S. Fifth Ave., Suite 301. A more detailed report will follow: [link]

An Oct. 24, 2013 meeting of the Ann Arbor city council’s audit committee featured just one item – a review of the draft audit report prepared by auditor Mark Kettner of Rehmann Robson, working with city staff. And overall the report on the fiscal year concluding on June 30, 2013 provided $2.4 million of good news for the city’s general fund.

Highlights from that draft FY 2013 report, which has now been issued in final form to the city, include an increase to the general fund balance from about $15.4 million to about $16.2 million. The $800,000 increase contrasts to the planned use of roughly $1.6 million from the general fund balance in the FY 2013 budget. About $200,000 of the increase was in the “unassigned” fund balance. The rest of it fell into restricted categories, CFO Tom Crawford explained at the meeting.

The result of the audit, in the new GASB terminology, was an “unmodified” opinion – which corresponds to the older “unqualified” opinion. In sum, that means it was a “clean” audit. The concerns identified last year had been addressed to the auditor’s satisfaction.

Members of the audit committee were enthusiastic about the $2.4 million better-than-budget performance for the city’s general fund, which had expenditures budgeted for $74,548,522 in FY 2013.

However, Crawford cautioned that he is “not crazy about the versus-budget comparison” because actual expenses will generally be less than budget anyway. He also pointed out during the meeting that just $1.3 million of the $2.4 million better performance are recurring items – things that he would expect to continue going forward.

While the year-end audit provided some good news, Crawford said he recommended that the city try to have about $1 million to $1.5 million of “good news” each year, because the city needs fund balance to pay for non-recurring items.

Crawford and Rehmann auditor Mark Kettner walked the committee through some of the highlights that still, on balance, had led to the good news. Revenue for services was almost $400,000 less than budgeted, due in part to lower-than-budgeted fire inspection fee revenue. Fines and forfeitures – including parking tickets – were $300,000 less than budgeted. And investment income was off by $400,000. But state shared revenue came in at $500,000 better than budgeted. [These figures come from page 36 of the final audit report.]

“The general fund had pretty much a year like you’d hope it would,” Crawford said. The year ended with an unassigned fund balance of roughly $14 million, or about 18% of expenditures – and 18-20% of expenditures is where the fund balance should be, he said. “So we’re really in a good spot.”

Challenges facing the city this coming year include the implementation of the new GASB 68 accounting standard starting in FY 2015, which begins July 1, 2014. That standard requires that most changes to the net pension liability will be included immediately on the balance sheet – instead of being amortized over a long time period. The GASB 68 standard must be implemented for an organization’s financial statements for fiscal years beginning after June 15, 2014.

Crawford prepped the committee to see a probable drop in the pension plans funded ratio – from about 82% to 80% – because of the five-year window used to book losses. The last of the losses in 2008-09 will be on the books this year, but after that the city would expect to see improvement every year, Crawford said. This most recent year, the pension fund had an 11% return, which is four points better than the 7% return the fund assumes for planning purposes.

Two of the city’s funds were highlighted by Crawford at the Oct. 24 meeting as having potential difficulties associated with the GASB 68 standard – solid waste and the public market (farmers market). For the public market fund, Crawford floated the idea to the audit committee that it could be folded back into the city’s general fund, on analogy with the golf fund. Starting this year (FY 2014) the golf fund has been returned to general fund accounting.

The consensus on the audit committee was that the full city council should receive a brief presentation on the audit report – either at an upcoming working session or a regular meeting. [.pdf of final audit report released on Nov. 15, 2013]

Prior to new committee assignments to be made by the post-election composition of the city council, the audit committee consists of: Margie Teall (Ward 4), Sumi Kailasapathy (Ward 1), Sally Petersen (Ward 2), Stephen Kunselman (Ward 3), and Chuck Warpehoski (Ward 5).

This report includes additional description of the Oct. 24, 2013 city council audit committee meeting. [Full Story]

Ann Arbor Transportation Authority board meeting (March 21, 2013): The board’s main business of the evening was a presentation from the audit firm Plante Moran on the result of AATA’s fiscal year 2012 audit.

About the audit report, Plante Moran’s David Helisek told the board: “Hopefully, you found it somewhat boring.” By that he meant there were no material weaknesses or significant deficiencies to report. And his firm had struggled even to find suggestions for improvement in controls and processes. In the category of a suggestion was a recommendation to formalize a policy on user access to IT systems. And one question was left over from the previous year’s audit – on the legal basis of the AATA’s investment in heating oil futures as a hedge against possible price increases in diesel fuel. The AATA has inquired with the state of Michigan on that issue, but has not received an answer.

At the meeting, the board also rescinded a $119,980 contract it had authorized with PM Environmental – because of a failure on the AATA’s side to go through the standard procedure for bidding out the contract. The contract is for remediation of contaminated soil at the AATA’s headwaters on 2700 S. Industrial Highway. That contract will now be re-bid, and PM Environmental will have an opportunity to participate in that process.

In a final voting item on its agenda, the board authorized a four-month extension to the current pricing agreement the AATA has with Michigan Flyer – to provide AirRide service between downtown Ann Arbor and Detroit Metro airport. The extension will allow negotiations to take place on a new arrangement, which is being considered in the context of at least two factors. Ridership on the service, launched last year in April, has exceeded projections. And Michigan Flyer may be eligible for a federal grant that could increase the number of trips per day. The current service is hourly.

The board also heard a range of updates from its committees and CEO Michael Ford. Among the most significant was about a meeting scheduled for March 28 among representatives of Washtenaw County’s “urban core” communities that have, for the last few months, been engaged in discussions with AATA about expanded transit in a much smaller geographic footprint than the entire county. [Full Story]

The board of the Ann Arbor Transportation Authority has formally accepted the result of it fiscal year 2012 audit report. [.pdf of FY 2012 audit]

There were no significant deficiencies found in the audit, although a question remained from last year’s audit. One remark was made about the legal basis for the AATA’s investments in heating oil futures. The AATA has inquired with the state of Michigan seeking a legal opinion on the issue, but has not yet heard back. The AATA’s basic financial picture at the end of FY 2012 was as follows:
2012
ASSETS
$17,109,000 Current assets
37,094,000 Capital assets, net
54,203,000 Total assets
LIABILITIES
1,619,000 Current liabilities
1,233,000 Noncurrent liabilities
2,852,000 Total liabilities
NET ASSETS
37,094,000 Invested in capital assets
… [Full Story]

A revised auditor’s letter to the city of Ann Arbor was attached to the city council’s Feb. 4, 2013 agenda, and has been formally received by the council as a written communication from the city administrator.

The original version of the letter had indicated three instances of an employee with a vehicle allowance also being reimbursed for mileage, and characterized those reimbursements as a “violation of city policy.” It was subsequently revealed that it was the mileage reimbursements of city attorney Stephen Postema that had caused the auditor to flag the issue.

But after further review – pushed by Postema and chief financial officer Tom Crawford – auditor Mark Kettner agreed that there was no written policy per se that disallowed the … [Full Story]

The Jan. 24, 2013 meeting of the Ann Arbor city council’s audit committee signaled a more actively engaged role for that group in the future. It was prompted in part by a report submitted by the city’s outside financial auditor late last year – on which the committee did not appear to have a unanimous consensus at the Jan. 24 meeting. The audit was conducted by the firm Rehmann, which is now in the first year of a five-year contract to perform auditing services for the city.

Listed among other relatively minor matters in Rehmann’s report was a note identifying three instances of an employee who had claimed mileage reimbursement despite receiving a vehicle allowance. At a scheduled Dec. 20, 2012 meeting of the audit committee, the dual claims were described by Rehmann’s Mark Kettner as a “double dip.” Those claims were also cited in Kettner’s written report as a violation of city policy.

The Chronicle’s write-up of the auditor’s presentation late last year to the audit committee – which did not achieve a quorum on that occasion – included the result of additional reporting: Mileage claims made by city attorney Stephen Postema caused the auditor to flag the issue in his formal report.

But at the Jan. 24 committee meeting, Kettner revealed that he’d been convinced to change the wording of the note. The new wording will not indicate a “violation” of city policy. At the meeting, however, Kettner indicated that a note about this issue would still be included – with the exact wording yet to be settled. City CFO Tom Crawford’s written response to the auditor’s report includes email messages that show it was Crawford and Postema who made a successful effort to convince Kettner to alter the report’s wording.

The wording of Postema’s employment contract factored into arguments made by Postema and Crawford for a revision to the auditor’s report. When Postema made his reimbursement claims, his contract at that time provided for “travel” expenses in addition to a vehicle allowance. Postema’s vehicle allowance was eliminated late last year, as a result of his annual performance review. Also factoring into the argument for revising the auditor’s note was Crawford’s contention that the city’s written policies don’t provide clear guidance on the question.

However, at the Jan. 24 committee meeting, Sumi Kailasapathy (Ward 1) challenged Crawford on that point. [Kailasapathy was elected to the council in November 2012 – running a campaign that stressed her credentials as a certified public accountant.] She reviewed the logic and specific wording of each of the city’s relevant policies, with particular attention to the meaning of the word “travel” – and reached the conclusion that the mileage reimbursements had not conformed with city policy.

And even though Kettner has agreed to change the wording of the note in his report, Kettner wrote in a Jan. 18 response to Postema and Crawford: “… from a business practices standpoint, our conclusion (with or without the existence of a policy) was it would be illogical and, therefore inappropriate, to make mileage reimbursements to persons having a car allowance.” Kettner’s response also indicates that his conclusion of inappropriateness was not based on a review of Postema’s employment contract.

At the Jan. 24 meeting, Crawford interpreted the fact that he and Kailasapathy reached different conclusions about the appropriateness of the mileage claims as evidence that the written policies didn’t provide clear guidance.

Stephen Kunselman (Ward 3) seemed to reflect the general sentiment of the two other committee members present – Chuck Warpehoski (Ward 5) and Margie Teall (Ward 4) – in concluding that he didn’t think anyone had been trying to “game the system.” Kunselman indicated little enthusiasm for delving into the wording of Postema’s contract or existing city policies. He was more interested in making sure that the relevant policies would be revised and applied in the future – not just for the travel and mileage policies, but for the other issues identified in the auditor’s report.

Kunselman also indicated that he was keen to see the audit committee take a more active, engaged role – throughout the year, not just once a year on the occasion of the auditor’s report. The committee as a group also seemed favorably inclined toward adopting a more proactive approach. The committee’s extended conversation about the relationship of the city’s part-time internal auditor indicated that while the internal auditor would still report to Crawford, the audit committee would be looped into the ongoing issues that emerged throughout the year as they arose – instead of six months after they happened. It could result in meetings of the committee at other times besides the occasion of the annual auditor’s report.

That reflects a transition from the role that the audit committee has played as recently as two years ago. The committee did not meet at all during that year, even to review the FY 2010 auditor’s report – because audit committee chair Stephen Rapundalo declined to call a meeting. Kunselman complained at the time about the lack of a committee meeting. Rapundalo was not re-elected in 2011 – when he had faced Jane Lumm, who received more votes than Rapundalo that November. [Full Story]

News of an essentially clean audit for the fiscal year 2012 was delivered to the Ann Arbor city council audit committee late last year by Mark Kettner, a principal with the auditing firm Rehmann. The audit culminated the work that had begun in preliminary meetings on July 10. The fiscal year 2012 ended on June 30, 2012. [.pdf scan of letter from Rehmann]

The auditor’s report concluded that the city’s financial statements are presented fairly and accurately – but as Kettner stressed, that was not meant to express an opinion on the city’s overall financial condition or anything about what a great place Ann Arbor is. “I never want somebody walking away who says, ‘The auditor said everything’s okay,’ because the auditor doesn’t say that …” Kettner noted.

Also presented to the committee was the comprehensive annual financial report (CAFR). The report included the year-end numbers for the city’s general fund, which were positive. Actual revenues were about $76.5 million, which was $2.2 million more than the budgeted revenues of $74.3 million. And actual expenses were $73.5 million, or $2.1 million less than the budgeted expenses of $75.5 million. That came out to an increased fund balance of $1.6 million – from $13.7 million to $15.3 million. The city had budgeted to tap the fund balance for around $2.7 million. That meant that the general fund did about $4.3 million better than budgeted. [.pdf of CAFR]

Although the audit report was unqualified – that is, clean – some problems were identified with the city’s internal controls. One was deemed to be a “material weakness” – the most serious classification. It related to the representation of the federal portion and state portion of funds involved in revolving loans. A second problem, identified as a “significant deficiency,” involved the reconciliation of subsidiary ledgers for customers’ utility bills with the city’s overall financial system.

Not rising to the level of an actual deficiency were several other matters that Kettner felt still warranted consideration, including: payroll process (no direct supervisor signatures on timesheets); employee expense reports (instances of “double-dipping” on vehicle allowances and mileage reimbursements); related-party transactions (family member of employee with city contract); internal staff auditor reporting relationship (currently reports directly to CFO); and information technology (password and disaster recovery policies).

The auditor’s report does not include the names or positions of any of the employees involved in those matters of concern. Records provided to The Chronicle by the city, responding to a request made under Michigan’s Freedom of Information Act, indicate that one of the employees who claimed both mileage and vehicle allowance in violation of city policy was city attorney Stephen Postema. The records indicate he claimed $1,043.37 in mileage reimbursements dating from June 23, 2011, despite his vehicle allowance of $330/month. Postema’s vehicle allowance has since been eliminated by the city council, as a result of his most recent performance review. It’s not clear at this point if the city will require that the mileage money be repaid. [Updated: City administrator Steve Powers has reached a different conclusion from the auditor's on this point. See below.]

Kettner and the city’s chief financial officer, Tom Crawford, indicated to the audit committee that the material weakness and significant deficiency had been corrected so that recurrence would also be prevented. For the other matters, Crawford assured the audit committee that the goal was not to see a repeat of those same items in future years, especially for the most serious issues – involving payroll and expense reports.

The related-party transactions, Crawford told the audit committee, are currently the subject of review in the context of possible revisions to the city’s procurement policy. Kettner suggested that the city’s part-time internal auditor report directly to the audit committee, instead of to Crawford. And Crawford encouraged committee members to share any concerns with the city’s internal auditor, the city administrator, or the auditor himself – if they did not feel comfortable approaching him. Crawford indicated that the city was currently working on a disaster recovery plan for information technology, but didn’t anticipate that it would be completed by the end of this fiscal year.

The presentation by Kettner was delivered to a short-handed committee. Because just two of the five members were able to attend – Sally Petersen (Ward 2) and Chuck Warpehoski (Ward 5) – the committee didn’t achieve a quorum necessary to vote to recommend the adoption of the audit by the full council. Two audit committee members were out of town – Sumi Kailasapathy (Ward 1) and Margie Teall (Ward 4). The third absentee, Stephen Kunselman (Ward 3), was suffering from the flu. City staff present were chief financial officer Tom Crawford and accounting services manager Karen Lancaster. [Full Story]

Ann Arbor Public Schools Board of Education regular meeting (Nov. 7, 2012): The Ann Arbor Public Schools (AAPS) board of education’s Nov. 7 meeting contained significant discussion of the district’s finances, straddling three fiscal years – past, present, and future.

Before receiving an “unqualified opinion” on the district’s 2011-12 audit and reviewing the first quarter financials from 2012-13, the board took a first pass at framing the discussion surrounding the development of the district’s budget for the 2013-14 fiscal year – a step the board has not typically taken as early as November.

Also at the meeting, the board approved the renaming of two facilities at Pioneer High School – the tennis courts and the planetarium. The tennis courts are being renamed for long-time tennis coach Tom “Brick” Pullen. And the planetarium is being co-named in regnition of a $100,000 gift from the IMRA America company.

The board also recognized Huron High School cross-country runner Allie Cell, for an extraordinary display of sportsmanship during a recent meet.  [Full Story]

If Michigan’s personal property tax were to be eliminated, as proposed in Senate Bill 34, the amount of the annual transit tax that’s used to help fund the the Ann Arbor Transportation Authority would decrease by $420,000 annually. That’s a point of information included in the AATA’s annual audit, which was recently done by Plante & Moran.

AATA controller Phil Webb included the item in his reaction to other findings in the audit – which he conveyed in a memo to AATA’s CEO Michael Ford. The memo was part of the AATA board’s information packet for its April 19, 2012 meeting. Other audit findings were discussed at the board’s March 15, 2012 meeting and included in The Chronicle’s report … [Full Story]

Ann Arbor Transportation Authority board meeting (March 15, 2012): After waiting out a tornado warning in the basement of the downtown Ann Arbor District Library building, the AATA board made relatively quick work of its monthly meeting.

Still, the board transacted two pieces of business. The first was to approve the report of its auditor, Plante Moran. The overall opinion was “unqualified,” which is the highest rating that can be given. Still, the audit revealed some issues that need to be addressed, one of which was dealt with as part of the audit – the recording of revenue from the tax levy in the year it’s received. That actually increased the amount of AATA net assets by $7 million, but is an accounting change, not an actual change. The auditors found one case of a contract that should have been subjected to Davis-Bacon compliance requirements but was not.

Another issue identified by the auditor involves the AATA’s practice of investing in fuel futures as a hedge against the volatility of diesel prices – the advice was to review the practice with legal counsel. Plante Moran also flagged an issue involving the shelf-life of federal grants – but the AATA and auditors see that issue differently.

The second business item was approval of revisions to the AATA management personnel handbook – it was part of a periodic review and revision. Among myriad other changes, the amended document adds “sexual orientation” to the list of protected classes. [Full Story]

Editor’s note: Before this article was finalized for publication, it was inadvertently posted for a brief time, then removed from the website. Between versions, some added material gave more precision to the planned expenditures and use of fund balance in the city of Ann Arbor’s FY 2011 budget.

In mid-December, the audit committee of the Ann Arbor city council received what could be considered good news from the final audit for the last fiscal year. It was clean. The city also managed to add incrementally to its fund balance, instead of using more than $1 million from that balance, which it had anticipated doing.

The council’s audit committee met on Monday, Dec. 19 at 6 p.m. just before the council’s last meeting of the year, which started at 7 p.m. Last year, the committee did not meet at all, a point of complaint made by committee member Stephen Kunselman (Ward 3) at a recent council meeting.

Alan Panter of the accounting firm Abraham & Gaffney, P.C. presented the audit committee with an overview of his findings for fiscal year 2011, which were summarized in the report as “an unqualified (‘clean’) opinion on the City of Ann Arbor financial statements for the year ended June 30, 2011.”

One finding that was not deemed a “material weakness” – but was nonetheless described as a “significant” deficiency in internal controls – involved adequate documentation of employee purchase card (P-Card) use. It’s an issue familiar to the city from previous audits.

In terms of the overall financial state of the city, as reflected in the audited numbers, the city added around $127,000 to its general fund balance.

That’s significant, because the city council-approved FY 2011 budget had anticipated drawing around $1.5 million from the fund balance reserve to help cover about $81.5 million in planned general fund expenditures. So on balance, the city appears to have done at least $1.6 million better than it had planned for FY 2011. No single factor was identified during the audit committee’s discussion to account for the better performance.

At the end of FY 2011, the city’s fund balance reserves stood at around 13.6% of expenditures – which is within the range of 12-15% that Panter said was recommended.

The audit committee’s discussion included the fact that the city’s audit is required by the city charter to be completed by Sept. 30 each year – within 90 days of the end of the fiscal year. This year’s audit was not completed until Dec. 9. Based on discussion among the audit committee members and accounting services manager Karen Lancaster, missing the charter’s deadline has become routine. Lancaster indicated that the first year she’d worked for the city, in the early 1990s, that deadline had been met.

In order for the city’s overall audit to be completed, the audits from the component units have to be done first. Lancaster attributed at least part of the now-routine delay to the fact that two such units – the Ann Arbor Downtown Development Authority and the city employees’ retirement system – have their own accounting staff. That was not the case when she first began working for the city. Because the auditor first works with those separate staff to complete their individual audits, the overall process is slower than it might otherwise be, she said.

The audit committee voted to recommend acceptance of the auditor’s report.

Based on its responsibilities described in the 2006 council resolution creating the committee, next up for committee members in 2012 will be working to come up with a recommendation on the selection of an auditing firm – the contract with Abraham & Gaffney expires with this year’s audit. [Full Story]

Ann Arbor Downtown Development Authority board meeting (Dec. 7, 2011): At its last monthly meeting of the year, the DDA board continued a public hearing on proposed parking rate changes that it had begun at its November meeting. Only two people appeared for the continued hearing on Wednesday – nine people had addressed the board for its Nov. 2, 2011 meeting.

The board will not vote on the rate increases until its Jan. 4, 2012 meeting. Some of the rate changes are scheduled for implementation in February 2012, but the increases affecting most downtown Ann Arbor parkers would not be implemented until September 2012. The September changes include an increase from $1.40 to $1.50 per hour for on-street metered spaces and an increase from $1.10 to $1.20 per hour for spaces in parking structures.

Some insight into the DDA’s interest in raising parking rates can be found in the DDA’s finances, as reflected in its annual audit. Acceptance of its annual audit report was the one action item on the agenda for Wednesday’s meeting. The board voted to accept its audit report done by the firm Abraham & Gaffney, P.C. for the fiscal year ending June 30, 2011.

Auditor Alan Panter had presented the report to a subset of DDA board members at a Nov. 30 meeting of the DDA’s operations committee.

The report 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. At Wednesday’s meeting, DDA board members characterized it as a “technical violation.” At the operations committee 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.) – connected to the underground parking garage and streetscape improvement projects currently under construction.

For the fiscal year 2011, the DDA showed $18,806,765 in revenues against $20,796,665 in expenses, drawing $1,989,900 from the 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 presentation to the operations committee on Nov. 30, Panter highlighted the fund balance reserve for the parking fund as a concern, saying that the fund was near deficit – it shows a fund balance reserve of less than 1% of operating expenses. A recommended fund balance level, said Panter, is 15-20%.

Another still outstanding issue for the DDA’s finances is the correct interpretation of the city’s ordinance (Chapter 7) specifying how the DDA tax increment finance (TIF) capture works. At Wednesday’s meeting, the board held its third closed session on the topic since July, to discuss the written opinion of its legal counsel on the issue. Taxing authorities that have their taxes captured under the Ann Arbor DDA TIF district have questioned the DDA’s legal position – the DDA contends that Chapter 7 does not place limits on its TIF capture. Depending on how the issue is resolved, it could mean as much as $600,000 less per year in TIF capture, compared with the budget planning the DDA is currently doing.

Also at the Dec. 7 meeting, during the opportunity for public commentary, the DDA board heard from Jim Kosteva –University of Michigan director of community relations – about a request to eliminate two on-street parking spaces on Monroe Street. With the imminent opening of the newly constructed South Hall, on the south side of Monroe, it’s anticipated that students will attempt to cross mid-block. The elimination of the parking spaces would be intended to make students who are crossing mid-block more visible to motorists. Based on the verbal exchange with Kosteva at the podium, it appears possible, but not guaranteed, that some kind of arrangement could be reached before the start of the next semester. [Full Story]

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 … [Full Story]

Ann Arbor District Library board meeting (Nov. 22, 2011): After pausing a project to redevelop the library’s downtown building three years ago, the AADL board voted at their November meeting to provide funds for consultants to help resume the process.

A transfer of $45,000 from the library’s fund balance to the administration’s consulting budget will be used to start the process for determining the future of the AADL’s downtown location, director Josie Parker told the board. In late 2008, economic conditions had prompted the board to call off plans to construct a new downtown building – a process that had been well underway. It’s time to start that discussion again, Parker said.

The downtown library is adjacent to several other projects that will impact its future, including the large underground parking structure – and whatever is eventually chosen to be built on top of it – being constructed immediately to the north of the library.

In other business, the board approved a one-year lease extension of the office space that houses the Ann Arbor News archives. The library took possession of the archives in January 2010. AADL is digitizing and posting the archives online, as part of the library’s Old News project.

The board also was briefed about an audit for its 2010-2011 fiscal year, which ended June 30. The auditor – Dave Fisher of the accounting firm Rehmann – described it as a clean audit. He suggested that the board consider implementing a fund balance policy in response to a new reporting standard issued by the Governmental Accounting Standards Board (GASB). The board’s finance committee plans to take on that issue.

In her director’s report, Parker noted that AADL had again received the Library Journal’s five-star rating. It’s the highest rating awarded to libraries, and AADL was the only library in Michigan to achieve five stars.

Later in the meeting, Eli Neiburger – AADL’s associate director of IT and product development – gave a presentation about the library’s popular summer game, which this year had added an online component and achieved an unprecedented level of participation. He noted that although the game is AADL’s version of the traditional summer reading program, the word “reading” isn’t used to promote it. Feedback from previous years indicated that reading seems too much like homework, and discourages participation. ”Take the word reading out of the game, and people will read a lot more,” he said. [Full Story]

Ann Arbor Public Schools board of education meeting (Nov. 16, 2011): The AAPS board of education heard updates on the district’s budget planning efforts, and received a favorable annual review from its financial auditor.

Trustees approved moving the technology bond millage vote from February to May 2012, and passed a set of resolutions opposing pending state legislation.

A packed consent agenda passed unanimously.

Among other items on the consent agenda, one made official the board’s shift from maintaining two standing committees to meeting monthly as a committee of the whole.

Notable in light of the board’s organizational change was the increase in use of the agenda planning section of the Nov. 16 meeting.

The board’s meeting agenda is now set by the whole board – instead of by an executive committee consisting of the board chair and the committee chairs. [Full Story]

At its Sept. 15, 2011 meeting, the Ann Arbor Transportation Authority board authorized a one-year contract with Plante & Moran for auditing services.

A policy adopted by the AATA board on June 16, 2011 limits contracting with any one auditing firm to a total of eight years. That meant that the auditing firm that AATA had previously used, Rehmann Robson, was not eligible to provide auditing services.

The request for proposals (RFP) was sent to 19 public accounting firms. Plante & Moran’s proposal was judged to be the best of the three proposals received by the AATA.

This brief was filed from the downtown location of the Ann Arbor District Library, where the AATA board holds its meetings. A more detailed report will follow: [link] [Full Story]

At its June 1, 2011 meeting, the Washtenaw County board of commissioners gave final approval to hire the professional services firm Experis (formerly known as Jefferson Wells) to perform internal auditing services for the county for one year, with the possibility of extending the contract over additional years. The board had authorized the county administration to issue requests for proposals for these services at its Dec. 1, 2010 meeting. The county received 10 responses, and a review team narrowed the selection and held interviews with three firms. The team’s recommendation for Experis was unanimous, according to a staff report.

The total cost for internal audit work in 2011 is $87,500. It would include: (1) overall internal control review and risk assessment; (2) more detailed internal control review for two county departments; (3) establishing a fraud hotline; and (4) eight hours of internal control training for county staff.

The contract was originally proposed for a five-year period. At their May 18 meeting, several commissioners raised concerns about the expenditure to an outside firm, and the resolution was amended to shorten the contract to one year.

This brief was filed from the boardroom of the county administration building at 220 N. Main St. in Ann Arbor. A more detailed report will follow: [link] [Full Story]

Ann Arbor Transportation Authority board meeting (March 17, 2011): At its regular monthly meeting, the AATA board voted unanimously to adopt a “Smart Growth” scenario as the basis for a countywide transit master plan (TMP). The transit authority has been developing the TMP over the course of a planning and public engagement process that began in the summer of 2010.

The final phase of that process included 20 public meetings in February, where three different scenarios were presented: Lifeline Plus, Accessible County, and Smart Growth. The three scenarios were nested subsets, starting with Lifeline Plus as a base, which would simply have expanded on existing services and focused on expanding services for seniors and disabled people throughout the county. Accessible County would have added fixed-route bus service to connect all the county’s urban centers. Smart Growth included all the features of Accessible County, as well as high-capacity transit along local corridors, plus regional commuter rail.

At Thursday’s meeting, board chair Jesse Bernstein characterized the TMP as a reflection of where the community wants to be 30 years from now. The entity that would be implementing the TMP, he stressed, would likely be organized under a different legal framework than the current AATA, which is an Act 55 transit authority, with a tax levied just in the city of Ann Arbor. The AATA board has actively discussed for at least the last two and a half years the idea of transforming the transit authority to a countywide funding source, possibly using Act 196.

The meeting included three other pieces of business: (1) approval of a contract for the AATA’s paratransit services; (2) acceptance of an auditor’s report on the AATA’s books from the previous fiscal year; and (3) approval of a contract for media services.

Also discussed, but not acted on, was a memorandum of understanding with the city of Ann Arbor for construction of a bus pull‐out on eastbound Washtenaw Avenue east of Pittsfield Boulevard. The bus pull-out is part of a larger project – a transfer center on the south side of Washtenaw Avenue at Pittsfield Boulevard, opposite Arborland mall – which will include a “super shelter.” The project is being funded with federal stimulus money granted to the AATA. The board was in favor of the agreement with the city, but was reluctant to vote on the memorandum absent a copy of the text of the memorandum itself. [Full Story]

At its March 17, 2011 meeting, the Ann Arbor Transportation Authority board voted to accept the auditor’s report for fiscal year 2010, which ended Sept. 30, 2010. The audit was performed by Rehmann Robson, which delivered a “clean opinion” on the AATA’s books.

Among the suggestions made by the auditor were: (1) to have the board sign off on a list of vendors/contracts greater than $25,000 – indicating that the AATA’s conflict of interest policy has been met – before the contract is executed; (2) that only the accounts payable accountant, or the controller – but not the payroll accountant – be able to distribute management and hourly paychecks; and (3) when a journal entry is made, it should be documented and reviewed by someone other than the person who prepared the journal entry.

The auditor also identified a need to make sure that Davis-Bacon Act compliance on construction contracts was systematically verified by AATA, even when that responsibility is delegated to a third party.

This brief was filed from the Ann Arbor District Library boardroom, where the AATA board holds its monthly meetings. A more detailed report will follow: [link] [Full Story]

Ann Arbor Greenbelt Advisory Commission meeting (Feb. 9, 2011): The main event of the commission’s Wednesday meeting was a review of the second-quarter financial picture. The review was presented  by Ginny Trocchio, who works for The Conservation Fund, a consultant the city employs to assist with administering the greenbelt millage. Highlights of the presentation included the calculation of administrative overhead costs – including The Conservation Fund’s work – which are well below the legal maximum of 6%.

Though not included explicitly in the millage language, the city approaches the administration of the millage as a one-third/two-thirds split between a portion for parks and a portion for the greenbelt program. So as part of the financial review, commissioners also looked at current fund balances as analyzed based on the one-third/two-third split between parks and greenbelt projects. Noting that the greenbelt fund balance might be on track to be drawn down before the parks portion is exhausted, commissioners seemed to agree that now is a good time to begin mulling what should happen if that scenario played out. The group discussed holding a joint meeting between the park and greenbelt advisory commissions – their last joint session was held in April 2010.

Also discussed on Wednesday was the scheduling of a first meeting of a commission subcommittee that will look at the question of changing greenbelt boundaries. The boundaries define the region where land or development rights on land might be acquired by the greenbelt program. Any change to those boundaries would ultimately require approval from the Ann Arbor city council. [Full Story]

Ann Arbor District Library board meeting (Nov. 15, 2010): Two financial issues drew much of the focus at Monday’s AADL board meeting.

Dave Fisher of the accounting firm Rehmann Robson was on hand to review the district’s financial audit for the fiscal year that ended June 30, 2010. He described the library as in solid financial shape, especially in relationship to other entities in Michigan that rely on property tax revenues. The library has no long-term debt and its fund balance is strong, he said. But he added a cautionary note that like other taxpayer-funded entities, the library would likely be grappling with a continued drop in property tax revenues in future years.

Property tax revenues emerged again in a discussion during the director’s report. AADL director Josie Parker drew attention to a Nov. 15 column published in The Ann Arbor Chronicle regarding the ongoing negotiations between the city of Ann Arbor and the Downtown Development Authority. The column pointed out an issue that Parker has been tracking as well: the potential for tax increment financing funds captured by the DDA from public entities, including the AADL, to be used to offset a parking fund deficit caused by striking a new parking deal with the city. The board ultimately passed a resolution at Monday’s meeting, directing Parker to seek legal counsel on the issue.

Board member Ed Surovell said he wanted to make sure the board was defending their right to collect taxes, and that they’re being as responsible as possible to the citizens of the district. “I think this is dead serious business,” he said. “The appropriation and misappropriation of tax revenues is the lifeblood not just of this library, but of a democracy.”

Also during her director’s report, Parker described the results of a site review by staff of the Michigan Commission for the Blind, which manages the federal program that the Washtenaw Library for the Blind and Physically Disabled @ AADL is part of. The review, conducted every two years, is the first one since the AADL took over management of the WLBPD from the county, a transition that occurred in early 2009. AADL received several commendations for its approach to providing WLBPD services.

At the end of the meeting, outgoing board member Carola Stearns – who lost her seat in the Nov. 2 election to challenger Nancy Kaplan – gave a poignant speech, thanking the library staff and her colleagues on the board. In connection with a possible downtown building project, she urged the board to explore alternative funding sources, beyond paying for the project solely with taxpayer funds. [Full Story]

Washtenaw County Board of Commissioners (Feb. 17, 2010): In an extensive presentation to the board, sheriff Jerry Clayton laid out changes he’s made in his department since he took office just over a year ago, and discussed his goals and priorities for the coming years.

One of the most significant changes was financial. In 2009, overtime hours dropped 36%, leading to nearly $1 million in savings during the year. The department also raised $1 million in new revenues, exceeding Clayton’s projections.

Beyond that, Clayton presented his broad philosophical approach to managing law enforcement in the county, and discussed some of the challenges he faces in light of the current economy.

Law enforcement also came up in a separate discussion during the board’s Wednesday meeting, as commissioner Wes Prater raised concerns over the county’s internal financial controls. Though he’s been agitating for action on this front for several months, his decision to ask the board to form a review committee was prompted by the recent arrest of a county employee charged with embezzling over $100,000.

Commissioners also spent considerable time on Wednesday debating the process of formally revising their priorities. The effort is aimed at adapting the priorities to reflect the county’s diminishing resources. While commissioners agreed that community input was crucial, there was no clear consensus about what the process for gathering that input should be, or how much time it will take.

Finally, the board got a brief update on the Wireless Washtenaw project, a coda to a report given at their Jan. 20 meeting. The firm that’s handling the project, 20/20 Communications, is partnering with Southfield-based Internet 123 and plans to submit a revised business plan for Wireless Washtenaw within 60 days. [Full Story]

AATA Board meeting (April 22, 2009): In their deliberations Wednesday evening, the AATA board assessed CEO candidate Michael Ford’s interview responses as “mushy” and not as “crisp” as they’d ideally prefer, with board chair David Nacht describing Ford’s communicative style as “modern management parlance.”

So often was the word “crisp” invoked that Thomas Partridge, who spoke at the conclusion of the meeting during public commentary, gave one of his standard talking points a little extra flourish: He asked the board to articulate a vision for expanded countywide service “in the same crisp language” that they expected from their next CEO.

In fact, it appears that the next CEO of the AATA will be Michael Ford. The board looked past a lack of crispness in his interview answers and voted unanimously to make him an offer and enter into negotiations. Assuming the two sides can reach an agreement, Ford might be able to take over the reigns of the AATA relatively quickly. Ford operates his own consulting firm, MG Ford Consulting, and there would be no coordination with a current employer to consider.

In other business, the board (i) heard a report from their auditor (who was roundly lambasted by board chair Nacht), (ii) got an update from their own financial staff (AATA is on course to keep its current year’s budget balanced), (iii) passed a resolution to charge the full cost of service for its purchase-of-service (POS) contracts, thus increasing the cost to municipalities like Ypsilanti by roughly 30% by 2012, and (iv) gave support only in concept for Ann Arbor’s Transportation Plan Update. [Full Story]

Washtenaw County Board of Commissioners (April 1, 2009): A light agenda for the public part of Wednesday night’s board meeting was followed by nearly 90 minutes in executive session discussing labor relations related to budget talks. Before that, the meeting included the presentation of several awards for historic preservation and recognition of the University of Michigan chapter of Alpha Phi Alpha, an African-American fraternity celebrating its 100th anniversary. [Full Story]