Audit shows a Pandora's Box of problems, including lack of documentation.
A Vadnais Heights city audit is calling for a thorough investigation of the Vadnais Sports Center's books and said there is a disconcerting lack of documentation.
The city's 2011 audit raised concerns about missing and unsigned contracts involving center users and advertisers, a lack of internal control over accounting procedures, concern about advertising commission payments made to a relative of the center's management company, and failure to file proper tax forms.
"The lack of documentation is a major concern," said the audit conducted for the city by the Edina firm Abdo, Eick & Meyers. "Given the significant revenue shortfalls, a forensic audit is being considered to locate existing contracts and to ascertain amounts and dates."
Before the sprawling complex on the city's border with White Bear Lake opened in November 2010, the city hired Mark Bigelbach and the nonprofit Sports Facility Development and Management Group to run the arena. Bigelbach and others had led city officials to believe that he had $2.3 million in signed contracts in hand. That would have been enough to pay the debt service without needing the city's help.
Records show that in 2011, the first full year, revenue was only about $1.5 million, or $763,000 below projections. City Council members want answers to explain the gap.
So far, the city has loaned the arena $830,000 to make bond payments and cover legal expenses and utilities. "I said in March that we needed a forensic audit," said Council Member Joe Murphy. "It is the only way we will find out what the taxpayers are owed."
That will likely come up when council members talk about the audit's findings at a workshop and at Wednesday's City Council meeting.
Bigelbach said there are "so many inaccuracies" in the audit and he plans to be at Wednesday's meeting with proof.
"This is a witch hunt; they are not playing fair," he said. "There are just so many inaccuracies in there. It comes down to facts. I will get my point across."
The audit suggested that lax record keeping was a major factor in tracking transactions. The report said several transactions lacked proper support and that deposit slips didn't identify what receipts were deposited. "Actual revenues were substantially less than budget revenues, which were allegedly based on signed contracts." But some of them could not be found.
Additionally, the audit found that several advertising and licensing agreements were not on file, and many that were did not have signatures or state when payment was received.
The audit also found that an advertising commission check for $10,237 was issued to a "person related to the management company owner." That would be in violation of the agreement signed April 10, 2010, because the city did not approve the payment.
An audit in 2010 said the center needed a system to ensure customers who use the facility during open dome and ice time are actually paying. Patrons were not given wrist bands or receipts, so there was no way to track who paid. The same problem was noted in 2011, and on at least one occasion two customers entered without paying, the audit said.
Another concern raised was that $124,000 from vending machines that should have gone to the sports center's account went into the management's account. The money had not been paid back as of Dec. 31, 2011, and "a forensic audit will be required to determine the amounts owed to the city."
The audit also said the center, at 1490 County Road E, did not file federal 1099 tax forms as required with some vendors, and that it did not have procedures in place to ensure its bills were paid on time.