10232010 - News Article - State auditors warn city not to continue operating in red

State auditors warn city not to continue operating in red

Post-Tribune (IN) 

October 23, 2010 

LAKE STATION -- The State Board of Accounts is warning Lake Station that it could face bankruptcy if it continues to operate at a deficit. 

State auditors estimated that the city's general fund budget could be $1.5 million in the red by the end of this year. 

"The amount of cash and investment deficit balances and the fact that tax levies have been set to statutory limits raises substantial doubt about the city's ability to continue as going concern," the audit stated. 

The city has spent nearly $6.5 million in excess of revenues since 2009 due to a failure to respond to the Department of Local Government Finance in a timely manner. As a result, the general, ambulance nonreverting and sanitary district bond funds did not have an appropriation. 

In the city's official response, Mayor Keith Soderquist and Clerk-Treasurer Brenda Sam-uels told auditors that the problems are inherited from the previous administration. The city has retained a financial consultant -- HJ Umbaugh and Associates -- to correct the problems and find viable options to eliminate the general fund deficit as quickly as possible. 

The letter states that city officials do not know why the city did not respond to the DLGF about its 1782 Notice. 

The audit listed several other problems, including the failure to use purchase orders, not listing a leased vehicle for the mayor as a taxable fringe benefit and paying $635.94 in interest charges and late fees on city-issued credit cards. 

Also, the city did not prepare a Schedule of Federal Grant Receipts and Disbursements for 2009. 

On Sept. 30, the city sanitary board raised taxes to pay off a bond on a court-ordered debt to the Gary Sanitary District. Each household will owe an extra $150 in property taxes. Officials said that then-mayor Shirley Wadding never informed the council that they had to raise sewer rates to meet the increased rates from GSD, which provides sewer services to the city.