The Oneida Vilas Transit Commission heard Monday the results of an audit done by Wipfli, LLC.
The audit was ordered in May by the Oneida County administration committee, stating an audit needed to be performed by an independent certified public accountant as the OVTC hadn’t completed an audit since its inception despite the stipulations outlined in the commission’s charter stating an annual audit would be completed.
“You asked us to do an audit of four years here, so there’s a lot to go over,” Brian Anderson from Wipfli said. “So, I kind of quickly highlighted a few things in the audit and then also a separate communications.”
Wipfli, LLC’s audit included an examination of the OVTC accounts from 2015, 2016, 2017, and 2018.
Anderson started with the 2015 audit and worked forward to 2018.
According to Anderson, “not much happened” in 2015 as that was the year the commission started.
While discussing the assets and expenses during the 2016 year, Anderson mentioned this was when the commission started to “run into the issue with the state and the feds” and it made up a significant portion of the commission’s balance sheet.
“Obviously, you spend the money and then you have to submit the expenses later, so as you get into 2018, that’s obviously something to worry about, is trying to, there’s nothing you can do. They’re going to pay you when they can pay you, no big concern there,” Anderson said.
Anderson said the commission was able to increase its net position during 2016 before detailing how the two different ways the commission could handle subsidies received from the state, federal, and county.
“I looked at a bunch of examples and some of them had it as operating revenue up above, some had it as non-operative revenue down below. In the end, it’s revenue,” Anderson said. “It affects your net position, so the consensus was to show it down below as non-operating revenue.”
Anderson also said either way “you get to that change in net position” regardless of whether the revenue is noted as operating or non-operating.
“Let me ask a question if I can, and it’s on this operating versus non-operating revenue,” commission member Ed Hammer said. “And I’m not an accountant, I don’t understand any of this, talk to me as to why you would want to do it one way as opposed to the other. Or is there a rationale for that?”
Anderson said it depended on whether the commission considered getting those revenues as part of its normal operations or a subsidy that helped operations.
The commission entered the Wisconsin Retirement System (WRS) in 2017, Anderson reported, stating the commission started to incorporate those numbers.
The only thing affecting the statements for the year was a “one-year lag” in reporting information, Anderson indicated.
“Anything you paid in 2017 becomes a deferred outflow of resources,” Anderson said. “This is something we came up with six or seven years ago more for timing of amounts. It’s not really an asset, it’s just more of a timing issue, so that’s how that was handled. $21,000 there.”
While Anderson said the OVTC did see a loss that year, having spent as a whole amount of the state and federal grants, as well as using reserves built up previously.
“In the end, it was a $13,000 loss,” Anderson.
In 2018, receivables were up to $135,713 by the end of the year.
“Definitely a significant number in comparison to your operations, and definitely caused issues with borrowing the short-term notes payable during the year, $100,000 to the counties and then starting to borrow the line of credit there,” Anderson said.
Anderson said there was a cash overdraft by the end of the year due to checks being written that hadn’t been fulfilled, but they had looked into it and found the commission had borrowed a line of credit in early January support the overdraft.
“The overdraft is also an issue related to when the fourth quarter payment from the federal government comes through?” OVTC chair Erv Teichmiller said.
“You gotta borrow money to pay for those, but it’s not like you can put off paying the vendors,” Anderson said. “And also, the grants are on a cash basis. So, unfortunately, to get reimbursement you have to pay it. So, it’s kind of a never-ending battle there, so luckily you have the line of credit to get you through.”
Anderson said it was “just a timing issue” and “hopefully the bank understands” it was a timing issue and not the OVTC running a deficit.
“This year, the statement of changes, there is a big increase, but that increase was basically to pay for the new buses that you bought during the year, so it’s not like you made money, it just increased your net position through assets,” Anderson said.
While the state paid for 80% of the vehicle, the entire amount is recorded on the OVTC’s books as the commission had custody of the asset with the 80% recorded as a grant.
“It does make it look like you have a little bit more money than you do, but it’s just because it’s sitting in an asset,” Anderson said.
Teichmiller asked if any of the state holdback money, 10% of the grant withheld from the state, was reflected in the report.
Anderson said what Wipfli had decided was to write that amount off as there was no way of knowing exactly how much the commission would receive until they received it, but that if they did, the net position would be increased.
“It should be understood that this audit is gonna be submitted to the state, and then the state will still do it’s own audit, but may not do as much of a financial audit,” Teichmiller said.
Anderson explained that state audits are often more compliance-based rather than financial-based.
Internal control matters
Following the presentation of the audit, Anderson turned the commission’s attention to page 17 of the 2018 audit and addressed the leasing situation.
“I’m sure you’re well aware Erv is also on the board of the non-profit that you lease space from, so we kind of put that as related- party, and I’ll go into that in the other report, too, as far as whether there’s a conflict of interest there,” Anderson said.
The second report, Anderson said, was an executive summary of how the audit went and addressing concerns for the audit, including internal control matters.
“Material weakness is when something is so significant to be a problem that it’s going to materially misstate your financial statements, meaning they can’t really be relied on in their present form,” Anderson said. “We didn’t find anything that significant, but we did find some that are significant to your operations and should be pointed out as such.”
Some of these included audit adjustments, which Anderson said was normal for a startup organization such as the OVTC to have several, and segregation of duties.
“When you have a big organization, you can have lots of checks and balances over everything to make sure there’s nothing going wrong, and any misstatement is corrected,” Anderson said. “But there’s definitely opportunities where somebody may be taking a transaction all the way through and reconciling it themselves.”
However, Anderson said he believed the commission had enough people involved that anything material would be noticed.
Teichmiller asked what kind of review would be suitable, whether it should be a signature or a form.
Anderson said he had seen it multiple ways, but it was up to the commission to find the easiest way to document it.
“And that’s just a recommendation. If you feel there’s something better that accomplished that goal, that’s just our concern,” Anderson said.
“The important thing is, when you come back, there’s some documentation that we’ve done what you’ve suggested we do,” Teichmiller said.
According to Anderson, there were some issues with bank reconciliations being done and then not closely reviewed.
“I think there was a couple year-ends where there was a bunch of checks that coded as outstanding checks that were later voided, or they weren’t really outstanding,” Anderson said.
Conflict of interest
Anderson moved on to discuss conflicts of interest which may pertain to the commission.
“We kind of did a little bit in this area, I mean, we’re not attorneys, so we can’t know all the cases of that,” Anderson said.
One of the conflict of interest issues Anderson addressed as the subject of the commission leasing office space from a non-profit company of which Teichmiller is a principal officer.
“We asked him, he has no personal interest. I think the state’s asked him on that as well, so we don’t feel that it’s a conflict of interest, but if you want to look into it more, you can obviously hire an attorney that’s more qualified in this area,” Anderson said. “In any other instance with any lease purchase, there’s always other options available.”
Anderson said he had looked into documentation that reflected transit manager Roger Youngren was “always looking to make sure you’re getting the best deal.”
Commission member Fred Radtke said there was more to it than office space, and the commission also had parking problems he didn’t see relayed in the report.
Another suggestion Anderson proposed to the commission was defining a conflict of interest policy, as conflict of interest is a “loose term” and there were different definitions of what constitutes a conflict of interest.
The only other conflict of interest point Anderson addressed was fuel transactions.
At a previous meeting, a concern was raised that the commission obtaining fuel from Holiday gas constituted a conflict of interest as Youngren had previously worked with Holiday as a manager in Eagle River.
“That was one we did look some documentation that Roger had that the company you’re using now gives a really good discount on fuel, better than the one you were using before,” Anderson said, and it was his recommendation the commission regularly review its contracts to determine which vendor would provide the best deal for fuel.
Overall, Anderson said there was nothing to be too concerned about, but there was room for improvement.
“My hope is if we move forward, just kinda clean up a few things and just make sure that everything’s good, and maybe getting the audit every year will alleviate some questions that the public has that you’re not spending the money as you should,” Anderson said.
“As I’m reading this, it looks like your recommendations are more in the way of patching up, or correcting vulnerabilities of things that could happen as opposed to there are some definite wrongdoings that need to be corrected,” commission member Chuck Hayes said.
Anderson said he would agree with that.
Also present at the meeting Aug. 19 were county board representatives from both Oneida and Vilas counties, including Vilas County chair Ron DeBruyne and Oneida County chair Dave Hintz; Vilas County finance director Jason Hilger, Oneida County corporation counsel Brian Desmond.
OVTC vice-chair Bob Mott was also available via telephone.
The commission opened the discussion to allow input from Hintz.
Hintz said part of the auditor’s job was to provide a standard set of financial statements that included a balance sheet and an income statement or revenue expenses.
He also recalled an incident a couple years prior where he had pointed out to Mott the commission hadn’t paid for fuel in several months, which had allegedly taken Mott by surprise.
“Had you had reliable financial statements during that period, you would have caught that type of problem earlier. And if you complied with the charter and had the audits done in a timely basis, you would have had that information,” Hintz said. “So, you went three years without proper financial statements. You do have them now, which is good, just like to make that point.”
Hintz also addressed the conflict of interest points Anderson had mentioned earlier.
“It goes on to say, ‘We also inquire that the transit commission chairman has no personal interest in the property.’ But those statements are a little bit confusing, how you can be a principal without having a personal interest,” Hintz said.
Anderson replied that Teichmiller didn’t “reap” anything better personally, but the money was going into his charity where it was distributed to other charities.
“No personal financial gain, but obviously he wants his organization to do well as well,” Anderson said.
“In most organizations it is suggested you do develop an internal control policy, which I think would be helpful in this case,” Hintz said.
Hintz mentioned Oneida County attorney Tom Wiensch, who had concerns had volunteered, if the commission desired, to look at possible legal issues.
“He’s not saying there are any, but he says ‘I think it’s worth my review,’” Hintz said.
“I’m curious, I just recently re-familiarized myself with our own county’s code of conduct, in which it addresses some, vaguely, conflict of interest. I think it could probably be better worded, to be perfectly honest,” commission treasurer Steven Schreier said. “But, that being said, I do know the State of Wisconsin has an ethics commission, which could probably also be approached about this specific issue if we wanted them to review it, if nothing else, get back to our corporation counsel, see what their opinion is about this.”
Schreier wasn’t sure what else the commission could do beyond that other than address how the commission wants it worded for its own county representatives.
“It was also mentioned that it was suggested that our commission actually create a conflict of interest policy that would be in our charter, basically language. Which I agree with strongly,” Schreier said. “I think that we should be doing that. And it probably should’ve been done two or three years ago when this initially was an issue.”
“I just have a suggestion that the findings I think are well-warranted and very well explained,” Hilger said. “I would just suggest that they stay on your agenda each month, or the next several months, and hopefully through policy you can take a look at each one.”
“I would also ask that we also talk about budgeting for annual audits going on in the future so that we are assured we are honoring the charter that we have with both counties and that we aren’t going to have to have this be an issue in the future,” Schreier said.
The commission approved the audit findings and passed them on the Department of Transportation’s auditing division for its review.
Kayla Houp may be reached via email at [email protected]