McHenry County Blog

A press release from Grafton Township Supervisor Linda Moore:

Grafton Township Forensic Audit Moves Forward

Grafton Township, IL – Today Judge Caldwell ruled against Township Supervisor Linda Moore, confirming the Grafton Trustees have the authority to order a forensic audit.

Linda Moore

Supervisor Moore was incorrectly advised she did not have the authority to order the audit.

“I apologize for delaying this audit,” Linda Moore said.

“Immediately following the ruling I signed the forensic audit contract, which is now in the hands of the auditor.”

Grafton Township trustees still have not authorized payment for a completed audit prepared by Evans, Marshall and Pease for FY ending 2011.

A forensic audit will provide the board and taxpayers insight into township finances.

The work is scheduled to start within the next two weeks.

Linda Moore

The weekly newsletter from Grafton Township Supervisor Linda Moore:

Grafton Township Supervisor’s Weekly E-Newsletter

11/11/2012

Dear Constituents,

Now that the township assessments have been published the township assessors’ office has been quite busy. If you haven’t received your assessment letter, please contact the McHenry County Supervisor of Assessment at 1-815-334-4242.

At the November 8 Board Meeting, the trustees hired a forensic auditor.

This action brings up many questions.

The Trustees won’t approve payment for last year’s audit.

The auditor refuses to start our 2011-12 audit that is now two months past due.

Now they are hoping a forensic audit with no specified total cost will have findings to their liking.

Please read on to gain a better understanding of the situation.

As supervisor, I welcome any audit of the township financials. However, we need to make sure we comply with township and state laws. We also need to conduct business in a logical and fiscally responsible manner. Decisions made in haste are often regretted later.

REGULAR OR FORENSIC AUDIT?

Three years of township records have been audited with no significant concerns found.

This timeline demonstrates the history of audits and gives you some insight into the situation.

• Fiscal Year 2008-09 Audit completed by Eder and Casella, no significant problems were found.
• Fiscal Year 2009-10 Audit completed by Evans, Marshall and Pease (EMP), no problems were found.
• Fiscal Year 2010-11 Audit in draft form, work done by EMP, no problems were found. Despite hiring this auditor, based on the fact that the results of the audit did not reflect their point of view on various issues, the trustees are withholding payment for services and now hope for a more favorable result with a forensic audit.-September 2012, final due date for submission of 2011-12 Audit has passed. In spite of the fact the trustees have chosen an auditor to complete this audit, it cannot be started until the prior auditing firm has been paid.
• October 2012, delinquent notice received from State Comptroller for 2011-12 Audit.
• November 8, 2012 Regular Board Meeting the board decides to meet with EMP on November 28th to ask questions about the 2010-11 Audit. The trustees have withheld payment for this audit for about a year.
• November 8, 2012 Regular Board Meeting, the board votes to hire forensic auditor.

Points of Interest include:

1. The Trustees directed the supervisor to advance payment to forensic auditor, ECS Financial Services, for services not performed in the amount of $10,000 as a retainer fee toward an unspecified total cost and further specifying the check is to be issued with a 24 hour deadline.  The regular audit for 2010-2011 has an outstanding bill of about $7,000.
2. Even though the board set a special meeting for November 28th with EMP, the trustees decide to move forward and hire a forensic auditor without paying EMP for work completed.
3. During this process, the trustees were not willing to define or identify the scope of the forensic audit. Currently the trustees have engages and used township money to have their attorneys, Ancel-Glink, create another set of financial records. Could this be the records the trustees will use for the forensic audit?
   These would not be the official financial records of the township.
4. The contract had not been presented to the supervisor for review prior to the meeting.
5. The agenda did not specify that the board would be interviewing auditors or reviewing a contract for a forensic audit.
6. The trustees have refused invitations to come to the township office to review the QuickBooks financial records. In fact, Trustee LaPorta made this statement on 11-10-12 on a blog:
   “We (trustees) don’t have the time–or the skill–to properly examine the financial records.” He went on to threaten the trustees by saying, “Would you rather be held personally accountable or put in jail for not taking care of the financials?”
7. The township owes the road district $300,000 which is due in 5 months. We also have a budget that spends $200,000 over the money received.
8. The trustees are two months late completing the regular audit for FY 2011-12.

As township residents, I would like to hear your ideas regarding this situation.

• Do you feel it would be best to complete the regular audits before contracting with a forensic auditor? Should the trustees have the time and skill to review QuickBooks records?
• Should the forensic audit be completed before we pay the vendor?
• Would the money be better spent paying our loan to the road district when it is due?

DEADLINE TO FILE PETITIONS FOR TOWNSHIP OFFICE

If you would like to run for township office you should be circulating your petition for candidacy. It is due to be filed starting the week of November 19th, through November 26, 5 pm, if you are to be part of the Republican Primary on February 26th. All elected offices are up for re-election and the term of office is four years. I encourage anyone who is concerned about the state of Grafton Township to throw their hat in the ring and become part of the future of Grafton Township.

Linda Moore, Grafton Township Supervisor

I can’t wait to read the report by Blackman Kallick about what went wrong over the ten years that Metra Executive Director Phil Pagano looted the agency.

Here’s a post the firm has put on its web site.

It’s the firm that did the $50,000 report on the Bill Cellini-led hotel deal in Springfield.

Metra Hires Blackman Kallick to

Assess Internal Controls and Management Practices

Phil Pagano

Blackman Kallick’s Forensic & Litigation Practice has been hired by Metra to investigate and assess their internal controls and operating procedures following a financial scandal that resulted in the suicide of former Executive Director Phil Pagano. Below is an excerpt from a June 12 article in the Chicago Daily Herald.

“Metra directors voted to hire the accounting firm of Blackman Kallick to scrutinize the agency’s operating procedures to see what went wrong and recommend future steps to avoid the abuses that occurred during Pagano’s tenure.

“Metra officials acknowledged that the trust they placed in Pagano – a highly regarded CEO – and his broad executive powers contributed to the abuses.”

I hope it does more good than that part of Huntley School District 158′s $100,000 forensic audit done by Jefferson Wells’ Mark Warner.

Jack Franks

John O'Neill

State Rep. Jack Franks loves to be in the media spotlight.

If it is a popular issue, Franks is ready with a quote.

He supported the forensic audit of state expenditures.

At least that’s what he said.

He voted for auditing Medicaid payments.

House Men's Room with automatically flushing urinals, just as the Tollway has for its high use osases.

And, he should have, because as far back as the 1970′s the Federal government has estimated that 10% of that spending is fraudulent.

But he also supported a forensic audit for the rest of the budget.

What happened when it was time for the vote?

McHenry County’s Democrat was Missing in Action.

Another part of the Illinois House men's room.

To put in terms used in the Illinois General Assembly, Franks “took a walk.”

Usually that means a legislator walks to the bathroom to avoid a vote.

This has not gone unnoticed by Franks’ Republican opponent McHenry Grade School and Library District Board member John O’Neill.

He issued the following statement:

House members had embossed paper towels with which to dry their hands in 2007. Click to enlarge.

“From day one of this campaign, I have been calling for a Forensic Audit of the entire Illinois Budget in order to eliminate waste, fraud, abuse, and corruption throughout Illinois government.“Adam Andrzejewski, who ran for Governor in the Republican primary, wrote a piece in Illinois Review about how the Political Machine in Springfield killed HR 1057, which would have directed the Audito General to ‘commence this forensic audit as soon as possible.’

“My opponent had been a co-sponsor of this resolution, but apparently when it came time for the vote, he ‘went to the bathroom.’

“There is a clever line in there somewhere about his support for the audit being full of…something.”

When the Reconnaissance Hotel opened in Springfield, it was the pride and joy of Bill and Julie Cellini.

I remember reading she did the interior decorating. You can see her taste every time you see the flowers in the entry corridor.

And Cellini even solved what must have been one of his pet peeves—shower curtains that impede taking a shower. He invented the curved shower curtain rod (on the left).

I appreciated his imaginative solution to the clinging shower curtain problem and think of him even when I see assume is a knock-off (on the right) of his invention in other hotels, e.g., the newly-opened Key Lime Cove Water Park in Gurnee.

This past weekend three McHenry County families went down to the Old Capitol Art Fair. There’s a wonderful children’s tent where for $4, $5 or $5 they can get art that would cost sometimes substantially more at an artist’s booth.

My son got a metal turtle with a semi-precious stone, among other pieces of artwork.

As followers of the political scene know, Democratic Party State Treasurer Alexi Gianoulias decided to do what his Republican predecessors didn’t.

He decided to foreclose on the hotel that Cellini got financed though a bi-partisan loan deal between Republican Governor Jim Thompson and Jerry Cosentino, a Democrat. Dan Walker Democrat Gary Fears got financing for a motel in Collinsville out of the bipartisan deal.

Marathon Pundit has a lot of the background on the Springfield hotel deal.

The Chicago Tribune article put the results of a $50,000 forensic audit by Blackman Kallick Bartelstein turned over to federal authorities as its lead story Monday.

The auditor’s findings, according to Gianoulias, indicate that “Cellini orchestrated a sophisticated scheme to cook the books and cheat the state.”

$2 million of diversions is the figure used at the top of the Tribune article.

Cellini’s spokesman denies the charges. “…all of the deductions are allowed under the terms of the loan,” attorney Kathleen Vyborny said.

To make people think hanky panky has taken place, the treasurer said the management company it had hired to run the hotel since taking control a year ago March had “turned a $1.2 million profit,” according to the Sun-Times article on the subject.

Cellini, of course, has his Crystal Lake connection. Let by Aaron Shepley, Cellini’s group was awarded the Vulcan Lakes-Route 14 Tax Increment Financing district contract just a couple of days before Cellini was identified as a co-conspirator, according to several newspaper, in the Tony Resko indictment. If you have not seen Cellini in action, here is a short YouTube interchange between Shepley and Cellini.

A longer version, just so you can see the snippet above is not taken out of context, follows:

Mayor Shepley and his city council decided to raise the city sales tax 75% to accomplish the preparation of Vulcan Lakes for recreational use, the same reason used for giving the TIF development contract to Cellini’s consortium.

All photos may be enlarged by clicking on them.

When the Reconnaissance Hotel opened in Springfield, it was the pride and joy of Bill and Julie Cellini.

I remember reading she did the interior decorating. You can see her taste every time you see the flowers in the entry corridor.

And Cellini even solved what must have been one of his pet peeves—shower curtains that impede taking a shower. He invented the curved shower curtain rod (on the left).

I appreciated his imaginative solution to the clinging shower curtain problem and think of him even when I see assume is a knock-off (on the right) of his invention in other hotels, e.g., the newly-opened Key Lime Cove Water Park in Gurnee.

This past weekend three McHenry County families went down to the Old Capitol Art Fair. There’s a wonderful children’s tent where for $4, $5 or $5 they can get art that would cost sometimes substantially more at an artist’s booth.

My son got a metal turtle with a semi-precious stone, among other pieces of artwork.

As followers of the political scene know, Democratic Party State Treasurer Alexi Gianoulias decided to do what his Republican predecessors didn’t.

He decided to foreclose on the hotel that Cellini got financed though a bi-partisan loan deal between Republican Governor Jim Thompson and Jerry Cosentino, a Democrat. Dan Walker Democrat Gary Fears got financing for a motel in Collinsville out of the bipartisan deal.

Marathon Pundit has a lot of the background on the Springfield hotel deal.

The Chicago Tribune article put the results of a $50,000 forensic audit by Blackman Kallick Bartelstein turned over to federal authorities as its lead story Monday.

The auditor’s findings, according to Gianoulias, indicate that “Cellini orchestrated a sophisticated scheme to cook the books and cheat the state.”

$2 million of diversions is the figure used at the top of the Tribune article.

Cellini’s spokesman denies the charges. “…all of the deductions are allowed under the terms of the loan,” attorney Kathleen Vyborny said.

To make people think hanky panky has taken place, the treasurer said the management company it had hired to run the hotel since taking control a year ago March had “turned a $1.2 million profit,” according to the Sun-Times article on the subject.

Cellini, of course, has his Crystal Lake connection. Let by Aaron Shepley, Cellini’s group was awarded the Vulcan Lakes-Route 14 Tax Increment Financing district contract just a couple of days before Cellini was identified as a co-conspirator, according to several newspaper, in the Tony Resko indictment. If you have not seen Cellini in action, here is a short YouTube interchange between Shepley and Cellini.

A longer version, just so you can see the snippet above is not taken out of context, follows:

Mayor Shepley and his city council decided to raise the city sales tax 75% to accomplish the preparation of Vulcan Lakes for recreational use, the same reason used for giving the TIF development contract to Cellini’s consortium.

All photos may be enlarged by clicking on them.

There was a classic moment at Huntley School District 158′s board meeting.

It started with board member Larry Snow making a motion to amend the board majority’s motion.

Here it is:

Whereas Jefferson Wells makes no reference to the word “misappropriations” in its report of June 29, 2007, the phrase “nor specific evidence or support regarding the allegations of misappropriation” be stricken from the second “Whereas” in this resolution.

Straightforword enough.

If the forensic accountant’s final report didn’t say anything about not finding anything about allegations of misappropriation, then the resolution shouldn’t say it.

Snow said that he had looked many times throughout the final June 29th report, word by word, looking for the word “misappropriation” and couldn’t find it.

And couldn’t find the phrase that was taken as a “finding” from the forensic accountant’s final report.

Snow asked if the other board members can show him where this wording or finding is, he would be glad to withdraw the motion to amend.

That’s when board member CPA Kevin Gentry said that the wording was in his final report of June 29th and asked Snow to look on page 3 at the first paragraph under Investigative Conclusion (bold and underline in the report)

That’s when the getting got good.

Snow looks at his page 3 at the first paragraph and says that his report doesn’t have that conclusion in it.

And Gentry says that it is in his final report.

Now you have to picture this.

Snow sits next to Gentry on the board.

Snow leans over and looks at what Gentry has printed out and says

“You have a different final report than me. There’s two different final reports with the same June 29th date. Mine is a spiral bound original handed out at the meeting. What’s yours?”

Gentry then says something like he printed it off his computer. Snow says something like

“How can there be two different forensic accountant final reports with the same date with a different conclusion in each?”

At that point the board majority and Superintendent Burkey have these dumbfounded expressions on their faces as in what do we say when we are caught at a public meeting B U S T E D!!!

After moments of–What do I say now?–silence, board member Aileen Seedorf says (paraphrasing closely)

“I have an original bound final report and mine has the same wording as Mr. Snow’s”.

(Seedorf sits on the other side of Snow and compared her page 3 to his.)

Obviously there can only be one final report dated June 29, 2007 that on the bottom left of the report pages has printed

How Gentry got his copy, how the conclusion got changed or not, who changed it or didn’t, and how it came about getting changed or not, raises a lot of interesting questions.

You would think that Gentry, a C.P.A. who got together with board members Quagliano, a C.P.A. and Green to draft the resolution might have been a bit more careful.

Wait a minute, who cares what is actually true or who needs to be careful when you have a majority of votes and can declare anything true you want, by resolution of the Board of Education.

What do you think happened to Snow’s motion to amend?

It got voted down by the board majority 4-2. The two C.P.A.’s, a police officer and furniture salesperson liked their version of Jefferson Wells’ final report a lot better than what was actually handed out to board members.

The resolution ended with this declaration.

1. The recitals set forth above are found to be true and correct.

It made me look up the spelling of this word:

chutzpah

I found chutzpa and hutzpa as well:

n. Utter nerve; effrontery: “has the chutzpah to claim a lock on God and morality” (New York Times)

There was a classic moment at Huntley School District 158′s board meeting.

It started with board member Larry Snow making a motion to amend the board majority’s motion.

Here it is:

Whereas Jefferson Wells makes no reference to the word “misappropriations” in its report of June 29, 2007, the phrase “nor specific evidence or support regarding the allegations of misappropriation” be stricken from the second “Whereas” in this resolution.

Straightforword enough.

If the forensic accountant’s final report didn’t say anything about not finding anything about allegations of misappropriation, then the resolution shouldn’t say it.

Snow said that he had looked many times throughout the final June 29th report, word by word, looking for the word “misappropriation” and couldn’t find it.

And couldn’t find the phrase that was taken as a “finding” from the forensic accountant’s final report.

Snow asked if the other board members can show him where this wording or finding is, he would be glad to withdraw the motion to amend.

That’s when board member CPA Kevin Gentry said that the wording was in his final report of June 29th and asked Snow to look on page 3 at the first paragraph under Investigative Conclusion (bold and underline in the report)

That’s when the getting got good.

Snow looks at his page 3 at the first paragraph and says that his report doesn’t have that conclusion in it.

And Gentry says that it is in his final report.

Now you have to picture this.

Snow sits next to Gentry on the board.

Snow leans over and looks at what Gentry has printed out and says

“You have a different final report than me. There’s two different final reports with the same June 29th date. Mine is a spiral bound original handed out at the meeting. What’s yours?”

Gentry then says something like he printed it off his computer. Snow says something like

“How can there be two different forensic accountant final reports with the same date with a different conclusion in each?”

At that point the board majority and Superintendent Burkey have these dumbfounded expressions on their faces as in what do we say when we are caught at a public meeting B U S T E D!!!

After moments of–What do I say now?–silence, board member Aileen Seedorf says (paraphrasing closely)

“I have an original bound final report and mine has the same wording as Mr. Snow’s”.

(Seedorf sits on the other side of Snow and compared her page 3 to his.)

Obviously there can only be one final report dated June 29, 2007 that on the bottom left of the report pages has printed

How Gentry got his copy, how the conclusion got changed or not, who changed it or didn’t, and how it came about getting changed or not, raises a lot of interesting questions.

You would think that Gentry, a C.P.A. who got together with board members Quagliano, a C.P.A. and Green to draft the resolution might have been a bit more careful.

Wait a minute, who cares what is actually true or who needs to be careful when you have a majority of votes and can declare anything true you want, by resolution of the Board of Education.

What do you think happened to Snow’s motion to amend?

It got voted down by the board majority 4-2. The two C.P.A.’s, a police officer and furniture salesperson liked their version of Jefferson Wells’ final report a lot better than what was actually handed out to board members.

The resolution ended with this declaration.

1. The recitals set forth above are found to be true and correct.

It made me look up the spelling of this word:

chutzpah

I found chutzpa and hutzpa as well:

n. Utter nerve; effrontery: “has the chutzpah to claim a lock on God and morality” (New York Times)

Huntley School District 158 has finally given the media a summary of the forensic audit.

Well, it gave some of the media the report. McHenry County Blog didn’t get a copy. Maybe no one could find the email address down to the lower right.

Maybe I’ll have to file another Freedom of Information request. That’ll mean I get it in two weeks.

Snow finds many flaws with the work of the firm, Jefferson Wells, which has been heard advertising for more business on WBBM radio.

I’ll bet they don’t use Snow as a reference.

Here are his comments:

The contract calls for identifying “any instances of inappropriate disbursements from any District account, which may be in violation of Board of Education policy.” This is under the heading “Jefferson Wells Services and Responsibilities” (underlined and bold in document)

This wasn’t done.

There was no forensic accounting of all of the payments and disbursements because the total dollars expended were so large. It may not be Jefferson Wells fault because the contract also says the District “oversees the direction and timing of Jefferson Wells procedures.”

Here’s what it looks to me was not approved in open session as part of specific compensation to many administrators:

1. The District paying for the employee’s contributions to his or her own retirement plans when there was no board policy to do so.

(One fiscal administrator had no provision for any retirement contribution to be paid by the District and the payments were made for three consecutive years. Cost to taxpayers: About $20,000.)

Using a payroll average of $1.5 Million and a 10% contribution rate for example, the dollar value would be about $150,000 per year. Do this for 4 years and you get $600,000.

2. Free family health care coverage paid for many administrators when there was no board policy to do so. If you think this pertained to only a handful of people, then consider that currently District 158 has about 35 individuals classified as eligible to receive this benefit and about 25 actually do.

If the extra cost difference averaged $6,500 per year, for four years this would be $28,000 for each administrator. For only 15 administrators this would be $420,000 (15 X $28,000)

3. Many weeks of extra paid vacation beyond what is called for by board policy.

Take an extra 2 weeks per administrator for only 15 administrators and that’s 30 extra weeks per year. For 4 years that’s 120 extra weeks, or more than 2 years of one administrator’s salary. That’s a six figure dollar value.

4. Extra cash payments to administrators who received free family health care. This was disguised as “cash-in-lieu” payments, meaning cash in lieu of receiving healthcare coverage.

These payments were not authorized as part of board policy during the four years examined in the audit. (The forensic auditors said the cash in lieu payments exceeded $200,000.)

Why wasn’t a forensic accounting done for all of the inappropriate disbursements?

Because the dollar value may approach or exceed $1 Million.

You can’t buy popularity with administrators if you embarrass them with the facts.

Were the many deficiencies of what and how the work was done pointed out by whoever authored the report?

Of course not.

Why weren’t all board members given the opportunity for input?

The answer is the board majority wanted their spin on the summary without interference from any who might question their interpretation.

This is a board majority whose approach is confrontational. It was a real missed opportunity to work together as a unified board.

Huntley School District 158 has finally given the media a summary of the forensic audit.

Well, it gave some of the media the report. McHenry County Blog didn’t get a copy. Maybe no one could find the email address down to the lower right.

Maybe I’ll have to file another Freedom of Information request. That’ll mean I get it in two weeks.

Snow finds many flaws with the work of the firm, Jefferson Wells, which has been heard advertising for more business on WBBM radio.

I’ll bet they don’t use Snow as a reference.

Here are his comments:

The contract calls for identifying “any instances of inappropriate disbursements from any District account, which may be in violation of Board of Education policy.” This is under the heading “Jefferson Wells Services and Responsibilities” (underlined and bold in document)

This wasn’t done.

There was no forensic accounting of all of the payments and disbursements because the total dollars expended were so large. It may not be Jefferson Wells fault because the contract also says the District “oversees the direction and timing of Jefferson Wells procedures.”

Here’s what it looks to me was not approved in open session as part of specific compensation to many administrators:

1. The District paying for the employee’s contributions to his or her own retirement plans when there was no board policy to do so.

(One fiscal administrator had no provision for any retirement contribution to be paid by the District and the payments were made for three consecutive years. Cost to taxpayers: About $20,000.)

Using a payroll average of $1.5 Million and a 10% contribution rate for example, the dollar value would be about $150,000 per year. Do this for 4 years and you get $600,000.

2. Free family health care coverage paid for many administrators when there was no board policy to do so. If you think this pertained to only a handful of people, then consider that currently District 158 has about 35 individuals classified as eligible to receive this benefit and about 25 actually do.

If the extra cost difference averaged $6,500 per year, for four years this would be $28,000 for each administrator. For only 15 administrators this would be $420,000 (15 X $28,000)

3. Many weeks of extra paid vacation beyond what is called for by board policy.

Take an extra 2 weeks per administrator for only 15 administrators and that’s 30 extra weeks per year. For 4 years that’s 120 extra weeks, or more than 2 years of one administrator’s salary. That’s a six figure dollar value.

4. Extra cash payments to administrators who received free family health care. This was disguised as “cash-in-lieu” payments, meaning cash in lieu of receiving healthcare coverage.

These payments were not authorized as part of board policy during the four years examined in the audit. (The forensic auditors said the cash in lieu payments exceeded $200,000.)

Why wasn’t a forensic accounting done for all of the inappropriate disbursements?

Because the dollar value may approach or exceed $1 Million.

You can’t buy popularity with administrators if you embarrass them with the facts.

Were the many deficiencies of what and how the work was done pointed out by whoever authored the report?

Of course not.

Why weren’t all board members given the opportunity for input?

The answer is the board majority wanted their spin on the summary without interference from any who might question their interpretation.

This is a board majority whose approach is confrontational. It was a real missed opportunity to work together as a unified board.