‘Suspicious’ Accounting Error Leads Illinois School District to Seek Tax Cut

Published October 1, 2005

Last November, after Huntley, Illinois narrowly passed a referendum raising taxes to support four new schools in District 158 (D-158), a certified public accountant with three children in the district discovered the newly administered tax increase was more than double the 55 cents per $100 of property value that had been advertised to voters.

A few weeks later, voters learned through the press they’d been misled. Worse, they found, a $5 million grant for the district had been sitting idly in the state capital for 18 months. Though D-158 Superintendent Steve Swanson knew about the grant before the referendum passed, the information wasn’t disclosed to voters. In the resulting outrage, D-158’s financial director announced early retirement, and Swanson resigned in February.

Practically overnight, the district went from “flat broke” to a $3.4 million surplus, possibly climbing to $9 million next year, according to an article in the August 14 edition of the Northwest Herald. Now School Board President Michael Skala is in the unprecedented position of trying to find ways to reverse the tax hikes. No taxing body has ever asked to have the rate reduced under these circumstances, he said, so there’s no model to follow. The district brainstormed four possible solutions this summer, but nobody knows yet if any are feasible.

“It’s going to take many years to recover from the problems and the mistakes that were made,” Skala said, “but you have to look forward and move forward and try to do the best you can from that point into the future.”

Warning Signs

In June 2005, state auditors found more than $2 million in errors, mostly in transportation accounts the district’s independent auditors had missed, said Larry Snow, a former financial analyst. Inspired by the debacle to run for the school board, he has been a member since April.

“Not only were there lots of errors, but multiple important documents have disappeared,” Snow said. “That’s serious stuff. This no longer looks like an innocent error.”

Snow didn’t pay much attention to the school district’s referendum ads until he heard the district was beginning to keep elementary kids in school until 5:00 p.m.–something he considered “anti-American.” That’s not the way he grew up, he said, so he decided to attend his first board meeting as a concerned citizen.

Tony Quagliano, the certified public accountant who later discovered the accounting error, said he supported the referendum at first because he “pretty much went along” with the financial information the school district was disclosing. However, he became suspicious when he started reading newspaper reports of what school board members were saying about the effect Illinois’ property tax cap had on school funding. He knew what they were saying was wrong.

Cold Shoulder

Quagliano began questioning board members and administrators and doing his own research to test the accuracy of the school district’s information and learn more about Illinois laws regarding school funds and how they’re raised.

Snow and Quagliano worked independently, poring over the district’s budget and proposed tax increase. They found revenues tended to be understated and expenses overstated. The proposed tax increase, they said, seemed excessive.

Both Snow and Quagliano sent fiscal analyses to D-158 to shed light on the subject. They received no response.

“When someone comes along who has the actual ability and skill to go through the actual numbers, you’re not received like, ‘Oh, well thank you very much,'” Snow said. “You’re received like, ‘Why are you anti-education? You’re against kids.'”

Blowing the Whistle

As a compromise, Snow had suggested reducing the proposed tax hike to 20 cents per $100 of property value, even though even that increase seemed unnecessary to him.

When D-158 decided to move forward with the 55-cent referendum, threatening not to open any new schools if it failed, Snow sent an 18-page letter to 3,000 residents in the district detailing the administrators’ faulty accounting, consulting Quagliano on the key calculations.

D-158, Snow wrote, probably had enough money to open three of the four new schools without a tax increase, and it was untrue to say no new schools could open if the referendum failed. The letter made such a splash that the school district issued a formal response to discredit it.

Greg McConnell ([email protected]) is a freelance writer in Palatine, Illinois.