Audit of the Operations of the Chicago Board of Election Commissioners

Executive Summary

The City of Chicago Office of Inspector General (OIG) conducted an audit of the operations of the Chicago Board of Elections Commissioners (CBOEC). The objectives of the audit were to determine whether CBOEC,

• employed sufficient financial controls to prevent fraud, waste, and abuse;
• had a human resources program designed to support its mission; and
• maintained a contingency plan designed to ensure continuity of operations in the event of attack or disaster.

The temporal scope of the audit was generally 2015-2016 for financial transactions, and 2013-2017 for human resource practices and contingency planning.

1. FINDINGS

OIG found significant gaps in CBOEC’s financial administration related to vendor payments, cost allocations, budgeting, employee reimbursements, payroll, contract procurement, and cash management. Although CBOEC was informed of many of these gaps in May 2009, CBOEC did not implement many of the corrective actions it committed to undertake. CBOEC instead spent taxpayer money on expenses that did not adhere to its own policies, were recorded in the wrong year, were unsupported, and/or did not align with its funders’ policies.

Specifically, CBOEC,

• spent an estimated $3 million in City of Chicago funds and spent $294,935 in Cook County funds on vendor payments and employee reimbursements that were recorded in the wrong year, violated CBOEC policies, did not align with City policies, and/or were inaccurate or lacked sufficient supporting documentation;
• improperly retained $28,247 in State grant funds that were spent but later refunded;
• accrued an obligation to its executive director for a lump sum of $24,615 upon retirement by not recording his vacation time;
• incorrectly allocated expenses between the City and County;
• accrued a debt of $28,733 to the City and is owed $22,835 by the County, due to not reconciling its hourly payrolls;
• paid three vendors in 2015 and 2016 a total of $324,588 more than was contractually allowed;
• could not account for $1,427 in cash and checks from its revenue-generating operations;
• made expenditures that exceeded and/or otherwise did not comply with provisions of its City budget without legislative approval;
• utilized an hourly payroll process that is susceptible to fraud; and
• made 27 procurements totaling $5.7 million in 2016 that violated its own procurement policies, as well as 27 procurements totaling $1.8 million that had no written contract or similar documentation.

OIG found several opportunities for CBOEC to improve its human resources program.

Specifically, CBOEC,

• is not fulfilling its obligations under the Patient Protection and Affordable Care Act (ACA);
• does not budget accurately for its personnel needs, resulting in a cumulative $908,790 in budget overages between 2013 and 2017;
• does not have transparent hiring practices;
• does not have a transparent, standardized system for pay raises based on a performance evaluation framework; and
• does not have succession plans for leadership and other critical positions.

OIG also found that CBOEC does not have a contingency plan effectively designed to maintain continuity of operations in the event of attack or disaster. Its 2018-2022 Infrastructure Plan draft does not meet best practices for such plans, and CBOEC does not have a complete inventory of its information technology hardware or software.

B. CONCLUSIONS

Based on these findings, OIG concluded that CBOEC has paid unnecessary expenses with taxpayer money, overcharged its funders, and caused its funders to record financial transactions incorrectly. We also concluded that CBOEC’s hiring, compensation, and succession planning activities do not align with best practices, that some of its employees are not receiving benefits to which they are entitled, and that CBOEC does not budget accurately for personnel. Lastly, OIG concluded that CBOEC cannot assure the public that election operations will continue in the event of an attack or natural disaster.

C. RECOMMENDATIONS

OIG recommends that CBOEC: undergo regular independent, external audits; develop and publish financial policies; develop accurate budgets; ensure that its purchasing department is included in all procurement activities; and correct outstanding financial inaccuracies.

OIG also recommends that CBOEC: immediately come into compliance with the ACA by conducting a full review and providing any required disclosures and reports to its employees and the Internal Revenue Service; conduct a staffing analysis and reach an agreement with the City regarding acceptable budgeting for hourly employees; develop standardized and transparent hiring, compensation, and performance management policies; and develop succession plans for staff turnover. Finally, CBOEC should develop a contingency plan and IT inventory that meet best practices.

D. CBOEC RESPONSE

In response to our audit findings and recommendations, CBOEC stated that it tentatively agrees with some recommendations, disagrees with others, and is still determining its response to others. OIG’s specific recommendations related to each finding, and CBOEC’s preliminary responses, are provided in the “Findings and Recommendations” section of this report. CBOEC’s response letter is included as Appendix C.

1. CBOEC Requests to Delay the Audit

CBOEC requests an extension of time to May 31, 2019, to provide a final response to OIG’s recommendations, asserting that OIG did not provide a reasonable amount of time to respond to the audit. On the contrary, as described below, OIG amply accommodated previous requests to delay the audit, kept CBOEC informed of its findings during the audit, and provided adequate time to prepare a written response. CBOEC’s request for yet more additional time is unreasonable.

OIG initiated this audit in 2016. Although the City of Chicago pays the majority of CBOEC’s bills, including nearly all of its regular staff who are on the City’s payroll and benefit systems, the Board challenged our jurisdiction to perform this fundamental oversight function. In April 2017, the Chief Judge of the Circuit Court of Cook County, exercising his statutory authority under Section 6-70 of the Illinois Election Code, designated OIG to a serve as an independent external auditor of CBOEC.

CBOEC asked OIG to delay the beginning of the audit process until May 2017 in order to accommodate work on the February 28, 2017 Special Election in the City’s 4th Ward. OIG consented, and held the audit entrance conference with CBOEC on May 31, 2017. OIG communicated our findings to CBOEC as we discovered them, throughout the course of the audit process.

For example, we notified CBOEC,

• in November 2017 that $1,500 cash was sitting an employee’s desk, and that revenue deposits had not been made;
• in May 2018 of potential non-compliance with the Affordable Care Act; and
• in June 2018 of vacation timekeeping irregularities.

In January 2018, CBOEC requested that OIG suspend the audit until April 20, 2018 due to the primary elections. OIG again consented. In late April 2018, CBOEC began responding to OIG requests for information that had been pending since December 2017. In September 2018, OIG presented a detailed briefing on the preliminary audit results to CBOEC staff, informing them that we would provide a draft of the audit report no later than the first week of December 2018 and request a response in early January 2019. OIG provided CBOEC with the draft audit report on December 7, 2018, requesting a response by January 4, 2019. On December 14, CBOEC asked OIG to delay publication of the report until after the April 2, 2019 runoff election results are finalized. On December 21, 2018, OIG and two senior CBOEC representatives discussed all findings and recommendations at a formal exit conference, at which time CBOEC repeated its request to delay response and publication until at least April. OIG declined, but extended the response deadline to January 16, 2019. CBOEC delivered its preliminary response on that date, but reiterated that the response time afforded was insufficient and stated its intention to submit a final response by May 31, 2019.

2. CBOEC Disputes OIG Authority

From the start of the audit process, CBOEC has disputed not only OIG’s authority to conduct the audit, but also its authority to publish the audit report. In its preliminary response, CBOEC asserts that Government Auditing Standards limit distribution of the report. This is incorrect. CBOEC cites a version of the Standards that is not yet in effect and a provision that does not apply to performance audits. The relevant Standard is the 2011 GAGAS 7.05, which states that one purpose of a performance audit report is to make the results available to the public, unless specifically limited. OIG has published this audit, as it does all its audits, in accordance with Government Audit Standards and to promote accountability to the taxpaying public.