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State petition audit of city of Crestwood finds no illegal activity or missing funds


March 16, 2005 - By MIKE ANTHONY

Executive Editor

A state audit of Crestwood found no evidence of illegal activity or missing funds.

But several people who collected the bulk of the signatures triggering the petition audit apparently were missing from last week's presentation of the results.

In response to residents' questions, Tom Kremer, director of local government audits for the State Auditor's Office, said no evidence of illegal activity or missing funds was discovered.

Roughly 75 people gathered March 10 at City Hall to hear Kremer present the results of the state audit, which primarily covered the fiscal year ending June 30, 2003.

"The city of Crestwood is in poor financial condition,'' according to the state audit, which cited some of the conclusions of the forensic audit performed by Brown Smith Wallace in 2003.

The forensic audit alleges that two former Crestwood officials violated the City Charter, numerous ordinances and their duties as fiduciary officers in their handling of the city's finances. In November 2003, the city filed a lawsuit in St. Louis County Circuit Court alleging that former City Administrator Kent Leichliter and former Finance Officer Robert Wuebbels breached their fiduciary duties by manipulating financial records to misrepresent the city's true financial condition to city officials.

The city's lawsuit also alleges professional negligence and breach of contract by Hochschild, Bloom & Co., which served as the city's independent auditing firm from 1998 to 2002.

"... We did not go and point out everything that was in the forensic audit, but we do talk at the bottom of Page 5 and the top of Page 6 (about) a few of the problems that were noted in that particular forensic audit, such things as things being handled as a interfund borrowing instead of a transfer, a number of questionable journal entries and transfers that exceeded what was approved in the budget process,'' Kremer said. "The city also, again, before we came in here, took some steps to make some changes. They eliminated the internal service fund. They changed some procedures as far as approval and documentation of journal entries and they redesigned an accounting system that would allow them to really recapture some of the previous costs that were incurred.''

Kremer later said, "... What we found was that apparently a lot of good financial information wasn't forthcoming in prior years. A lot of reports and things that needed to be given to a governmental body from them to make good decisions was not there. We have not seen any evidence of that fact. Now what we are finding is that currently the city has implemented some procedures and more and more financial records and more and more financial information is being provided either on a quarterly or a monthly basis. Bottom line on our recommendation is still that you're not out of the woods yet and the city needs to continue to closely monitor your operations and work in order to improve the overall financial condition of the city.''

The city's response to that recommendation stated, "The city remains extremely concerned that the state auditor has chosen to so briefly discuss the forensic audit, its findings and the many actions taken by the city beginning long before the results of that (forensic) audit were complete ...''

The state audit also contended that the city did not have adequate documentation to support $75,300 paid to the former city administrator from December 2002 through October 2003. In December 2002, the city entered into a reassignment agreement with Leichliter changing his position to administrative adviser and agreeing to pay him his current salary less standard deductions until March 1, 2004. Aldermen terminated the agreement in October 2003, shortly before the lawsuit was filed.

The city disagrees with the auditor's position on Leichliter's reassignment agreement.

"The city strongly disagrees with the state auditor's opinion regarding the reassignment agreement entered into with the former city administrator. The city believes that the state auditor has failed to recognize this personnel matter and has rendered this opinion with insufficient information,'' the city's response stated.

Kremer also noted concerns over the board-approved car allowance of $830 per month to Don Greer, who was named city administrator in December 2002. Greer, the city's police chief since 1990, continues to serve in that role.

"... We raised a concern as far as the overall reasonableness or how the support of a car allowance that was given to the city administrator. You see a chart on Page 11 where we've done some comparison and we basically question (the) $830 allowance to the city administrator,'' Kremer said. "Now to the city's credit, they had some documentation in here that went about their analysis. As you can see throughout here, we question some of that information that went in there, but, again, they did have some methodology to it. It comes back to what you define as reasonable. We did particularly — we questioned this.''

The state audit report recommended the board review the "reasonableness'' of the car allowance, but in its response, the city noted that the car allowance is part of a "negotiated compensation package. The chief of police receives no additional compensation for assuming the responsibilities of city administrator. The city realizes a savings in excess of $135,000 annually in wages and benefits through this agreement. At present the chief of police/city administrator's compensation is 85 percent of the standard wage scale for the one position of city administrator in this region.''

Of the city's response, Kremer said, "... They do disagree with us on the vehicle allowance and they make some very valid points in here that I'd like to bring to your attention ... The amount paid to the city administrator is part of a, that they believe it's part of the overall negotiated compensation package. As you're probably aware, your (police) chief/city administrator is one individual and they point out in here that as a result of this situation that the city has taken on a tremendous savings. Obviously, there's not a lot of cities that do that, but some do. We're not here to tell you that's a good idea or a bad idea. Our point was basically to discuss the fact that the (car) allowance is something that we thought needed to be looked at.

"So, again, I caution you and I actually ask you to take a good look at not only what we're saying, but (at) all the responses and things that are here in order to put this thing on balance. It's real important to go ahead and look at that,'' Kremer added.

In November 2003, the city received a letter from the State Auditor's Office that stated a petition containing 1,129 signatures had been submitted requesting a state audit, and 739 signatures were needed to trigger such an audit. Of the 1,129 signatures submitted, 1,020 were signatures of registered Crestwood voters. Non-residents collected 766 signatures or 67.85 percent of the total number collected. Non-residents Ken Boegeman, Ken Boegeman Jr., Timothy Boegeman and Harry M. Boegeman Jr. — collected 584 signatures, while Kelley Isherwood of Oakville collected 167 signatures. Another nonresident, Carolyn Dobbs, collected 15 signatures.

None was present March 10 for the presentation of the audit. The chief petitioner for the audit, Roger Anderson of Crestwood, also was not present.

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