Richmond makes do without administrator

Auditor points to weak areas in financial controls

RICHMOND – About a year after the village of Richmond decided not to decide on whether to replace its administrator, officials still are working out the kinks, the village president said.

The village’s auditor – Eder, Casella & Co. of McHenry – identified issues, what it calls material deficiencies in the village’s internal financial controls, in a report delivered to the village’s board in August.

Some concerns are part and parcel with operating an entity with few full-time employees, and others were the result of a new finance clerk taking over right around the time the audit was taking place and the village grappling with how to pay back a $7 million loan to the Illinois Environmental Protection Agency, acting Village President Pete Koenig said.

When Tim Savage left in July 2011 after six years as Richmond’s village administrator, the board debated whether to fill the position. Savage earned $82,000 managing the village’s day-to-day operations.

The board looked at several alternatives.

One option included paying the city of Woodstock almost $47,000 a year to borrow its deputy city manager nine hours a week.

Another scenario involved making the village clerk full time with supplemental administrative support provided by the village’s engineering firm, HR Green, for a cost of about $51,000.

“As we spent time debating all of these options, time went by, six and seven months had elapsed, and we realized, you know what, we’ve been without this person for six or seven months, and we’re still here. Maybe we can do this,” Koenig said.

In the end, the Village Board decided to make its village clerk full time without going out for administrative support.

That means there are now two full-time administrative staff – the village clerk and a finance clerk – at village hall plus one “nearly full-time” administrative assistant, who also handles building and permits, Koenig said.

Without an administrator, oversight officially falls to the village president but, he said, the different trustees have been helping out in the areas in which they have the most experience and expertise.

Koenig took inspiration from the commission style-government he covered in Cedar Rapids, Iowa, as a radio and TV reporter.

Under the commission form, each member of the City Council oversees a particular segment of government activity.

The number of Illinois cities that use this form has dwindled over the past few decades as more cities hire professional city managers or administrators.

The main issue in deciding whether a municipality should have an administrator is demographics, said Scot Schraufnagel, a political science professor at Northern Illinois University.

“In fairly culturally homogeneous communities, an administrator might be your best bet,” he said. “Everybody is on the same page politically. You just need someone to administer the city’s business efficiently.”

As the Village Board considered the issue, it wondered whether Richmond, with a population of less than 2,000 people, is small enough that it doesn’t need a full-time administrator.

And maybe they don’t need one, Schraufnagel said.

“It just depends on what they’ve got to do,” he said. “If they’re trying to attract business, you might want to have a full-time guy there.”

At this point, Koenig said, he doesn’t see the village replacing Savage unless it experiences a lot of growth.

Having only three employees working out of village hall can make separation of duties difficult, and over the years, the village has made changes to strengthen internal controls as recommended by the auditing firm.

In order for a check to be issued, for example, the Finance Committee must first approve a warrant. That warrant then goes before the full board. Then checks are cut based off that warrant. Each check needs two signatures, the village clerk and village president.

And while checks like this are helpful, especially to catch unintentional mistakes, fraud experts say it’s just as important to control the blank checks themselves.

The security of the blank check stock is something that needs to be fixed, Koenig said.

Other changes like those recommended this year by the auditor typically go before the Finance Committee, which reviews internal processes and financial transactions.

Auditors pointed to six potential issues in their August letter to the board.

Two of the concerns were one-time issues caused by the village hiring a new finance clerk, Koenig said.

One point raised by the auditing firm was that the village’s bank accounts were reconciled during the last several months of the year instead of on a monthly basis.

Also, this year the auditing firm prepared the annual statements, from which the audit is conducted. In the past, those were prepared by the finance clerk, and that likely will be the policy going forward, he said.

It’s not unusual, though, for small- to medium-sized organizations to have the auditor prepare the statements, the firm said in its letter.

Eder, Casella & Co. also recommended the village develop its own process to identify mistakes in financial reports throughout the year instead of relying on the auditor to catch errors. It also recommended establishing procedures to reconcile payroll liability accounts on a regular basis.

While Richmond keeps a listing of its fixed assets and their value for the water and sewer departments – for things such as insurance – it should keep a listing for its other departments, as well, the firm recommended.

The village also has a number of accounts that owe other accounts, the letter said. It should establish a plan to pay down the balances.

Koenig said this is because the sewer and water account operates at a deficit, mainly caused by the loan the city acquired to pay for the wastewater treatment plant.

While these items likely will be discussed by the Finance Committee, Koenig said, they’re not high on his priority list.

The village is dealing with its own “fiscal cliff” as it prepares to negotiate with the Illinois EPA, he said. It hopes to change the terms of its loan.

If a deal can’t be reached, it could mean drastic changes, including shutting down the police department and contracting out police protection to the county, Koenig said.

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