Northwest Indiana Discussion

As part of the agreement, Horseshoe Casino was to pay the Port Authority boat slip rental for
slips that could not be rented during the construction period. The Casino was originally invoiced
for the 2008 boat slips totaling $748,995 on January 10, 2008, and invoiced repeatedly during
2008; however, the Casino has not paid. Some other items per the agreement that were to be
reimbursed by the Casino have not been reimbursed. The attorney for the Port Authority is
currently negotiating with the Casino for these items.

The City of Hammond, in conjunction with the Hammond Port Authority and Hammond Park
Board, is receiving a three year funding grant package in the amount of $31,480,000 from the
RDA for the Hammond Lakes' Area Marquette Plan Improvements, which includes: Lake
Michigan Shoreline Enhancement, Wolf Recreational Area Development, and George Lake Trail
Bridge.
The funding grant package is divided as follows:
Year One: Wolf Lake Amphitheater, Paths and trail connections, Greenway Enhancements,
Water Quality Activities and Erosion and Sediment Control $16,800,000.
Year Two: Wolf Lake Aquatic Play Center and Bathhouse, Formal gardens and conservatory,
Road and playground improvements, Shoreline enhancements $7,630,000.
Year Three: Shoreline Enhancements, Marina and Street improvements, Landscaping and
Seeding Activities $7,050,000.
The City has $22,782,700 currently invested for this project for a total project cost of $54,262,700.

Water Utility
In 2009, the Utility is undertaking a $3,500,000 project to upgrade the Filtration Plant. The project
is being funded through a grant from the Hammond Redevelopment Commission of $1,000,000
received on December 31, 2008, a state revolving forgivable loan from the State of Indiana of
$1,000,000, and $1,500,000 from cash balances on hand. The Utility closed on the state revolving
loan on September 23, 2009.
To assist in the financing of the acquisition and construction of the upgraded filtration plant,
$1,500,000 was loaned from the Hammond Redevelopment Commission on April 27, 2009, and
matures on April 27, 2010, with no interest.

Noncompliance – Legal/Contractual Provisions
Sanitary District
In April of 1999, the Sanitary District entered into a Consent Decree with the United StatesEnvironmental Protection Agency (EPA) to implement improvements to address the effects of
sediment contamination in the West Branch of the Grand Calumet River.
For CSO Control, the Sanitary District was to initiate construction by May 1, 2004for new
reservoir and pump station improvements, sewer separations, sewer interceptors, and sewer
interceptor improvements in order to eliminate the use of the Columbia, Sohl, and Johnson Avenues
CSOs. , The projects were to be completed by May 1, 2009, and achieved operational statusfor all new or modified components and cease all discharges from Columbia, Sohl and Johnson
Avenues CSOs. In accordance with the Consent Decree failure to comply with any completion
date specified and to remain in noncompliance for more than 90 days, the Sanitary District shall
not thereafter make any new hook-up, connection, or extension to its sewage system until the
Sanitary District certified to EPA and Indiana Department of Environmental Management (IDEM)
that it has completed the requirement.
For any noncompliance of the Consent Decree requirements noted above, the stipulated penalty
would be applicable based on the period of noncompliance. From the first to the 30th day of continuous
violation, $500 per day per violation; from the 31st to the 60th day of continuous violation,
$750 per day per violation; and after 60 days of continuous violation, $1,000 per day per violation.
The Sanitary District is required to report semiannually to the EPA and IDEM on the status of the
Sanitary District's compliance with all requirements of the Decree.

The semiannual reports were sent on June 17 and December 17, 2008, and on June 15, 2009;
however, the Sanitary District has not completed the CSO Control construction projects due to a
lack of funding. As of September 16, 2009, the Sanitary District is negotiating with representatives
of the EPA, the U.S. Department of Justice, and the IDEM to modify the terms of the Consent
Decree. As of September 16, 2009, no penalties have been assessed against the Sanitary
District.
A permit renewal application was submitted to IDEM on January 29, 1999. A new NPDES Permit
was issued in 2006. Due to concerns regarding certain pollutant parameters, the permit has been
petitioned by the Sanitary District for administrative review. Also, the Sanitary District has been
advised by the EPA and IDEM of their intent to seek civil penalties as provided in the existing
Consent Decree. The penalties sought are for certain NPDES Permit pollutant parameter violations
alleged to have occurred over the last five years, which the Sanitary District denies the
existence and/or the extent of these violations. The Sanitary District estimates the liability for any
such penalties to be less than $250,000.

Hammond Sanitary District
Hammond Water Utility
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CITY OF HAMMOND
AUDIT RESULTS AND COMMENTS
REVIEW OF BANK RECONCILEMENTS
The bank reconcilements are not reviewed by management after they are prepared to ensure the
reconciled bank balances agree to the ledger balances for the City. This control deficiency could result in
materially misstating the financial statement cash and investment balances for the City overall. Adjustments
to the bank balances could be included as reconciling items and errors could go undetected and
not be corrected in a timely or efficient manner.
Governmental units should have internal controls in effect which provide reasonable assurance
regarding the reliability of financial information and records, effectiveness and efficiency of operations,
proper execution of management's objectives, and compliance with laws and regulations. Among other
things, segregation of duties, safeguarding controls over cash and all other assets and all forms of information
processing are necessary for proper internal control.

OVERDRAWN CASH (FUND) BALANCES
The cash (fund) balances of funds indicated were overdrawn as follows:
The cash balance of any fund may not be reduced below zero. Routinely overdrawn funds could
be an indicator of serious financial problems which should be investigated by the governmental unit. (Accounting
and Uniform Compliance Guidelines Manual for Cities and Towns, Chapter 7)
Fund Name Balance
Major funds:
General $ 17,269,299
Other governmental funds:
Transit (Transportation) 431,426
Parks and Recreation 1,301,052
Technical Grant 540
Redevelopment Commission Operating 303,231
Asbestos Program 1 ,284
Water Hydrant Rental 71,506
EPA Grant 45,179
Civil City Bonds 122,010
VOC Detector 16,856
Lost Marsh Golf Course 494,270
Internal Service Fund:
Diesel Fuel Tax 2 ,516
Pension Trust Funds:
1925 Police Pension 1,148,474
1937 Firefighters' Pension 1,239,932

FESTIVAL OF THE LAKES
Parking and Concessions
Tickets were sold for parking and beer concessions; however, the tickets were not retained for
audit. Ticket sales reports were prepared, but report totals did not always agree to the cash collected.
Furthermore, nonprescribed receipts were issued by controller's office employees that were on-site for
collections made at various times during the event.
Concessions Agreement
The agreement between the Hammond Fire Fighters Association and the Hammond Parks and
Recreation states in part: "The Fraternal Order of Police and the Hammond Fire Fighters Association
have agreed to split 22% of the profit from the 2008 Festival of the Lakes beer concessions after product
is paid for . . ." Per the summary report, the total beer concessions were $70,464.08. The claim attached
to the agreement was for Hammond Firefighters in the amount of $15,502.10 (22% of $70,464.08). It is
unclear if the Fraternal Order of Police received their share of the profit.
Officials and employees are required to use State Board of Accounts prescribed or approved
forms in the manner prescribed. (Accounting and Uniform Compliance Guidelines Manual for Cities and
Towns, Chapter 7)
IC 5-15-6-3(f) concerning destruction of public records, states in part: "Original records may be
disposed of only with the approval of the commission according to guidelines established by the commission."
Supporting documentation such as receipts, canceled checks, tickets, invoices, bills, contracts,
and other public records must be available for audit to provide supporting information for the validity and
accountability of monies disbursed. Payments without supporting documentation may be the personal
obligation of the responsible official or employee. (Accounting and Uniform Compliance Guidelines Manual
for Cities and Towns, Chapter 7)
Payments made or received for contractual services should be supported by a written contract.
Each governmental unit is responsible for complying with the provisions of its contracts. (Accounting and
Uniform Compliance Guidelines Manual for Cities and Towns, Chapter 7)

EXPENDITURES NOT COUNCIL APPROVED
The City has appropriated the Gaming Revenues Fund to allow for the Mayor and each Council
Member to have "discretionary" funds. The Mayor and each Council member can decide how to spend
their specific allotment. Some of the funds are used to pay for street paving and purchases of vehicles for
the Street department. In these instances, the vendor is paid directly and the claim is submitted to the
Council for approval. In other instances, the Mayor or Council member may decide to donate funds to
other City departments. For example, funds are donated to the "Festival of the Lakes" or to the "Henry
Unit." In these examples, a claim is prepared; however, it is not submitted to the Council for approval.These donations account for a significant dollar amount of the expenditures made from the Gaming
Funds; therefore, the majority of these donations are not approved by the Council.
IC 5-11-10-1.6 (c) states: "The fiscal officer of a governmental entity may not draw a warrant or
check for payment of a claim unless: . . . (5) payment of the claim is allowed by the governmental entity's
legislative body or the board or official having jurisdiction over allowance of payment of the claim."

ACCOUNTS PAYABLE VOUCHERS
Use of Credit Cards
Payments made by the City for the Mayor's American Express Card were not always supported
by itemized vendor invoices. In addition, the business nature of the expenditure was not always noted.

Unreasonable, Excessive or Undocumented
Payments were made for at least three council members and the Mayor to attend the International
Council on Shopping Centers Conference in Las Vegas from May 16 to May 21, 2008. Some of
the expenditures reimbursed were not supported by itemized vendor invoices. Others included reimbursements
for room upgrade and other extras. (Basic room rates paid ranged from $299 per night to
$480 per night.)
[b]The City also reimbursed a council member for his hotel stay in Chicago for a "Gang Crime"
conference at a cost of $795.85.
Per Section 37.093 of the travel policy for the City:
"The Mayor, the Clerk, the Judge and the members of the Common Council may, at their
option, be reimbursed for their expenses either by reimbursement, as provided above for
other employees, or by a per diem rate as follows:
(A) No more than $60 per day for meals, when such expenses are evidenced by original
receipts or bills are attached to the purchase order;
(B) Lodging at the prevailing rate of a hotel or motel for single occupancy rooms; and
(C) Reimbursement for travel expenses."
The State Board of Accounts will not take exception to the use of credit cards by a governmental
unit provided the following criteria are observed: . . .
7. Payment should not be made on the basis of a statement or a credit card slip only. Procedures
for payments should be no different than for any other claim. Supporting documents
such as paid bills and receipts must be available. Additionally, any interest or
penalty incurred due to late filing or furnishing of documentation by an officer or employee
should be the responsibility of that officer or employee.[/b] (Accounting and Uniform
Compliance Guidelines Manual for Cities and Towns, Chapter 7)
Every effort should be made by the governmental unit to avoid unreasonable or excessive costs.

All claims, invoices, receipts, accounts payable vouchers, including those presented to the governing
body for approval in accordance with IC 5-11-10, should contain adequate detailed documentation.
All claims, invoices, receipts, and accounts payable vouchers regarding reimbursement for meals and expenses
for individuals must have specific detailed information of the names of all individuals for which
amounts are claimed, including the nature, name, and purpose of the business meeting, to enable the
governing body to authorize payment. Payments which do not have proper itemization showing the
business nature of the claim, may be the personal obligation of the responsible official, employee or other
person for whom the claim is made. (
(Accounting and Uniform Compliance Guidelines Manual for Cities and Towns, Chapter 7)

OFFICIAL BONDS
The official bonds were not filed in the Lake County Recorder's office. A similar comment
appeared in prior audit reports. Furthermore, the current Controller has not yet obtained bond coverage.
IC 5-4-1-5.1(b) states in part: "Every elected or appointed officer, official, deputy, or employee of
a political subdivision . . . shall file the bond in the office of the county recorder. . . ."

EMPLOYEE SERVICE RECORDS
Employee service records are maintained for all employees of the City by each department;
however, many do not have proper leave balances maintained. Not all records show leave time earned
or used. Thus, we were unable to determine compliance with leave policies for all employees. Additionally,
service records reviewed from the Fire Department were not on prescribed or approved forms.
This form (Employee Service Record No. 99A) must be kept by each office or department for
each employee in order to properly prepare "Payroll Schedule and Voucher, General Form No. 99." It
records the hours or days worked, sick leave, vacation and days lost. It may also be used to comply with
the requirements of IC 5-11-9-4 regarding recording hours worked each day by an employee. It is suggested
that these be arranged alphabetically in a binder. (Accounting and Uniform Compliance Guidelines
Manual for Cities and Towns, Chapter 4)
Officials and employees are required to use State Board of Accounts prescribed or approved
forms in the manner prescribed.

INTERNAL CONTROLS (PORT AUTHORITY)
Accounts Receivable Controls
A Computer software program is used to account for boat slip rentals. [color=#800000]When year-end closing
procedures are performed the system deletes all prior balances and transactions. Computer generated
reports and transactions [b]were not retained for audit. Furthermore, there is no centralized system for
following up on unpaid balances from prior years. We reviewed current reports but found that the financial
information recorded did not always agree with the information in the individual customer files.
The governing body of a governmental unit should have a written policy concerning a procedure
for the writing off of bad debts, uncollectible accounts receivable, or any adjustments to record balances.
Documentation should exist for all efforts made by the governmental unit to collect amounts owed
prior to any write-offs.
Officials or employees authorizing, directing or executing write-offs or adjustments to records
which are not documented or warranted [u]may be held personally responsible[/u]. (Accounting and Uniform
Compliance Guidelines Manual for Cities and Towns, Chapter 7)
Correction (Adjustment) Entries
Reports from the computerized system are not retained for audit to support adjustments made to
customer accounts. Current period reports reviewed do not provide adequate documentation to support
the correcting entries made; therefore, we were unable to determine the validity of such adjustments.
Furthermore, there is not a system in place for management to approve adjustments to customer accounts.
The computerized accounting system must maintain electronic audit trails sufficient to trace all
transactions from original source of entry into the system, through all system processing, and to the
results produced by the system. The audit trails must also maintain sufficient information to trace all
transactions from the final results produced by the system, through all system processing, and to the
original source of entry into the system. Audit trials must also identify the user that processed the transaction
or updated the information. These audit trails must be protected from modification and deletion.
(Accounting and Uniform Compliance Guidelines Manual for Cities and Towns, Chapter 7)
Receipt Controls
Collections from the various cash collection points are remitted to the Port Authority office and the
cash composition (cash, check, credit card, etc.) is verified; however, the receipt is not issued until after
the collections have been deposited at the bank. It is unclear why receipts are not issued at the time
collections are remitted and verified.Receipts shall be issued and recorded at the time of the transaction; for example, when cash or a
check is received, a receipt is to be immediately prepared and given to the person making payment. (Accounting
and Uniform Compliance Guidelines Manual for Cities and Towns, Chapter 7)[/color][/b]

Port Authority Payroll Controls
The Port Authority processes payroll transactions and checks electronically. One person is
responsible for entering the wage amounts, computing the payroll, verifying the hours and computed
wages to the source documents, and generating the payroll checks. The Port Authority director reviews
and approves a preliminary payroll report.
Segregation of duties is the concept of having different people do different tasks within the organization.
It provides the foundation of good internal control by assuring that no one individual has the
capability to perpetuate and conceal errors or irregularities in the normal course of their authorized duties.
Segregation of duties is achieved within information technology systems by appropriate assignment of
security profiles that define the data the users can access and the functions that they can perform.
Access must be restricted to the minimum required for the user to perform their job function. Access
rights must be periodically reviewed and approved by management. (Accounting and Uniform Compliance
Guidelines Manual for Cities and Towns, Chapter 7)
Governmental units should have internal controls in effect which provide reasonable assurance
regarding the reliability of financial information and records, effectiveness and efficiency of operations,
proper execution of management's objectives, and compliance with laws and regulations. Among other
things, segregation of duties, safeguarding controls over cash and all other assets and all forms of information
processing are necessary for proper internal control.
Controls over the receipting, disbursing, recording, and accounting for the financial activities are
necessary to avoid substantial risk of invalid transactions, inaccurate records and financial statements
and incorrect decision making.

The terms and conditions of the agreement state in part: "An equipment/cleanup deposit in the
amount of three hundred dollars ($300.00) is due and payable ten (10) business days prior to the first
date of the Lease Term. If Lessee defaults hereunder, Lessor may apply said deposit or any pay thereof,
to compensate Lessor for any loss, damage or expense sustained due to such default. The balance of
such security deposit shall be returned to Lessee within thirty (30) days of Lessee's use of the Clipper
Room." For 100% of the leases audited none had documentation that the $300 deposit was collected.
Per inquiry of the ship store manager they do not deposit nor receipt the $300 deposit. The lessees
either give cash, a blank signed check, or a credit card number for the deposit. The cash and checks are
kept in the safe and right after the event they are given back to the lessees.
Per the agreement the final payment is required ten (10) business days prior to the first date of
the lease term. We noted final payments made from one day after the event to 68 days after.
Fees should only be collected as specifically authorized by statute or properly authorized resolutions
or ordinances, as applicable, which are not contrary to statutory or Constitutional provisions. (Accounting
and Uniform Compliance Guidelines Manual for Cities and Towns, Chapter 7)
The governing body of a governmental unit should have a written policy concerning a procedure
for the writing off of bad debts, uncollectible accounts receivable, or any adjustments to record balances.
Documentation should exist for all efforts made by the governmental unit to collect amounts owed
prior to any write-offs.
Officials or employees authorizing, directing or executing write-offs or adjustments to records
which are not documented or warranted may be held personally responsible. (Accounting and Uniform
Compliance Guidelines Manual for Cities and Towns, Chapter 7)

CAPITAL ASSET RECORDS (PORT AUTHORITY)
The Port Authority records some capital asset additions and disposals, but the records are not
complete. The Port Authority is undergoing several building and renovation projects which are not being
reported as construction in progress. For example, during 2008, the Port Authority awarded contracts for
Indianapolis Boulevard landscape improvements totaling $1,578,248, a guardhouse and main entrance
$974,250, and for construction of the Lost Marsh Clubhouse $9,183,000 of which $4,554,589 had been
paid on the contract as of December 31, 2008.
Every governmental unit should have a complete inventory of all capital assets owned which
reflects their acquisition value. Such inventory should be recorded in the Capital Assets Ledger. A complete
inventory should be taken every year for good internal control and for verifying account balances
carried in the accounting records.

INTERNAL CONTROLS PAYROLL (SANITARY DISTRICT)
The Sanitary District's policy regarding vacation leave states, "Vacation time may not be carried
into the next calendar year, unless the employee's scheduled vacation time has been canceled by the
Sanitary District and there is insufficient time to reschedule the vacation during the calendar year." The
Sanitary District's compensatory time policy states, "Comp time must be taken within a reasonable
amount of time. Only Comp time earned in the month of December may be carried over into the first
quarter of the new year."
In June 2008, the payroll clerk requested permission from the Sanitary District Manager to
convert her compensatory time used from February 1, 2008 through June 30, 2008, to vacation time
used. Written documentation of the number of hours to be converted was not provided to the Sanitary
District Manager. Additionally, the Business Manager, who is responsible for approving the time sheets
of the Payroll Clerk was not informed of this request. All compensatory time used during this period was
converted to vacation leave which was 44 hours. In December 2008, the Sanitary District Manager
approved the payment of the payroll clerk's balance of 191 compensatory hours for which one-half was
paid in December 2008 with the remainder being paid after the board approved the payment of the compensatory
time in January 2009. The conversion of the compensatory time to vacation resulted in her
receiving an additional $797.72 (44 hours at $18.13/hour).
Furthermore, the Business Manager, who became a contractor in 2008, stopped signing the time
sheets for the employees in the finance department. This employee had access to a signature stamp
which was used occasionally by the Business Manager for other purposes. Since the Sanitary District
Manager or Business Manager had not designated anyone to sign the time sheets, this employee used
this signature stamp to indicate that her time sheets had been reviewed and approved.
Governmental units should have internal controls in effect which provide reasonable assurance
regarding the reliability of financial information and records, effectiveness and efficiency of operations,
proper execution of management's objectives, and compliance with laws and regulations. Among other
things, segregation of duties, safeguarding controls over cash and all other assets and all forms of information
processing are necessary for proper internal

RATE NOT APPROVED BY COUNCIL (SANITARY DISTRICT)
The Sanitary District Board approved a resolution increasing the garbage collection fee for the
Sanitation Utility. This [i]increased fee has not been approved by the Hammond City Council in the form of
an Ordinance[/i].
IC 36-9-25-11 (c) states:
"Fees may not be established until a public hearing has been held at which all the users of
the sewage works and owners of property served or to be served by the works, including
interested parties, have had an opportunity to be heard concerning the proposed fees. After
introduction of the resolution fixing fees, and before they are finally adopted, notice of the
hearing setting forth the proposed schedule of fees shall be given by publication in
accordance with IC 5-3-1. After the hearing the resolution establishing fees, either as
originally introduced or as amended, shall be passed and put into effect. However, fees
related to property that is subject to full taxation do not take effect until they have been
approved by ordinance of the municipal legislative body or, in the case of a district described
in section 3(b)(2) of this chapter, under section 11.3 of this chapter."

ACCOUNTS PAYABLE VOUCHERS (SANITARY DISTRICT)
General
Accounts payable vouchers for the attorney and a lab cleaning service did not have properly
itemized invoices attached. The attorney was paid based upon the attached purchase order, and the
cleaning service invoices did not indicate a rate of pay for the service provided.
Travel
When mileage is claimed for reimbursement, the Mileage Claim Form 101 is not always used.
Employees are reimbursed for registration fees for conferences and meals based upon submission
of cancelled checks, money orders, or personal credit card statements. Invoices are not always
provided to support amounts claimed.
An employee attended a conference in Georgia. The conference ran from January 28 thru
January 31; however, hotel and meals paid for on February 2, 2008, were reimbursed totaling $212.86.
No justification was provided for the additional costs to the Sanitary District.

Section II – Financial Statement Findings
FINDING 2008-1, REVIEW OF BANK RECONCILEMENTS
The bank reconcilements are not reviewed by management after they are prepared to ensure the
reconciled bank balances agree to the ledger balances for the City. The Controller indicated that he does
not review the reconcilements because the person responsible for reconciling the bank accounts has
limited responsibilities over cash handling functions. Furthermore, he indicated that he is to receive notice from the bank if cash balances are reduced to a predetermined amount. This control deficiency
could result in materially misstating the financial statement cash and investment balances for the City
overall. Adjustments to the bank balances could be included as reconciling items and errors could go
undetected and not be corrected in a timely or efficient manner.

FINDING 2008-2, INTERNAL CONTROLS (PORT AUTHORITY)
Accounts Receivable Controls
A computer software program is used to account for boat slip rentals. When year-end closing
procedures are performed they system deletes all prior balances and transactions. Computer generated
reports and transactions were not retained for audit. Furthermore, there is no centralized system for
following up on unpaid balances from prior years. Current computer record information does not always
agree to supporting information per individual customer files.
The governing body of a governmental unit should have a written policy concerning a procedure
for the writing off of bad debts, uncollectible accounts receivable, or any adjustments to record balances.
Documentation should exist for all efforts made by the governmental unit to collect amounts owed
prior to any write-offs.
Officials or employees authorizing, directing or executing write-offs or adjustments to records
which are not documented or warranted may be held personally responsible. (Accounting and Uniform
Compliance Guidelines Manual for Cities and Towns, Chapter 7)
Correction (Adjustment) Entries
Reports from the computerized system are not retained for audit to support adjustments made to
customer accounts. Current period reports reviewed do not provide adequate documentation to support
the correcting entries made; therefore, we were unable to determine the validity of such adjustments.
Furthermore, there is not a system in place for management to approve adjustments to customer accounts.
The computerized accounting system must maintain electronic audit trails sufficient to trace all
transactions from original source of entry into the system, through all system processing, and to the
results produced by the system. The audit trails must also maintain sufficient information to trace all

Receipt Controls
Collections from the various cash collection points are remitted to the Port Authority office and the
cash composition (cash, check, credit card, etc.) is verified; however, the receipt is not issued until after
the collections have been deposited at the bank. It is unclear why receipts are not issued at the time
collections are remitted and verified.

Payroll Controls
The Port Authority processes payroll transactions and checks electronically. One person is
responsible for entering the wage amounts, computing the payroll, verifying the hours and computed
wages to the source documents, and generating the payroll checks. The Port Authority director reviews
and approves a preliminary payroll report.
Segregation of duties is the concept of having different people do different tasks within the organization.
It provides the foundation of good internal control by assuring that no one individual has the
capability to perpetuate and conceal errors or irregularities in the normal course of their authorized duties.
Segregation of duties is achieved within information technology systems by appropriate assignment of
security profiles that define the data the users can access and the functions that they can perform.
Access must be restricted to the minimum required for the user to perform their job function. Access
rights must be periodically reviewed and approved by management. (Accounting and Uniform Compliance
Guidelines Manual for Cities and Towns, Chapter 7)
Governmental units should have internal controls in effect which provide reasonable assurance
regarding the reliability of financial information and records, effectiveness and efficiency of operations,
proper execution of management's objectives, and compliance with laws and regulations. Among other
things, segregation of duties, safeguarding controls over cash and all other assets and all forms of information
processing are necessary for proper internal control.

FINDING 2008-3, CONTROLS OVER ALLOWABLE COSTS, HOME PROGRAM
Federal Agency: U.S. Department of Housing and Urban Development
Federal Program: HOME Investment Partnerships Program
CFDA Number: 14.239
Award Numbers: M-04-MC-18-0006, M-05-MC-18-0006, M-06-MC-18-0006, M-07-MC-18-0006
The Rehab Specialist/Inspector is responsible for verifying that the invoices to be paid from
HOME program funds are allowable costs under the grant guidelines. Accounts payable vouchers paid
from HOME program funds are not signed by the Rehab Specialist/Inspector indicating that he has
reviewed the invoices. The Rehab Specialist/Inspector indicated that he is responsible for entering the
accounts payable vouchers into the electronic payment system for the City; thus, it is not necessary for
him to sign the vouchers to indicate that he has reviewed or approved the voucher for payment. The
electronic payment system does not have user identification or password controls which would prevent
others from entering accounts payable vouchers for payment from the HOME program funds. Furthermore,
at least two other employees enter HOME program accounts payable vouchers for payment.

Sufficient Records
The City has not established and maintained records sufficient to determine that the City has met
the requirements for activity eligibility and national objective compliance. There must be documentation
that at the time of the funding and throughout the implementation, activities were eligible, funds disbursed
towards activities were eligible costs, and that the activities met a national objective. At the time of the
review, the City did not have written policies and procedures for management to follow. Thus, it could not
be determined that all activities were eligible and met the national objective requirements per 24 CFR
507.208.
HUD determined the following activities were not documented properly to show the costs were
eligible and met the national objectives:
CFR 570.208 states in part: "The following criteria shall be used to determine whether a CDBGassisted
activity complies with one or more of the national objectives as required under § 570.200(a)(2):
(a) Activities benefiting low-and moderate-income persons.
(1) Area benefit activities. (i) An activity, the benefits of which are available to all the
residents in a particular area, where at least 51 percent of the residents are low and
moderate income persons.
(2) Limited clientele activities. (i) An activity which benefits a limited clientele, at least
51 percent of whom are low- or moderate-income persons. (The following kinds of
activities may not qualify under paragraph (a)(2) of this section: activities, the benefits
of which are available to all the residents of an area; activities involving the
acquisition, construction or rehabilitation of property for housing; or activities where
the benefit to low- and moderate-income persons to be considered is the creation or
retention of jobs, except as provided in paragraph (a)(2)(iv) of this section).
(3) Housing activities. An eligible activity carried out for the purpose of providing or
improving permanent residential structures which, upon completion, will be occupied
by low- and moderate- income households.
Program Amount Remaining
Activity Name Year Activity # Ineligible Amount Eligible Questioned Costs
Administration of Non-Profit Progam 2007 992 $ 171,988.24 $ (23,498.37) $ 148,489.87
Program Delivery of Non-Profit Program 2008 1083 2 6,306.84 (25,726.95) 579.89
Acquisition Match for Special Impact Area 2006 901 286,509.23 - 286,509.23
Acquisition and Disposition 2007 990 266,472.91 - 266,472.91
Acquisition and Disposition 2008 1081 3 8,861.72 - 38,861.72
Revolving Loan 2006 904 8 1,785.06 (81,785.06) -
Revolving Loan 2007 1019 1 4,859.94 (14,859.94) -
Economic Development Administration 2006 903 189,927.49 - 189,927.49
Economic Development Administration 2007 994 207,346.00 (207,346.00) -
Economic Development Planning 2007 996 942.87 - 942.87
Economic Development Administration 2008 1085 1 5,079.39 - 15,079.39
Economic Development Planning 2008 1091 4,402.50 - 4,402.50
Other ineligible disbursements NI NI 6 7,364.14 - 67,364.14
Totals $ 1,371,846.33 $ (353,216.32) $ 1,018,630.01

We recommended that officials remain in contact with the U.S. Department of Housing and Urban
Development to resolve the questioned costs of $1,018,630.01. Officials should continue the process of
writing a policies and procedures manual. Furthermore, officials need to maintain proper records to
document that costs paid from HUD funds are allowable under the guidelines.

Most of the audit notes are completely ridiculous and definitely malfeasance on the part of Hammond.

However I will make notes on few ......

The Water Filtration upgrade I think is a mandated project from the Federal Govt It has to be done. Regardless of the economy and tight budgets, it is money that has to be spent.Was not this project to be started in the late 1990's when there was no money problem?

The Sanitation work is also federally mandated, but the Feds delayed their funding of the project. I am sure that the consent decree will get kicked down the road. Eventually the project will get done, but it is going to have to wait for the money. Was this project to have been started in the late 1990? We had

And for the overdrawn accounts. That's the price of delayed tax bills from the county. We really have no idea if that is or is not the case. Obviously the City doesn't receive their money until later than normal and accounting gimmicks have to be used to keep the city running. Not a fan of accounting gimmicks, but Hammond can hardly be held responsible for the tax fiasco. The overdrawn accounts is a common theme in audit reports for Lake County municipalities.

I haven't checked in a while but is Horseshoe still behind on their property taxes as well? Harrah's entertainment is still in a world of debt hurt corporate wise. They barely escaped bankruptcy in June, 2009 when their creditors agreed to kick the debt can down the road into 2011 hoping for better credit conditions. Harrah's has a lot of debt coming due in the next 5 years that may or may not be able to be renewed based on the credit markets. It's still very rough out there for corporate debt. My guess is these bills will be paid but they will drag it out as long as they can. Horseshoe has noticeably cut back on costs here in Hammond. They are running employment on a tight leash (Rightfully so from a management perspective.).