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Waukegan finance director says audits are months late, cites material weaknesses and $2 million fix
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Summary
Finance Director Juan Garcia told the City Council on March 16 that the city's audits and continuing disclosure filings are significantly behind, auditors found material weaknesses in reconciliations and revenue recognition, and a $2 million transfer was required to address a shortfall in the fixed asset replacement fund.
Juan Garcia, Waukegan's director of finance, told the City Council on March 16 that the city's annual audits and required continuing disclosures have been delayed since 2022, leaving the finance office roughly six months behind on reconciliations and filings.
Garcia said independent auditors identified three recurring problems ' financial discrepancies, compliance shortcomings and internal‑control weaknesses ' and described material weaknesses in bank reconciliations, revenue recognition and financial reporting for 2023 and 2024. Those weaknesses, he said, can produce material misstatements and could harm the city's ability to issue bonds or maintain favorable borrowing rates if continuing disclosures are not filed promptly.
Garcia gave two concrete examples of the operational impact: a misposted payment in November 2025 that belonged to an out‑of‑state university and a February 2026 shortfall in Fund 307 (the fixed asset replacement fund) that required a $2,000,000 transfer. He said the problems stem in part from backlog and from relying on cash‑based balances without reconciling items in transit.
Council members pressed Garcia on staffing and timing. Alderman Florian asked how many positions report to contractors versus city staff and sought a timeline for catching up. Garcia said the city has engaged MGT Consulting and that work has accelerated; he said staff vacancies remain and that the department is redistributing tasks so more staff handle easier accounts while a senior team tackles complex reconciliations.
When asked whether elected officials could rely on budget numbers presented earlier this year, Garcia said those budget‑to‑actual reports were unaudited and based on the best information available; he added the city was caught up through December 2025 and was working through January–March, with a target of being current through April and May ahead of the June audit cycle.
Council members repeatedly emphasized the need for reliable, timely numbers. Aldermen asked for concrete milestones and said they want monthly reconciliations and improved continuing disclosure timeliness so investors and the public have confidence in the city's financial reporting.
The council did not take a formal vote on policy changes at the meeting; Garcia said staff are implementing a remediation plan (training, shifting accounts among staff and addressing audit findings) and will report progress to committees.
