Officials experiencing flood of emotions in wake of audit
Crestwood officials are experiencing a flood of emotions about the conclusions contained in a forensic audit of the city's fiscal 2001 and fiscal 2002 finances.
Mayor Jim Robertson and City Administrator Don Greer told the Call that they are outraged over the results of the forensic audit, but they also are relieved that the investigation, under way since last July, has concluded.
They also are relieved because now they can address residents' questions about the city's finances. Furthermore, they say that changes already have been implemented or are scheduled to be implemented to prevent many of the issues identified in the forensic audit performed by Brown Smith Wallace.
Two former Crestwood officials — City Administrator Kent Leichliter and Finance Officer Robert Wuebbels — violated the City Charter, numerous ordinances and their duties as fiduciary officers in their handling of the city's finances, the forensic audit alleges.
Among the audit report's allegations is that many journal entries made by Wuebbels "were questionable and there was little or no supporting documentation ... We have established that the preparation of these journal entries represented a serious manipulation of the true accounting results on a fund-by-fund basis and these actions represent mismanagement of city funds and improper financial reporting to the board.
"The inter-fund activity recorded by Wuebbels, and approved by Leichliter, covered up the true financial results of the General Fund, which created a large deficit position,'' the report states.
In an executive summary of the forensic audit report, Greer notes that on a budget basis, the city operated at a nearly $2.5 million deficit in fiscal 2002, though aldermen were led to believe the city was operating in the black.
"... The fact of the matter is if you look at what happened, $2.5 million in round numbers in reserves are gone,'' Robertson told the Call. "The city almost went bankrupt. We came within minutes of turning off the lights and closing the doors and I'm kind of tired of being laid back about it. Twelve people are gone. We're broke.
"We're on our way to recovery. We're going to make it. I have people working 60-70 hours a week ... maybe 80. I've been up here after midnight repeatedly. I've been up here on the weekends repeatedly. We have turned the corner. We're on our way. We're going to make it and frankly I'm kind of tired of not talking about the good things that the people who work for the city have done. The heroic effort that they have gone to, to turn this thing around,'' he added.
Referring to the forensic audit report, Greer told the Call, "What you read is done, it's over. The wash of relief in the last day or two that's gone through this office has been nothing short of — I can't even think of a word. We can breathe ... When I was dealing with BSW (Brown Smith Wallace) and the attorneys who oversaw this because of obvious legal ramifications, my instructions to them were very painfully clear was that the reason that I was so aggressively involved in this is that this information was going to be public. You have to understand that there's got to be a public accounting of what occurred.
"We've reached that point. There's a tremendous amount of relief ... I know that the public's going to be outraged and upset and you know what, they ought to be. They deserve to be. They ought to be — but don't shoot the messenger. Take at look at what is criticized by BSW and balance that against the things that have already been corrected — long before BSW was even here — and what we've got scheduled,'' he said.
"Part of what you read when you read BSW's report is that we have objective confirmation that some of the postures and positions and administrative changes that we've made are appropriate,'' he said. "That makes me feel pretty good. We made most of these before BSW was even here. The big thing that happened was the moving of money between funds and part of that, largely that allowed that to occur, was that there was no check-and-balance mechanism that identified how those numbers were arrived at.''
Greer continued, "... This has been under a cloud for some period of time because of the legal nature and the personnel nature that's associated with what's been going on. The city has not been in a position where we could (discuss the situation). Now we can. We're ready. We know what happened. We know the extent of what's happened ... We feel good about where we're at right now in terms of the knowledge, in terms of being able to answer the questions that need to be answered. There's not, whatever the number is, $582,000 of merchant license money missing. It's not. It never existed. It was a fictitious revenue that we didn't catch and why didn't we catch it?''
Director of Finance Diana Madrid said, "The figures were audited. You go off history (when preparing a budget) and they're audited.''
"Twice,'' Robertson said.
Greer emphasized, "Don't shoot the messenger ... We are the ones who will deal with the repercussions, the echo that goes through the community now that this is public. We're the ones who sit in the chairs and sit at the dais and it's, like I said before, it's appropriate that the city residents be outraged. They should be. I'm a resident. The important thing, the truly, truly important thing is asking the question: 'How do we make sure this never happens again?'''
In his executive summary, Greer addresses that issue. "The impact on the information contained in this report has rather obvious long term ramifications to the city and our financial health. We have already corrected a number of the poor accounting practices detailed in BSW's findings and established appropriate mechanisms for internal controls. Those that we have not been able to immediately address will be in place by the beginning of January 2004. As we move forward, our first priority must be to rebuild our cash reserves.
"We have identified and reduced our annual operating costs by more than $650,000, delayed or adjusted capital expenditures totaling more than $1 million, established revenue projections based upon realistic expectations that do not include receipts from sources not yet available, and developed internal controls to prevent the unauthorized transfers of monies not approved by the board,'' he states.
Asked about the potential legal ramifications of the forensic audit's conclusions, Greer said, "We have attorneys that are looking into all of the findings and they will make a recommendation to the board when their research is complete.''