By: Nancy Mathieson and Mark Glennon*
Country Club Hills, a suburb of Chicago, seems intent on making itself the poster child for poor financial reporting. A reader recently alerted us to its plight, which indeed looks bad, but just how bad is hidden by the shoddiest municipal financial reporting we have seen.
The city appears to be living day-to-day, short of cash, because its City Council minutes from last month say it’s issuing payment vouchers, just as it did last year at this time. That sets off an alarm, but if you look for data similar to what other towns and cities report, in hopes of getting an explanation and clearer picture, you won’t find it.
It’s an old story for Country Club Hills. In 2011, the Better Government Association and WGN reported on their joint investigation into the city, including concerns about a possible $8 million unaccounted for. Country Club Hills Mayor Dwight Welch was also questioned about personal spending charged to the city, allegedly racking up a long list of dubious expenses at places like Hooters, Build-a-Bear, the Apple Store, Niketown and the Disney Store, plus an all-expense paid undercover police vehicle. The city council approved a $36,000 allowance for city business for the mayor but, according to the BGA/WGN investigation, he overspent it. “He is acting like a CEO of a 500 company with profits of billions of dollars a year and perhaps the capacity to give him some perks,” said BGA President Andy Shaw back in 2011.
Chicago Magazine earlier said he appears to enjoy an all-expenses paid lifestyle. He justified spending $40,000 of campaign funds on his house by saying it was his campaign headquarters, according to the Southtown Star, and their list of suspicious items goes on and on.
In response to the probe, in November 2011 the city council voted unanimously not to use the mayor’s appointed auditor but an independent auditor to review their books. Residents also called for a state and federal investigation of the city’s accounting practices.
Aside from the mayor’s own expenditures, the city itself, with 16,000 residents, may have overspent under his tenure. During 2006, the city took out a $16 million municipal bond and began construction on a $5 million amphitheater, a $2 million fire station and various infrastructure improvement projects.
After 27 years as mayor of Country Club Hills, Dwight Welch is completing his final term of office, but he is not going out easily. Last year, three aldermen who had been critical of Welch placed a term limits referendum on the ballot that passed, prohibiting Welch for running again in April.
The city’s finances, however, are still hopelessly obscured. The most recently published financial statements go back to 2012. A 2014 auditor’s report on those financial statements said they could not give a clean opinion on the 2012 statements because the city couldn’t provide appropriate supporting documentation for a significant amount of items.
Don’t expect to find current information about pension problems, either. All we could find came from FOIA’d reports from the Illinois Department of Insurance. Those reports indicate the city’s police and fire pensions were only 57% and 55% funded as of May 2013. Their total unfunded liability at that time was $19.8 million, a major problem for a city that had just $23 million in total revenue in 2012.
Minutes from a city council meeting on March 24th of last year posted to the city website show some of the problems arising from delinquent and inadequate financial reports:
Mayor Welch stated that there are two outstanding fiscal year audits and that the forensic audit needs to be released to the City. City Attorney, John Murphey stated that the Inspector General had stated that the audit could be released to the City Council. Mayor Welch stated that grants could not be received from the IDNR (Illinois Dept. of Natural Resources) because of incomplete audits; that the audits should be completed and a CPA should be hired for the City. A heated discussion ensued with Alderman Lockett addressing issues of missing monies in the amounts of $40,000 and $6.5 million, Mayor Welch stating that there are seven civil rights suits pending against the City and the treasurer stating that she feels the staff is unable to do their jobs with integrity because of the corporate culture set by the Mayor.
At last year’s May 12th city council meeting, Mayor Welch said the results of the recent forensic audit and an I.R.S. audit would be posted on the city website. A current review of the site does not show those documents.
Finally, Mayor Welch’s bio says he has been an adjunct professor for several colleges and that, “as a Graduate School professor,” his curriculum included government finance classes. He is “nationally recognized financial expert in city government operations,” it says.
Homeowners in working class cities like Country Club Hills have much of their lives’ savings invested in their homes, and the value of those investments depends heavily on their city’s financial condition. If financial disclosures this inadequate occurred in association with many other types of investments, legal action would ensue.
*Nancy Mathieson is Contributing Editor of WirePoints. She has a 30-year career in business, securities regulation and public policy. She held positions as staff auditor at the Chicago Mercantile Exchange (CME) and Director of Market Surveillance at the New York Stock Exchange (NYSE). Most recently, Nancy was Operations Director at Truth in Accounting, a Chicago non-profit whose mission is to promote transparency in government financial reporting. In this role, she directed Accounting teams in grant-funded research studies on the financial condition of state and local municipalities.
Mark Glennon is founder of WirePoints