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Township audit comes back 'clean'



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June 04, 2014 - By Meg Peters

Review Staff Writer

Representatives from Orion Township's auditor, Plante Moran, presented their financial audit findings to township trustees at the board meeting this week.

Orion Township received a "clean opinion," the highest opinion Plante Moran can offer, for their current financial status.

The township general fund balance, governmental fund revenue and governmental fund expenditures were tracked over a three year period, but for reference purposes Plante Moran representatives used 2012 and 2013 figures.

There was a slight increase of the general fund balance since 2012, roughly $850,000, mainly due to increased revenue in licenses and permits, increased building activity and increasing miscellaneous revenues.  

Coupled with revenue increase was an increase in annual expenditures from 2012 to 2013 of about $1.4 million in two main areas: capital outlay, which increased about $350,000 mainly related to special assessment expenditures and transfers. The township transferred about $1 million more in 2013 than 2012 to other accounts. About $300,000 went to fire protection funds and over $1 million was transferred to the capital improvement fund.

The general fund subsidized about $300,000 to the fire fund in 2013, however, the fire fund budgeted expenditures are expected to exceed budgeted revenues by $644,000 over the next four years if no additional revenue sources are sought.

Although revenues came in a bit under budget, expenditures were even more under budget, so the result was still favorable.

Revenue

At the end of 2013 the township had roughly $4.89 million in the general fund balance.

The township's general revenue for 2013 consists primarily of state sources (43 percent), property taxes (21 percent) licenses and permits (19 percent) and other revenues (17 percent).

In 2013 township revenue increased $350,000 due to a variety of increasing and decreasing items.

Federal grants decreased from $38,000 to $3,000, however tax fees/rent/recreation increased from $827,000 to $1,339,000 from 2012 to 2013. State revenue increased $62,000. 

The largest source of revenue derives from township taxes and penalties, which increased from $5,330,000 in 2012 to $6,454,000 in 2013.

Plante Moran representatives noted 2013 was the first year the increase in the police millage was assessed, another reason why taxes and penalties increased over $1 million in 2013.

Licenses and permit fees increased from $715,000 to $1,082,000, or about $367,000.

Also in 2013 the township realized interest dividends and income decreased from $120,000 in 2012 to $23,000 in 2013.

Property Value

Plante Moran tracked the Orion Township property tax revenue gap for the past several years and concluded property taxes have decreased by 36 percent in the last five years.

Between 2011 and 2012 property taxes decreased at a rate of 9.3 percent. Between 2012 and 2013 the township felt a slight increase, however, there was still a slight decrease in taxable value of approximately 2.6 percent.  

Between 2012 and 2013 there was a significant drop in property taxable value, representatives said, and even though things are starting to look on the upside, it's going to take quite a bit of time to get to where the value was before 2008.

"Given the inflationary increases it will take until 2022 to get back to the levels you were in in 2008," audit official Stacey Reeves said. "Unless they (residential and commercial new builds) are absolutely new growth those increases will be limited to the rate of inflation."

Expenditures

Where the revenue side of the budget fluctuated greatly in 2013, expenditures were more pinpointed.

The largest township expenditure pays salaries and benefits for township employees, at 48 percent of the total expenditures. Second to that are contractual services, about 20 percent of township expenditures. Miscellaneous costs, including postage, supplies and printing, repairs and maintenance, training and transportation and insurance, ranked third in township expenditures at 17 percent of the costs. Capital outlay comprises 11 percent of the expenditures and utilities cost 4 percent of total expenditures.

Capital outlay is where the township saw the largest fluctuations. In 2011 the township spent about $5 million in capital outlay, or money spent to maintain, acquire, upgrade or repair capital assets. In 2012 that number was about $799,000, and in 2013 expenditures in capital outlay increased to $1,8650,000, or about $1.1 million.

Auditor's opinion

"The township positioned itself well to remain fiscally healthy. All the general fund departments were under budget for expenditures in 2013, there was significant commercial and residential building, and salaries and benefits represent under 50 percent of the total fund expenditures, lower than other local governments due to lower legacy costs," the report reads.  

The letter also highlighted some internal control manner deficiencies and pointed to the limited staffing in the township. Additional staffing would provide other ways to create segregation and duties, including additional monitoring to ensure journal entries posted are accurate.

Plante Moran officials said all financial investments made by Treasurer Mark Thurber are compliant with Public Act 20 as well as the township investment policy.

Although Public Act 20, along with the township investment policy, prioritizes safety over rate of return regarding investment fluctuations, the investments in contention—three mutual funds—are within the requirements of the policies.

The three investments which cost the township roughly $8 million in 2006 had a unrealized principle value of about $8.4 million at the beginning of 2013, and dropped about $625,000 throughout the year.

If the township does not wish to see such fluctuations in investments, Reeves said they trustees need to modify their investment policy.

After December, 2013 the investment return rates have increased almost to the point of their initial principal, Thurber said, and he is in favor of selling, although at least one trustee, Neil Porter, has opined perhaps they should wait and try to gain back more of the principal.  

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