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?)

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!”

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!

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!”

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.

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!”

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.

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!”

SAUK VILLAGE FINANCIAL MESS - Politics over Progress

This is the second 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 | Instead of discussing ways in which his administration can address the serious issues with the Audit Report, David Hanks cancels yet another Village Board Committee of the Whole meeting scheduled for Tuesday March 1^st.  He and Trustees he supports continue politics over progress, instead of asking questions and seeking solutions to the vast problems within the Audit.   Trustees Rosie Williams, Lynda Washington and Ed Myers continue to support the inaction by Hanks and his administration.

The Village Treasurer James Griegel is under an indictment by the Will County States Attorney and is under a Federal Investigation for alleged misappropriation of funds for the Police Pension Fund remains on the taxpayer’s payroll!  Griegel allegedly took “thousands of dollars” from the Police Pension Fund.  This has happened under the watch of Mayor David Hanks and the complete financial mismanagement which the Trustees he controls (Williams, Washington and Myers) enable him to do. 

The recent audit report has revealed 19 material weaknesses.  A material weakness in a audit is a “deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the Village’s financial statements will not be prevented, or detected and corrected on a timely basis.  We (the auditors) consider the following deficiencies in the Village’s internal control to be material weakness”

Excerpt from the 2014-15 Audit: 

2.       Lack of Segregation of Duties (Repeated from Prior Year)

Similar to many other organizations of the Village’s size, substantially all accounting functions of the Village are performed by a single individual.  As a result, some of the aspects of internal accounting control which rely upon adequate segregation of duties are missing in the Village and a general lack of internal controls exists, increasing the risk of fraud or errors may occur and remain undetected.

 

Nothing was done to correct this Material Weakness from the prior year’s audit report, and we see what the lack of oversight of taxpayers’ dollars can do with the Village Treasurer scandal.
 
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?

***CLICK HERE*** FOR A FULL COPY OF THE AUDIT REPORT

SAUK VILLAGE FINANCIAL MESS - Your Tax Dollars

This is the first 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 | While David Hanks praised Trustees Rosie Williams, Lynda Washington and Ed Myers for voting for unbalanced budgets in a social media post.  “Thankfully, last year the majority of the board (Williams, Washington and Myers) passed a worse-case scenario budget” Hanks stated on his post.  Residents and taxpayers should be steaming mad at how the Village’s finances are handled, these are your tax dollars.  Not necessarily what they’re spending your money on, but the manner in which it is handled by David Hanks and his administration.  Hanks proposes yet another “worse-case scenario budget” and plans on presenting a budget which he states “may reqire(sic) more cuts than last year”.

Trustee Derrick Burgess voted against the budget and appropriation ordinances presented by Hanks calling it once again “irresponsible and unbalanced”.  Trustees Cecial Tates and Kelvin Jones also voted against the Budget and Hanks voted to break the tie.  With that said, over $1 million dollars has been “borrowed” during the last year to keep the village’s accounts flush and to make the village's payroll.  All that despite Hanks claiming that the budget was balanced.  The Village’s water fund and several other funds have been tapped to pay the bills and not repair the infrastructure or other intended purposes resulting in interfund borrowing.

The recent audit report has revealed 19 material weaknesses.  A material weakness in a audit is a “deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the Village’s financial statements will not be prevented, or detected and corrected on a timely basis.  We (the auditors) consider the following deficiencies in the Village’s internal control to be material weakness”

1-      Audit Adjustments (Repeated from Prior Year)

Numerous adjusting entries were identified, proposed to, and accepted by management, and recorded in the Village’s financial statements, as of and for the year ended April 30, 2015.  Several of the adjustments were material to the financial statements, individually and in the aggregate.  The adjustments affected various asset, liability, deferred inflow, net position/fund balance, revenue, expense/expenditure, and other financing sources and uses accounts.  We recommend that the finance department (Mohan Rao) reconcile all account balances to the supporting schedules, document and other sources of information in a timely manner, in order to ensure that accurate financial reporting, during the year and at year end is achieved.  Those procedures should include but not be limited to the following:

·         Review of accounts receivable detail ledgers to determine the adequacy of the allowances for doubtful accounts.

      ·         Reconciliation of prepaid items to supporting details

·         Allocation of property tax receipts to individual funds based on the appropriate tax levy extension for each distribution.

·         Reconciliation of unbilled utility revenue balances to detail ledgers

·         Grants recorded in an appropriate manner based on the terms of the grant agreement.

·         Reconciliation of other tax receipts to state and other taxing authority reports

·         Review of construction, equipment, and other invoices to determine propriety of capitalization, depreciation and accrual of retainage of a liability.

·         Reclassification of held checks as a current liability.

·         Reconciliation of accounts payable and accrued compensated absences balances to supporting details.

·         Reconciliation of recorded debt principal and interest payments to maturity schedules.

·         Proper recording of debt issuance.

·         Reconciliation of interfund transfers in and transfers out, to ensure that all interfund transfers are properly recorded in the transfer accounts in the general ledger.

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!”

 

 

***CLICK HERE*** VILLAGE AUDIT REPORT LINK

FINANCES GET LITTLE ATTENTION BUT PUBLIC COMMENT TAKES CENTER STAGE

SAUK VILLAGE |  The Village Board met last night and were presented with the Village's Audit Report.  The audit showed few surprises and virtually no change in financial position of the Village according to the Susan Jones of Miller, Cooper & Co LTD of Deerfield, Illinois.

Trustee Derrick Burgess asked about the issuance of immediate checks and then having them approved after the fact by the Village Board.  Susan Jones said that is not common and that there should be few exceptions to for immediate checks, payments should go through the normal payment process.  Burgess also asked about borrowing funds from the water fund or other funds, the auditors said that there appears to be adequate documentation and general ledger information, however, the Village Board should vote to borrow money according to Illinois Statute and in some cases that has not happened.

Trustee Cecial Tates said he only had a matter of minutes to review the audit report and asked if they would be returning so that he could review the report and prepare his questions.  Mayor David Hanks said that any questions could be directed to Village staff at a future date. 

While the audit review was underway, Trustees Lynda Washington, Rosie Williams and Ed Myers sat mute for the twenty minute time it took for the auditors to present the audit.  Each of them did, however, chime in when it came to Public Comment and each had their own opinions and comments.  Rosie Williams suggested that the Ordinance for the public comment period be no longer than 60 minutes, but the discussion of the matter took 1 hour 13 minutes.

Burgess merely wanted the Village Board to get rid of its current restriction that says the public can only comment on "agenda items only".  "Why should we restrict what the public has to say.  We do have a First Amendment and the Illinois Attorney General has issued binding opinions that state public bodies cannot restrict the content for public comment" Burgess said following last nights meeting.  Burgess does not want residents intimidated when they come up for Public Comment by threats of arrest or removal from the meeting

Myers and Williams, who comprise the Ordinance Committee will once again take up the matter at a Special Meeting on Friday.  Williams, who was not present at the Village Meeting Tuesday night was on the telephone during the entire time will apparently be required to attend in person Friday, as someone attending a meeting by conference call cannot constitute a quorum according to state law.

"Why is it that public comment take more time and it seems every one of the trustees who remained silent during the auditor's presentation all spoke up on public comment" Tates said after the meeting.  "It's interesting to see where their priorities are".

During the Public Comment period of the meeting Bernice Brewer asked why Hanks has not removed the Village Treasurer James Griegel who admitted to purchasing heroin for sex and allegedly admitted to embezzlement from the Police Pension Fund.  Hanks' response "we're not talking about the Village Treasurer".