Outstanding debt on aquatic center totals $200,000, administrator says
Though work on the Crestwood Aquatic Center at Whitecliff Park was completed more than a year ago, outstanding debt on the project totals roughly $200,000, according to City Administrator Don Greer.
While the city issued nearly $8.5 million in bond-like certificates to finance the new aquatic center and other improvements at Whitecliff Park, revenue from the city's Parks and Stormwater Fund will have to be used to retire the outstanding debt as a result of alleged mismanagement of city finances.
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, a forensicaudit performed by Brown Smith Wallace alleges.
During a Dec. 10 closed session, the Board of Aldermen voted unanimously to approve a "reassignment agreement'' in which Leichliter, who had served as city manager since 1978, would retire from his post Dec. 31 and become an adviser to the Board of Aldermen in the newly created position of administrative adviser until March 2004.
Under the terms of the agreement, Leichliter would continue to receive his $91,056 salary until March 1, 2004.
However, during an Oct. 28 closed session, the Board of Aldermen voted unanimously to terminate the reassignment agreement and to terminate all payments to Leichliter.
Shortly after Greer was named city administrator last December, he began researching the city's finances.
"After reviewing the expense and revenue history, I questioned the (former) finance officer and confirmed that a rather large amount of expenses in excess of those approved by the Board of Aldermen had been transferred to the Capital Improvements Fund. The (former) finance officer indicated that he had transferred in excess of $250,000 in this manner ...,'' Greer states in an executive summary of the forensic audit report. "Based largely upon violations of the city of Crestwood's charter, the resultant misrepresentation to the board and other financial problems, I asked for and received the finance officer's resignation in January 2003.''
The forensic audit of fiscal 2001 and fiscal 2002 was initiated after current city officials began an internal investigation into the accounting practices used by Leichliter and Wuebbels.
In his executive summary, 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 whole thing is about cash flow. Don't ever lose sight of it. That's what it's about. It's all about cash flow. The timing of all of this is really relevant,'' Greer told the Call.
In his executive summary, the city administrator wrote, "Among the most significant findings detailed in the report speaks to the issuance of the certificates of participation — COP — for the aquatic center. You will remember that when certificates of participation are issued, the money is not directly available to the city, but held in trust for disbursement based upon verified warrants approved by the city.''
The aquatic center financing came to Greer's attention last winter when the city received a bill from a landscaper totaling roughly $30,000 for work performed at the city's new aquatic center.
"We verified it was appropriate based on what already had been paid to him and all that other stuff. Filled out the appropriate form to send the bill and documentation over to the trustee to pay the bill ... Two days later, (Assistant to the City Administrator) Matt Conley walks in and says: 'I got a call from the trustee. We don't have enough money to pay the bill,''' Greer recalled.
That was true, he said, noting, "So we paid whatever we had out of the trust. We paid the rest of it from the Park and Stormwater Fund ...''
City officials then reviewed invoices sent to the trustee. "I'm looking at them and they all look right. It's a perplexing situation. I talked to Lisa Blumer, director of Parks and Recreation, asked for the budget that had been prepared ... It looked to me like we should have several hundred thousand dollars left and we still had a couple hundred thousand dollars worth of debt to finish the aquatic center project. So, in my mind, I'm looking at at least a half a million dollar swing here somewhere, but I can't figure it out.
"Well, I'm also without a director of finance by this time ... All this other stuff was going on. I'm trying to build (a financial) history and trying to get a handle on where we're at and I thought, well the aquatic center's built, I'll figure it out. At some point in time, I'll figure it out ...,'' he recalled.
After the board hired forensic auditors in July to research fiscal 2001 and 2002, Greer said he asked: "In addition to looking at this, I'd like it very much if you would look at the COPs (certificates of participation) issuance for the aquatic center project ... I thought a fresh pair of eyes from no history, no knowledge would be a good thing.''
After reviewing the prospectus for the issuance of the certificates, Greer noted that roughly $8.5 million of certificates were issued to fund the aquatic center project and other improvements at Whitecliff Park. Of that amount, 10 percent was placed in reserve, leaving about $7.5 million available, plus an estimated $150,000 in interest. The prospectus also indicated the Board of Aldermen had committed $954,200 for design, engineering and construction management for the project.
"Now I go back and look at all of those invoices,'' the city administrator said. "There happens to be a total of $918,000 and some change worth of invoices submitted to the certificates of participation for architect, engineering and construction management ... So I started looking at 2001, 2001 is when the certificates were sold. That's when the money started coming in.
"We can't find — (Director of Finance) Diana (Madrid) and I — neither of us can find a budget for 2001. It would have had to been a budget amendment. They would have had to adopt a budget in midyear for receipt of the tax in the special tax fund and any expenses associated with that, but we find no record of one in 2001.
"And it wasn't until we read the 2002 budget narrative, we found out that, in fact, there was not one made. The narrative discusses very specifically that this is the first year for it. But when you look at what was anticipated for fiscal year '02, there was no money set aside — that $954,000 was not identified.
"What we did find was for fiscal year '02, the spreadsheet that goes on into the future, also had a column for the previous year, 2001, that showed that they spent $491,000 for architect and engineering fees. OK. That's not exactly the way I would have done it, but they showed they spent money out of the Park and Stormwater Fund for architect and engineering fees. Well, why didn't they budget for the rest of it? There's no record of that being budgeted for.
"But wait a minute, there's still something not right ... I already know that that $918,000 should not have gone to that. Well, if I found $918,000 and they already spent $491,000, that's like $1.3 million. I mean that's way over, it doesn't make sense. But now, now we're figuring it out. So you look at when did this occur?''
During the fall months, particularly November, Crestwood has little cash on hand, Greer noted.
"Well, low and behold, in November of 2001 and you remember why November is an important month for the city of Crestwood ... Invoices that were paid in the prior fiscal year, a total of $350,000, the previous fiscal year that had been paid, and originally they did pay, it looks like $491,000 out of parks and stormwater. That would have been consistent with what the board had intended ...
"In November of 2001, the finance officer, his signature's on them, sent $350,000 ($349,215), he sent invoices that the city had paid in the prior fiscal year for reimbursement by the trustee ... and then when we got the money back in November, he didn't show it as a miscellaneous revenue,'' Greer said, "He offset expenses in the Parks and Stormwater Fund. If you reduce the expenses, what happens now? Now, I've got another $350,000 to play with. When? In November when I need money.''
Another $569,413 also was sent to the trustee for reimbursement, Greer said, noting, "That's how you get to the $918,000 ($918,628) because, in effect, the accounting for the certificates, there was originally $150,000 anticipated for interest and I think the interest was actually closer to $250,000 ... There was an additional $100,000 available for use. So that's why we ran out of money. That's why projects at Whitecliff (Park) can't be finished. That's why the board is going to have to go back and take a look at some priorities.
"We've got nearly $200,000 worth of outstanding debt for the aquatic center complex that's going to have to come out of the Parks and and Stormwater Fund. Now, understand, it would be OK to pay for architect and engineering and construction management fees from the (proceeds of) the certificates of participation. That's a potentially legitimate transaction. There's nothing wrong with spending the money on that, but that's just one more example it didn't matter what the board said. The board was very clear, very specific. It's in the prospectus. So when you ask the question: 'How could they have stopped it?' They didn't know. How would they have known that in one fiscal year $918,000 of additional revenue was either offset or hidden? Five-hundred-thousand (dollars) of that should have been expensed out of the Parks and Storm-water Fund in fiscal year '02. But it wasn't. It was ex-pensed out of the COPs.''
Citing a lack of checks and balances, Greer said, "The board wouldn't have known. There's no way for them to know because it was done in house.''