Taxpayers have paid thousands of dollars for annual mandatory audits of East St. Louis Township, none of which mention that Supervisor Oliver Hamilton and two others charged as much as $280,000 on taxpayer-supported American Express cards.
The charges — which ranged from trips, gasoline and car washes to thousands spent at big box hardware stores — were made without the knowledge or approval of the township board of trustees on credit cards capped at $1,000 a month. There was not one month when the spending came in under the cap, township financial records showed.
Even though taxpayers paid for the services, Dennis Ulrich, a spokesman for the auditing firm Scheffel Boyle in Belleville, said when it comes to an audit, he can speak only to “the client,” who in this case is Hamilton. Scheffel Boyle was paid $8,000 for the latest township audit for the fiscal year ending March 31, 2015.
Hamilton, who signed a form that he personally accepted the audit findings, is the target of an FBI investigation into the credit card spending. He has declined to comment on the advice of his attorney.
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Since June, the News-Democrat has reported in a series of investigative stories that Hamilton, his sister, June Hamilton Dean, who is paid to be a financial consultant, and an office administrator, spent $280,000 from 2012 to July 2016 on their township credit cards, including $12,500 during a single trip to Walmart; thousands spent on trips to Las Vegas, Chicago and Los Angeles; tens of thousands on building supplies such as paint, drywall and special tools; more than $3,000 for car washes, detailing and oil changes for Hamilton’s personal vehicle, and nearly $40,000 in gasoline. Oliver Hamilton’s card accounted for $230,000 of the total spending.
Ulrich declined to respond to a list of News-Democrat questions about township financial matters and limitations of the audit. He said state law prohibits him or his staff from discussing his firm’s report, “With anyone who is not a client.” He said that for the township audits, only a government official could be considered a client.
“It is weird that the taxpayer can’t go in and ask questions about the audit, but that is the way it works,” said Mark Peecher, a certified public accountant who teaches business at the University of Illinois.
“If (an auditor) sees an irregularity or a suspicion is raised, he should do something about it. But credit card (abuse) might not even be included in the audit’s working papers, so he might not know anything about it,” Peecher said.
If (an auditor) sees an irregularity or a suspicion is raised, he should do something about it. But credit card (abuse) might not even be included in the audit’s working papers, so he might not know anything about it.
Mark Peecher, CPA and professor at University of Illinois
The outside audits covering fiscal years 2012-15, which are required by state law, do not mention that the credit card spending was not approved by the board of trustees.
A federal grand jury session that was scheduled to meet Tuesday in connection connection with the investigation of township finances was canceled. A spokesman for the U.S. attorney’s office in Fairview Heights would neither confirm nor deny the existence of an investigation, but the News-Democrat saw copies of subpoenas issued to potential witnesses or targets.
Trustees have said they never received a breakdown of credit card charges. Trustees received only an overall monthly claim sheet that listed the credit card costs as a single, lump sum line item with no breakdown of what was actually purchased. The trustees routinely approved the line item credit card costs without discussion, according to board minutes. Every one of the monthly totals exceeded a $1,000 limit set by the board in February 2012, just a few months after Hamilton became supervisor.
Trustee Edith Moore, who heads the Community Development Department for the city of East St. Louis and pushed the resolution to limit credit card spending, said of the credit card spending, “I don’t know anything about what is going on about that. Nothing.”
Township debt a ‘growing concern’
The latest audit for 2015 states the township has compiled a deficit of nearly $3 million — debt that threatens its financial future as a “going concern.” This same warning has been repeated word for word in audits from 2012, 2013 and 2014.
“The auditors should have submitted to the township a management letter, which would indicate irregular transactions and procedures that are not conducive to sound financial principles,” said Joe Behnken, a certified public accountant from O’Fallon. Behnken is a former Republican member of the St. Clair County Board.
Oliver Hamilton, a Democrat, is also a member of the County Board and serves on the board of the East Side Health District.
“A quick review of the budget versus an actual expenditure report would immediately bring to light excessive, unbudgeted expenditures” like the credit card purchases, Behnken said in a written response.
Behnken also commented on copies of township checks made out to Hamilton that were intended for others, including $900 to help a woman who has three small children pay rent. The woman said she never received any money from the township. There also was a $3,000 payment to a St. Louis construction company where the check was made out to Hamilton.
Part of the routine duties of the auditor would be to review (trustee board) resolutions that would affect financial management, such as the resolution limiting credit card spending. Any violation of the resolution should have been noted.
Joe Behnken, CPA and former St. Clair County Board member
“Part of the auditor’s responsibility is to review the check register and question any large payments made to employees other than normal payroll. The $280,000 paid to American Express would show up in a statement of Revenues, Expenditures and Changes in Fund Balances and in the budget,” Behnken said.
“Large undocumented payments” should be included in a management letter, Behnken wrote. “Part of the routine duties of the auditor would be to review (trustee board) resolutions that would affect financial management, such as the resolution limiting credit card spending. Any violation of the resolution should have been noted.”
The latest audit shows that the township has 15 full-time employees and eight part-timers. In addition, two financial consultants are paid $33,000 each per year. They are June Hamilton Dean, who is also an East St. Louis City Councilwoman, and businessman George Laktzian, who has worked for the township for more than 40 years.
The township has operating expenses of about $1.3 million per year that includes grants for a Summer Youth Program and a lunch program for senior citizens.
Of the total operating expenditures, “general assistance” to the needy is listed as $118,073, or about 9 percent.
The audits noted other irregularities, often without explanation, including:
▪ Salaries in the latest audit were budgeted at $431,985, with $424,171 spent. Janitorial supplies were budgeted at $2,572 but $7,406 was actually spent.
▪ In fiscal year 2014, a total of $406,329 was budgeted for salaries but the actual expenditure was $547,231 — $140,902, or 35 percent, over budget.
▪ Travel was budgeted at $5,000 with only $736 listed as being spent in fiscal year 2014, even though travel costs listed on monthly American Express bills totaled at least $8,000 for that year.
▪ Janitorial supplies were budged at $3,000 in 2014, but $18,944 was spent, a 600 percent increase.
As for the capability of external audits to detect fraud, Evy Poumpouras, a faculty member of the Association of Certified Fraud Examiners, told CNBC in 2014, “You can’t put the onus on somebody else to keep your place clean.” She said internal financial controls should be relied upon to prevent misappropriation of funds.