Plante Moran presents audit report

By: April Lehmbeck | Advertiser Times | Published September 23, 2015


HARPER WOODS — The city continues to struggle with its finances, according to the 2014 audit report.

In recent years, the city has worked to cut expenditures and make changes that will help the city’s bottom line. Even with major cuts to staff, the city continues to struggle, especially due to the need to fully fund its pension system and other increases in costs.

The city’s auditing firm Plante Moran presented the 2014 audit and financial report during its Sept. 9 meeting.

Ultimately, the city continues to face a lot of challenges, according to the auditing firm.

The city did receive a non-modified opinion, which is the best opinion that an auditing firm can give a city. It means that the city’s financial information is in order and accurate.

The city’s revenue declined by about $900,000 from 2013 to 2014, and the expenditures increased by about $600,000. 

From 2012 until the 2014 budget, the undesignated fund balance went from $1.3 million to $415,000.

“This is not a good trend,” Plante Moran representative Dave Harrington said. “Your general fund having just a little over $400,000 of unassigned or available fund balance in the general fund is a very low percentage — we all know that.

“It’s so important that we get our arms around what our true costs are, what we fully need to fund (our) pension (system) and what the millage rate needs to be to make sure the city’s solvent,” he said.

The problem the city faces is that expenditures continue to increase, especially due to legacy costs.

In the 2014 budget, pension and health insurance costs led to an increase in expenditures over the previous year’s numbers.

Expenditures were only half of the story. According to auditors, cities in Michigan have dealt with revenue issues as well, such as cuts in state revenue sharing.

Cuts in state revenue sharing meant an $8.6 million cumulative loss in revenue for Harper Woods since 2001, according to Plante Moran.

“If you had just that amount, it would be a totally different financial story for all of southeastern Michigan.” Harrington said.

Besides the general fund, other funds need attention.

The water and sewer fund has a shortfall of $88,000.

“It really shows there’s no wiggle room for the fund.” Harrington said.

City Manager Randolph Skotarczyk said that the City Council approved a 9 percent rate increase for residents instead of a 21 percent rate increase, and asked if that greater increase would have led to a balanced budget in the water and sewer fund. Auditors said that it would have likely meant moving into positive numbers.

To tackle the budget issues, the city has cut staff and made other changes in recent years. The city also has been making major changes to the pension system, including transferring the system to the Municipal Employees’ Retirement System.

Mayor Ken Poynter said the city is working on its budget, and he’s staying positive.

“Times will get better, and I’m very optimistic about the future of Harper Woods.”