Mich. Gov. Rick Snyder has appointed two separate teams to examine the finances of both the City of Highland Park and the Royal Oak Township.
The appointment of a review team is the second step under the Public Act 436 of 2012 if the Local Emergency Financial Assistance Loan Board determines “probable financial stress” exists in a local government after a preliminary review by the Department of Treasury. The ELB reached that conclusion last month for both municipalities after a Treasury review.
The preliminary review of Highland Park found numerous conditions, including:
--The city has violated requirements of the Uniform Budgeting and Accounting Act, allowing four activities in its fiscal year 2012 General Fund which went over budget, with transfers out being the largest at $491,161;
--The city is in breach of its obligations under an approved deficit elimination plan (DEP), filed in 2009;
--The city’s proposed DEP for FY 2012 has not been approved, because it would not eliminate the deficit within five years;
--The city has ended a fiscal year in a deficit condition in one or more funds since at least 2008; and
--The city’s Water and Sewer Fund has had operating losses since 2008, which have impacted cash flows and undermined the city’s ability to pay its bills.
The preliminary review of Royal Oak numerous conditions, including:
--The township has violated requirements of the Uniform Budgeting and Accounting Act. For the year ending Dec. 31, 2012, the General Fund had a total of $205,216 in unbudgeted expenditures;
--The township borrowed $300,000 without either the authority to borrow or approval from the Department of Treasury. Subsequent repayment of the loan precipitated cash flow issues;
--The township has operated with deficits in several different funds over the past five years. As of June 30, 2013, the Township's overall deficit increased by nearly 65 percent, from $301,544 to $496,416.
--The township submitted a deficit elimination plan deemed unacceptable by the Department of Treasury; and
--The township has failed to timely file annual financial reports (audits).
The review teams must send a report to the governor in 60 days, as to whether specific statutory conditions exist or are likely to occur, and they must determine whether a financial emergency exists. The teams may request a 30-day extension. A report is also sent to the state Treasurer, officials of the local government, legislative leaders, and the lawmakers representing the local government.
