Newly released audits for the former U.S. Cellular Coliseum show the city was warned eight years ago that its finance department wasn’t providing adequate oversight over the arena’s records, due in part to staffing shortages.
That warning was one of 36 problems discovered by auditors at the Coliseum from 2006-2015, including 22 “material weaknesses” that are the most serious issues, records show. Several of the problems were repeated year after year, despite being told by auditors to fix the underlying issue.
This week’s release of the audits comes amid finger-pointing about how the alleged fraud scheme at the Coliseum went undetected for eight years. Five former Coliseum managers have pleaded not guilty to 111 criminal counts of theft, fraud, and money laundering. Current city officials say those managers—who ran Central Illinois Arena Management (CIAM)—refused to release detailed financial information, specifically related to food-and-beverage sales. They’ve also blamed the city’s original 10-year contract with CIAM as bad “from the very beginning.”
The Coliseum (now called Grossinger Motors Arena) is audited annually. Bloomington City Manager David Hales, who was hired in January 2009, has said the Coliseum “received a clean opinion each year.”
That depends on how you define clean.
In 2009 Sikich LLP, the city’s external auditor, found six issues that needed to be fixed. One of them was that “there is no formal review or monitoring of Coliseum operations and record-keeping by the appropriate level of City personnel,” Sikich wrote to city leaders. The city’s Finance Department previously performed monthly reviews of the Coliseum, including specific events and accounting.
But in 2009, those reviews were discontinued “as a result of staffing shortages” in the Finance Department, Sikich wrote. That lack of oversight could lead to “potential material misstatement of the financial statements” at the arena, they warned. Sikich recommended that the city resume those regularly reviews to “comply” with the city’s contract with Central Illinois Arena Management.
In response, the city said it would “re-establish a formal internal audit program” in 2010 to better review and monitor Coliseum finances.
That apparently didn’t happen in 2010, although the auditor’s finding was not repeated in the next year’s audit report. The city considered but ultimately did not fund the internal auditor position in subsequent years. The city’s internal audit program was launched in 2015-2016. It’s unclear why that internal auditing program was not created sooner.
The city’s current finance director, Patti-Lynn Silva, was hired in 2013. Brian Barnes served in that role until 2008. Tim Ervin was then appointed finance director, and he was succeeded by Silva.
In response to questions from GLT on Thursday, a city spokesperson declined to answer specific questions about Hales' "clean opinion" comment and the 2009 audit finding related to the Finance Department.
"The integrity of the criminal proceedings dictates certain protocols be followed and, as the City and its taxpayers are the alleged victims in this case, the City therefore cannot comment on the situation any further at this time," said city spokesperson Nora Dukowitz.
Finding 'Material Weaknesses'
The 36 “findings” identified by auditors at the Coliseum vary in seriousness. Some are relatively minor, such as poor computer password management. And the number of overall findings has declined in recent years. There were nine total in 2006 when the arena first opened. There were zero in 2015.
Other “material weaknesses” include:
- Inadequate segregation of duties. The Coliseum’s “finance director has both the ability to post entries to the (Coliseum’s) QuickBooks system and check-signing authority. Duties like that should be segregated so that “no one individual has both custody of assets and recordkeeping ability,” the auditors wrote. Not doing that leads to “potential misappropriation of assets.”
- From 2006-2009, auditors noted that there was no supervisory review of all nonstandard entries into the arena’s financial record-keeping system. That could lead to potential material misstatement of the financial statements, the auditors warned.
- In 2010, 2011, 2012, and 2014, auditors recommended “material adjustments to present financial statements,” a problem caused by oversight by management.
Others, like the 2009 finding related to the city’s Finance Department, stand out.
Indeed, the number of full-time staff in the city’s Finance Department plunged from 17 in 2006 to just nine in 2010 and 2011, city records show. The department now has around 12 full-time staffers.
The staffing reductions took place in the wake of the Great Recession, when Bloomington quickly shed around 70 employees citywide through layoffs, early retirement incentives, and other cost-cutting moves. It can take a long time for city coffers to recover from a recession, as revenue begins to slowly pick back up.
For those who remained, the city’s original 2005 management contract with CIAM includes some lengthy provisions giving the city access to annual audits, monthly reports, and event reports.
“The city shall have the right … to cause recognized independent auditors to audit all of the books of (CIAM) relating to revenues and operating expenses, including, without limitation, bank books, sales slips, cash register tapes, credit card invoices, duplicate deposit tapes, and invoices,” the contract reads. The contract also required CIAM to retain those records for at least three years.
That contract gave the city “the right to hire an auditor and go over every record,” said Todd Greenburg, the former Bloomington city attorney who reviewed the contract for the city. He left the city in 2013.
CIAM owner John Butler has pleaded not guilty to all charges. His attorney said he cooperated with the State Police investigation that lead to last month’s indictments. He told The Pantagraph in September that the case was “about business and business practices and proper accounting for funds.”
“My client has done that and done it the right way,” said attorney Steve Beckett.
The annual Coliseum audits for 2006-2011 were obtained by GLT through a Freedom of Information Act request. The arena’s audits for 2012-2015 were already available on the city’s website.
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