Bankruptcy administrators find $1m cheque in Detroit city hall drawer

Uncashed cheque discovered one month after it was received gives a glimpse into city's financial troubles

Detroit's authorities were forced to default on their $18bn debts in July (Reuters)

Administrators drafted in to rescue Detroit after it became the largest city in US history to declare bankruptcy have found an uncashed cheque for $1m nestled in a desk drawer at City Hall.

In a symbolic illustration of the city's fiscal mismanagement, the cheque, received from the local school system, languished for a month before it was discovered. Four months later the city authorities were forced to default on their $18bn debts.

A spokesman for Kevin Orr, a bankruptcy expert hired by the state in March to help turnaround the city's finances said, “Nobody sends million-dollar cheques anymore - they wire the money.

“We have [in Detroit] financial systems that are three, four, five decades in the past. If we can fix those issues, then we’ll be able to provide services better, faster, more efficiently and cheaper.”

In a shocking indictment of the way business was done by the city, last year the US Internal Revenue Service described Detroit's tax collection methods as “catastrophic”, with some bills reportedly going uncollected for six years.

Mr Orr also revealed that Detroit “doesn’t have a central municipal computer system, with each department buying its own machinery - much of which doesn't worked properly.”

Part of the city's rehabilitation will involve buying new software to improve income tax collection, especially from suburban commuters who work in Detroit, said James Bonsall, the chief financial officer hired by Orr, according to Bloomberg Businesweek. Before the bankruptcy on 18 July, income tax receipts were commonly processed by hand.

While the $1m would have struggled to make a dent in the city's vast debt, it could have been used to pay those owed money, including many employees and retired workers.

Currently, Detroit's largest creditor is the city's general pension scheme, which is owed $2bn. The retirement scheme for former police employees and firefighters is owed $1.5bn, the Daily Telegraph reports.

Mr Orr, speaking at a press conference with Mayor Dave Bing, assured the city's citizens that it was “business in the ordinary course”, with public services remaining open and municipal employees continuing to receive their paycheques.