Northwest Indiana Discussion

Federal Awards:
Internal control over major programs:
Material weaknesses identified? yes
Significant deficiencies identified? yes

Type of auditor's report issued on compliance for major programs: Unqualified, except for
Community Development Block Grants/Entitlement Grants and ARRA Energy Efficiency and
Conservation Block Grant Program (EECBG), which are qualified.
Any audit findings disclosed that are required to be reported
in accordance with section 510(a) of Circular A-133? yes

Identification of Major Programs:
CFDA
Number
Name of Federal Program or Cluster
CDBG – Entitlement Grants Cluster
14.239 HOME Investment Partnerships Program
14.257 ARRA Homelessness Prevention and Rapid Re-Housing Program
66.458 Capitalization Grants for Clean Water State Revolving Funds
66.468 ARRA Capitalization Grants for Drinking Water State Revolving Funds
81.128 ARRA Energy Efficiency and Conservation Block Grant Program (EECBG)
Dollar threshold used to distinguish between Type A and Type B programs: $300,000
Auditee qualified as low-risk auditee? no

Furthermore, the City's grant schedule included receipts and disbursements of the Technology
Grant Fund #288; however, these receipts and disbursements were determined to not be federal funding.
The Technology Grant Fund accounts for the City's Certified Technology Park established by Indiana
Code 36-7-32 whereby the City can capture incremental sales and income taxes from the State of
Indiana.


The City did not ensure that employees had the adequate training, nor did they take advantage of
available opportunities to seek the guidance necessary, to prepare an accurate Schedule of Expenditures
of Federal awards. In addition, there was a lack of management oversight or approval of the schedule
before it was filed with the state. Adequate internal control over reporting of Federal awards requires that
employees be aware of the applicable requirements and that they have the requisite knowledge and skills
to prepare accurate schedules. In addition, adequate internal control requires sufficient supervision and
oversight by management and the governing bodies to ensure accurate reporting of Federal awards.

http://www.in.gov/sboa/WebReports/B39219.pdf page 70/71




Opps, does that mean there is a problem here.... Auditee qualified as low-risk auditee? No?

Tom, who is the city's book keeper? Who did you hire Tom?

Section III – Federal Award Findings and Questioned Costs
FINDING 2010-3 - DAVIS-BACON ACT

Federal Agency: U.S. Department of Housing and Urban Development
Federal Program: Community Development Block Grants/Entitlement Grants
ARRA Community Development Block Grant ARRA Entitlement Grants (CDBG-R)
CFDA Number: 14.218, 14.253 Award Number: B-09-MC-18-0006, B-10-MC-18-0006, B-09-MY-18-0006

Compliance with the Davis-Bacon Act requires payment of federal prevailing wage rates for
construction, repair or alteration work. The grantee must establish controls for monitoring wages paid by
contractors. They must obtain recent and applicable wage rates from the U.S. Department of Labor and
incorporate them into the construction contract.

According to a U.S. Department of Housing and Urban Development on-site review conducted on
March 24, 2011, three projects in which Davis Bacon laws were applicable, adequate payroll records
were not maintained nor were the proper labor standards provisions and correct wage decision included
in the bid specifications or the construction contract. The City also failed to conduct the appropriate wage
interviews for all three projects reviewed. The lack of monitoring of compliance with the Davis-Bacon Act could result in cancellation of contracts and/or the repayment of federal funds.

Section II – Financial Statement Findings


FINDING 2010-1 - INTERNAL CONTROLS OVER BANK RECONCILEMENTS

Monthly reconcilements shall be prepared to verify the existence/occurrence and completeness of
the City's accounting records. Documentation of management review of the monthly bank reconcilements
was not provided. Management should review the monthly bank reconcilements to ensure the reconciled
bank balances agree to the ledger balances and that reconciling items are appropriate and supportable.
Reconciling items noted should then be timely posted to the ledgers within the following month to ensure
informed management decisions. Monthly reconcilements should be expected to be completed within the
following month after month end. A similar comment was stated in the prior report.


A review of the 2010 monthly bank reconcilements prepared by the City noted the following items:

1. The dates designated on the 2010 monthly bank reconcilements indicated that the
monthly reconcilements were not completed timely. Untimely reconciling of the City's
bank accounts inhibits management's ability to make informed financial decisions. The
following details the month to be reconciled and when the monthly reconcilement was
actually completed:

2. The City's bank account activity included deposits and/or electronic fund transfers (EFTs)
received by the bank which were not receipted and posted to the City's ledger by month
end. Monthly bank reconcilements, performed on a timely basis, would allow for outstanding
deposits to be receipted and posted to the ledger during the following month.
An analysis of the City's monthly bank reconcilements outstanding deposit amounts
noted that outstanding deposits are not timely receipted and posted to the City's ledger.

The following table details the monthly outstanding deposits not receipted and posted by
the following month:

Reconcilement
Month Date
January May 2010
February Sept 2010
March Sept 2010
April Sept 2010
May Nov 2010
June Nov 2010
July Nov 2010
August Nov 2010
September Dec 2010
October March 2011
November March 2011
December March 2011

Outstanding
Deposits Not
Posted By The
Month Following Month

January $ 131,330
February 477,641
March 453,540
April 563,771
May 416,799
June 416,799
July 420,901
August 1,832,495
September 985,041
October 5,050,241
November 1 1,675
December 1 0,730

"which were not receipted and posted to the City's ledger by month
end"

Tommie's words: "Well, 12 full months of not depositing funds"

Where does it say they were never receipted?

Another stretch of the truth folks. Seems JCMCHUCK has a tendency to twist things a bit wouldn't you say?

Section II – Financial Statement Findings


FINDING 2010-1 - INTERNAL CONTROLS OVER BANK RECONCILEMENTS

Monthly reconcilements shall be prepared to verify the existence/occurrence and completeness of
the City's accounting records. Documentation of management review of the monthly bank reconcilements
was not provided. Management should review the monthly bank reconcilements to ensure the reconciled
bank balances agree to the ledger balances and that reconciling items are appropriate and supportable.
Reconciling items noted should then be timely posted to the ledgers within the following month to ensure
informed management decisions. Monthly reconcilements should be expected to be completed within the
following month after month end. A similar comment was stated in the prior report.


A review of the 2010 monthly bank reconcilements prepared by the City noted the following items:

1. The dates designated on the 2010 monthly bank reconcilements indicated that the
monthly reconcilements were not completed timely. Untimely reconciling of the City's
bank accounts inhibits management's ability to make informed financial decisions. The
following details the month to be reconciled and when the monthly reconcilement was
actually completed:

2. The City's bank account activity included deposits and/or electronic fund transfers (EFTs)
received by the bank which were not receipted and posted to the City's ledger by month
end. Monthly bank reconcilements, performed on a timely basis, would allow for outstanding
deposits to be receipted and posted to the ledger during the following month.
An analysis of the City's monthly bank reconcilements outstanding deposit amounts
noted that outstanding deposits are not timely receipted and posted to the City's ledger.

The following table details the monthly outstanding deposits not receipted and posted by
the following month:

Reconcilement
Month Date
January May 2010
February Sept 2010
March Sept 2010
April Sept 2010
May Nov 2010
June Nov 2010
July Nov 2010
August Nov 2010
September Dec 2010
October March 2011
November March 2011
December March 2011

Outstanding
Deposits Not
Posted By The
Month Following Month

January $ 131,330
February 477,641
March 453,540
April 563,771
May 416,799
June 416,799
July 420,901
August 1,832,495
September 985,041
October 5,050,241
November 1 1,675
December 1 0,730

For your reading convenience,




Precise, I think not. Lousy accounting, I'll give ya that, but stiring in your hearsay bull$h!t to give the impression of wrong doings isn't right either.

For your reading convenience,




Precise, I think not. Lousy accounting, I'll give ya that, but stiring in your hearsay bull$h!t to give the impression of wrong doings isn't right either.

For your reading convenience,



I'll give ya that, but stiring in your hearsay bull$h!it isn't right either.

Over $10,000,000 of late deposits.

$33,000,000 in over drawn accounts.

City Credit Card charges with out receipts.

And the State reporting Tom McDermott distributing contracts to contractors and there was absolutely no follow up that the laborers were getting union rate.

Exceptionally Poor Accounting Proceedures

Federal Awards:
Internal control over major programs:
Material weaknesses identified? yes
Significant deficiencies identified? yes

PAYROLL DEFICIENCIES

Over payment of consessions

No submittal of Festival Receipts

Schedule of Federal Grant Receipts and Disbursements for 2010 that was
materially inaccurate.

CRIME INSURANCE POLICIES
The crime insurance policies have not been filed in the office of the County Recorder as required
by Indiana Code 5-4-1-15.1(b).

April 2010 collections of
$13,638 were included in both the May and July 2010 distribution, resulting in an overpayment to the
County without the City resolving the overpayment as of May 2011

properties acquired by the City's Department of Planning and Development were not added to the City's capital asset records in
2010.


Financial Statement(s):
Internal control over financial reporting:
Material weaknesses identified? yes


1. Part 1 - Statement of Receipts, Disbursements, Cash Balances, and Investment Balances
(Governmental Funds) did not agree to the City's cash and investments balance at
year end. The Annual Report cash and investment balance was $8,383,205 less than
the City's ledger balance.

2. The Public Defender, Inspection/Rental, and Riverboat Loan Funds were omitted from
the Annual Report. The total annual receipts, disbursements, and ending cash balance
for all omitted funds were $7,628,065, $1,700,000, and $5,928,065, respectively.

3. The Annual Report omitted $6,120,425 of transfers in and out between funds. The
omission of the transfers caused 14 funds ending reported cash balances to disagree
with the City's ledger balances.

4. The Cabela's Bond Fund (#408) did not include $2,101,385 of receipts posted to the
City's detail of receipts ledger.

5. The Energy Efficiency and Conservation Block Grant Fund (#017) and the State Forfeited
Fund (#220) did not include $336,337 and $113,542, respectively, of disbursements
posted to the City's detail of disbursements ledgers.

The City Controller corrected the discrepancies noted above and filed an amended Annual Report
with the State Examiner. In addition, the City Controller approved the adjustments to the financial statements
presented herein to reflect the total receipt and disbursement activity.

Furthermore, the City advertised Part 1 - Statement of Receipts, Disbursements, Cash Balances,
and Investment Balances (Governmental Funds). The totals advertised did not agree to the City's ledger. The advertised cash and investment balance was $6,246,674 greater than the City's ledger balance.

In addition, even though the City's Annual Report filed with the State Examiner included the activity of the
City's Sanitary District, Water Utility, and Port Authority, the activity advertised did not include the receipt,
disbursements, and ending cash balance of the City's Sanitary District, Water Utility, and Port Authority.
Therefore, the receipts and disbursements of the City's Sanitary District, Water Utility, and Port Authority
were not published as required by law. A similar comment appeared in the prior report.


$31,682,814 in unapproved use of city gaming money!

In 2010, payments were made to the law firms of Eichhorn & Eichhorn, LLP and Baker & Daniels
in 2010 totaling $476,216 and $18,211, respectively, for litigation and professional services. These payments were made without written contracts.


Furthermore, the Park Board approved payments to Lisa Berdine and Dennis Hardesty in 2010
totaling $24,113 and $21,282, respectively, for legal services and boxing club management services
without written contracts.

payments were made to Bose Public Affairs Group totaling $60,137 for public affairs
services without a written contract.

Disbursements
in Excess of
Fund Approved Appropriations
General $ 2,711,309
Redevelopment Commission Operating 387,322
Water Hydrant Rental 136,387
A total of $2,711,309 ?

The City Clerk's office and Fire Department did not maintain appropriate payroll records
reflecting the actual number of hours worked each day by an employee.

College Bound $2,505,394 No audit on this program is their? Naw, we don't need no stinkin audit.

$3,142,294 in Penalities

Woodmar Tiff came in with $0 cash balance, generated $1,989,798 in Taxes
Disbursements were $1,326,532

$320,154 in Personal Service


Lost Marsh Golf Course started with a negative $244,270 begining balance.....and had not one black cent of income


Now the ReDevelopment Autority had $8,764,214 in receipts....what did they sell?


And disbursed $3,272,564, but in an adjacent line item had $2,768,917 in receipts, spending $5,583780 winding up with a negative blance of $2,814,863.

discovered that a $77,737.85
Section 108 loan repayment to the U.S. Department of Housing and Urban Development
was paid by both, a written check and electronic wire transfer in January 2010. The loan
trustee sent a reimbursement check to the City for the duplicate payment. The reimbursement
check was deposited and receipted back to the fund from which it was paid.
On January 15, 2010, a $77,737.85 disbursement was posted for the check issued for
the loan payment. However, the City voided the original check even though it cleared the
bank and a negative ($77,737.85) disbursement was posted on March 18, 2010, to
reverse the January 15, 2010 entry. Thus, the City's attempt to correct the situation
netted to an overstatement of the fund by $155,475.70. The overstatement was not
identified as a reconciling item on the April to December 2010 bank reconcilement until it
was discovered by the field examiner in March 2011. On March 31, 2011, the City
posted a negative ($155,475.70) receipt to correct the 2010 posting errors.


City's general bank account for December 2010 included a $154,694 reconciling
item for two March 2010 electronic wire transfers out for vendor payments that had not
been posted to the City's ledger. However, upon further review of the disbursement
ledger, the electronic transfers out were posted to the City's ledger on March 29 and April
3, 2010. Once the City posted the disbursement to the City's ledger to support the
electronic transfers out, the reconciling item should not have been a reconciling issue on
the City's monthly reconcilement after March 2010. However, a monthly "outstanding
wire xfers" reconciling item was carried on the monthly reconcilements from April to
December 2010.

Section II – Financial Statement Findings

3. The City's general bank account for December 2010 included a $154,694 reconciling
item for two March 2010 electronic wire transfers out for vendor payments that had not
been posted to the City's ledger. However, upon further review of the disbursement
ledger, the electronic transfers out were posted to the City's ledger on March 29 and April
3, 2010. Once the City posted the disbursement to the City's ledger to support the electronic
transfers out, the reconciling item should not have been a reconciling issue on the
City's monthly reconcilement after March 2010. However, a monthly "outstanding wire
xfers" reconciling item was carried on the monthly reconcilements from April to December
2010.

4. During our review of the City's annual debt payments, we discovered that a $77,737.85
Section 108 loan repayment to the U.S. Department of Housing and Urban Development
was paid by both, a written check and electronic wire transfer in January 2010. The loan
trustee sent a reimbursement check to the City for the duplicate payment. The reimbursement
check was deposited and receipted back to the fund from which it was paid.
On January 15, 2010, a $77,737.85 disbursement was posted for the check issued for
the loan payment. However, the City voided the original check even though it cleared the
bank and a negative ($77,737.85) disbursement was posted on March 18, 2010, to
reverse the January 15, 2010 entry. Thus, the City's attempt to correct the situation
netted to an overstatement of the fund by $155,475.70. The overstatement was not
identified as a reconciling item on the April to December 2010 bank reconcilement until it
was discovered by the field examiner in March 2011. On March 31, 2011, the City
posted a negative ($155,475.70) receipt to correct the 2010 posting errors.

5. A dormant payroll bank account remains open to allow any outstanding checks to clear
the account for the allowable two-year period before the checks can be voided by the
City. The following items were noted based on our review of the December 2010 reconcilement:
a. The City's reconcilement included a reconciling item for old outstanding checks
that were already voided and properly receipted to the ledger in 2010.
b. The City's reconcilement did not include the bank's account analysis charge,
totaling $4,452.93 from the prior audit, as a reconciling item nor were the charges
posted to the City's ledger in 2010.
c. In March 2011, the Deputy Controller determined that checks totaling $19,750
had actually cleared the bank in 2009 and 2010 without being cleared in the City's
accounting system and remained on the City's detail of outstanding checks at year
end.
d. The Deputy Controller also determined that during 2010 three amended payroll
checks cleared the dormant payroll bank account that should have been processed
through the City's new payroll bank account. A $3,142.46 reconciling item reflecting
the bank to bank transfer between the dormant and new payroll bank accounts were
not included on either reconcilements.

FINDING 2010-4 - EQUIPMENT AND REAL PROPERTY MANAGEMENT

Federal Agency: U.S. Department of Housing and Urban Development
Federal Program: Community Development Block Grants/Entitlement Grants
CFDA Number: 14.218

Program Title: Neighborhood Stabilization Program (NSP1)
Award Number: B-08-MN-18-0006

The City used funds from the Neighborhood Stabilization Program for acquisition and rehabilitation
of foreclosed residential homes. The City expended approximately $1.8 million dollars purchasing
and rehabilitating homes during 2010. The properties purchased with federal dollars were not included in
the capital asset records of the City.



24 CFR 85.20 Standards for financial management systems states in part:
"(b) The financial management systems of other grantees and subgrantees must meet the
following standards: . . .

(2) Accounting records. Grantees and subgrantees must maintain records which
adequately identify the source and application of funds provided for financially-assisted
activities. These records must contain information pertaining to grant or subgrant
awards and authorizations, obligations, unobligated balances, assets, liabilities, outlays
or expenditures, and income."

24 CFR 85.31 states in part: "(a) Title. Subject to the obligations and conditions set forth in this
section, title to real property acquired under a grant or subgrant will vest upon acquisition in the grantee
or subgrantee respectively."

24CFR 85.42(c)(2) states: "The retention period for real property and equipment records starts
from the date of the disposition or replacement or transfer at the direction of the awarding agency."
Failure to maintain complete capital asset records of properties purchased with federal grant
awards may jeopardize the City's ability to obtain future federal funding.
We recommended that officials establish procedures to ensure that assets purchased with federal
funds are adequately recorded in the capital asset ledger of the City in accordance with state and federal
guidelines.