Clerk, treasurer point finger at each other

An auditing firm has uncovered “significant deficiencies” in how Leelanau County officials account for taxpayers’ money – and fixing the deficiencies is costing taxpayers even more money.

Meanwhile, a sharp disagreement exists between county clerk Michelle Crocker and county treasurer Vicki Kilway over whose department is primarily responsible for creating the problems.

So far this year, an auditing firm has charged the county $47,357 to help fix problems identified in an audit of county financial records for the fiscal year ending Dec. 31, 2006. The figure is in addition to the $32,400 the county expended last month for the Traverse City auditing firm of Rehman-Robson to complete its audit of county financial records for submission to state officials.

Exactly how much more it will cost for auditors to identify an overage of some $10,000 that remains unaccounted for in the county’s books is anyone’s guess, according to county officials. However, officials estimate they’ll pay an additional $5,600 over the remainder of the year for an expert from the auditing firm to train employees of the county treasurer’s department and the county clerk’s department on how to avoid similar problems in the future.

County officials last week responded to a detailed Freedom of Information Act (FOIA) request filed late last month by the Leelanau Enterprise that sought copies of reports, letters, billing statements, emails and other documents related to the 2006 audit. The newspaper’s FOIA request stemmed from action taken by the Leelanau County Board of Commissioners to accept an audit report on May 15 following a legally questionable meeting on May 11 during which commissioners discussed public finances with auditors in a session closed to the public.

The official rationale for holding the closed session was discussion of an “attorney-client privileged letter” that contained a recommendation on how the county should respond to concerns raised by auditors. A “comments and recommendations” statement subsequently approved by the county board outlined the problem:

“During the year (2006), the County continued to have problems (i.e. identifying the reasons for fluctuating variances) in completing its bank reconciliations for its primary operating accounts…”

The “cause” of the problem, according to the statement, was: “County personnel responsible for completing the bank reconciliations, particularly the primary operating bank accounts, simply failed to identify all of the bank and book transactions that were reconciling items and to learn from that identification process in order to properly record those transactions to eliminate them as carryover or continuing reconciling items.”

The county department responsible for completing bank reconciliations is the treasurer’s department.

Responding to questions from a reporter this week, county treasurer Kilway said the problems began around 1998 when the county switched to a new accounting software system.

“Basically it comes down to this,” Kilway said. “It is the responsibility of the county treasurer to balance the bank accounts and the cash accounts to the bank. The problem has been that the cash accounts do not tie into the amount the bank says we do or don’t have in the main checking account…There isn’t any physical money missing.”

Kilway said that up until this year, her department was the only department looking into how to fix the problem – even though much of the problem appeared to be the reconciliation of bank accounts to the county’s General Ledger.

“The General Ledger is basically in the control of the county clerk and her accounting staff,” Kilway said. “I can verify every deposit to every receipt produced by this (the treasurer’s) office.”

Clerk Crocker said she had anticipated that Kilway would attempt to shift the blame for the problem elsewhere.

“For the treasurer to imply that the county clerk or my staff is somehow involved or responsible for the significant deficiencies regarding the internal controls over cash-bank reconciliations … is absolutely ludicrous,” Crocker said. “It is the responsibility of the county treasurer to reconcile the bank statement to the General Ledger cash accounts,” the clerk said.

Crocker characterized Kilway’s assertions as “nothing more than an attempt to divert attention from where the problem has been and continues to exist.”

County administrator David Gill said an auditor from Rehman-Robson would provide special training sessions over the remainder of the year for representative of both the treasurer’s office and the clerk’s office. The firm has agreed to provide about eight hours of training per month through December at a cost of $100 per hour.

Gill said the additional, unanticipated expenditures were coming out of the county’s “contingency” fund.

As for the “missing” $10,000, Gill said, the amount is to the county’s credit – that is, the county actually has an additional $10,000 in its coffers that it cannot account for.

“If the $10,000 were a debit, we’d be a lot more excited about it,” Gill said. “And you may have to go back into the books five to seven years to find out where it came from,” he added. “Just the work required to find out where that money came from would end up costing more than $10,000. As long as the amount is stabilized, we’ll move on and reconcile the books accordingly,” Gill said.