First Place, accountant differ on error of $1.4 million
By Don Shilling
WARREN — First Place Financial Corp. disagrees with an accounting firm about the seriousness of an error made when the local banking company was preparing a financial report.
At issue is an error that, if not caught, would have added $1.41 million to First Place’s net loss last fiscal year.
The accounting firm, Crowe Horwarth, said First Place did not “maintain effective internal control over financial reporting.”
It called the error a “material weakness,” which means the firm is questioning whether bank management would have uncovered the error on its own. According to federal accounting regulations, Crowe must report when it finds a material weakness.
First Place said in a filing Thursday with the U.S. Securities and Exchange Commission that it disagreed with Crowe’s finding. It is labeling the error a “significant deficiency,” which does not have to be reported to the public.
The mistake came when First Place overvalued some loans because of a computational error. The loans were overvalued by $2.17 million, but the net effect after taxes was $1.41 million after taxes.
The error was caught by Crowe as part of an audit at the end of the bank’s fiscal year, which closes June 30. The error was found before First Place issued its year-end financial statements.
Dave Gifford, First Place chief financial officer, said bank executives disagree with Crowe’s findings because they are confident they would have caught the error when preparing financial reports for July. The error would have flowed over into the next month’s accounting, he said.
The bank has changed its procedures in valuing loans because of the mistake, he said.
“Now we believe we would surely catch any kind of an error in the future,” he said.
Crowe officials could not be reached, but they wrote a letter to the SEC that said it agreed with First Place’s comments about the firm. The letter was attached to the bank’s filing.
First Place has hired another accounting firm to serve as its auditor, but Gifford said its dismissal of Crowe was not related to the disagreement.
First Place hired KPMG on Aug. 28 after putting the work out to bid in January, he said. Crowe notified First Place of the error on Sept. 1.
KPMG was to take over when Crowe finished its work with the 2009 fiscal year. Crowe completed its work with First Place on Tuesday.
shilling@vindy.com