Macomb County moves to fire auditors

Two auditors from Rehmann, a Troy-based company, were called on the carpet by the Board of Commissioners after county financial analysts discovered that millions of dollars connected to the Macomb Health Plan for the poor were incorrectly credited as revenues in the budget for several years.

“Why shouldn’t we dismiss you outright as our county auditors?” asked Commissioner Don Brown, the Washington Township Republican who chairs the board’s Finance Committee. “This is accounting 101. We pay you a lot of money to make sure our books are managed properly. Clearly that wasn’t the case and they haven’t been for some time.”

Mark Tschirart, a CPA for Rehmann, which was paid more than $500,000 from 2007-10 to perform county audits, said his firm’s track record and good reputation statewide should mitigate concern over any one error. But Tschirhart’s explanation that their audits do not check every transaction each year only generated more support for the firm’s removal.

“We do sampling. We can’t look at every single transaction,” he said. “There are inherent risks in any audit.”

County Finance Director Pete Provenzano has devised a bookkeeping solution that minimizes the damage to the budget but commissioners were in no mood to put the incident behind them.

A motion passed by the Finance Committee, which consists of all 13 commissioners, calls on the Office of County Executive to “explore” the possibility of immediately firing Rehmann and hiring a new auditing firm through a bid process.

The vote was 8-1, with Commissioner Roland Fraschetti, a St. Clair Shores Republican dissenting because he felt a firing would be a “knee jerk” reaction.

Rehmann has some time left on their contract with the county – they are slated to conduct an audit of the 2011 budget, with completion in June. Commissioners hope that Rehmann will grant a “release” from the contract and end their relationship with the county.

Trchirhart would not comment on the motion or whether the firm may fight an abrupt end to the contract.

Provenzano said County Executive Mark Hackel will receive legal advice before making a decision on how to proceed. However, Hackel had already planned to put the county’s auditing needs up for bids sometime next year in a single package. Previously, the Department of Roads, formerly the road commission, had a separate auditing firm.

Under the solution devised by Provenzano’s staff, the county’s 2010 financial statement will be re-issued with $3.7 million in revenues that had been attributed to the Macomb Health Plan eliminated and the county’s “rainy day” fund simultaneously cut by 7 percent to balance the books.

Because the error was carrier forward and compounded year after year, patching the problem in 2010 will fix the subsequent bookkeeping errors that would have pushed the “missing” MHP funds to $5 million by the end of 2012.

Created in 2004 by the Board of Commissioners, the MHP, a not-for-profit agency based in Roseville, provides medical care and “urgent care” at local health clinics and physicians’ offices. The program also helps small businesses provide health care coverage to their employees.

The program takes advantage of a system that allows the county to leverage  federal money flowing to the state government that is designed to provide basic care and preventive services to the indigent, keeping them away from hospital emergency rooms.

From 2004-10, the program provided care 420,000 times to a clientele that currently numbers about 11,000. The agency’s annual budget is $10 million.

The bookkeeping mistake occurred when the county Finance Department began sending money for MHP services to Lansing and then, when it was returned, logging the amount on paper as actual revenues rather than a “receivable.” At no time did the budget shortage involve cash.

Dave Diegel, the former longtime county finance director, has admitted the error, according to Provenzano. Diegel played a dual role, as the official in charge of the county budget at the time and as the MHP treasurer keeping tabs on their finances, a position he still holds.

County officials have apparently backed off from a claim that MHP owed them $5 million.

Instead, a year-by-year contract for $500,000 for health care services between the MHP and the county will be up for approval at a special meeting of the Finance Committee on Tuesday.

The motion to fire the auditors will also be taken up that day by the board’s Audit Committee before it is forwarded to the full board for final approval.