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Quarterly: Winter 2019 - Claire Kruschke and Ben Spies

auditing the void: Chicago elections


By Claire Kruschke and Ben Spies


Elections in the Windy City have come a long way. The days of the dead rising to cast ballots are long gone, and many local governments around Chicago have accepted greater oversight in recent decades. Even so, the day-to-day operations of the Chicago Board of Election Commissioners (CBOEC) have remained a black box to taxpayers and watchdog agencies. The city’s election authority has been steered by the same executive director for over 30 years, staunchly resisting oversight and creating an accountability void in this area of local government. The City of Chicago funds those operations to the tune of $8 million to $25 million each year (based on the election cycle), without assurance that this money is being properly spent.

The Chicago Office of Inspector General (OIG) was finally able to step into this void and launch an audit of CBOEC’s operations in 2017. We encountered jurisdictional obstacles, scoping challenges, and scheduling delays, including eight months of suspensions to accommodate election seasons, culminating in a two-and-a-half-year effort. However, we think this experience illustrates the value of auditing operations at the boundaries of government oversight.

THE CHICAGO BOARD OF ELECTION COMMISSIONERS

CBOEC administers elections within Chicago city limits at all levels of government, from city council to the president of the United States. It also manages voter registrations and oversees candidacy issues, such as petition challenges.

CBOEC was created by an 1885 reform measure to remove elections from the purview of elected officials. As a result, it is housed under the judicial branch (the Circuit Court of Cook County). The majority of its funding comes from the city, with varying proportions from the county based on the election cycle.

JURISDICTIONAL CHALLENGES AND SCOPING THE UNKNOWN

Although both its funders have dedicated oversight bodies, CBOEC argues that it is an independent agency and therefore exempt from oversight by either entity. Instead, the Illinois Election Code requires the chief judge of the Circuit Court to audit CBOEC’s salaries and expenditures or to appoint an independent external auditor (this had been done infrequently in the past, if ever). The last time CBOEC had undergone anything resembling an audit was in 2009, in response to alleged fraud in its finance department. As the oversight body for city government (CBOEC’s primary funder), we argued that we were appropriately positioned to audit CBOEC’S operations. Although CBOEC pointedly contested our authority, we formally obtained the chief judge’s designation in April 2017 — nearly a year after our initial attempt.

The chief judge tasked our office with meeting the core requirement of the Election Code by auditing CBOEC’s financial practices. He also empowered us to design objectives to address areas of highest risk. Recognizing that CBOEC’s operations had been shielded for many years — and that the public had few opportunities to gauge its performance or operations — we optimistically scoped this audit very broadly. We ultimately examined whether CBOEC:

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

We did not assess election integrity or security, in part because the State Board of Elections is tasked with oversight in these areas.

FINANCIAL PRACTICES

We reviewed CBOEC’s financial practices and found that it did not use a centralized accounting system, perform account reconciliations, or follow written policies. We therefore had to dig in the old-fashioned way, spending days combing through paper financial records and scanning thousands of pages of invoices and receipts. We made several discoveries in this area, including:

Checking accounts for routine operations: City and county departments typically rely on payment vouchers, which build in accountability by requiring standardized review and record-keeping. While CBOEC utilized vouchers for most expenses, it also made hundreds of payments to vendors and employees — mostly its executive director — from an independent checking account. CBOEC would submit reimbursement requests for this account in bulk, asking for lump sum payments for dozens of transactions totaling tens of thousands of dollars at a time. The city did not always review these requests in detail before making the reimbursement payments, and CBOEC challenged the city’s legal authority to question or withhold payments.

Incorrect expense allocations: We found that CBOEC misrepresented its expenses by purposefully listing them under the wrong budget categories. For example, when it ran out of money in its IT budget, it inappropriately reported IT maintenance as “Postage.” When it ran out of money in its annual budget, it also regularly withheld payments to vendors for months until the new budget year, at which point it would incorrectly submit a voucher under the new year’s budget. This in turn caused the city and county to inaccurately report $1.8 million worth of expenses in the wrong years.

Missing and unwritten contracts: Several of the vendor “contracts” we intended to review for the audit did not have written contracts at all. In many cases, CBOEC upper management entered handshake agreements without the involvement of its purchasing department, which is normally tasked with bidding out procurement opportunities. In some cases, CBOEC had been doing business with vendors for years or even decades for products that could have been provided by other vendors and should have been put to bid. CBOEC also paid vendors over $300,000 beyond the limits agreed upon in their written contracts.

Unsubstantiated paid time off: CBOEC’s executive director had not reported taking any vacation or sick time for over 20 years. As a result, he had accrued the maximum time off balance and would be paid out nearly $25,000 if he left the agency. We also found that CBOEC’s three commissioners accrued paid time off even though they were not full-time employees. One commissioner was paid nearly $12,000 for this unearned benefit when he retired in 2016.

HUMAN RESOURCES

As an independent agency, CBOEC set its own hiring, promotional, and compensation rules and was not required to meet the standards governing most city and county hiring practices. However, this independence also meant that its approach to HR had evolved to suit its own internal needs, with little regard for transparency and best practice. We ultimately concluded that its hiring, recruitment, and compensation practices were opaque and — in the case of its hourly employees — potentially noncompliant with federal law.

Noncompliance with the Affordable Care Act: CBOEC employed long-term hourly administrative workers, several of whom worked enough hours to be considered full-time under the federal Patient Protection and Affordable Care Act. Although its salaried staff received health benefits, CBOEC had never provided health benefits to its hourly employees. It also had not filed the required tax documents or paid the potential financial penalties for noncompliance. CBOEC’s HR department acknowledged it had been aware of potential noncompliance for several years but had not addressed it.

No documented hiring policy: CBOEC told us it preferred to hire internally because its operations were so unique. In fact, it had not posted a position externally for four years. Managerial positions were posted internally, while hourly vacancies were filled solely through word of mouth. We learned that the board had not updated its HR manual since 1996, and its HR department was not always involved during the hiring process.

No transparent, standardized system for pay raises: CBOEC had not conducted performance evaluations for over 10 years, and job descriptions had not been updated since the 1990s. Instead, pay increases were based solely on managerial recommendations, and hourly employees had no standard starting rate. In one instance, this lack of transparency led to a terminated employee suing for alleged pay discrimination. CBOEC ultimately settled the suit for over $32,000, paid for by the city.

CONTINGENCY PLANNING

While we did not assess election operations, we did attempt to determine whether CBOEC’s election contingency plans met best practices. CBOEC provided only a draft infrastructure plan with proposed upgrades to equipment, and did not have a complete inventory of its information technology hardware or software. Without these plans, we concluded that CBOEC could not assure the public that it would be capable of maintaining the continuity and integrity of elections in the event of a disruption. CBOEC told us that it had contingency plans but agreed with the wisdom of writing them down.

DON'T FEAR THE VOID

Conducting an audit of an unfamiliar and reluctant entity — particularly one that exists at the intersection of government oversight and the democratic process — can be a delicate and challenging enterprise. However, we learned that it offers the same prizes and pitfalls of typical audit work. All told, our audit took over two years to complete, in part because we agreed to suspend fieldwork for eight months during election seasons. While this felt like half a lifetime to a young team of auditors, it was necessary to address our broad scope. Our approach was persistent, but not novel: we stayed as organized as possible and diligently pursued the questions relevant to our objectives. Despite its opposition, CBOEC ultimately acted on many of our recommendations.

The full report can be found on our website. Follow @ChicagoOIG on Twitter for the latest information on our audits and how we continue to fight waste, fraud, abuse, and inefficiency in Chicago government.

ABOUT THE AUTHORS

Claire Kruschke is a senior performance analyst with the City of Chicago Office of Inspector General (OIG). During her four years at the office, Claire’s work has covered a variety of topics including affordable housing, language accessibility, election operations, and police use-of-force reporting. She is a certified inspector general auditor and a member of the ALGA Publications Committee. Prior to joining OIG, Claire worked in government and policy agencies in London, England, and Wellington, New Zealand. She holds an MA in social science from the University of Chicago.

Ben Spies is a senior performance analyst with the Chicago Office of Inspector General. Ben’s audit work has intersected with multiple city agencies, including the Chicago Department of Transportation, the Department of Fleet and Facility Management, and the Chicago Police Department. He holds a BA in English and communications from the University of Wisconsin-Madison and an MA in public policy from Central European University in Budapest and is a certified inspector general auditor.