OSCODA – In a 4-3 vote at their Monday meeting, the Oscoda Township Board of Trustees approved a professional services contract agreement (PSCA) – in an amount not to exceed $50,000 – with The WoodHill Group, based in Royal Oak.
Opposed to the motion for these financial consulting services were Trustee Jim Baier, Treasurer Jaimie McGuire and Clerk John Nordeen. Casting the “yes” votes were Supervisor Aaron Weed and Trustees William Palmer, Timothy Cummings and Martin Gayeski.
While this is separate from the action the board took at their Sept. 28 meeting, to approve the advertisement of a financial director position – which passed in a 5-2 vote – the two items are related.
This is where Baier says one of his concerns lies, given that the township could be looking at spending upwards of $125,000 between the potential $50,000 cost for The WoodHill Group, and the $65,000-$75,000 salary range being advertised with the financial director position.
Both Palmer and Superintendent Dave Schaeffer, though, said that the PSCA with WoodHill is a not-to-exceed figure. Therefore, if there aren’t a lot of problems, they can get in and out quickly and cheaply. If there are issues, as the auditor’s indicate for monthly and annual closing procedures, then the WoodHill team can get remote access into the system and be able to make those proactively, instead of waiting for the auditors to complete the 2020 audit.
Weed added that the expenses related to The WoodHill Group would be a one-time cost.
Schaeffer provided further details, noting that the board members – individually and collectively – have a responsibility for the township’s finances, which the laws call a fiduciary responsibility.
“Officials are responsible for protecting the township’s assets. A strong accounting and financial reporting system must be in place,” he said.
He referenced language in the management letter of the township’s 2019 audit, which states, “By accounts not being adjusted monthly, the financial records provided to the Board each month are not an accurate reflection of the Township’s standings.”
“When the board members have a fiduciary responsibility for the township’s finances, this language contained in the 2019 audit should be alarming to each member of the township board,” Schaeffer remarked.
He also shared the following statement from the 2019 management letter: “We believe that a review and evaluation of the transactions with proper monthly and yearly closing procedures being performed, would expedite the year-end closing process, reducing audit time and fees.”
The board was presented with a PSCA with The WoodHill Group, to perform the procedures necessary to properly close each month within the township financials for 2020, as well as perform the year-end closing procedures for 2020.
“The scope of services detailed in the [PSCA] with The WoodHill Group will ensure that the township board is provided with an accurate reflection of the township financial standings moving forward,” according to Schaeffer. “The [PSCA] details that The WoodHill Group would provide the financial services based on an hourly rate that would be detailed in monthly invoices to the Township.”
Further, township officials will be kept informed of the progress made on the scope of services with a status report by WoodHill, at both a three-month and a six-month interval from project commencement – meaning January 2021 and April 2021.
“If the [PSCA] is approved by the township board, I would immediately begin working to establish a remote connection for The WoodHill Group into the township’s financial management software, as well as get them access to the township’s bank statements and investment statements,” Schaeffer advised. “The WoodHill Group is willing to begin work on this project immediately.”
The scope of work outlined in the PSCA, reads that WoodHill will provide the following financial services to the township:
• Perform month-end close procedures, starting with January 2020, to bring the township current.
• Perform the annual close for the year ending Dec. 31, 2020.
• Document procedures for month-end close and annual close.
• Assist in the development of the new finance director, ensuring proper training on new procedures.
• Assist with the preparation of work papers needed for the 2020 audit.
• Assist with resolving management comments from the 2019 audit.
• Review existing financial policies and procedures, recommending any changes or additions, if needed.
• Prepare suggestions for improvements in system controls, internal controls or other financial areas, as needed.
• After the 2020 audit, perform quarterly health checks to ensure procedures are being followed and assist the new finance director, as needed.
Baier asked if this was the first time the WoodHill connection had been discussed by the board, and he wondered how this originated. “Is it your idea?”
Schaeffer answered that it was the auditor’s idea, reiterating that this is stated in the management letter.
But McGuire noted that the township can call the auditors anytime they want, to have them review things, assist with different transactions and so on, all at no cost. “And I believe that that’s what they’re referring to in the management letter; and not hiring somebody to do this for $50,000.”
Echoing Baier’s comments, she said that this is also the first time she has heard of this approach.
Palmer said he thinks this move will get the finances in order for the year, and help to get both the incoming finance director and the new board members on solid financial footing. Otherwise, they won’t know until June of next year what the actual fund balances are, if they wait for the audit to come through. He added that this will also help the township save on audit costs.
If the board goes the WoodHill route, Baier asked whether this will have any impact to the clerk or treasurer’s duties, salaries or benefits.
He said that when they talked about the finance director, they discussed a $30,000 reduction in wages. “Does this have that kind of effect?”
Schaeffer answered that it will not.
Should the board proceed with an agreement with WoodHill, Baier also asked what this will do to the financial director plan that they voted to move ahead on at their last meeting.
“It helps give the finance director, as well as the new township board, a clean slate for the finances,” said Schaeffer.
Augmenting Palmer’s comments, he said the new board members aren’t really going to know the 2020 ending fund balances until the auditors show up next May, after all the audit adjustments have been applied.
Also participating in the meeting was WoodHill Group representative Colleen Coogan.
“Our objective will be to set your new finance director on good footing,” she confirmed.
She said she thinks the township’s auditor has done a very diplomatic job, and added that auditors cannot audit their own work.
“Auditors are allowed to put together your financial statements for you,” Coogan explained, noting that this is a pretty typical service which auditors perform for municipalities. “But as far as helping put together the actual financial information, that is really not the auditor’s role.”
Coogan said the township can call the auditors and ask the occasional question, but actually how to make the entry is not what they should be involved in.
She added that she thinks the auditors have done a good job of informing the township that it is not closing its financial statements accurately.
Coogan said WoodHill’s mission is to push as much knowledge as they can into the local units. She advised that there is a crisis in the state, and nationwide, for people who know accounting and hard core bookkeeping skills.
“You guys are running a $14 million business. A $14 million business needs to have a high-end person who knows accounting; who knows the books; who knows how to do financial projections,” she said. “And in the long run it does save you money, actually, to have a really solid finance person there.”
Coogan added that The WoodHill Group is supportive of the direction the township seems to be going. “And we would love to help set you off in a very strong path in your fiscal 2021.”