State & Local Reports

An audit was conducted to assess the adequacy, completeness, and accuracy of the Fiscal bank reconciliation process. The bank reconciliation process had been an area of higher risk due to the historic issues associated with the bank reconciliation, including bank reconciliations not being performed timely and having an unreconciled difference between bank and book of approximately $2.2 million.The Department of Internal Audit conducted interviews with management regarding procedures that the Fiscal Office utilizes for bank reconciliations. Internal Audit reviewed the adequacy of procedures relating to the performance and review of bank reconciliations. Internal Audit also assessed the adequacy of spreadsheet controls utilized on the bank reconciliation. A test of transactions was performed to assess the completeness and accuracy of the bank reconciliation. Our audit procedures disclosed internal control weaknesses and/or areas of potential process improvement related to management of accounts payable and payroll checks outstanding for over one year and documented review of consolidated bank reconciliation.

Our investigation showed that the City’s former Finance Director, Robert Mays, and the former Finance Director who succeeded him, Pennie Zuercher, failed to sufficiently scrutinize Lanier’s invoices from April 1, 2019, through June 30, 2022, the period of our review. Neither finance director ensured that Lanier’s reports of revenue it collected on behalf of the City, which totaled $2,942,099.83, were accurate whencompared to Lanier’s deposits into the City’s parking bank account, which totaled $3,056,220.00. In addition, we calculated that the City paid at least $108,093.11 in questionable expenditures when the two former finance directors approved reimbursements to Lanier of $77,589.36 for inadequately documented employee wages and another $30,503.75 for unauthorized expenses.

This quarterly report provides an overview of the operations of the City of Chicago Office of Inspector General from April 1, 2024, through June 30, 2024, and includes information required by the Municipal Code of Chicago.

On April 25, 2024, the Office of Inspector General notified the Mayor’s Office of concerns about the incidence and handling of allegations that members of the Chicago Police Department belong to or associate with extremist and anti-government groups.

Our investigation found that Steven Chapman, a former director of North Lauderdale’s Finance Department (“Finance”), engaged in grossmismanagement for his failure to properly oversee the financial aspect of the City’s contract with Waste Pro (“Waste Pro Contract”), which allowed Waste Pro to overbill the City’s residents, through payments to the City, and its commercial customers a total of approximately $2,589,753.48 from January 2012 through September 2021. Specifically, the OIG estimated that Waste Pro overbilled the City $599,707.68 for residential solid waste services. And the OIG estimated that Waste Pro overbilled commercial customers a total of $1,990,045.80, that is, $1,611,392.17 in overbillings for solid waste services and approximately $378,653.63 for overbillings in franchise fees.

A Washington state employee misappropriated nearly $900,000 through fraudulent credit card purchases, the Office of the Washington State Auditor found in a fraud report released in early July 2024. It is the largest internal misappropriation in a state agency in at least the last 15 years.The report identifies $878,115 in misappropriations between 2019 and 2023 at the Office of Administrative Hearings (OAH).

An audit of the Economic Development Loan Portfolio for processes in place during the period of January 1, 2020 – December 31, 2022 was performed. The main objective was to assess the effectiveness and adequacy of policy, procedures, and controls in mitigating the risk of servicing the County’s development loan portfolio including collection of payments.Department of Internal Audit (DIA) relied on authoritative guidance to determine lending best practices that mitigate risk, providing a basis for assessing the adequacy of Department of Development’s (DoD) policies, procedures, and controls. DIA made its assessments by conducting interviews with management and staff regarding processes, reviewing the Department of Development’s (DoD) policy and procedures, and obtaining various documentation from staff. In addition, where best practices were observed, DIA performed audit procedures to determine effectiveness. The audit procedures disclosed internal control weaknesses or areas of potential process improvement relative to board oversight, loan underwriting and monitoring, risk analysis, job creation and diversity monitoring, prevailing wage compliance monitoring, disbursements and receipts reconciliations, financial reporting, and IT controls. DIA recommended DoD implement the following: risk-rating process to score new loans and a formal loan portfolio risk analysis process to monitor risk exposures, formal loan collectability and write-off review policy to ensure the timeliness of collections activities and financial reporting accuracy, monthly reconciliation of loan disbursements and receipts between financial systems, update policies and procedures, and implement additional IT controls, including a system access policy to achieve least privilege access, stronger password requirements, and policy requirement as to an expected timeframe for user deactivation.