Editor's note: This is the first in an ongoing series reporting details of a forensic audit of the Saline County Clerk and Recorder's office.
SALINE COUNTY -- The 96-page forensic audit findings of a firm hired to evaluate transactions within Saline County Clerk and Recorder Kim Buchanan's office says it contains evidence of mismanagement, waste and abuse.
"Results are that mismanagement, waste and abuse have occurred based on the evidence discovered by examiners with an estimated impact to the county being at approximated as $1.084 million," the report says in the cover letter to the Special Audit Committee.
The cover letter also states "The report contains fact-based findings that are not a matter of opinion."
The Saline County Board authorized the audit in September and the audit period is from January 2015 to October 2017. Marsh Minick PC, the auditing company, is a financial crimes consulting firm from Portland, Ore. The examiners, Brandi Marsh and Melissa Frick Minick, have more than 30 years of combined practice, according to the report.
The bulk of the $1.084 million noted in the report appears to stem from borrowing money from one levy fund and depositing it another levy fund.
Under the "Extension of Taxes and Levies" section, the impacts are "$400,000 to $510,000 borrowed from the Social Security Levy for IMRF Levy between 2013 to 2014," and "$597,451 paid from the IMRF Levy for 'Egyptian Health Department Levy.'"
According to the audit report, "Forensic analysis of the IMRF account and ledger, Social Security account and ledger, and CB meeting minutes, together show a longstanding debt from at least 2013 when the CCRO 'borrowed' money from the Social Security Levy to fund a shortfall in the IMRF levy. The CCRO officeholder informed the CB in August 2015 that it had borrowed $400,000 from a 'special levy' to cover for a 'shortfall' in the IMRF Levy. Then in October 2015, the CCRO officeholder discussed with the CB an even higher amount of $410,000 borrowed in 2014."
IMRF is the Illinois Municipal Retirement Fund. It is a defined-benefit retirement plan that provides retirement, survivor, disability and death benefits to municipal government employees in Illinois, according to IMRF.
According to the audit report, IMRF auditors found the commingling of IMRF and Social Security funds and sent a report to Buchanan. Marsh Minick, the forensic auditors, contacted IMRF during the course of their audit and were told commingling of IMRF and Social Security funds "may violate the Section 218 agreement with the Social Security Administration, which requires 'the money must be accounted for separately outside of the audit report.'"
The audit report also indicates improper payments may have been made from the IMRF levy fund.
"When examining the expenditures of the IMRF Levy fund, payments were detected for other purposes besides IMRF. Additionally, late levy payments for other levies seem to have been made out of the IMRF fund," the report says. "In a FOIA request submitted to IMRF, examiners were told, 'The levy authority for the IMRF portion of the employer contribution is found in Section 172 of the IMRF Article of the Illinois Pension Code. Paragraph (h) of this section sets out the limitation that the levy can only be used for IMRF employer contributions.'
"Moreover, regarding the IMRF fund payments to other levies, the IMRF responded, 'No, IMRF levy money is restricted for IMRF employer contributions. See Section 172 of the Pension Code.'"
The audit report also includes a timeline from Aug. 15, 2015 through October of 2017 that details several transactions within various levy funds.
From the timeline:
"On August 18, 2015, the CCRO officeholder and deputy attended a committee meeting for the CB where they disclosed the IMRF special levy will be out of money by the year-end and IMRF owes $400,000 to Social Security special levy. The CB meeting notes reflect the officeholder, two months prior, had said, 'Everything was okay' in levies. The CB instructed the officeholder that it is the 'responsibility as the County Clerk to handle levies and if needed do a truth/taxation hearing. If needs more money it's their [Clerk] responsibility to take care of it.'
"On August 27, 2015, the CCRO officeholder advised the CB during a meeting there was a shortfall in IMRF and '$400,000 was borrowed from a special levy to fund IMRF.'
"On October 22, 2015, the CCRO officeholder attended a committee meeting of the CB where special levies IMRF and Social Security were discussed, 'Social Security in 2014 was borrowed from in the amount of $410,000. We owe the Social Security this amount.'
"Two checks written by CCRO during October 2015 for a total of $178,289 to Egyptian Health Department. One check for $91,269 with a memo of '2nd half of 2014 Levy' and the other check for $87,020 for '1st half of 2015 Levy.'
"On November 4, 2015 the CB, committee-meeting notes say an advisory accountant shows the 'IMRF funding is behind $1.2 million… In 2014 (CCRO Officeholder) borrowed $410,000 from Social Security to meet IMRF needs.'
"In December 2015, another check issued to Egyptian Health Department for $82,780 with a memo of '2nd half of 2015 Levy'. This brings a total of $351,538 paid to the Egyptian Health Department between August 2015 and December 2015 for the payment of 2014 and 2015 levies.
"On August 5, 2016, the CCRO paid the officeholder a check to 'Stipend K Buchanan' for $292.50 with a corresponding ledger entry 'Trans from SS- K Buchanan stipend.'
"On August 26, 2016, a payment to the Egyptian Health Department for $31,833 with a memo of 'Balance of 2015 Levy.' The levy from 2015 was being paid in 2016.
"On September 30, 2016 check issued for $71,360 to Egyptian Health Department for '2016 Levy.'
"On October 17, 2016 check issued for $71,360 to Egyptian Health Department for '2016 Levy.'
"On November 17, 2016 check issued for $71,360 to Egyptian Health Department for "2016 Levy.'
"By the end of October 2017, there is no indication of repayment of the $400,000 to $510,000 borrowed from Social Security.
"During 2017, no checks were written to the Egyptian Health Department."
The audit report suggests moving money from one levy fund to another is considered mismanagement.
According to the report, "The CCRO misapplied Social Security Levy funds by borrowing them for the IMRF Levy fund. As of the date of this report, the Social Security Levy Ledger book and account does not show repayment of these funds. In one instance, a misapplication was for a stipend to the CCRO officeholder. When the CCRO officeholder was asked about borrowing money from Social Security levy for IMRF levy, they responded by saying 'absolutely…to my knowledge that has been moved because we have had to borrow from here to pay the other'. The officeholder indicated they authorized the funds borrowed. This appears to be mismanagement of levies budgeted, extended and collected. The CCRO officeholder referred to themselves as an 'IMRF Authorized Agent,' which does not seem to have the authority to commingle levies or pay IMRF funds for any other purpose. The misapplication of funds is problematic with statute 720 ILCS 5/33E-16 because between $400,000 and $510,000 was borrowed."
The audit report also suggests that because an increase in the county's tax levy would have exceeded the 5 percent "truth in taxation" threshold in order to make up its shortfall, money was moved around in the levy funds to avoid tax levy hearings.
"Borrowing, late and mismatched levy payments are indicative of a shortfall in the levy. The CCRO's actions, combined with the delay in reporting such actions to the CB, seems intentional to deceive the taxpayers about the financial standing of its tax status, to avoid triggering the Truth and Taxation 35 ILCS 200/18-56. Given the duration of the shortfall from 2014 through the present period, and the large amount borrowed, it seems implausible that less than a 5% tax increase would recuperate the money in a single fiscal year," the report states.