Audit costs DuPage water agency $365,000 - so far
A forensic audit to determine how the DuPage Water Commission drained its $69 million reserve fund already has cost more than $364,000 and there is no immediate end in sight.
Four months of invoices from the Chicago-based law firm of Jenner & Block total $302,300.81, while an invoice from auditing firm Crowe Horwath for $62,242.50 brings the forensic audit bill's grand total so far to $364,543.31.
More invoices are expected from Jenner & Block, commission officials said Tuesday.
"I think it's just a staggering amount," Commissioner Jim Zay said. "I don't think anyone thought it was going to be this much."
The commission released the financial data Tuesday after the Daily Herald filed a Freedom of Information Act request March 12. A request for the forensic audit report was not granted, but the Daily Herald obtained a copy of the report last week.
Jenner & Block was hired as special counsel to oversee the audit and analyze the results after financial irregularities came to light at the agency that provides Lake Michigan water to more than two dozen municipalities and agencies. The firm submitted its findings to the board March 2 in a 64-page report that detailed a series of accounting mistakes and misinformed decisions that led the commission to drain its $69 million reserve fund over the course of two years.
The report indicated there was no evidence of any illegal acts. Instead, the money was misspent by a commission that believed it had about $40 million more in reserves than actually existed.
Financial administrator Max Richter was fired in October for his role in the debacle, while General Manager Bob Martin and Treasurer Richard Thorn resigned this month.
Commissioners said the expenditure for the audit is necessary to quell public speculation about the appropriation of the reserve funds.
"I knew they weren't going to find anything illegal," Commissioner Frank Saverino said. "But I don't think we had any choice not to do the audit. If we didn't spend the money for this audit, who would ever believe there was no money misappropriated?"
Saverino said he and several other commissioners wanted to cap spending on the audit, but were overruled. He was surprised by the total so far.
"I thought this thing was going to cost us $150,000 to $180,000, tops," he said. "I would have liked to have had the county come in and do the audit, but with the county's six appointees (to the commission) and the chairman being appointed by the county, who would have believed those results?"
Jenner & Block billed the commission at $500 an hour, officials said. Its costliest invoice arrived in February and amounted to more than $133,000.
Zay was upset to learn the commission also had directly paid Crowe Horwath. He said he believed Jenner & Block was responsible for those costs.
Zay said he was told the forensic audit report hasn't been released publicly because it was deemed privileged information between the two firms.
"That's something that has to be discussed because if we're paying Crowe Horwath, I don't think (the report) is subject to attorney/client privilege," he said. "It should be released."
The special attorney and audit fees are just some of the mounting bills the commission is facing in the wake of the financial crisis.
Martin's resignation agreement calls for a $90,000 severance payout. Interest from a $30 million short-term loan the commission was forced to take out in December is expected to cost the commission $350,000 this year, while another $900,000 in interest costs are expected for a contemplated $40 million loan.
The $30 million loan was needed to fill the commission's reserves and pay some construction debt. The possible $40 million loan would be used to pay all its construction debt.
<p class="factboxheadblack">Water audit</p>
<p class="News">Here's a breakdown of monthly invoices from Chicago law firm Jenner & Block for work done on the DuPage Water Commission's forensic audit.</p>
<p class="News">December: $17,700</p>
<p class="News">January: $56,009.40</p>
<p class="News">February: $133,918.18</p>
<p class="News">March: $94,673.23</p>
<p class="News">Total: $302,300.81</p>
<p class="News">Source: DuPage Water Commission</p>
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