Dixon scandal has others asking, Could it happen here?
In Monday's editions of the Telegraph and Daily Gazette, read about new steps the city of Dixon is taking to make its processes more transparent. Also, find out which local administrator said Dixon's audit records had looked "out of whack" before Rita Crundwell was arrested.
DIXON – For years, then-Comptroller Rita Crundwell signed checks for the city of Dixon – and only her signature was required.
Things are beginning to change in light of Crundwell's arrest last month.
The city now gets three signatures on its checks – those of City Clerk Kathe Swanson, who has assumed Crundwell's duties; Mayor Jim Burke; and Assistant City Clerk Stephanie Terranova.
Entities can make fraud harder to commit by splitting up financial duties, especially the approving of expenditures, signing of checks, and recording them in the books.
Crundwell, 59, handled two of those duties – signing of checks and recording them in the books. And, in many ways, she essentially approved the expenditures.
She is now accused of misappropriating $53 million in city funds over more than two decades.
So how do other government entities in this area split up their financial responsibilities? And could they find themselves victims of large-scale fraud?
Sauk Valley Media reporters asked local government officials about their financial practices.
A chance to be proactive
The day after Crundwell's April 17 arrest, the Dixon School Board met for its regularly scheduled monthly meeting, but a new topic was added to the agenda: its internal controls.
"I felt that we needed to assure the residents of Dixon," Superintendent Michael Juenger said. "On our website, we have a letter that I've written and we have our procedures there. I did mention at that board meeting that we would have a third set of eyes look our books."
The district's reaction wasn't typical.
Most officials were confident that they already had procedures in place to minimize the chances that fraud could occur.
"It hasn't made us proactive, because we have been proactive prior to this," Rock Falls High School Superintendent Jane Eichman said.
She pointed to lunch money as an example: The district has one person collect it, another count it and a third take it to the bank.
Eichman, who was a business teacher for 20 years and got her bachelor's degree in business administration, said checks and balances were just something you had.
Executive Director Deb Carey said the Dixon Park District hadn't made any changes, either.
Juenger said the schools' reaction didn't have anything to do with David Blackburn, who besides being the city's elected finance commissioner also is the business manager for the district.
After the meeting, Juenger said he met with the different people who oversee different parts of the district's finances and told them that he was going to be making sure that what the district says they do is what they actually do.
"What came out of that meeting was they were all receptive to that idea," he said. "People want to make sure that their reputation remains clean. They want the checks and balances there."
'Redundant in everything we do'
Lee County has separated its financial duties among three elected entities.
The County Board approves expenses. Sometimes the board chairman OKs them in the middle of the month, with the board later ratifying them.
The separately elected county clerk, who has the checkbook, makes out the checks. The elected treasurer signs them.
"It would take a minimum of three people for any kind of conspiracy," said Rick Ketchum, D-Amboy, chairman of the board's Finance Committee. "We're redundant in everything we do."
Another form of redundancy that the Dixon School District practices is cross-training, so that employees can take over other's jobs when they're on vacation.
By switching it up, Juenger said, other people are seeing the books and could, perhaps, discover anything unusual.
Sauk Valley Community College has different processes, depending on the amount of the expenditure. For an expense of less than $1,000, a department head approves it and two finance employees sign the check. The finance department records it.
If the expense is more than $1,000, the signatures of the president and a vice president are required. The college board must approve spending of more than $10,000.
President George Mihel said the college has the checks and balances in place to make fraud "extremely unlikely."
Although Mihel said he thinks the school is safe from corruption, he wouldn't say it never could happen, noting that the Titanic was billed as unsinkable.
In the Sterling School District, the computer-generated signature of the school board's treasurer appears on checks. Tim Schwingle, assistant to the superintendent for finance, said he approves expenditures, while the fiscal services coordinator cuts checks and the accounts payable clerk records them.
Both the Rock Falls High School and Dixon Public Schools districts have similar policies. At Dixon, the business manager also reviews the bookkeeping and on a test basis double checks expenses.
As for whether large-scale corruption could take place, Schwingle said: "I don't see how it could. I'm a little confused about how it could have happened in Dixon."
Checks and balances 'entrenched'
In Morrison, the city administrator authorizes expenses, the mayor and city clerk sign checks, and another staff member keeps the books.
City Administrator Jim Wise said he doubted corruption could happen in the city.
"The checks and balances system here is too entrenched," he said. “Things are monitored."
Morrison resident Harvey Zuidema, who attends council meetings, said two of the eight City Council members keep close track of expenditures. But he questions whether some of the others do.
"A few years ago, a couple of council members said they didn't look at the audit," Zuidema said. "I don't like to hear that."
Some people speculate that Dixon's commission form of government helped make corruption easier. Each part-time City Council member is a commissioner in charge of an area of city government – for instance, Blackburn is the finance commissioner.
Whiteside County Board member Glenn Truesdell, chairman of the board's Finance Committee, said the commission form of government is bad.
"You have people who are both policymakers and administrators. In all forms of government in the United States, you separate policymakers from administrators," the Rock Falls Democrat said.
'It can happen anywhere'
Both Lee and Whiteside counties have 22 townships. Their officials often stay in office for decades, with little scrutiny from the public or media.
Because many of them are so small, it's hard to have enough people to separate financial duties.
In Lee County's Harmon Township, which has about 400 people, the township board approves expenses, with a majority signing vouchers. The supervisor signs checks and records them in the books, said the township's clerk, June Partington.
A former official made off with township money years ago, she said.
"It can happen anywhere," she said.
Partington has been the clerk's township for a couple of decades.
"It's hard to get anyone to run," she said. "That's why I'm still in."
Sterling Township, with some 19,000 residents, has a similar system, but it requires two signatures on checks – that of the supervisor and the financial officer.
Park districts also run small operations, which can make segregation of duties difficult.
As of fiscal year 2011, the Dixon Park District had seven full-time employees and nine part-time employees, but Carey said the district has one employee who handles vendor checks and another who handles payroll.
All of its reports are reconciled with bank statements and bills aren't paid until receipts are turned in, she said.
"The park district can and does account for every penny."
A failure in the form of government
In Rock Falls, audits are performed by an accounting firm, CliftonLarsonAllen, City Clerk Bill Wescott said. Audits are performed each year as required by law.
The fiscal year runs from May 1 until April 30. The process of conducting this year's audit will begin June 11, he said.
Wescott said that when he heard news of the misappropriation in Dixon, he attributed the lack of checks and balances to the mayoral-commission form of government the city has.
"It appears that the person in charge, the treasurer/ comptroller, is responsible for any and all avenues of financial reporting and disclosure," he observed. "There is only one person writing checks."
In Rock Falls, four people can sign checks, Wescott said. They are Wescott, City Administrator Robbin Blackert, Mayor David Blanton, and City Treasurer Suzanne Dir.
Two signatures are required on every check. That includes petty checks, payroll, and accounts payable, Wescott said.
"All other bills are approved at one of the two council meetings during the month," he said. "Aldermen get the packet ahead of time, review those bills. If they have questions, they ask. That's after us going through them and asking questions."
Wescott said lots of checks and balances are in place in the city of Rock Falls.
He said the problem in Dixon was that one person was responsible for everything.
"[Dixon City Clerk] Kathe [Swanson] looked at the thing and saw the account, nobody else had access," Wescott said.
"If there had been a dual system, somebody else would have seen it, too. As big as the dollar amount has gotten, the fact that one other person was able to see something that only really had eyes of one person … as simple as that.
"It's just astounding."
