WOODS — The city fared well in this year’s audit report as far as financial recordkeeping goes, but there were words of caution when it came to the city’s fiscal health.
During its Nov. 26 Committee of the Whole meeting, Grosse Pointe Woods City Council sat down with Plante & Moran representatives to go over the audit report for the fiscal year ending June 30, 2012.
The city received an unqualified opinion, which is the top opinion cities can receive, which means that auditors didn’t find any major red flags in the city’s financial records.
“Ultimately, this is what’s referred to as a clean opinion,” Plante & Moran representative Mark Hurst said.
It’s a marked improvement over where the city was several years ago, before Dee Ann Irby took over the city treasurer/comptroller position.
“I think you’ve reached a point of an ‘A-,’” Hurst said of where he would rate the city’s records on a grading scale.
The audit report came a little earlier this year than in the past, which was welcome news to city officials. Plante & Moran representatives put in 600 to 700 hours of work poring over the city’s records.
“I’m just really pleased with the timing of it. Obviously, for you folks to get it this early, things have gone really well in our office,” Irby said.
The auditors didn’t find any major red flags, but they did find a couple of minor reporting issues, which is typical of an audit report, Hurst said.
“There is an outstanding chance during the course of an audit we’re going to find something,” Hurst said of the auditing process.
“Big picture what we noticed though … the quality of the books and records have been better this year than they’ve ever been,” Hurst said, praising Irby.
“You are light years ahead of where you were,” he said.
Hurst said they appreciate the work of Irby and her team.
He said there have been improvements every year for the past four years.
While the city received accolades for its financial reporting, auditors warned that the city needs to be careful when it comes to its financial well-being because revenues and expenditures are not working in the favor of cities across the state, including Grosse Pointe Woods.
“Obviously, big picture-wise for Grosse Pointe Woods, for all communities, finances are getting tighter,” Hurst said. “There’s more complexities.”
Kari Shea, a second representative of Plante & Moran at the meeting, agreed with Hurst and gave the city a nine out of 10 when it came to their records. Yet, she said they were at about a six or seven when it came to overall financial health, which is the same for many cities in the state, she said.
Yet Shea feels that many of the city’s financial health issues are beyond its control, like property tax revenue and rising costs.
The city was able to increase its general fund balance by $345,000, but the city had cut out things like capital improvements to help with its finances. That’s something that they won’t be able to keep doing, city officials and auditors said.
“There were things that were not expensed this year that may have been needed,” Shea said during the presentation.
“I wouldn’t necessarily look at the $345,000 as encouraging,” she said.
Hurst credited the city’s financial management for being able to grow that balance.
Auditors discussed areas the city needs to pay attention to, like the employee retiree health care fund. The city is funding it on a pay-as-you-go basis, but that puts the city in a growing hole when it comes to the health of the fund in the report.
Many cities are dealing with this issue at this time.
“You’re definitely not alone,” Shea said.
With a more than $4 million general fund balance, the city is well above the 10 percent minimum auditors used to recommend in the past. Plant & Moran auditors said that they no longer recommend that during these times because of all the financial issues cities are facing.
They think cities need a larger cushion.
“I think you’re at a point where protecting cash is extremely important,” Hurst said, adding that the city should only do essential projects to maintain a fund balance.
City officials explained that they are looking at seeing the fund balance disappear by 2015 due to the costs and revenue losses the city is tackling, if they make no changes.
The city is planning to talk about financial issues during a meeting Dec. 10.
Mayor Robert Novitke said the numbers for this year included some one-time revenue enhancements that the city won’t see in future years, so they need to prepare.
“That’s what we’re going to talk about on the 10th, revenue sources and some cuts,” he said.
Novitke believes there are some things that the city will have to spend money on in the next year that cannot be put off any longer, like some road projects.
However, Irby said that that would mean cuts in other areas to make it work.
City officials have said that they’re running out of places to cut.
“Going from 105 full time employees to the 86 full time employees … you’re not going to be in the position that you’ll be able to cut that much more,” Novitke said.
For those wanting to see the audit report, city officials said they planned to have it posted on the city’s website within the next week or so.
Novitke encouraged city officials to take any questions they have in the upcoming days to Irby and the auditors concerning the report. He said he has paper clipped and marked some areas in his report that he plans on asking them about.
Auditors praised the city for looking into the future when doing their financial planning.
“It’s going to be very beneficial,” Shea said.
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