Graham Jaehnig/Daily Mining Gazette Bob Tarvis, former Allouez Township clerk, who had been rehired by the township board to figure out the errors and discrepancies in the books, said there were 190 line item corrections that the auditor needed to address.

ALLOUEZ TOWNSHIP — The township’s 2023 audit was the focus of a special meeting of the Township Board on Monday, which resulted in the resignation of township clerk Becky Butala and deputy clerk Bob Tarvis. A retired township clerk, Tarvis had been requested by Supervisor Mark Aho to make corrections to the books for the audit.

The audit, which was due for submission to the Michigan Department of Treasury several months ago, met with delays resulting in the state withholding revenue sharing from the township until the audit is submitted.

Due to errors in accounting, discrepancies in payroll and several other mistakes, the township was required to retain the services of an independent auditor, Sue Sanford. In addition to paying the auditor and Tarvis, IRS penalties and late fees have cost the township, as Tarvis estimates, between $25,000 and $45,000.

In correcting the township’s books, Tarvis and Sanford found 190 line items that needed fixing.

Both Tarvis and Sanford said, in essence, that no individual board member is to blame, because they are all at fault. In her report to the board, Sanford divided the issues she found into four categories, among them were lack of segregation of accounting duties and little oversight or monitoring by the board.

Sanford said the township board has failed to monitor the internal control activities of the township. The township clerk was given full control of the township’s financial records and financial accounts with limited oversight. Her statement echoed that of Tarvis’ report to the board.

Typically, Travis said, the clerk presents all the bills to the trustees, who in turn approve or deny the bills, what he referred to as a double-checking system.

Part of the problem, said Sanford, is that trustees were not given the actual invoices to review, they just got a sheet of paper, adding that the board was already working to correct that oversight.

“It’s very, very important that you scrutinize the bills,” Sanford said.

The next is a material finding on the general ledger, Sanford said. The township did not maintain a set of accounting records that were accurate or reconciled. There were many misclassifications and error when posting to, in particular, payroll, to the respective funds and in some cases, expenditures were posted to wrong funds.

“Now again,” she said, “when you have another set of eyes looking at this, they should be correcting these things. They shouldn’t go as far as they did.”

To correct this oversight, Sanford recommended the board establish monthly procedures to ensure that all transactions are properly posted to the general ledger and each individual fund is maintained. Further, she said, balance sheets should be reconciled to the subsidiary records.

“We have to find some compensating controls that are going to detect any errors on a timely basis,” said Sanford. “My recommendation for this — as there is no easy answer,” said Sanford, “the most that you can do is when you do your job, make sure you are pretty vigilant in checking all the bills. Make sure that the accounts are in the proper order in the proper fund.”

To the extent possible, duties are allocated between accounting personnel to mitigate risks of material misappropriation of assets, she continued.

“That would be the clerk and the treasurer working together doing the bank reconciliations,” she said.

Bank reconciliations were the next topic Sanford addressed. The conditions in place at the time of the audit included the clerk having complete access and control of the banks, and was the only one able to conduct bank reconciliations. She would do it, said Sanford, then give it to the treasurer. But the treasurer was not doing anything that would match with the reconciliation.

Sanford said she discussed the statutory duties of the treasurer, part of which is to maintain a separate check register that could then be compared to the Sage books.

“So, if there was a double posting of a check,” Sanford said, “you would find it, so you’re not double posting checks. You guys would find these errors much quicker.”

Some of the treasurer’s statutory duties had changed years ago, said Sanford, and more authority was transferred to the clerk, including total control over the banks.

“Now, that is really a treasurer’s job,” she said, “but here we had the clerk having all that control of being able to transfer money.”

Sanford told the audience that she discussed these issues with the board and that custody has been transferred back to the treasurer, where it should be.

“But now, when transfers are made, it is now with the clerk and the treasurer together signing off on those.”

Sanford found that the payroll bank statement was not reconciled for the payroll fund, and it was off significantly. The township had to hire an outside firm to reconcile that account, which is now reconciled up to November 2023.

The big reconciliations, she said, contained old, outstanding checks, deposits and transfers, as well as journal entries to cash, some dating back two and three years. After clearing those out, Sanford said, the cash and the bank reconciled perfectly without any outstanding checks or deposits.

Sanford found that there was no appropriate supervisory approval that was listed on the bank reconciliations. She recommended that the treasurer, in beginning the custody of the bank accounts, check the register previously mentioned and the board should review the reconciliations.

“Again,” she told the board, “you’re like the third eye in this process, that with all of these eyes looking at this, you should be able to detect any errors or corrections that are needed.”

At the conclusion of her presentation of findings, Sanford told the board their next step is to sit together as a group to determine what their corrective action plan is going to be. That will be attached to the audit report for the Department of Treasury, which she said, they will require.

The next item on the agenda was to pay Tarvis for the work he had done for the township. Township clerk Becky Butala said the board must first make a motion to decide whether Tarvis was hired as an employee or an independent contractor. Meeting minutes from several past regular meetings clearly indicate Tarvis was hired, not contracted, and held the title of Deputy Clerk.

The argument between Aho, Butala and township Treasurer Julie Newman ended when an audience member called for Butala’s resignation.

“I will gladly resign,” she replied. “Then it will also be on the board to find someone for the (February) election.”

Butala then left the meeting, saying she would submit her written resignation.