HomeMy WebLinkAbout1920-12 Fair & Expo Trending costs (Final 8-18-20)Fair & Expo – Trending costs report #1920-12 August 2020
Fair & Expo – Trending costs
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Deschutes County,
Oregon
David Givans, CPA, CIA
Deschutes County Internal Auditor
1300 NW Wall St
Bend, OR 97703
541-330-4674
David.Givans@Deschutes.org
Audit committee:
Daryl Parrish, Chair - Public member
Jodi Burch – Public Member
Tom Linhares - Public member
Scott Reich - Public member
Summer Sears – Public member
Stan Turel - Public member
Patti Adair, County Commissioner
Nancy Blankenship, County Clerk
Nick Lelack, Community Development Director
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Fair & Expo – Trending costs report #1920-12 August 2020
TABLE OF
CONTENTS:
HIGHLIGHTS
1. INTRODUCTION
1.1. Background on Audit …………..……………..……………………………………………. 1
1.2. Objectives and Scope ……………….……..…………….…..…….…………………… 1-2
1.3. Methodology …………………………………….………….………………………..……… 2-3
1.4. Background on Fair & Expo ……………………………………………...…………… 3-5
2. FINDINGS and OBSERVATIONS
2.1. Common size and variance analyses ……....……………………………….… 5-19
2.2. Recommendations …………………………………………………………………….. 20-30
2.3. Compliance recommendations …………………………………………………. 30-33
3. MANAGEMENT RESPONSES
3.1. Fair & Expo Department ……………………………………………………..... 33-37
3.2. Finance Department …………………………………………………………...... 38-39
Fair & Expo – Trending costs report #1920-12 August 2020
HIGHLIGHTS
Why this audit was
performed:
A desire to better
understand trending costs
of Fair & Expo.
What was
recommended:
Recommendations include:
• setting up receivables in
the County accounting
system;
• budgeting accounts
expected to have activity;
• controlling
entertainment costs;
• changing some County
Fair budget information;
• communicating budget
expectations;
• contracting for
entertainment should
include appropriate
approvals and legal
review;
• following statute for Fair
fund transfers; and
• building a reserve for the
County Fair fund; and
• considering a new Fair
Association agreement.
Fair & Expo - Trending costs
The Deschutes County Audit Committee authorized the review of fiscal trends with
Deschutes County Fair & Expo at the request of the Board of County Commissioners and
Budget Committee in developing the FY2021 budget.
What was found
Fair & Expo
Fair & Expo revenues from rights and signage could use greater oversight as some FY 2020
sponsorships have not been received. Some kitchen costs could be reflected in costs of
food and beverage division. A capital purchase from capital reserves was split into two
transactions and didn't receive appropriate approvals. Noted some suggestions from
review of the food and beverage inventory process.
County Fair
County Fair budget provided accounting information that unfairly raises questions. County
Fair budgeting could be improved as there were a number of line items with activity that
were not budgeted. Major entertainment and rodeo costs increased more than originally
planned. The management transition likely put additional pressure on controls over
expenditures. Concert contracting could be strengthened and improved by including
appropriate approvals and legal counsel review. County Fair entertainment contract
process could be improved as they lacked uniform contracts and legal review.
Compliance and legal areas
County Fair funds are restricted and may call into question any transfers out of the fund.
The County Fair Agreement with the Fair Association no longer represents how the County
Fair is operated.
Deschutes County Internal Audit
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Page 1
1.
Introduction
1.1 BACKGROUND ON AUDIT
Audit Authority:
The Deschutes County Audit Committee authorized the review of fiscal trends with Deschutes
County Fair & Expo at the request of the Board of County Commissioners and Budget Committee in
preparing the FY2021 budget. The objectives were determined through discussions with the County
Administrator, Department, Board of County Commissioners, and Fair Board.
1.2 OBJECTIVES and SCOPE
“Audit
objectives” define
the goals of the
audit.
Objectives included:
1) Review and trend accounting (budget and actual) for Fair & Expo; County Fair; RV Park and
associated reserve funds (funds 615, 616, 617, 618, 619). Annual trend and possibly monthly for
near term pandemic impacts, as applicable. Distinguish work by fund.
2) Identify significant variances (based on % and $) in revenue and expenditure accounts from
budget or expectation for additional analyses. Look for reasons for higher costs and lower
revenues and how approved.
a) Some previously identified areas include:
• Fair: Rodeo, entertainment, food & beverage, misc. supplies, and Sunday event
• Fair & Expo: Food & beverage (inventory levels), utilities, camping fees, and events
3) Be aware of any issues with compliance with federal and state regulations and requirements, as may
be applicable.
Scope and timing:
The audit commenced in June 2020 and extended into July 2020. All Fair & Expo funds, policies, and
procedures in affect at 6/2020 with an emphasis on operating funds. Covid-19 pandemic impacts
started in the middle of March 2020. The scope of the audit did not include all aspects of internal
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controls employed. The work occurred during the COVID-19 pandemic.
1.3 METHODOLOGY
“Audit procedures
are created to
address the audit
objectives”
Audit procedures included:
• Discussing objectives with the Board of County Commissioners, County management, Fair &
Expo management, and Fair Board.
• Financial analyses – including common size and trending by accounting fund /organization
/object for actual results of operations (develop understanding of revenue and expense
recognition) and over calendar period for County Fair;
• Identifying any areas warranting additional review (additional review is judgmental and can
include review of supporting documentation, authorizations, and additional analyses);
• Interviewing Fair & Expo management, staff, and selected Fair Association director on trends
and observations;
• Observing food and beverage inventory for fiscal year end associated compilation of
inventory value;
• Judgementally reviewing accounting support for selected accounts, postings, and purchases
(including inventory purchases); and
• Review associated statutes and agreements governing Fair & Expo.
We conducted this performance audit in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings and conclusions based on our
audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objectives.
(2018 Revision of Government Auditing Standards, issued by the Comptroller General of the United States.)
The County Internal Auditor position was created by the Deschutes County Code as an independent
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office conducting performance audits to provide information and recommendations for
improvement.
1.4 BACKGROUND ON FAIR & EXPO DEPARTMENT
Table I
Fair & Expo
Change in Net
Position by FY
(2017-2019)
Fair & Expo operates from a 320-acre site in Redmond. In addition to hosting the County Fair, the
facility is used for more than 400 events annually with an emphasis on youth, agricultural,
commercial, and educational opportunities for the citizens of Deschutes County. The facility has
over 167,000 square feet of exhibit space, 120,000 square feet of covered livestock and equestrian
arenas, 400 horse stalls, a 105 space RV park complex, and at its center a four-acre County park.
The Department has currently 10 full-time employees and a total budget of nearly $2.7 million.
Source: Deschutes County CAFR's FY 2017, 2018 and 2019. (County Fair included in Fair & Expo)
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Table II
County Fair
revenues to
expenses without
transfers
(Calendar 2017-
2019)
The Fair & Expo Department is an enterprise department within the County, which means they are
to operate like a for-profit business.
FY 2019 showed a somewhat consistent operating loss to prior periods. The operating losses are
funded mostly through supporting transfers since 2017 when the property tax levy ended. These
transfers come primarily from Transient Room Tax (TRT) and general fund.
The County Fair is included in Fair
& Expo numbers shown above,
however the occurrence of the
County Fair in July/August means
there are some revenues and
expenses that are not reflected
properly in fiscal year reporting
(without accruals).
The 12 month calendar year
reporting to the left is prepared
by Finance and shows a clearer
picture of the County Fair results.
Transfers in from Transient Room
Tax (TRT) for marketing vary and
amounted to $200 thousand for
the 2019 Fair. Transfers were not
included in this presentation.
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The County Fair has historically been a positive contributor to the results of Fair & Expo. The 2019
Fair was the 100th anniversary of the Fair incurred a number of costs outside of the norm in order to
raise the bar on the event. The net contribution as shown above from the budget for the 2019 Fair
(within the FY 2020 budget) was about $145 thousand.
2. Findings
and
Observations
The audit included limited procedures to understand the systems of internal control since the audit
was primarily focused on investigating specific variances in expenditures. No significant
deficiencies were found in this audit. A significant deficiency is defined as an internal control
deficiency that could adversely affect the entity’s ability to initiate, record, process, and report
financial data consistent with the assertions of management in the financial statements. The
findings noted were primarily compliance and efficiency matters.
Audit findings result from incidents of non-compliance with stated procedures and/or departures
from prudent operation. The findings are, by nature, subjective. The audit disclosed certain
policies, procedures and practices that could be improved. The audit was neither designed nor
intended to be a detailed study of every relevant system, procedure or transaction. Accordingly, the
opportunities for improvement presented in the report may not be all-inclusive of areas where
improvement may be needed and does not replace efforts needed to design an effective system of
internal control.
2.1 Common size and variance analyses
The common size and percent change analyses are useful in identifying accounts worth further
examination. These were done down to the line item, but are shown below in aggregate for
perspective. Common size are taken as a percentage of identified revenues. Percent change
represent the increase (decrease) from prior year. FY 2020 numbers were pulled in July 2020 but
probably did not include all of the final year-end adjustments.
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Table III.1
Fair & Expo High
Level common size
and % change
comparisons.
(FY 2017-2020)
Table III.2
County Fair High
Level common size
and % change
comparisons.
(FY 2017-2020)
Expenditures have been growing as a percentage of revenues. The budgeted expenditure level has
not been keeping pace with actual, at least as used in comparison with revenues. Revenues
declined significantly in 2020 (Covid 19) so many of the more fixed costs of operations are
represented. Percentage change also shows the overall improvement in revenues up to the Covid
19 shutdown but expenditures have trended at a higher rate.
As represented in the fiscal year accounting, the 2019 County Fair (100th anniversary) represented in
FY 2020 had slightly lower revenues and higher expenses resulting. However, this accounting does
not match or reflect the seasonality of the County Fair that occurs in July/August.
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Table III.2.1
County Fair High
Level common size
and % change
comparisons.
(12 month Fair
accounting for
2016-2019)
Table III.3
RV Park High Level
common size and
% change
comparisons.
(FY 2017-2020)
\
Contrasting with the prior analysis in Table III.2, the calendar representation of the County Fair is a
fairer accounting of the overall Fair. Especially since FY 2020 accounting records had not been
completed for this analysis and as well for the budget presentation. As shown in Table II and
discussed later, this calendar presentation actually reflects a positive net revenues over
expenditures. This is a better way to present the results in situations where there is not an accrual
accounting. Expenditures, however, continue to show a significant increase.
Revenues and expenditures are pretty comparable along trends. FY2020 numbers are down due to
the onset of the Covid-19 pandemic.
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Graph I
FY 2020 Monthly
Fair & Expo
resources by
month with
estimated lost
revenue
The following items (resources or expenditures) were reviewed further:
These were selected judgmentally or because of change from trend or expected norm.
CALCULATIONS: Common size calculations are taken as a percentage of identified revenues.
Percent change calculations represent the increase (decrease) from prior year. FY 2020 numbers
were pulled in July 2020 but these do not include all of the final year-end adjustments.
FAIR & EXPO (Fund 615)
1) RESOURCES:
a) Event revenue declined significantly with the Covid-19 pandemic. All events were
discontinued from March on. Between the events and associated food and beverage revenue
lost is estimated to be around $565 thousand.
As indicated in Graph I, the Covid-19 pandemic came at a time when Fair & Expo typically receive
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Table IV.1
Interfund payment
common size and
% change
comparisons.
Table IV.2
Beginning working
capital common
size and % change
comparisons.
Table IV.2.1
Trend in actual to
budget in
beginning working
capital
their greatest levels of revenues.
b) Interfund payments increased during COVID-19 due to a number of staff that were picked up
by other departments and the department was reimbursed for their costs (inclusive of all the
fringe costs). This offsets some of the salary and benefit costs.
c)
d) Beginning working capital was budgeted to come in at $80 thousand and came in at a deficit
of $94 thousand. This swing of $175 thousand increased the level of needed resources.
As seen in this trending, the working capital expectations continue to be over budgeted.
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Table IV.3
Camping fees
common size and
% change
comparisons.
Table IV.4
Rights common
size and % change
comparisons.
Table V.1
Employee
common size and
% change
comparisons.
Table V.2
Overtime common
size and % change
comparisons.
e) Camping fee revenues declined due to equestrian events cancelled with the Covid-19
pandemic.
f) Rights and signage revenue down due to $17 thousand of uncollected receivables. {See
recommendation below}
2) EXPENDITURES:
a) Employee costs continued to great extent except for one retirement. Costs were somewhat
offset by interfund reimbursements.
b) Overtime increased more than budgeted for the year due to grounds staff person going on
medical leave and increased coverage.
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Table V.3
Electricity common
size and % change
comparisons.
Table V.4
Building and
Grounds Repair &
Maint. common
size and % change
comparisons.
Table V.5
Time management
common size and
% change
comparisons.
Table V.6
Equip. Repair &
Maint. supplies
common size and
% change
comparisons.
c) Electricity a bit high but department has been shutting down usage as much as possible.
Percentage is higher since on lower revenue amount.
d) Building and grounds repairs and maintenance was higher as some items in here (upgrade to
LED fixtures) could be capital purchases as well.
e) Time management leave (TML) can vary a bit from plan. TML resulted from a couple of
employees cashing in TML and a retirement cashing in all TML. Without the retirement, the
comparison would have been closer to budget.
f)
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Table V.7
Software Maint.
Agreements
common size and
% change
comparisons.
Table V.8
Conference &
Seminars common
size and % change
comparisons.
Equipment repair & maintenance had a number of charges related to the kitchen that might
be charged to the food and beverage division. See recommendation below.
g) Software maintenance appears to be mostly for their EventPro software. They went to a
cloud version of the software in late FY 2019 that increased the costs for FY 2020 more than
expected. Management was able to address so that costs are almost half in FY 2021.
h) Conference and seminars had significantly more costs than budgeted. Geoff Hinds indicated
that these costs were broken out whereas they had been in other categories and indicated
that advertising and promotion was one area that benefitted. This account was down.
Staff attended the following conferences: Connect Pacific Northwest (Portland, OR);
CONNECT Marketplace (Louisville, KY); Teams Conference (Redmond, OR); Cascadia
Conference (Portland, OR); Digital Marketing Conference (virtual); and Leadership skills
training (Bend, OR).
Approvals: Geoff Hinds, Director.
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Table VI
Food & Beverage
resources
common size and
% change
comparisons.
Table VII.1
Temp Help –Labor
common size and
% change
comparisons.
FOOD AND BEVERAGE (Fund 615)
3) RESOURCES
a) Composition of revenues is pretty close but down from the lost events. Margins on food sales
appears to be lower. That is probably contributed to by the food ordered and not used when
the pandemic occurred. See further discussion with food and beverage costs below.
4) EXPENDITURES
a) Temp labor is up. Hourly cost for temp labor has increased by 4.5% but overall composition
compared to concession, catering and alcohol revenues has been trending up. The actual
usage rate is significantly higher than budgeted. This component can significantly impact
profitability. Management should consider their plan for controlling these costs and
budgeting for them accurately.
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Table VII.2
Rental Equipment
/ Non-Office
common size and
% change
comparisons.
Table VII.3
Bank & Trustee
Charges common
size and % change
comparisons.
Table VII.4
Food & Beverage
costs common size
and % change
comparisons.
b) Rental equipment includes rentals of linens and other materials that are pretty consistent
over time, however prices for these have escalated and has driven costs up. These were
discontinued once the pandemic occurred and the Director is looking at options.
c) Bank and trustee fees reflect the increased usage of credit cards to make purchases. This is
part of the business that hasn’t been budgeted yet.
d) Food costs are higher as a percentage of sales and this is thought to have been the costs born
near the pandemic but without sales. Alcohol costs probably due to more beer being held
beyond dates since going into pandemic without associated sales. Overall composition of
food and beverage costs as a percentage to food and beverage revenues is around 24%.
FY2020’s rate of nearly 27% makes sense with the additional inventory purchasing and
spoilage without additional revenues. FY2020 Budgeted food and beverage costs rate of 18%
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Table VIII.1
Entertainment-
Major common
size and % change
comparisons
Table VIII.1.1
Entertainment-
Major composition
and
authorizations
is perhaps overly optimistic.
COUNTY FAIR (Fund 616)
5) RESOURCES
a) As noted in Table II, revenues were closely aligned with prior year.
b) Beginning working capital for FY2021 was budgeted to come in at $0 and came in at a deficit
of $48 thousand. This unfavorable variance increases the level of needed resources. See
recommendation below.
6) EXPENDITURES
a) This accounting object is comprised of concert acts and associated costs.
Description Amount Authorizations
Concerts (with backstage
management fee)
$ 421,525 Dan Despotopulos signed contract/Geoff Hinds
Munis / Greg Munn Munis (See recommendation)
Video 6,500 Ross Rogers Munis / Geoff Hinds Munis
Lighting - Basic 35,000 Ross Rogers contact / Geoff Hinds Munis / Tom
Anderson Munis
Lighting extra – Old
Dominion event lighting
30,647 Originally posted to Rental Equipment - Ross
Rogers contact / Geoff Hinds Munis / Erik Kropp
Munis
Lighting extra – Collective
soul event lighting
4,300 Originally posted to Rental Equipment - Ross
Rogers contact / Geoff Hinds Munis
TOTAL $ 497,972 {Budget of $450,000}
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Table VIII.2
Entertainment-
Grounds common
size and % change
comparisons
Table VIII.3
Rodeo common
size and % change
comparisons
Concerts were all approved in the overall budget since there was a fundamental increase
from prior year for the 100th Fair. However, there were a number of event driven costs for
mainly the largest act (Old Dominion) that drove costs higher than budgeted. The Fair
Coordinator indicated these production level costs were driven by the act. At the time of the
Fair, the Director was made aware of the costs but there was nothing clear about the amount
and the extent of the costs until they were billed. Our contract stipulated the limitations of a
County Fair venue. See recommendation regarding management of costs. See
recommendation regarding workflow for Munis approvals. See recommendation below
about contracting for concerts.
b) This line item was made up of numerous types of agreements. Contracts vary from using the
contractor’s agreement or the County’s basic form. Some are signed by staff and some are
signed by Fair Association volunteers. Some of the contracts lack signatures. See contracting
recommendation.
c) The 100th County Fair added a 5th day of costs to the rodeo and a couple of other costs not
anticipated. The most significant costs were for the rodeo prize money and management.
Rodeo prize monies appear to have been increased beyond what is customary and
represented one of the highest in the Northwest for the number of competitors.
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Table VIII.3.1
Rodeo
composition and
authorizations
Description Amount Authorizations
Rodeo prize money $ 37,100 Geoff Hinds initialed invoice /Geoff Hinds Munis /
Erik Kropp Munis
Up from $19,200 in Prior Year
Rodeo event
management
27,800 Geoff Hinds initialed invoice /Geoff Hinds Munis /
Erik Kropp Munis
Up from 21,200 in prior year
Fighting Bulls 9,409 Dan Despotopulos contract / Geoff Hinds Munis
Rodeo Clown 8,000 Dan Despotopulos contract / Geoff Hinds Munis
Barrelman – 5
performances
7,000 Geoff Hinds Contract / Geoff Hinds Munis
Rodeo Announcer – 5
days
6,500 Dan Despotopulos contract / Geoff Hinds Munis
Sound system – 5 days 6,000 Dan Despotopulos contract / Geoff Hinds Munis
Scoreboard system 5,625 Fair Assoc. contact / Dan Despotopulos contract /
Geoff Hinds Munis
Rodeo prizes – buckles
(for 2020 Fair)
2,789 Fair Assoc. / Geoff Hinds Munis
Rodeo photos 2,500 Geoff Hinds contract /Geoff Hinds Munis
Hay for rodeo 2,240 Geoff Hinds Munis
Vet Services 1,250 Geoff Hinds Munis
TOTAL $ 116,213 {Budget of $65,000)
The prior Fair Director indicated he had all major contracts signed, but any rodeo
management and prize money contracts signed by him could not be found. A record of any
prior contract could not be located or the department’s file on the rodeo vendor. From
discussions with the prior Director it didn’t sound like he would have approved an increase in
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Table VIII.4
Electricity common
size and % change
comparisons
Table VIII.5
Bank & Trustee
charges common
size and % change
comparisons
Table VIII.6
Grants &
Contributions
common size and
% change
comparisons
the rodeo prize money. The Fair Association Director involved with the rodeo indicated these
contracts were all reviewed with the prior Director (Dan Despotopulos).
d) The Fair is charged for the August electricity bill which is higher than July. Might consider
whether this is appropriate. If consider recommendation for charge for event center it would
be implied that normal costs would be included and may not charge for this directly.
e) This is not currently budgeted but there is a consistent need and usage of credit card sales for
food and beverage. See recommendation for additional budgeting by line item consistent
with actual charges.
f) The County was requested to provide $10,000 in support and cover the Directors’ insurance
at the request of Fair Association. Same as 2019 and hasn’t been budgeted consistently in
last two years. Not budgeted for FY 2021. See budgeting recommendation. Approved by
Geoff Hinds, Director in Munis. There seems to be no current agreement or contract that
requires this support.
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Table VIII.7
Program supplies
common size and
% change
comparisons
Table VIII.8
Miscellaneous
supplies common
size and % change
comparisons
Table VIII.9
Tools & Equipment
common size and
% change
comparisons
g) The program supplies are mostly for 2020 Fair - Fair queen costs but these lack any
budgeting. Refer to budget recommendation.
h) Miscellaneous supplies appear to be appropriate expenses but who is driving these costs.
They are submitted by 4H and Fair management. Reference budget recommendation.
i) These are capital purchases made for five televisions and associated mounting. The current
Director indicated these TV purchases were cheaper than renting for 100th County Fair
presentations.
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2.2 Recommendations
FAIR & EXPO
Rights and
signage
sponsorships
occur from the
event center down
to website
banners.
Fair & Expo revenues from rights and signage could use greater oversight.
Fair & Expo revenues from rights and signage could use greater oversight as some FY 2020
sponsorships have not been received as of July 2020. The department uses a paper tracking system,
but some amounts billed back in April have not been followed up on into July.
The Fair & Expo has a significant number of sponsors ranging from the event center naming rights
down to website banner advertising.
The paper system lacks transparency and staff isn’t consistently following up on outstanding
receivables. Some of this is due to the transition subsequent to the retirement of one of the
administrative staff.
There was $17 thousand over three sponsors identified as still requiring follow-up. This is income
on the accrual method.
It is recommended for the Department to utilize the County accounting system for sponsor
receivables to provide better transparency, accounting, and collectability.
It is recommended the department develop an approach for addressing sponsors and collection.
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Some kitchen costs could be reflected in costs of food and beverage division.
Within some of the repair expenditures there are some costs related to the kitchen. Arguably these
could belong to the food and beverage division.
The expenditure accounts included equipment repairs & maintenance and building and grounds
repairs and maintenance.
The division of food and beverage into its own division allows for better tracking and monitoring of
profitability. Having expenses not posted to the correct division makes it difficult to assess
profitability by division. With the movement of the food and beverage division in-house, there
probably hasn’t been a thought about where these costs belong.
The accounting system the County uses now can make use of purchase orders, requisitions, and
contracts. Utilizing these will help assure that the associated invoices are posted in a consistent
manner. It does still require the requisition or purchase order to identify the correct division.
It is recommended the department consider posting kitchen repairs to the food and beverage
division.
The department might consider using requisitions, purchase order, and contracts in the accounting
system.
Capital purchase was split into two transactions and didn't receive appropriate
approvals.
Fair & Expo (Capital reserve) acquired a food trailer and separated the transaction into two
transactions, a down payment and the final payment. By doing so in separate transactions, the
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Splitting
transactions does
not allow the
accounting
software to
enforce the proper
approvals based
on the dollar
amount of the
overall
transaction.
required approvals in the County accounting system was not required by established workflows.
The total cost was around $46 thousand. The Fair & Expo Director has purchasing authority up to
$25 thousand. The County Administrator's approval is required above that level. The Board of
County Commissioners approval is required for purchases over $150 thousand.
The accounting software cannot determine that transactions are being split and so it was not able to
enforce the required approvals. The department entered these as invoices and did not use the
requisition, purchase order, or contract process to collect approvals on the intended purchase.
The proper approval by the County Administrator was not obtained. It did not appear that the
Department did this knowingly as it was based upon a series of events (a down payment and a final
payment). Management indicates this item was planned for and included in the approved budget.
The support for the transaction clearly indicated the overall purchase price, but involved Finance
staff and the Fair & Expo Director did not identify the need to seek additional authorization.
It is recommended that capital purchases not be split into separate transactions. This can be
accomplished by using the purchase order or requisition process.
Inventory process could be improved.
The review included an observation of the food and beverage Inventory count process and
identified some areas that could be improved.
• Fair & Expo provides monthly inventory counts, but the monthly inventory amounts are not
recorded in the County accounting system.
• At least year-end, review and update pricing of inventory to reflect recent prices. on a first-in
first-out basis
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• When product is received, make sure receiving invoices are marked off as received. Consider
requisition process in the accounting system that requires three-way match.
• Inventory process should be developed in written procedures.
• Inventory should be organized in advance of any counts and any spoiled or past date
merchandise marked DNI for “Do Not Inventory”.
• Inventory value was noted as being a couple of thousand higher and a number of goods were
not counted as they were past date by the Food and Beverage Manager.
By improving the above areas, the food and beverage division will attain more consistent control of
inventory and more accurate accounting.
It is recommended for the Food & Beverage Manager to establish some additional processes over
inventory including: updating pricing to reflect first-in first-out method and establishing
additional procedures for the inventory as noted.
COUNTY FAIR
Accounting information provided for County Fair budget unfairly raises
questions.
For the County Fair, the nature of budget accounting information doesn’t match with the Fair’s
performance and raises questions.
The annual County Fair occurs in Late July and early August each year. Activities for it more closely
align with the calendar year as monies are received in advance of the Fair and span the County's
fiscal year end reporting period (June 30).
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Table IX
County Fair
resources to
expenditures with
FY 2021 budget
information
compared to 2019
Calendar year Fair
accounting.
The budget accounting data shows information that raises many questions (especially for
revenues.). The year-to-date presentation for budget (YTD End April ’20) includes revenues for the
2020 Fair (which has since been cancelled) and doesn’t include Fair revenues received in FY 2019. If
you looked at the accounting nearer to the fiscal year-end, there would be year-end adjustments for
deferred revenue to address the timing of collections.
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As indicated above, the provided FY2021 proposed line item budget data infer with the YTD End April
’20 data that the 2019 County Fair which occurs in FY2020 did not perform very well. The calendar
Fair report better (last column-Actuals Calendar 2019) was added and reflects the actual results of
the event. The differences in presentation occur from how some income is received and expenses
paid across fiscal periods. The County Fair is not accounted for on the accrual basis in these
presentations. The underlying fiscal year accounting provided in the budget process makes it
difficult to ask all the right questions on the performance of the Fair in assessing the next year’s
budget.
The current method of evaluating the budget create additional concerns that are not necessarily
appropriate given the accounting provided. Year to date fiscal numbers do not present as well the
seasonal results of the Fair.
Note: Discussed potential accounting and budgetary approach with Finance to see if another
approach could better represent the County Fair in the budget and accounting process. It was
thought that using a unique “org” for each County Fair would isolate each Fair and result in a clearer
alignment with budget. That solution has not been fully tested.
It is recommended for Finance to consider changing some of the information presented for budget
for the County Fair fund (Fund 616) in order to properly reflect the Fair results.
This might include providing the County Fair accounting on the calendar year basis; isolating the
Fairs (past, present, and future) by using a separate organization codes; or other approaches so
long as the results provide more comparable data for comparison.}
County Fair budgeting could be improved.
A number of budget line items had activity and no budget. It appears management was making an
Fair & Expo – Trending costs report #1920-12 August 2020
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Establishing
budgets with more
line item detail
provides
management with
more granular
oversight of
spending.
effort to better source expenditures to the appropriate titled line item. Many of these expenditure
accounts/objects have activity year over year and were not budgeted.
• Electricity billed to Fair was from September billing and perhaps should be August billing,
which is a bit lower and represents July. Actual bills have been consistently higher than
budget for the last two years. Approximately a $5 thousand impact from using September.
• Bank charges have not been budgeted and there are some additional postings from other
periods. These look like miss postings. This could result in approximately $3 thousand in
savings.
• Printing and binding costs are less than prior year but unbudgeted.
• Grants which are to Fair Association are as in prior year and unbudgeted even though
historically paid.
• Program expenses are less than in prior year but unbudgeted.
• Miscellaneous supplies are not budgeted but there is a history of expenditures and some
review indicates these seem to be in the right place.
• Tools and equipment is used for capital items and the purchase alleviated the high cost of
renting.
With the 100th year Fair, a lot of costs seemed to be under pressure and during a time when there
was turnover in management.
Fair Directors of the Fair Association who help plan and operate the Fair are not involved with the
budget. However, they sometimes are involved in ways that create costs through signing on
contracts and or ordering materials.
Budgeting is a more effective practice if there are budgets for each account anticipated to be used.
It is recommended that Fair & Expo management consider budgeting accounts expected to have
Fair & Expo – Trending costs report #1920-12 August 2020
Page 27
activity.
It is recommended for staff and Fair Association to work together to manage resources within the
expectations of the budget.
Entertainment costs increased more than originally planned.
Headline concert (Old Dominion) was allowed to have some significant improvements in sound,
staging, and lighting that might have been controlled or should have received additional oversight.
In addition, the rodeo contract (for prize monies) appears to have been increased more than
anticipated and is greater than other northwest events by competitor.
The contract with Old Dominion had a number of artistic riders that were noted as perhaps not
applicable since this was a Fair venue. Though some of the riders were crossed-out many
referenced the “existing event production will be in place” and “to be mutually agreed upon”. The
additional costs for sound, stage, and lighting additions were significant. There should have been
time to negotiate or push back on some of these requests. Similarly, rodeo prize costs exceeded
budget and reasonable levels and this should have been discussed.
The 100th Fair allowed a lot of staff/volunteers to take additional measures to make a great event.
Staff and Fair Association Directors for the Fair worked with the Director but didn't know the budget
and were not accountable to it.
It is recommended for Fair & Expo staff to provide more control over entertainment additional
requirements, manage expectations for costs, and stay within the provided budget.
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The “Green
book” is a valuable
reference for
internal controls in
government.
Management transition likely put additional pressure on controls over
expenditures.
A significant aspect of control is communication and expectations. Staff and volunteers for the
County Fair are not responsible or knowledgeable of the budgets for their areas and responsibilities
to stay within those budgets.
The Fair & Expo Director retired prior to the Fair and had arranged for many of the contracts and
service levels in the budget. There were a number of increased costs that occurred through staff
and volunteers and accepted by the new Director. Staff and volunteers always indicated that they
ran all changes by the Director. Their decisions likely expanded the costs for the Fair.
The “Standards for Internal Control in the Federal Government” (also referred to as the “green
book”) as a good source of information for developing an internal control system in government. As
outlined in the guidance, communication is an integral component of an internal control system.
The Green Book advises us to think ahead about the information that needs to be shared and to
make sure the data shared is valid through prompting us to address the who, what, when, where
and how.
Staff lacked information on the budget and where they were on budget to make additional
decisions. They made decisions without considering prior direction. It was the 100th Fair so the
County and the Director had made allowances for expanding some of the events, entertainment,
and services provided.
Fair revenues did not increase enough to cover the additional expenses.
It is recommended for the Director to communicate budget expectations to volunteers and staff.
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Concert contracting could be strengthened and improved.
In 2019, the County contracted with the agent in total for all concert acts. This resulted in a contract
for over $380 thousand. The contract was signed by the prior Fair Director. The contract was paid
in the accounting system as an invoice and did not get appropriate approvals for the size and
complexity of the contract and did not get reviewed by County Legal Counsel.
This contract was over the department head’s authority of $25k and over the County Administrator’s
authority of $150 thousand. Therefore, it should have received Board approval as well as County
administrator approval. Policy F-15 outlines the requirements for payments to suppliers. Policy GA-
17 outlines requirements for contracts to be approved by County Legal Counsel.
Having the concerts go over the $150 thousand threshold occurred for the first time in FY 2020. The
Finance Director was relatively new to their position and did not request the County Administrator
and Board approvals. The accounting software has workflow associated with larger payments that
require intervention of the Finance Director.
The overall contract was larger than normal since it included all of the musical acts as well as the
larger contract for the headlining concert “Old Dominion”. In the past, musical acts were done
individually. The concerts budget was increased significantly from $320 thousand in FY 2019 to
$450 thousand in FY 2020. The contract was also processed as an invoice when the system allows
for contracts to be setup that allows much more control.
It is recommended for the County Fair to contract individually with concert artists and process
those contracts through appropriate legal and approval processes.
It is recommended for Fair & Expo staff to consider using the contract purchasing process in the
County’s accounting system (Munis).
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County Fair grounds entertainment contract process could be improved.
Grounds entertainment contracts for the Fair had many forms some the forms provided by the
artist and some of them County forms. The contracts reviewed did not have legal review. Many of
the contracts were signed by volunteers and not County staff. Some of the support for payments
did not include signed versions of a contract. Many contracts indicated the ability to have insurance,
though it was not clear that the County had taken steps to establish the insurance and be an
additional named party.
Grounds entertainment is the description for the many acts and local entertainment provided
during the County Fair.
Policy GA-17 outlines requirements for contracts to be approved by County Legal Counsel.
There are around forty contracts for a variety of entertainers. Some entertainers provide their own
contracts.
It is recommended for the County to establish with County Legal Counsel what the process should
be to minimize risk for these contracts.
2.3 Compliance Recommendaitons
Transfers of County Fair funds are restricted.
For FY 2020 the County Fair (Fund 616) transferred $250 thousand which represented most if not all
of its post-Fair resources to the Fair & Expo. This left the County Fair fund with a deficit cash
balance of $14 thousand. In FY 2019, the County Fair transferred $417 thousand to the Fair & Expo.
Fair & Expo – Trending costs report #1920-12 August 2020
Page 31
The amounts transferred were contributed to significantly by transfers in from the transient room
tax (TRT) of $250 thousand in FY 2020 and $150 thousand in FY 2019. TRT started providing monies
in 2019.
Oregon statute 565.325 provides for the establishment and maintenance of the County Fair fund.
The Fair fund may be expended only for the promotion and operation of the County Fair and to
provide, maintain and improve County fairgrounds, buildings, facilities and improvements on the
County fairgrounds for the County Fair and other events authorized by the County Fair Board.
The County Fair should contribute its share for the use of the event center. The transfers are not
currently traceable to the County Fair usage of the event center grounds; usage of staff; or needed
capital improvements.
The County Fair (as an event) is one of the more risky ventures of Fair & Expo and the only event
they put on. Currently, this fund does not retain sufficient reserves for an operating contingency
above the working capital requirements discussed in fiscal policy (F-14). Working capital of 8.3% of
the operating budget would be $125 thousand based on the 2020 budget. Since this fund is
dependent on event revenue working capital might need to be higher.
The County Fair fund started FY 2021 with a deficit working capital balance of $48 thousand, which is
$173 thousand less than a typical Fair year. However, given that the 2020 County Fair was cancelled,
there is significantly less need in the current year.
It is recommended for transfers out of the County Fair fund be justifiable in the context of the
statute (i.e. limited to reasonable share of capital improvements and costs and services not
otherwise charged).
Management might consider an event charge for the use of the grounds for the County Fair.
Fair & Expo – Trending costs report #1920-12 August 2020
Page 32
It is recommended the County Fair fund retain some excess funds as an operating
reserve/contingency for future events for use in planning and in case things do not work out as
intended. At a minimum, it should develop an operating reserve to the County minimums (8.3%).
The Budget Officer might consider not transferring in monies from TRT as they may be used readily
from Fair & Expo capital reserve fund for future improvements so these funds are not further
restricted to use by the County Fair fund statutes.
County Fair Agreement with Fair Association no longer represents how County
Fair operated.
In 2000, when the County assumed the fairgrounds, there was an agreement between the County,
the Fair Board, and the Fair Association on the running of the County Fair. The Fair Association did
not fully comply with the agreement from the start. An informal unwritten arrangement was
established by the County and Fair Association, whereby the Fair Association assists in the planning
and operation of the County Fair. The County and Fair Board continues to be responsible for
contractual, financial, and operational aspects of the County Fair.
There isn’t a current agreement or memorandum of understanding outlining the specific
responsibilities of parties for putting on the County Fair.
In the absence of an appropriate agreement it makes it difficult to manage and control costs for the
County Fair.
The County has been providing the Fair Association an annual grant for nearly $12 thousand to
cover directors’ insurance and operating costs.
It is recommended for the Fair & Expo Director to consider what kind of agreement should be used
Fair & Expo – Trending costs report #1920-12 August 2020
Page 33
for working with the Fair Association that best outlines the responsibilities of the Fair Association
during the County Fair.
3. Management responses
Fair & Expo
Director,
Geoff Hinds
2.2 RECOMMENDATIONS:
• Fair & Expo revenues from rights and signage could use greater oversight
o It is recommended for the Department to utilize the County accounting system for
sponsor receivables to provide better transparency, accounting, and collectability.
o It is recommended the department develop an approach for addressing sponsors and
collection.
DCFE agrees with this response and is working to utilize the County Accounting
system (Munis) for additional items including the monthly and quarterly billing of
payments
DCFE may also look to implement a system requiring pre-payment for any
sponsorship services prior to delivery
A complete review of all existing sponsorships agreements will be completed by DCFE
staff to assure adherence to current contracts, as well as assuring adherence to
existing market price.
• Some kitchen costs could be reflected in costs of food & beverage division
o It is recommended the department consider posting kitchen repairs to the food and
Fair & Expo – Trending costs report #1920-12 August 2020
Page 34
(continued)
Fair & Expo
Director
beverage division.
DCFE agrees with this response, and will consider using the requisition, purchase or
contract system
DCFE is in the process of evaluating expense items, and working to post all
expenses/revenues into the most appropriate/accurate categories
Certain expense categories may cross over between two (2) divisions, and DCFE will
work to come up with a determination of the most accurate category in which to incur
expense
• Capital purchase was split into two transactions and didn’t receive appropriate approvals
o It is recommended that capital purchases not be split into separate transactions. This
can be accomplished by using the purchase order or requisition process.
DCFE will follow all County protocols and procedures for purchasing of future capital
expenditures
DCFE Board of Directors is working on updated policies and procedures to address
contract issues
• Inventory Process could be improved
o It is recommended for the Food & Beverage Manager to establish some additional
processes over inventory including: updating pricing to reflect first-in first-out method
and establishing additional procedures for the inventory as noted.
DCFE agrees with this response and management will work with the F&B manager to
establish additional protocols over inventory to include FIFO and appropriate
inventory management needs
COUNTY FAIR
• Accounting information provided for County fair budget unfairly raises questions
o It is recommended for Finance to consider changing some of the information presented
Fair & Expo – Trending costs report #1920-12 August 2020
Page 35
(continued)
Fair & Expo
Director
for budget for the County Fair fund (Fund 616) in order to properly reflect the Fair results.
DCFE will continue to work with Finance department to provide clear, accurate
financial reporting, especially in relation to the annual County Fair, which overlaps
two (2) Fiscal Years.
• County fair budgeting could be improved
o It is recommended that Fair & Expo management consider using budgeted accounts
expected to have activity
DCFE agrees with this response, and is working to accurately reflect both revenues
and expenses in their most appropriate category vs. historical locations. It will also
be important to identify these adjustments to allow for trend/tracking reports
o It is recommended for staff and Fair association to work together to manage
resources within the expectations of the budget
DCFE has, and will continue to request input from the association during the
budgeting and planning process. For FY21 DCFE requested budget expenditure
requests from each department who planned large expenditures, and utilized these
numbers in preparation of the FY21 budget
• Entertainment costs increased more than originally planned
o It is recommended for Fair & Expo staff to provide more control over entertainment
additional requirements, manage expectations for costs, and stay within the provided
budget.
DCFE agrees with this recommendation and for FY21 worked to create itemized
budgets, representing true costs for entertainment activities.
DCFE will work with entertainment and contracts to identify costs earlier and to
provide an opportunity to reduce costs where necessary and appropriate.
• Management Transition likely put additional pressure on controls over expenditures
Fair & Expo – Trending costs report #1920-12 August 2020
Page 36
(continued)
Fair & Expo
Director
o It is recommended for the Director to communicate budget expectations to volunteers
and staff.
DCFE agrees, and For FY21 the DCFE director has worked to effectively communicate
budget expectation to all appropriate staff and volunteers.
The F&E Director will also work to create strong contracting and expenditure policies
that will be conveyed to all staff & volunteers.
• Concert contracting could be strengthened and improved
o It is recommended for the County Fair to contract individually with concert artists and
process those contracts through appropriate legal and approval processes.
o It is recommended for Fair & Expo staff to consider using the contract purchasing process
in the County’s accounting system (Munis).
F&E agrees and plans to utilize individualized contracts with all national, touring
entertainment for the 2020 and 2021 Fairs, and beyond. This policy will be in place
moving forward and Fair & Expo will follow all County and State guidelines regarding
expenditures.
• County Fair grounds entertainment contract process could be improved:
o It is recommended for the County to establish with County Legal Counsel what the process
should be to minimize risk for these contracts.
Fair & Expo agrees and staff has worked with County legal on the development of a
new/revised standard entertainment agreement or contract. This agreement or
agreements, will be utilized for all future entertainment contracting, and will require
review, and approval by the department director to assure adherence to all
applicable state and county guidelines prior to final execution and/or payment. No
payments will be provided without a fully executed contract, and the receipt of all
contractually mandated items, including but not limited to insurance.
Fair & Expo – Trending costs report #1920-12 August 2020
Page 37
(continued)
Fair & Expo
Director
2.3 COMPLIANCE RECOMMENDATIONS:
• Transfer of County Fair Funds are restricted:
o It is recommended for transfers out of the County Fair fund be justifiable in the context
of the statute.
o It is recommended the County Fair fund retain some excess funds as an operating
reserve/contingency for future events for use in planning and in case things do not work
out as intended. At a minimum, it should develop an operating reserve to the County
minimums (8.3%).
DCFE will work to assure than we remain compliant with ORS at all times. If
adjustments are necessary, DCFE will work with County legal and/or finance on
appropriate adjustments
• County Fair Agreement with Fair Association no longer represents how County Fair
operated.
o It is recommended for the Fair & Expo Director to consider what kind of agreement should
be used for working with the Fair Association that best outlines the responsibilities of the
Fair Association during the County Fair.
DCFE agrees with this recommendation, and is interested in the possible creation of
a new agreement or memorandum of understanding that outlines the roles of each
party.
Fair & Expo – Trending costs report #1920-12 August 2020
Page 38
Treasurer and
Finance
Director,
Greg Munn
2.2 RECOMMENDATIONS:
• Fair & Expo revenues from rights and signage could use greater oversight
o It is recommended for the Department to utilize the County accounting system for
sponsor receivables to provide better transparency, accounting, and collectability.
County Finance agrees with the recommendation and can work with the department
to utilize the County’s financial system to track sponsor contracts and receivables.
• Capital purchase was split into two transactions and didn’t receive appropriate approvals
o It is recommended that capital purchases not be split into separate transactions. This
can be accomplished by using the purchase order or requisition process.
County Finance agrees and will train department staff on the benefit and use of
purchase orders.
COUNTY FAIR
• Accounting information provided for County fair budget unfairly raises questions
o It is recommended for Finance to consider changing some of the information presented
for budget for the County Fair fund (Fund 616) in order to properly reflect the Fair results.
County Finance agrees that the use of organizational codes will allow the Fair to
seasonalize its budget to provide both traditional fiscal year budget appropriation vs
actual reporting but also budget vs actual information on a calendar year which
Fair & Expo – Trending costs report #1920-12 August 2020
Page 39
(continued)
Treasurer and
Finance
Director
coincides better with the Fair’s operating period.
• Concert contracting could be strengthened and improved
o It is recommended for Fair & Expo staff to consider using the contract purchasing process
in the County’s accounting system (Munis).
County Finance agrees that the purchasing approval workflow for the entertainment
contract was erroneously and unintentionally bypassed. Gained experience and
understanding of the system will prevent this from happening in the future.
2.3 COMPLIANCE RECOMMENDATIONS:
• Transfer of County Fair Funds are restricted:
o It is recommended for transfers out of the County Fair fund be justifiable in the context
of the statute.
County Finance agrees that an annual use fee be established for the use of the
facilities and other costs related to the operation of the fair that can be budgeted and
prioritized along with other fair costs.
o It is recommended the County Fair fund retain some excess funds as an operating
reserve/contingency for future events for use in planning and in case things do not work
out as intended. At a minimum, it should develop an operating reserve to the County
minimums (8.3%).
County Finance agrees that the Fair fund be required to budget a contingency and
be allowed to carry a fund balance consistent with other county departments.
Fair & Expo – Trending costs report #1920-12 August 2020
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{End of Report}
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