Berkley receives positives, but caution, in audit

By: Mike Koury | Woodward Talk | Published December 26, 2017

 In a recent audit report, accounting firm Plante Moran said it saw positives with Berkley’s fund balance, but it had concerns about legacy costs in the future.

In a recent audit report, accounting firm Plante Moran said it saw positives with Berkley’s fund balance, but it had concerns about legacy costs in the future.

Photo by Mike Koury

BERKLEY — An audit report from accounting firm Plante Moran given to the Berkley City Council laid out positives with the city’s fund balance but concerns with legacy costs.

The report, given at the council’s Dec. 4 meeting for the fiscal year that ended on June 30, was a positive one, said Lisa Manetta, a partner with the firm, but she also called it “cautiously positive.”

One positive that Manetta referred to was an increase in the fund balance of the general fund, which puts the city in a good financial position to address future concerns.

“However, we continue to see communities throughout southeast Michigan looking forward and seeing still a lot of legacy costs — unfunded legacy costs that need to be addressed, increasing pension contributions … as well as really taking a look at infrastructure and some of those things that have been delayed for many years and really need to be addressed,” she said. 

Keith Szymanski, an associate at Plante Moran, said the general fund revenue increased a little less than 3 percent from 2016 to 2017, with property taxes proving to be the largest revenue category. Expenditures also increased a little, but remained under budget by about $600,000.

“Because revenue exceeded expenditures over the last year, there was an increase in fund balance,” he said. “That number, from 2016 to 2017, was about $739,000. And while it is a favorable position to be in, it is important to remain cautious. No. 1, it is important to (maintain) some level of fund balance just to have adequate cash on hand for cash flow purposes for any emergencies that might take place during the year, and unforeseen expenditures.”

The long-term concerns that Plante Moran referred to were about the pension and retiree health care plans, with each unfunded to a certain degree. This includes the municipal employee pension, the public safety pension trust and retiree health care.

“While it’s not an emergency — it’s not an immediate need — it’s something that will have to be dealt with on a long-term basis,” Szymanski said.

Mayor Dan Terbrack asked the firm for a little more background on funding other post-employment benefits.

Szymanski said the city has been able to fund these long-term liabilities every year to some extent, but it has never quite, in recent history, been able to meet what the actuary recommended on an annual basis.

“The extent possible that you can work your way up to that and eventually start to chip away at this future deficit, that’s certainly in the best interest of the city,” he said.