Sauk Village, Illinois: March 2016

Thursday, March 17, 2016

FINANCE TOPS TOWN HALL MEETING

Trustee Derrick Burgess

SAUK VILLAGE | The finances of the Village topped the discussion at Wednesday's monthly Town Hall Meeting. Trustee Derrick Burgess hosts a monthly Town Hall meeting on the third Wednesday of each month at which residents can discuss matters of the Village without time limits as are imposed during Village Board meetings.

Latasha Harris started off the questioning and asked Burgess "what is the state of the Village's finances"? It was revealed that the Village's actual deficits have not really come down much at all. Mayor David Hanks made public statements that the village's "deficit" has come down by $2 million, however, Burgess confirmed that is not the case. According to the Village's annual audit report the village's "net financial position" changed by $2 million which he attributed to the Village not taking depreciation on assets and the addition of the Air Strippers. "Had nothing to do with brilliant financial management" Burgess said.

It was also revealed that the Village' accounts payable aging report (the amount of bills piling up) has actually increased since 2012. Burgess confirmed that the aging report numbers have gone up since 2012 according to the audit report. The Village has been carrying unpaid bills to the tune of $1.1 million according to the audit report.

Residents also learned that the change over for the Village's dispatch service to CalComm did not save the village much money at all this last year. The additional costs for computer equipment and other expenses, not budgeted for in 2015-16's budget last year pushed the dispatch expense far higher than the Hanks Administration anticipated. Burgess along with Trustees Cecial Tates, and Kelvin Jones voted no on the budget. "You could see that the budget was not balanced when you looked at the numbers. I made proposals and tried to give the other Trustees information so we could make an informed decision." Burgess said. "I will wait to see what the Budget and Finance Committee and the Village Administrator have to say about the budget this time. I don't expect that this budget will be truly balanced until they address our outstanding bills and our interfund deficits" Burgess said following the meeting.

"The proof is in the numbers" Burgess said following the Town Hall meeting. "Don't take my word for it see the audit report for yourself, the numbers do not lie" Burgess said.

Residents also voiced concerns about noise at night across the street from Candlelight Village mobile home park. One resident stated she has lived here for 6 years and the noise continues all night long. Truck trailers are being dragged and one cannot sleep she said. The same resident voiced concerns about the matter at Tuesday's village board committee of the whole meeting. Hanks will be advised to look into the matter to see what the company can do to mitigate the excessive noise during the night hours.

Saturday, March 12, 2016

HANKS NOT TELLING THE TRUTH ABOUT VILLAGE MONEY

SAUK VILLAGE | Bills keep piling up at Village Hall these days. The Village currently has outstanding bills totaling $831,315.79 according to a Freedom of Information Act request we filed and received. $381,000 is more than 120 days past due according to the Village’s Accounts Payable Aging Report dated March 8^th.

Mayor David Hanks has been tapping the Village’s Water and Noise Mitigation Funds to pay its employees and other expenses, even though he claims there is a “balanced budget”. Hanks did not budget any money to be borrowed from the Water or other funds. According to our Freedom of Information Act request, as of November 20, 2015, $1,266,175 had been withdrawn and as of March 8^th,the amount owed was still at $1,247,367. Hanks recently paid back a paltry $350,000 to the water fund.

In 2015, Village Trustee Derrick Burgess called Hanks’ proposed budget “unbalanced and irresponsible”. “The constant need for inter fund borrowing clearly shows that this budget was not balanced. When we are forced to repeatedly borrow money to pay bills because of Hanks' over estimating revenues and under projecting expenses, that is not balanced”, Burgess said. Burgess criticized Hanks budget last year for not taking into consideration the accounts payable aging report. “How can you call this balanced when you aren’t budgeting your bills?” Burgess said. Burgess voted no for the 2014-15 Budget and for 2015-16 Budget along with Trustees Cecial Tates and Kelvin Jones. Trustees allied with Hanks, Rosie Williams, Lynda Washington and Ed Myers helped him to pass the unbalanced budget since he's been in office as mayor. Hanks had to cast the tie-breaking vote to approve the unbalanced budget in May, 2015.

“This is irresponsible. He (Hanks) said that we historically have had to borrow $500,000 from the water fund to pay payroll. $1.2 million is not $500,000, let’s get that straight. This administration is not being open, honest, or transparent with the residents” Trustee Cecial Tates said following a recent Village Board meeting.

All information is taken from the Village's Audit reports from 2009 to 2015

The Village’s recent audit report shows the Village owes virtually $1.1 million in outstanding bills from 2014 to 2015. Hanks erroneously and proudly stated at a recent board meeting that the Village’s deficit had been reduced by $3.2 million; however, the audit reveals that the Village still has enormous deficits in the various funds which have not been reduced.

The Village’s audit report also reveals that the accounts payable aging report has skyrocked under David Hanks from 2012 to 2015. When he took over as acting-Mayor in November, 2012 the Village owed $748,536 in outstanding bills. This amount increased slightly to $800,715 by April 30, 2013 and ballooned to $1.1 million by April 30, 2014 and stayed the same as of the most recent audit at $1.1 million.

Hanks has said on more than one occasion since 2013 that he has reduced the outstanding accounts payable aging report from when he took over as Mayor in 2012. However, village audit reports clearly indicate otherwise.

“This is not being honest with the people’s money” Tates said. "Doing what is right with the taxpayers money should not involve politics, just common sense which is apparently not too common these days" Tates said.

Thursday, March 10, 2016

SAUK VILLAGE FINANCIAL MESS - WHERE THE HELL IS THE MONEY GOING?

This is the eight and the final in a series of revelations of the 2014-15 Audit Report. The Village was delinquent in filing their audit with the Illinois Comptroller (due December 26, 2015). The Audit report (see attached link at the end of this report) reveals the status quo with the Village finances continues with 3 years into David Hanks’ Administration.

SAUK VILLAGE | When it came to the “Watergate Scandal” where money was spent from the Water Fund for a grass cutting scheme not included in the Village’s Budget in 2014. Trustee Derrick Burgess exposed that scandal because of his tenacity and the questions he asked. Burgess, at that time was the only Village Trustee who dared ask the Hanks Administration how money was being spent. Burgess criticized the Hanks Administration for irresponsible spending of water funds without the Village Board’s approval at that time.

The Village applied for and received a grant from the State of Illinois and one of the items the grant would cover was for mowing lawns for vacant homes. The glitch was that the Village had to pay for the project beforehand and get reimbursed later. None of this was discussed during the Budget process and no funds were budgeted for the program. The Hanks administration and the Housing Commission had people out mowing lawns with no way to pay those doing the service and scrambled to take money from the water fund without the Village Board's approval. The grant was suspended by the State of Illinois due to the financial fiasco of the State.

This past week, it was learned that a former fire fighter mowed some lawns under the program in 2014 to the tune of $650, but the Village incorrectly reported that this individual was paid $65,000 and now the Internal Revenue Service wants $27,000 from this person for taxes and penalties. The IRS is investigating the matter.

Now let’s take a look at the 2014-15 Audit Report Management letter which found some very irresponsible actions reported. The following is an excerpt from the letter:

14. Grant Tracking (Repeated from Prior Year)

The Village lacks an adequate system to track grant revenues and related expenditures. We recommend that the Village create a system to track grant revenues and related expenditure, to ensure that both revenues and expenditures are properly recorded in the correct period.

(Editorial Note: Trustee Derrick Burgess made this very recommendation to Mayor David Hanks and to the Village Board during the Budget hearings in the summer of 2014. Burgess suggested that Grant monies not be allocated under the departmental line items, however, Hanks scoffed at the idea in a two hour diatribe before they passed the budget by a 5 to 1 vote, Burgess the only NO vote; Trustees voting yes: Rosie Williams, Lynda Washington, Ed Myers former Trustees John Poskin and Jeff Morden)

15. Sauk Village Housing Commission

The Village did not properly establish the Sauk Village Housing Commission (the Commission) as an agency fund of the Village. The Commission was established during fiscal year 2015, and meets the criteria for recognition as an agency fund of the Village due to the nature of the relationship between the Village and Commission. We recommend that the Village give appropriate consideration to the nature of potential agency and other fiduciary relationships that may occur in the future, to ensure their proper recording in the Village’s financial statements.

(Editorial Note: The Hanks Administration is running the Housing Commission, whose sole purpose is for enforcing Fair Housing laws, as a “Housing Authority”. Many are of the opinion that this violates Illinois law and that the Housing Commission has overstepped their legal mandate and authority.)

16. Sauk Village Housing Commission- Cash Handling

During fiscal year 2015, a cash withdrawal was made an automatic teller machine (ATM), from the Sauk Village Housing Commission bank account. The Sauk Village Housing Commission is an agency fund of the Village. Per management, the withdrawal was made by a commissioner of the Sauk Village Housing Commission. We recommend that the Village discourage the use of ATM transaction, and instead reinforce the need to process all transactions through the internal controls of the Village.

(Editorial Note: Wow! This is truly amazing! No other community allows non-bonded people to be a signer on an account and none allow one to have an ATM card so they could clean the account out. This is ripe for fraud, misappropriation of funds when people are permitted to do this)

An expert on Illinois Municipal Finance, intimately familiar with Sauk Village’s financial history reviewed the Village’s audit and management letter and stated the following: “I don't believe any of these are just normal issues. In a well run environment, none of these issues should occur. There should always be a system of "double-check" in order to eliminate any possibility of wrongdoing. We have many of these safeguards in place to prevent fraud and provide transparency with taxpayer’s money. What I don't get is the lack of attention being paid to account receivables. What exactly does everyone working at Village Hall do? Why is it that the Finance Director has no backup from existing staff? What does this so called Village Administrator or the Mayor do? (by the way the Finance Director seems to have a lot of authority according to this report)? This report is pathetic!”

Wednesday, March 9, 2016

SAUK VILLAGE FINANCIAL MESS - You can't pay? Village wants to charge more!

This is the seventh in a series of revelations of the 2014-15 Audit Report. The Village was delinquent in filing their audit with the Illinois Comptroller (due December 26, 2015). The Audit report (see attached link at the end of this report) reveals the status quo with the Village finances continues with 3 years into David Hanks’ Administration.

SAUK VILLAGE | When it comes to the finances of the Village clearly there has been a lack of attention to detail, especially when it comes to investment, assets and the Village’s public utility. At last night’s Village Board meeting David Hanks’ political lackey and Village Administrator J.W. Fairman recommended raising the reconnection fee for water when the Village shuts the water off due to nonpayment. The reconnection fee currently is $25 if paid before 3pm or $75 if paid after 3pm according to Community Development Director Sherry Jasinski. Fairman wants to raise this to $250. “When people cannot afford their water bill in the first place, how in the hell can they afford an additional $250 to have it turned back on” Trustee Derrick Burgess said following the meeting.

With all that said, the Village seems to have its own problems managing the water fund receivables according to the Village’s audit management letter. The following is an excerpt of that letter:

17. Outstanding Utility Bills (Repeated from Prior Year)

We noted that various residents have long-outstanding unpaid utility bills, and that receivable balances are escalating. We recommend that the Village review its policies and procedures with regard to the collection of utility receivables. Implementing these policies and procedures on a timely basis could improve cash flow.

(Editorial Note: Is increasing the water reconnect fee a way we have reviewed the policies and procedures regarding collections? If people could not afford to pay their outstanding debts and the village allowed them to accumulate a “high balance” then logically, they need to work out arrangements with the user.)

16. Capital Asset Capitalization Policy (Repeated from Prior Year)

The Village does not have a formal written capitalization policy. We suggest that the Village develop, and the Board approve a form written capitalization policy.

(Editorial Note: Really? This is a repeated finding by the Auditors! Way to take care of the Village’s Assets!)

18. Investment Policy

The Village’s investment policy does not address interest rate risk, credit risk, concentration of credit risk, and custodial credit risk. We recommend that the Village update its investment policy to include, at a minimum, the foregoing risk considerations.

Tuesday, March 8, 2016

SAUK VILLAGE FINANCIAL MESS - No Documentation Needed!

This is the sixth in a series of revelations of the 2014-15 Audit Report. The Village was delinquent in filing their audit with the Illinois Comptroller (due December 26, 2015). The Audit report (see attached link at the end of this report) reveals the status quo with the Village finances continues with 3 years into David Hanks’ Administration.

SAUK VILLAGE | Three plus year into the Administration of David Hanks and we still see a reckless pattern of financial mismanagement at Village Hall.

Hanks has said repeatedly over the course of the last few years that the village has “had to borrow $500,000 each year from the water fund” in order to make payroll. Well, according to statements made by Village Finance Director Mohan Rao the Hanks Administrations has had to borrow some $900,000 from the water fund and $200,000 from the Noise Mitigation Fund during this most recent fiscal year. There has never been a vote by the Village Board of Trustees to borrow such money from the water fund, as has been the case during previous administrations. The Village actually received more money from the State of Illinois than Hanks put into his budget. Basically, Hanks is using “fuzzy math” when it comes to his budget mismanagement and when it comes to taking money from the water fund.

The following is an excerpt from the Village’s most recent Audit Report Management letter:

11. Documentation of Employees Salaries/Hourly Rate (Repeated from Prior Year)

We noted certain instances where employees’ personnel files did not contain formal documentation of the current rate of pay. We recommend that formal documentation of all such changes be included in the personnel file, and authorized by the departmental supervisor or another appropriate individual.

(Editorial Note: Seems simple enough right? So why is this repeated from the prior year?)

12. Controls over Cash Receipts (Repeated from Prior Year)

The Finance Director (Mohan Rao) often records large cash receipts via a manual journal entry, and deposits the receipt to the bank, in order to ensure that the receipt is deposited an expeditiously as possible. However, this result in a deviation from standard Village procedures. We recommend that all cash receipts, and other transactions, be processed under the Village’s existing internal controls on a timely basis.

13. Capital Asset Disposals (Repeated from Prior Year)

The Village recorded significant capital asset additions in the current year, but did not record any disposal in either the current year or the preceding fiscal period. The Village should consider whether, based on the nature of additions, disposals are occurring and not being recorded. Additionally, the Village should carefully review its capital asset details to identify potential items that are no longer owned, and/or no longer in use

(Editorial Note: So how do they know if assets belonging to the village aren’t disappearing?)

Sunday, March 6, 2016

SAUK VILLAGE FINANCIAL MESS - Auditors miss policy... What Policy?

This is the fifth in a series of revelations of the 2014-15 Audit Report. The Village was delinquent in filing their audit with the Illinois Comptroller (due December 26, 2015). The Audit report (see attached link at the end of this report) reveals the status quo with the Village finances continues with 3 years into David Hanks’ Administration.

SAUK VILLAGE | Residents should be asking the questions? How is this administration handling my tax dollars?

Clearly there is no oversight by this administration when it comes to your tax dollars. Mayor David Hanks’ move to put Trustee Rosie Williams and Ed Myers as chairman and co-chair of the Village’s Finance Committee was a joke. These same trustees have virtually nothing to say when it comes to the Village’s budget or audit reports. It’s kind of like putting the fox in charge of the hen house. The only checks and balances that the residents have for their tax dollars are three trustees who seek answers to the Village’s money Trustees Derrick Burgess, Cecial Tates and Kelvin Jones.

Burgess, Tates and Jones voted no for what is clearly an "irresponsible and unbalanced budget", voted no to raise property taxes twice, routinely demand that public votes be taken when it comes to spending and transferring money around, continually ask questions about the accounts payable and voting no on reckless spending some $200,000 for computers and software which are still not in use today.

The following are additional items in the Village’s Audit Management Letter:

3. Expense Reimbursements (Repeated from Prior Year)

We noted that not all expense reimbursement requests include evidence of approval prior to reimbursement. We recommend that all expense reimbursement request be reviewed and approved by an individual in supervisory capacity, prior to reimbursement.

Additionally, the Village’s per-diem expense allowance policy does not require the submission of receipts to substantiate the amount paid to the individual. Per-diem allowances that lack receipts as evidence of the business nature of the expense, and which are in excess of IRS-prescribed amounts, are required to be reported as income to the individual on Form W-2 or 100, as appropriate. Consideration should be given to reevaluating the village’s expense reimbursement policy in light of its current practice and IRS reporting requirements.

Editorial note: Why not simply do away with the antiquated and archaic “per-diem” policy. Do like most corporations do reimburse individuals for their out of pocket expenses after the fact. Seems simple enough!

4. Purchase Orders (Repeated from Prior Year)

We noted that the Village lacks a formal purchasing policy, and that purchase orders are not used for most purchases. We recommend that the Village develop and adhere to a formal purchasing policy. Purchases that require a purchase order should be formally approved by an individual other than the employee initiating the purchase order.

Editorial note: Where do the auditors get that there is no “purchasing policy”? The Village adopted a Purchasing Manual in the early 1990s and amended said Purchasing Manual on June 23, 1993 and again on July 23, 2003 and votes were taken to waive certain requirements of the Purchasing Manual. Most of which, David Hanks was on the Village Board when they waived such requirements! What is puzzling, is why hasn’t this Administration taken the same votes to in the form of an Ordinance to “waive” competitive bidding for items never included in the Village’s Budget for instance, the computers and software that the Village bought to the tune of some $200,000? Bet that is going to be in the next audit finding report!

Saturday, March 5, 2016

SAUK VILLAGE FINANCIAL MESS - Why follow the law, who is going to question them?

This is the fourth in a series of revelations of the 2014-15 Audit Report. The Village was delinquent in filing their audit with the Illinois Comptroller (due December 26, 2015). The Audit report (see attached link at the end of this report) reveals the status quo with the Village finances continues with 3 years into David Hanks’ Administration.

SAUK VILLAGE | Why does David Hanks have Village Administrator J.W. Fairman poking around in things better left to professionals such as the Uniform Crime Reporting instead of the Village’s financial mess? Mayor David Hanks and his administration have failed to address over 19 serious issues with the Village’s audit, most of which are repeated from the prior year according to the audit report.

None of these 19 items has come out publicly, nor have they been discussed by Hanks with his Village Board.

The following are a few items that were found in the Village’s annual audit report Management Letter:

3. Tax Increment Financing Fund (Repeat from Prior Year)

The Village presents certain deposits, held with the trustee/paying agent (which is Amalgamated Bank) for the payment of principal and interest maturities on the Village’s tax increment financing (TIF) and other general obligation bonds, and transactions associated with those accounts, within the Debt Service Fund. As a result, it is unclear to the users of the Village’s financial statement the extent of the balances and transactions associated with each of the Village’s TIF Districts. We recommend that the Village consider recording all such activity in funds that are specific to each TIF district.

4. Accounts Payable Detail

The Village lacks an adequate detail of accounts payable that reconciles to the general ledger balances by fund. Various non-audit services were required to assist the Village in preparing a detail that reconciled to the general ledger. We recommend that the Village consult with its account software support firm to ensure that a detailed accounts payable report, by invoice, is available. We also recommend that the Finance Director (Mohan Rao) review invoice posting dates to ensure that invoices are posted to the correct accounting period.

5. Interfund Advances and Transfers (Repeated from Prior Year)

Various interfund advances and transfers have been made, either without the formal authorization of the Board of Trustees, or in excess of Board-approved budgeted amounts. We recommend that all interfund advances and transfers be brought to the Board of Trustees for formal approval, especially in situations where actual amounts exceed budget.

Illinois law states:  65 ILCS 5/8-1-3.1 “Borrowing from financial
institutions. The corporate authorities may borrow money for corporate purposes
from one fund for the use of another fund providing such borrowing shall be
repaid within the current fiscal year.”

Trustee Derrick Burgess during fiscal year 2014-15 was the only Village Trustee that demanded that the Village Board vote on such transfer of funds. Hanks and his allied Trustees have taken on a practice of merely giving “consensus” which is not a formal process. Village Trustees Burgess, Cecial Tates and Kelvin Jones have all demanded that such transfers take place with a public vote. “Taxpayers have a right to know how elected officials are spending their money” Burgess said.

“When this administration ‘borrows’ money from the water fund or from other funds, there has not been a public vote. This has not taken place during this last fiscal year. This not only violates Illinois law (65 ILCS 5/8-1-3.1) but it circumvents the authority of the Village Board” Tates said.

Thursday, March 3, 2016

SAUK VILLAGE FINANCIAL MESS - No Pride, No Progress!

This is the third in a series of revelations of the 2014-15 Audit Report. The Village was delinquent in filing their audit with the Illinois Comptroller (due December 26, 2015). The Audit report (see attached link at the end of this report) reveals the status quo with the Village finances continues with 3 years into David Hanks’ Administration.

SAUK VILLAGE | Pride and Progress may be the Village’s motto but when it comes to the finances of Sauk Village, there’s not much to be proud of nor clearly has there been any progress. Mayor David Hanks and his administration have failed to address over 19 serious issues with the Village’s audit, most of which are repeated from the prior year according to the audit report.

The following are a few items that were found in the Village’s annual audit report:

3. Journal Entries (Repeated from Prior Year)

The Finance Director (Mohan Rao) initiates and records substantially all manual journal entries, without formal independent review. This lack of review increases the risk that fraudulent financial reporting, or a misappropriation, could occur and remain undetected. Although the Board of Trustees reviews the monthly financial data, we recommend that another individual with financial expertise and knowledge of the Village’s chart of accounts review and initiate each manual adjustment that is identified and posted by the Finance Director.

4. Wire Transfers (Repeated from Prior Year)

The Finance Director (Mohan Rao) initiates and records substantially all wire transfers, without formal independent review. This lack of review increases the risk that a misappropriation of Village funds could occur and remain undetected. We recommend that another individual with financial expertise review and initial each wire transfer advice. Additionally, automatic notification should be sent by the bank to a responsible individual other than the Finance Director.

5. Working Cash Fund (Repeated from Prior Year)

The Working Cash Fund has made interfund loans to the General Fund, and those loans have not been repaid in accordance with State Statutes. Under 65 ILCS 5/8-7, the Village is permitted to transfer all or part of the Working Cash Fund to the General Fund in anticipation of the collection of taxes levied for general or special corporate purposes; however, the Working Cash Fund is to be reimbursed within a certain period of time as specified in the Statutes. The statutes further provide for the abolishment of the Working Cash Fund by resolution of the Village Board, whereupon the Fund may be transferred to the General Fund, at the end of the fiscal year; however, a municipality that has abolished the working cash fund may not establish another working cash fund for four years, after the date the fund was abolished. Additionally, any general obligation bonds that were previously issued for working cash purposes must be retired before a municipality may establish a new working cash fund.

Presently, the Village is recording property taxes, levied for purposes of payment of principal and interest on the Working Cash Bonds, to the Working Cash Fund, and in turn making a transfer to the Debt Service Fund. We recommend that the Village set up transactions to be recorded in the proper fund.

Nothing has been done to correct these Material Weakness from the prior year’s audit report, and we see what the lack of oversight of taxpayers’ dollars can clearly result in another scandal just like with the Village Treasurer.