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Thursday, March 21, 2013 11:04 am

Red flags aplenty

Park board warned on money issues

An accounting firm that conducted annual audits of the Springfield Park District repeatedly warned the park board about lax financial oversight, but the board didn’t quickly implement recommendations for improvement.

Issues raised as long ago as 2007 by Perrino and Associates, a CPA firm that conducted annual audits, ran the gamut. Hundreds of dollars were spent on alcohol and exorbitant tips, according to an audit of the fiscal year ending April 30, 2008. A half-dozen operating funds had negative balances without park board approval, according to letters to the board from auditors written in 2008 and 2010. And the board didn’t review financial records, auditors wrote in three letters sent to the board in 2008, 2009 and 2010 that included recommendations that the board review records to ensure that money was properly spent.

Despite repeated recommendations to review financial records, the board didn’t start reviewing monthly records documenting the expenditure of public funds until 2010, when Perrino and Associates told the board that reviews were necessary and needed safeguards weren’t in place. In a letter, the accounting firm told the park board that it had found “certain deficiencies in internal control that we consider to be significant deficiencies.” In that same letter, the firm wrote “there is more than a remote likelihood that a misstatement of the entity’s financial statements (that) is more than inconsequential will not be prevented or detected by the entity’s internal control.”

Board member Ted Flickinger, who was elected last year, acknowledged problems with oversight and financial practices. The district, he says, needs to change the way it does business.

“I’m glad all this is coming out,” Flickinger said. “I think we’ll be a better park district.”

After being warned of deficiencies in financial controls, the district in 2010 began paying employees, including top administrators, for unused vacation without the board’s knowledge. More than $165,000 was paid out, with former executive director Mike Stratton receiving the largest chunk, before the board found out last month. Stratton subsequently resigned when the board discovered that he had received a $500 advance on salary and an additional $2,100, apparently in lieu of vacation.

After resigning, Stratton got his last vacation checks on March 7, when the district paid him $993.86 and $4,066.59 in two payments for unused vacation, according to the district. It’s not clear how Stratton, who was paid for 391 hours of unused vacation in 2012, amassed so much time off given that he accrued vacation at the rate of 136 hours per year and had received payouts for unused time in 2011 and 2010, when the district, without board approval, established a policy of paying employees for all unused vacation in excess of 24 months at the end of each calendar year.

Last year, Stratton got checks for unused vacation in June, August and November. At least 10 other district employees also received checks for unused time last November, but none got checks for unused time earlier in the year.

Flickinger said he doesn’t know how Stratton was able to accumulate enough vacation to be paid for nearly 400 hours in a single year.

“It certainly is a fair question to ask,” Flickinger said. “One of the problems we had, and that’s going to change, is the director works for the president of the board. Sometimes, that working relationship doesn’t get conveyed to the board.”

Board president Leslie Sgro said that the director works for the entire board, not her.

“Ted must have misspoke,” Sgro said. “The director works for the entire board, not just me.”

Does Flickinger have confidence in Sgro?

“I think she means well,” Flickinger answered. “I think she’s a great ambassador for the park district. How much she knows about finances and how much she knows about all these different (operating) funds, I don’t know. I don’t like to talk about a fellow board member and be negative.”

In a 2010 memo, Stratton and Mark Bartolozzi, district finance and human resources director, wrote that the payout policy was enacted due to a concern about unfunded liabilities that included accrued vacation. And auditors had repeatedly told the board that unused vacation, sick leave and comp time had accumulated in seven-figure amounts. In 2008, Perrino and Associates put the total at more than $937,000. The amount rose through the years, according to annual audits received by the board. By last April the figure had grown to nearly $1.16 million, according to Lawrence Travis and Co., a CPA firm that replaced Perrino as the district’s auditor.

While the board has rescinded the 2010 policy that paid employees for unused vacation, there has been no action to limit the amount of sick time or comp time that employees can accrue. Sick time is, by far, the largest chunk of the district’s time-off expense, according to annual audits. It was most recently broken down in 2009 by  Perrino and Associates, which put the figure at nearly $700,000. Lawrence Travis has combined sick time, compensatory time and vacation time as a lump sum in subsequent audits.

Sgro said that the board plans to update policies regarding vacation, compensatory time and sick time.

Besides repeatedly notifying the board of the financial consequences of accrued time off, auditors in 2008 and again in 2010 told the board that a half-dozen operating funds had negative balances without board approval, which could result in failure to pay bills in a timely manner.

“We had recommended previously that the board be apprised of the negative cash balances each meeting and they approve the borrowing of cash from other funds and from which funds at each meeting,” Perrino and Associates told the board in a 2010 letter. “There is no record in the park district’s board meeting minutes that this has been done.”

In 2009, the firm told the board that a review of 2008 records showed that district credit cards had been used to buy alcohol. One charge was for $113, auditors found, and another charge was for $428. In one case, auditors found, a $150 tip had been tacked onto a bill for alcohol, which amounted to a 26 percent gratuity. In another case, auditors wrote, a 26 percent tip had been given on a food bill. Auditors also found that the district had paid for meals twice by giving per diems to employees, then paying for meals. In addition, there was no documentation showing who had dined at district expense, auditors found. As in subsequent reviews, auditors wrote that the board wasn’t kept apprised of money matters.

“During our review of the minutes of the board and the finance committee there was no indication that the board was kept informed of the financial position of the park district,” auditors wrote.

The district on Feb. 25 instituted a spending freeze and plans a forensic audit in the wake of Stratton’s departure. The spending halt is routine, according to Bartolozzi, who said that the district always freezes spending near the end of its fiscal year.

That’s not a sound financial practice, according to Flickinger.

“Everything should be in the budget, and we should stick to the budget,” Flickinger said. “This district has not faced up to the fact that every year they have a cash flow problem. They need to do something about it. We’ve got a problem.”

Sgro didn’t directly answer when asked if freezing spending near the end of each fiscal year is a good practice. She said the board is working on a “very conservative” budget for next year.

“We are moving forward to make sure that the district stays on sound financial footing,” Sgro said. “We need to get things on sound footing.”

Letters from auditors to the park board
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