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Local

How did the auditors miss the missing millions?

Not shocking for fraud to go undetected, one expert says

About 75 press members and citizens squeezed into Dixon City Council chambers Wednesday morning to hear a statement from Mayor Jim Burke about the arrest of Comptroller Rita Crundwell.
About 75 press members and citizens squeezed into Dixon City Council chambers Wednesday morning to hear a statement from Mayor Jim Burke about the arrest of Comptroller Rita Crundwell.

DIXON – The main question Dixon residents are asking, Mayor Jim Burke said, is how can someone steal $30 million and get away with it?

The mayor was addressing a crowd of about 75 residents, city employees and reporters gathered for a news conference in council chambers Wednesday morning, a day after the city’s top financial officer was arrested.

Comptroller Rita A. Crundwell, 59, of Dixon, was arrested Tuesday morning at work at City Hall. Prosecutors say she took the $30 million over the past 6 years. She is charged with federal wire fraud, and faces up to 20 years in prison.

“We realized the main question is, how can someone allegedly steal $30 million and get away with it for so long?” Burke said in a 5-minute prepared statement he read at the news conference.

The city’s annual audit is prepared by two accounting firms: CliftonLarsonAllen LLC (formerly Clifton Gunderson) compiles the financial information, which is given to Samuel S. Card, CPA, LLC, of Sterling, which reviews the information and issues the audit report.

Card has been doing the audit since 2006, Burke said in an interview after the news conference. CliftonLarsonAllen used to do both parts before recommending Card to do the report. The City Council approved the decision.

As required by state law, the yearly audits were reviewed by the Illinois Comptroller’s Office; they always were approved, Burke said.

Card didn’t return calls to his home or office Wednesday. On Tuesday, he said he hadn’t heard about the arrest and declined to comment.

As part of its effort to restore confidence in the process, the city will use different firms in the future, Burke said.

That doesn’t necessarily mean the auditor did anything wrong, said Mark Peecher, an accounting professor at the University of Illinois.

“One of the things you need to keep in mind, there’s this thing called the expectation gap,” Peecher said. “The public thinks the audit does more than it does.”

Even so, Peecher said he wouldn’t be shocked to find out the audit wasn’t up to par.

“The probability that this happens and the person doesn’t get caught increases if the audit was of insufficient quality,” he said. “But even if the audit were up to standard, this could still happen and that would not be shocking.”

Fraud is most likely to be detected, he said, by someone within the entity – like in this case – or by the media.

“The classic kind of fraud for a municipality or a not-for-profit is that some very trusted employees are taking money for themselves,” Peecher said.

Entities can make fraud harder to commit by splitting up financial duties, especially the bookkeeping, custody of assets and the authorization to release those assets.

Crundwell handled all those jobs for Dixon.

Peecher also recommended two additional types of audits: one that looks at internal controls such as the segregation of duties, and a forensic audit, which takes more time and is more costly. Forensic audits also work on the assumption something is wrong, he said.

Burke said he absolutely would consider implementing forensic audits.

State Sen. Tim Bivins, who lives in Dixon and represents the city in Springfield, said cities should utilize forensic audits.

“I don’t know if we want to require them, but everybody’s got to take a hard look at who’s running the store,” said Bivins, who graduated from Dixon High School with Crundwell in 1971.

Both Bivins and state Rep. Jerry Mitchell, R-Sterling, said the arrest is a big topic of discussion in Springfield.

“We’ve got to wait and see what the federal investigation brings about,” said Mitchell, whose district also includes Dixon. “Once this reaches the federal level, the state doesn’t usually interfere or try to step in.”

Once more information is available, Mitchell said, residents may see some bills in the works. His idea was to increase the number of people notified of payments from the state, so that one individual wouldn’t be able to siphon the dollars and just say they never came.

In the news conference, Burke pointed to late state payments, among other things, as a reason why no one at the city suspected the city’s financial troubles were anything more than what other cities were experiencing.

Bivins wants to revive bill requiring officials to report fraud

SPRINGFIELD – A Senate bill requiring municipal officials to review audits and report any suspected fraud may see a second life, its sponsor said.

The measure was referred to the Assignments Committee at the end of March – a move that often means the end of a bill’s progress through the Legislature – but following the arrest of Dixon Comptroller Rita Crundwell, state Sen. Tim Bivins, R-Dixon, said he may try to resurrect it.

Bivins sponsored the legislation following the arrest of Whiteside County Engineer Steve Haring, who was accused of misusing county equipment and having employees he oversaw work on his personal projects on county time.

Assistant to the Engineer John Bauscher initially took his suspicions to a Whiteside County Board member, but when the board member did not respond quickly enough, he went to State’s Attorney Gary Spencer.

Bivins worried that sometimes elected officials, especially at local levels, aren’t sure what to do when things happen. He wanted the bill to clear that up, although he said it probably wouldn’t have helped in either the Haring or Crundwell cases.

To read the bill, go to ilga.gov and search for “SB3323.”

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