Audit shows City’s financial records in order

By: K. Michelle Moran | Grosse Pointe Times | Published December 2, 2015

GROSSE POINTE CITY — Santa dropped off an early present to Grosse Pointe City officials.

The audit for the 2014-15 fiscal year — which ended June 30 — showed that the City is doing a good job of maintaining its financial books.

“The City received an unmodified opinion this year, which is the highest level of assurance you can receive,” said Pam Hill, one of the audit partners with Plante & Moran, which conducts the City’s audits. “The numbers … are free of material misstatements.”

Addressing the Grosse Pointe City Council during a meeting Nov. 16, Hill said the community “should feel good about” receiving an unmodified opinion.

But while the City’s books are in order, the City, like many other communities in Michigan, continues to feel the impact of the housing market collapse and the last recession. Hill said that because Proposal A and the Headlee Amendment work to cap property tax increases at 5 percent or the rate of inflation, whichever is lower, “Even though the value on … homes may be going up, your revenue is not going up” nearly as quickly as the rise in property values. 

“Obviously, you’re taking that into account,” Hill said, as she complimented City leaders for being fiscally responsible and responsive to the changing economic climate.

Spencer Tawa, another of the Plante & Moran auditors, said that property tax revenue “has started to creep up a little bit,” but projections suggest that even by 2024, the City won’t be at its 2009 level of taxable value. In 2009, the City had almost $400 million in taxable value. In 2024, the City is expected to have just over $370 million in taxable value.

“The recovery takes a lot longer than the decrease,” Tawa said.

The City had an unassigned general fund balance of more than $1.25 million as of the end of the 2014-15 fiscal year, which amounts to about 20 percent of the total budget, in keeping with a City policy, said Daniel Block, another member of the audit team from Plante & Moran. 

“The general fund still is looking healthy,” Hill said. “The City has made a lot of hard decisions (over the last seven to eight years) in order to deal with your new set of revenues today. … You should feel good about where you ended up.”

Block said rates charged for special funds, such as parking and water and sewer, are covering the costs to maintain these respective systems.

The auditors praised City staffers, including Finance Director/Treasurer Kimberly Kleinow.

“We did not note any deficiencies in the City’s controls,” Hill said, calling the City’s financial data “reliable.” 

“You should feel really good about that. That’s largely due to the staff you have and the work they do,” she said.

City Manager Pete Dame concurred.

“I want to thank Kim for her good work,” he said.

Mayor Dale Scrace said he and the council echoed that sentiment.

The City’s pension system is in good shape as well.

“This is probably one of the only communities I work for where the pension system is very, very well-funded, where you don’t need to contribute (to it),” Hill said. “That’s great news and something you should feel good about as a city.”

However, in 2017, Hill said, the audit will reflect a new accounting standard: retiree health care liability. The audit will start looking at retiree health care to the extent that it’s unfunded, and that unfunded portion will be recorded as a liability, she explained. The City’s pension system, on the other hand, is considered an asset because it’s well-funded, Hill said.

This year, she said, the auditors spent “approximately 400 hours auditing the books and records,” which is more than the norm for the City. Hill said the additional time was required because of federal funding that the City received in the 2014-15 fiscal year.

“We did not have any (worrisome) findings, as the monies were spent appropriately,” Hill said.

She said the auditors spent about two weeks in the City.

“It’s good to hear we have no issues (with our financial record keeping),” Scrace said.