Pension fund dollars diverted to general fund expenses, officials say

ISLAND LAKE – More than $200,000 in taxpayer dollars were mismanaged, spent on legal fees and settlements instead of being placed into the police pension fund, village officials said.

Facing cash-flow problems, the village did not transfer any of the money levied for the police pension fund to the fund for the 2011-12 fiscal year and only half of the $150,000 levied for the 2012-13 fiscal year, Treasurer John Little said.

The Police Pension Fund Board was alerted by fund managers this past spring that the money had not been deposited, said Sgt. David Walz, who serves as the board's president. The board received the fund's audit this week, which confirmed the report.

"That is money due to the pension fund," Walz said. "That is taxpayer money from hardworking people [levied] to pay police pensions."

The board is in talks with the fund's auditors, the village's auditors and the village administration to figure out how much is owed and on how to reimburse the fund, he said. They also are discussing what interest the fund would have earned if the money had been in the fund to invest.

Pulling the money from the general fund could create cash-flow problems in January or February 2014 – the same issue that led to the money not being deposited in the first place, Little said.

Under state law, after notifying the village, the board can notify the Illinois State Comptroller that the village failed to transmit the required contribution. The comptroller would then, starting in fiscal 2016-17, divert a portion of state funds that would have otherwise gone to the village.

Village President Charles Amrich, who took office in May, did not return a call for comment Thursday.

Debbie Herrmann, who was village president during the years the funds were not deposited, said she was never informed that cash-flow issues had led to the funds not being deposited.

Village trustees and the village president do not attend pension board meetings and don't get minutes from the meetings, she said.

"There's no real correspondence between the pension fund and the board," Herrmann said.

Little did not inform the Village Board during a public meeting and could not immediately confirm whether he had notified them some other way.

Little did approach the board in February 2011 about borrowing money from the water department fund to cover general fund expenses, according to Little and meeting minutes. The board voted down the request.

After the vote, the board was informed that the village had spent $250,000 on legal bills, $247,000 on lawsuit settlements, and $175,000 on unexpected police retirements over the 2010-11 fiscal year.

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