The Indiana State Board of Accounts (SBA) released its latest audit of the
Porter County’s 2011 expenditures and reported discrepancies regarding
purchases at the Memorial Opera House.
In the audit report, the SBA questioned the Porter County Board of
Commissioners’ purchase of “various audio equipment items” totaling $150,145
on May 19, 2011.
The state said the county did not follow proper procedures by failing to put
the audio upgrade project out to bid, nor was there a contract awarded.
The law states a contract must be awarded if the purchase is expected to be
at least $50,000 and the project must be put up for bid.
The vendor, Michael L. Anton – not to be confused with Mike Anton of Anton
Insurance agency – of Dyer, prepared and submitted three different invoices
for the phases and installation of the equipment, but according to the SBA
“purchases may not be artificially divided so as to constitute a small
In a response written to the SBA, the Opera House’s business manager at the
time Brian Schafer stated on his part that the audio system upgrades were a
two-year endeavor and “was done with the best intentions” and saved the
county money because it did not require a consultant to perform a study.
“The project was presented several times in public meetings before the
(Commissioners) ultimately approved at each stage of the installation,”
Schafer said in his explanation and went on to say the upgrades have
provided “top quality” entertainment from national tour concerts to
Schafer resigned this July to take a job in the private sector in
Indianapolis after working a dual role as both head of the Opera House and
manager for the Porter County Expo Center, a situation both questioned by
the SBA and an earlier audit by the Internal Revenue Service. He was hired
by the county as a contractor through his business Next Level Productions
for the Opera House but remained an employee with the Expo Center.
Although the IRS backed the arrangement for Schafer’s double duty as a
employee/contractor, the SBA ruled that the county should have increased
Schafer’s salary as an employee and “eliminate the contractual payments.”
Schafer was paid $22,506 in 2011 for contractual services through his
company Next Level Productions in addition to his full time salary at the
County Attorney Elizabeth Knight responded to the SBA saying the county
commissioners understood the state provisions and would correct the matter
by eliminating the “dual employment problem” as the two positions would no
longer be filled by the same individual.
County Council member Jim Biggs, R-1st, had raised questions long before the
SBA audit was released last week as to why a contract for the audio
equipment was not drafted and signed by the commissioners.
Biggs became suspicious of potential conflicts of interest discovering that
Anton’s companies Unified Strategies and 101 Event Productions were written
in Schafer’s contract with the county as two entities Next Level Productions
regularly did business.
“You’d have to assume that (Schafer) was getting something out of this.
(Anton) was awarded $150,000 of work, why wouldn’t this guy give a kickback
to him?” said Biggs who had consulted the county prosecutor’s office.
The prosecutor’s office as well as the County Commissioners earlier this
year said they believed there was no wrongdoing or criminal action on
Schafer’s part as the money had been accounted for.
Schafer called Biggs’ actions “unprofessional” and accused Biggs of being
politically motivated in his resignation letter, which was read aloud at the
July 3, 2012, commissioners meeting.
Biggs said he was only doing his job as an official on the County Council by
bringing attention to something he saw as problematic.
“We’re all entitled to our opinions but mine is driven by data and in my
opinion what went on there is absolutely, unequivocally wrong. That is not
the way government is supposed to operate,” he said.
County Commissioner President John Evans, R-North, said on Tuesday that he
believes Schafer did his job in researching the equipment purchase and found
the best deal for the county, but admitted in hindsight the board should
have followed the procedures of bidding out the project and signing a
Even though problems did arise and records were not maintained sufficiently,
Evans contends Schafer did a “marvelous job” with running both facilities.
“We asked a lot from Brian and he did a yeomen’s task,” Evans said.
Other red flags
The SBA further questioned an outstanding credit card used by Schafer and
donation and gift card sales that were not tracked through computer
Schafer said in his response that the computer program used to track gift
cards was not compatible with the ticketing software since they were
produced by two separate companies and therefore he could not show the
records to the SBA. He did express his confidence that “all revenue and
expense is properly” recorded.
A separate audit report done on the Expo Center cited that throughout 2011,
a computer ledger of receipts, disbursements and balances was not maintained
and said Schafer failed to produce a ledger.
Taking over for Schafer, the Expo Center’s new interim director Ken Blaney
told the Council last week that he and the staff are in the process of
bringing the Expo Center’s books up to date and would make the budget “more
realistic” reducing it from $555,000 to about $475,000.
In another matter, Biggs said the $250,000 in county economic development
income tax (CEDIT) money that the Council awarded the Opera House 4-3 last
November that was to help free up the Opera House budget for building
repairs has been used but “none of has been put into the structure like we
were told,” saying the purchase of the new boiler was part of the deal.
A little more than $50,000 of that CEDIT amount remains but records in the
auditor’s office show that much of it was spent on the show business side
such as advertisements and equipment.
County Auditor Bob Wichlinski said that CEDIT money can be used for “almost
anything” when it comes to operations, except for salaries. With the tax
caps in place, the state allows counties the freedom to use income tax
dollars for their many functions and CEDIT would not necessary be required
to be used for building upkeep only.
Evans said the commissioners did not purchase a new boiler but it has been
“fine-tuned” using a portion of the CEDIT.
Like Blaney, the Opera House’s new interim director Michelle Smith has
regularly been into the auditor’s office to bring the facility’s accounts up
to date, as well as outlining budget reductions for 2013 by cutting obsolete
or defunct contracts.
One of those for example was the contract to show small independent films at
Opera House which was losing money. Still to be featured next year are five
Broadway shows, down from six this year, and two plays that are “cost free”
Smith plans to present a new budget to the County Council at its meeting
tonight of a little more than $400,000.
Instead of asking for more money, Smith said that the Opera House has
streamlined its employees and will be using more volunteers to help run
operations. Fundraisers for new equipment will be held in the near future
and Smith said she is reviving the Foundation for the Opera House which has
not been active for years.
The non-profit Foundation will actively pursue grant opportunities for the
purpose of preserving the structure.
“It’s a 120-year old building and needs continual maintenance,” said Smith.
In the next few months, the commissioners plan to discuss with Smith
renovations such as roof repairs, a new light board and new upholstery to
Smith said the goal is for the venue to not have to rely on tax dollars.
“I feel we are going in the right direction,” said Smith.
A few County Council members like Jeremy Rivas have made the argument that
the county should not be involved in operating a theater business and said
there are other theaters in Valparaiso, Chesterton and Portage that survive
without tax money to support them.
“I’m not against the arts but we have to fund our basic services,” said
Evans said he wishes to have the Memorial Opera House still be a county
facility mentioning it is a Civil War memorial to Union troops and is
important to veterans.