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Audit answers few questions

DELAVAN — The Delavan City Council last month ordered an audit to seek clarification of invoices and payments between the city and Lake Lawn Resort.

The result: Nearly $300,000 in invoices is not clear.

Council members Tuesday night directed staff to review part of a Baker Tilly audit for further clarification. The council will review those results soon, but not before the sheriff's sale scheduled Thursday for the resort. However, Lake Lawn's attorney and the attorney for the city reassured council members that the sale itself wouldn't change anything. It will take time—at least eight days and possibly until November—for the court to approve the results of the sale if it takes place.

Here are the numbers the council looked at and what they want to see next:

Baker Tilly's spreadsheet includes invoices billed to the city from a dozen vendors who provided administrative work for the city from 2005 until now. However, most of the invoices on the spreadsheet had nothing to do with Lake Lawn.

Baker Tilly picked out the invoices that were related to Lake Lawn and broke them down into several columns, including:

-- $123,600 in invoices that definitely is cost recoverable.

-- $146,600 in invoices that definitely is not cost recoverable.

-- $295,600 in invoices that needs to be analyzed by the city to determine if they're cost recoverable. Baker Tilly did not feel comfortable making the decision because the description on the invoices wasn't clear, Baker Tilly partner Heather Acker said. The number already has been cut to $243,000 because city staff members recognized a mistake as soon as they saw the audit, City Administrator Joe Salitros said.

While the auditor was not positioned to clarify every invoice, city council members should be confident that every Lake Lawn invoice is included on the list, Acker said.

Lake Lawn has paid all of the invoices the city billed the resort, Treasurer Jennifer Wiese said. That includes some of the cost-recovery invoices as well as some invoices in the "needs more analysis" column. Lake Lawn has been invoiced and paid "just short of $300,000," Salitros previously said.

The council on Sept. 13 approved spending up to $15,000 for the audit.

After some debate, the council voted 4-2 to direct staff members to review the costs in the "needs more analysis" column and divide those invoices in to a spreadsheet of hypotheticals. Staff members are supposed to analyze each invoice:

-- Based on the original developers agreement between the city and the resort as well as city ordinances.

-- Based on the agreement when it was amended once.

-- Based on the agreement when it was amended twice.

-- Based on the agreement including a third amendment that Salitros said the council approved but others said was not signed. City attorney Steve Koch said the amendment does not have legal bearing because it was unsigned.

The city has rescinded the first and second amendments. Council members Ron Siedelmann and Dave Kilkenny voted against the motion.

Kilkenny argued that the city consider all the unclear documents under only the original agreement, which was less restrictive than the amended agreement.

Other council members disagreed, saying that wasn't fair to Lake Lawn and didn't take in to consideration the room taxes, sales taxes and jobs the resort brings to the city.

If Lake Lawn closes of its own accord, that's one thing, council member Mary O'Connor said.

"But let it not be that they are put out of business because of things we did not do right," she said.

The city and Lake Lawn have long disagreed on the cost-recovery invoices. Lake Lawn has been unfairly billed for some unnecessary costs, Lake Lawn owner Pat Nelson said.

Lake Lawn attorney Steve Wassel asked that Lake Lawn be allowed to weigh in while staff sorts out the "needs more analysis" column. That request was not mentioned in the motion directing staff to work on the audit.

Lake Lawn Resort is scheduled to be sold in a Walworth County Sheriff's auction Thursday, Oct. 7, as part of a $51.9 million foreclosure action filed by Anchor Bank of Madison. According to letters mailed by the court-appointed receiver for the property, the resort will be closed after Nov. 30 if Anchor Bank becomes the owner after the sale.