CHICAGO — The Illinois state auditor found "pervasive" management problems and troubling fiscal operations at the Illinois International Port District in a review that covered 2010 and 2011.

Auditor William Holland's audit was released last week, shortly after Mayor Rahm Emanuel, Gov. Pat Quinn, and board chairman Michael Forde announced a tentative lease agreement handing operations over to a private company.

Forde was installed in the post in late 2011 as Emanuel sought to overhaul the troubled district, which had long recorded financial losses before turning a profit in 2012. The current leadership sought the audit and it covers a period that mostly predates reforms implemented since 2012. The review, however, does suggest the changes to date don't solve all the district's woes and that privatization plans don't eclipse the need for vigilant oversight.

For the 2010-2011 period, Holland's audit "found pervasive management problems at the district" that span the gamut from outdated policies and pricing to poor oversight of leases and contracts. They include the inability to provide written agreements for appointees during the period reviews, the failure of three committees to hold meetings, and outdated and below-market rates. The audit also criticizes the district for failing tackle long-term strategic planning issues.

The district experienced losses of $966,000 in 2010 and $251,000 in 2011. It failed to establish competitive bidding guidelines or to incorporate up to date policies regarding expenses, and did not sufficiently segregate financial and banking duties. It also did not require employees or board members to contribute toward the cost of their insurance or pension. The district's pension plan is just 30.1% funded.

The district did not have written leases with five of 25 tenants or monitor leases for compliance terms, its personnel management was outdated and lacked a formal timekeeping system, and the district made annual vacation payouts to its executive director of between $40,000 and $50,000 on top of a $200,000 salary, the audit found.

Other challenges facing the district include repayment of a $15 million state loan from 1980 and escalating payment provisions on a $15 million variable-rate bond sale from 2003. The audit did not assess the condition of the district's infrastructure or facilities.

Forde responded in audit documents to many of the auditor's 26 recommendations that the district had implemented many of the suggested changes and that others would be rendered moot eventually by the pending lease.

The auditor responded that "simply changing the operating structure without changing operational practices and policies will not make the recommendations contained in this report 'moot'….rather, the board needs to be vigilant and perform oversight to ensure that deficiencies in District policies and management practices are corrected."

Under the preliminary lease deal, the district would lease most of its facilities to the Colorado-based international investment and management company Broe Group.

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