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May 1, 2018

State of Michigan
Local Audit and Finance Division
ATTN; Cary Jay Vaughn
P.O. Box 30728
Lansing, MI 48909-8226

Dear Mr. Vaughn:

This letter is in response to a letter we received dated March 30, 2018 regarding a request for improvement
of deficiencies noted in the 2017 audit report of Berrien Mental Health Authority (the Authority). Specifically,
the letter noted the following deficiency:

1. Expenditures have exceeded revenues for the last three years.

Following is a detailed corrective action plan (CAP) to resolve the above-mentioned matter:

 During fiscal year 2015, two key events occurred with had a significant effect on our financial
statement presentation. The Authority moved from a governmental fund presentation to an
enterprise fund presentation. This change now requires us to now show depreciation in our
operating expenses which equaled $279,187 in 2015; $372,216 in 2016 and $423,583 in 2017.
Also, with the implementation of GASB 68 in 2015, our enterprise fund presentation also shows the
effect of our change in pension expense related to GASB 68 which equaled $468,483 in 2015;
$1,295,757 in 2016 and $895,791 in 2017. The Authority is exploring options to contain costs
related to our defined benefit plan.

 Over the last three years, the Authority has (as with many other mental health agencies in Michigan)
experienced a steady reduction in our general fund contract revenues from the State of Michigan.
The reduction from $3,698,437 in fiscal year 2014 to $1,725,626 in fiscal year 2017 has been aan
annual decrease of @ $2,000,000. However, we are still required to provide mental health related
services to the residents of our county. We have urged our State representatives to consider a
revaluation of the general fund dollars among the counties in Michigan for a more equitable split of
these funds based on eligible lives in each county. We have recently received word that a new
redistribution model has been suggested which would allow our agency to receive an increase of
general fund contract revenues of $472,758 to be spread out over a 5 year implementation period.
This information, coupled with our increased efforts to control costs of services should improve the
Authority’s financial position in the future.

If you have additional questions or would like further support for the items noted, please feel free to contact
me either via mail at P.O. Box 547, Benton Harbor Michigan 49023, via phone at (269) 934-1642, or via e-
mail at mrr@riverwoodcenter.org.

Sincerely,

Michael Reed
Chief Financial Officer
Berrien Mental Health Authority

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