The annual audit of Leelanau County found its books in a better condition than a year ago — but not stellar.

Auditor Stephen Peacock gave the county’s 2011 books a passing grade.

“Does this constitute an A minus audit? No.DoesthisconstituteaBminus audit? Possibly,” Peacock said earlier this month when providing his finding to the Leelanau County Board of Commissioners.

Peacock is a Certified Public Accountant and a principal in the Traverse City financial firm of Rehman Robson.

“It’s not a D, which would be a poor audit,” Peacock continued. “The most important element to cure these findings is communication with everybody in this building ... we’re all on the same team here. I understand legally we all have silos, but we all have to work as a team.”

In theory, the county treasurer is responsible for keeping track of revenue received by the county, while the county clerk handles accounts payable. It’s a checks and balance system that follows separate streams of monies that should equal each other.

The audit found no indications of fraud, and in general found the state of county finances in very good shape compared to other governments.

However, several changes were again suggested in how the county records and accounts for its funds, and the county books were tagged with two “material weakness” warnings — one that was unavoidable, and one that the county treasurer is working to avoid in the future. In all, the auditor flagged four “deficiencies” in county books — down from seven stated in the audit of 2010 county finances conducted by Rehman Robson.

County treasurer Chelly Roush took note of the improvements in a letter to the County Board addressing the audit. “I am very proud of the hard work my staff has demonstrated by putting into action the plan that was outlined to the Board last year. As noted in the audit, the plan was effective,” she wrote.

She also said that “internal control over financial reporting” — material weakness No. 2 — is being addressed. The weakness required the county ledger to be adjusted in several categories, including the reporting of property tax revenues.

Said Peacock, “The good news is that we found areas that were corrected last year ... which showed us that there is effort being made to make this go away.”

Material weakness No. 1 would be expensive to correct, as the county would have to keep a CPA on staff.

A “significant deficiency,” which is not as severe as a material weakness, was found in the accounting of the county’s affordable housing project because “the county lacks the internal controls for properly tracking and recording the existing outstanding loans.” Also, a second significant deficiency was issued after “several manual journal entries” were found to lack supporting documentation, proper review or were posted in improper amounts.

“Most times when this happens, it is some type of hurried journal entry,” Peacock said.

County clerk Michelle Crocker was unhappy with deficiencies in the audit.

“I’mverybummedwegotaBminus. We should be getting an A,” she said. “One material finding we had is a given because we don’t have a CPA on staff. The other I’d just as soon go away.”

Added Roush: “Our fund balances are good, and no funds were in the red. We just have some internal procedures that we need to work on.”

The County Board authorized Roush to hire a financial expert to help prepare for the audit. Padgett Business Services of Traverse City was paid $938 for its work, according to figures provided by the county Clerk’s office.

The cost of the audit did go down in the second year of a two-year contract with Rehman Robson, as the firm did not need to spend as many hours rectifying county books. The audit price for 2011 was $56,436; the 2012 audit cost was $43,525.