MUNICIPALITY OF ANCHORAGE MEMORANDUM DATE: December 2, 2015 TO: Susanne Fleck-Green, Chief of Staff, Mayor's Office FROM: Acting Director, Internal sutt WLLL SF SUBJECT: — Centennial Celebration Funds At your request we have performed a brief review of revenues and expenses associated with the Centennial Celebration (Centennial). In summary, we found that contract administration was poor, Municipal processes were often disregarded, and financial records were mismanaged. Many of the problems noted below could have been avoided with proper supervision and proper contract administration, As a result, it appeared that revenues were insufficient to pay the remaining expenses. At the time of this memorandum, the following points summarize our observations. Remaining Unpaid Expenses Vendor Amount Owed Alaska Aces, LLC $14,500 Alaska Railroad Corporation (ARRC) 30,000 Anchorage Downtown Partnership (ADP) 15,0008! Anchorage Convention & Visitors Bureau 2.500%"? Alaska Dispatch News 2,142 Logisties, LLC 23,465 Anchorage Media Group 975 Alaska Mint 288 Alaska Video Postcard 9.827 Total: $98,697 Souree: Centennial Celebration Coordinator’s (Coordinator) unaudited balance sheet detail, available contracts/agreements, and available invoices. ‘Note 1: This expense can be reduced by $1,456.18 due to remaining Centennial funds at ADP. Note 2: DBA Visit Anchorage. According to the Coordinator, Anchorage ‘Convention & Visitors Bureau told her that this fee will be waived. ————>—>——————————Centennial Celebration Funds December 2, 2015 Page 2 We also identified the following potential additional funds that could be used to help pay unpaid expenses: 5 eS Potential Additional Funds + Diverted revenue: $19,654.25 (See Revenues, Item 2) + Unused donation: $5,000 (See Expenses, Item 2) + Remaining business account balance“ ': $4,436.09 + Remaining Centennial Funds at ADP. $1,456.18 Total: $30,546.52 Source: Auditor analysis of unaudited accounts. Note I: Potential additional funds in the Coordinator's business account do not include funds from items sold and refunded and potential revenue from unsold Centennial merchandise, (See Expenses, Items 6 and 7 and Miscellaneous, Item 1). Revenues 1. Various Revenue Accounts ~ We found revenues from various sources in municipal accounts and non-municipal accounts. For example, it appeared that prior to the Coordinator’s separation from the Municipality some revenues were deposited into a PeopleSoft account. After the Coordinator's separation from the Municipality, some revenues were deposited into her business account. According to the Coordinator, revenues were deposited into her business account ‘because, as a private contractor, she no longer had access to PeopleSoft for reporting purposes. In one instance these revenue deposits were approved by the former Mayor. On June 9, 2015, the ‘Coordinator sent a memorandum to the former Mayor for his signature authorizing her to deposit into her business account a $14,101.10 check from Bridge Builders of Anchorage and a $19,808.61 fiom the Alaska Humanities Forum. The former Mayor approved the request. 2. Diverted Revenue — In one instance revenue was diverted directly to a vendor. As a result, this, revenue was never recognized in any of the Centennial accounts. Specifically, on September 13, 2014, the premier of the Anchorage Centennial documentary/film was held at the Alaska Center for the Performing Arts (ACPA). A user agreement was signed by the former Mayor and an ACPA representative. Alaska Destination Specialists organized the event. According to ACPA, net revenue totaled $19,654.25.‘Centennial Celebration Funds December 2, 2015 Page 3 ‘The Municipality never received the $19,654.25. Instead, a September 24, 2014, email from a special assistant to the former Mayor was sent to the ACPA stating, “Please make the check out to Alaska Destination Specialists, ..”. In response, the ACPA sent to the Municipality an email asking that the Final Building Settlement be reviewed and signed and then the check would be sent to the Municipality's subcontractor as requested. On September 26, 2014, the former Mayor signed the Final Building Settlement and on September 29, 2014, the ACPA wrote a check to Alaska Destination Specialists, We could not locate an invoice for the $19,654.25 and contacted the Purchasing Department (See Expenses, Item 4). The Purchasing Department called Alaska Destination Specialists on November 24, 2015, and asked them to provide a copy of the invoice or return the money. Since Alaska Destination Specialists had not yet responded by December 1, 2015, the Purchasing Department again contacted them asking for a copy of the invoice or return the money. Coordinator Transferred Personal Funds — The Coordinator transferred some of her personal funds, totaling $2,525, into her business account, Revenue Distorted — Revenue in the Coordinator's balance sheet detail was distorted because it included unbilled potential revenue from several sources. For example, $17,178 from unsold book sales and $15,953 in unsold artwork was included as potential revenue in the Coordinator’s balance sheet detail, but no invoices were issued, Expenses 1 Purchasing Process Bypassed — Purchasing processes established in Anchorage Municipal Code (AMC) Title 7 were bypassed. For example: -A $14,500 agreement to purchase advertising services for the 2015-2016 regular season of the Alaska Aces was entered into without a purchase order. Instead, the agreement was signed by the former Mayor's Chief of Staff. According to AMC 7.15.050, Execution of contracts, “All municipal contracts for supplies, services, professional services and construction . .. shall be signed by the mayor or his designee.” We could find no documentation designating the former Mayor's Chief of Staff as a designee. In addition, the agreement provided a $3,625 ticket allowance, four VIP room passes, and a parking pass. -The Anchorage Downtown Partnership provided $15,000 worth of services for a solstice concert, but had no signed contract or signed agreement. Instead, according to ADP staff, “good faith and a lot of handshakes” sealed the deal.‘Centennial Celebration Funds December 2, 2015 Page 4 2. Donation to Sister Cities Not Used - In May 2015, a $5,000 donation was provided to the Sister Cities Commission. The check was written from the Coordinator's business account. ‘According to the Commission Chair, “The Commission helped sponsor an Opening Reception for the Imagining Anchorage Symposium June 18 at the Anchorage Museum to kick off the Symposium, I believe the $5,000 was solely devoted to this event.” According to the ‘Commission’s Treasurer the funds were never spent. ‘Agreement fo Pay Bill for Anchorage School Distriet - The Municipality agreed to pay for student field trips on the Alaska Railroad, but the contract was signed between the ARRC and the Anchorage School District (ASD). According to one email from the Municipality to ASD and ARRG, the former Mayor “. . . would like the contract to be arranged between the Alaska Railroad Corporation and the Anchorage School District since ASD is organizing the field trips and for insurance purposes.” In another email to the Municipality, ASD asked, “Do we both need to sign it because the MOA is so graciously paying for the rides?” In response, the Municipality stated, “Nope just send us the invoices.” Purchased Order Exceeded Without Approval ~ On September 10, 2014, the former Mayor requested a sole sourve contract *. . . with Alaska Destination Specialists for professional event coordination for the Anchorage Centennial Legacy Film Premier in the amount not to exceed $30,000.” A $30,000 purchase order was approved and later changed to $29,002.39. An invoice for $29,002.39 was received in September 2014 and paid on September 30, 2014. As previously explained, on September 29, 2014, ACPA wrote a check to Alaska Destination Specialists for $19,654.25 at the request of the Municipality (See Revenues, Item 2). Therefore, the $29,002.39 purchase order was exceeded by $19,654.25 without an approved change order. We could not locate an invoice for the $19,654.25 and contacted the Purchasing Department. The Purchasing Department called Alaska Destination Specialists on November 24,2015, and asked them to provide a copy of the invoice or return the money. Since Alaska Destination Specialists had not yet responded by December 1, 2015, the Purchasing Department again contacted them asking for a copy of the invoice or return the money. Grant Appeared to Circumvent Intended Use ~ We found a grant that appeared to deviate from the scope outlined in the grant agreement. Specifically, on July 1, 2015, the Municipality approved a $25,000 grant 1o Greater Anchorage, Inc. to help cover expenses for the Centennial. ‘According to the agreement, “Expenses are but not limited to the following: event services, traffic control devices, contracting crowd control systems, security personnel, purchase of media advertising, payment of permits, insurance, and park clean up and toilet placement services.”Centennial Celebration Funds December 2, 2015 Page 5 Instead of spending grant funds on these services, Greater Anchorage, Inc. wrote a $23,750 check on July 26, 2015, that was deposited into the Coordinator’s business account. The remaining $1,250 was charged by Greater Anchorage, Inc. asa handling fee. However, according to the grant agreement the “Grantee is not entitled to any compensation under this Grant Agreement ...”.In addition, the grant agreement stated that the Muncipality should have been provided a copy of the subcontract. However, it appeared that Greater Anchorage, Inc. did not provide the subcontract to the Municipality. Some Items Sold — Some items acquired with Centennial funds were sold without going through the Municipality's normal disposition process. For example, according to the Coordinator she sold a bubble machine and astro turf to Golden Amusement. We could find no evidence in the detailed financial information that these funds were deposited in the Coordinator's business account. According to the Coordinator, she probably miscoded the deposit. Refunds Not Always Recorded — It appeared some items acquired with Centennial funds were later returned to vendors because they were not used. For example, according to the Coordinator fans and other supplies were purchased from Lowe's but were not needed due to cool weather. According to the Coordinator, she returned the fans and other supplies to the vendor. However, ‘we could not find the refund in any of the Centennial financials. According to the Coordinator, she probably miscoded the deposit. She stated that the refund was used to pay an invoice from Arctic Enterprises. Miscellaneous i Centennial Items Not Returned ~ Centennial merchandise such as artist proofs, decorations, and Centennial store inventory were not retumed to the Municipality. For example, according to the Coordinator there are artist proofs sitting in her garage and other miscellaneous merchandise stored at the Fur Rondy (Greater Anchorage, Inc.) headquarters. QuickBooks Improperly Installed — QuickBooks was installed on the Coordinator’s personal laptop. QuekBooks was purchased using Municipal funds. According to the Coordinator, QuickBooks is still on her personal laptop. It appeared that QuickBooks was being used for her personal business. Financial Reports Not Always Provided ~ Some Centennial Committee members stated that they had asked the Coordinator to provide them with financial reports regarding the status of revenues and expenditures. However, according to these Committee members the reports were not provided,Centennial Celebration Funds December 2, 2015 Page 6 4. Contract Administration Needs Improvement ~ When we asked who was responsible for administering various contracts no one was able to provide us satisfactory answers. In some cases, even when a contract administrator was identified the contract administrator denied knowing anything about the contract. Various Accounts Used - Various accounts, both Municipal accounts, non-profit accounts, and a private account were used to record Centennial revenues and expenses as shown in the below table. As a result, financial transactions were not as transparent as they should have been. Sd Summary of Centennial Accounts Grants to Source Budget + Revenues - Expenses - Others = Balance ‘Municipal PeopleSoft Account Dept ID: 111500G $500,000 $77,365 $69,811 $500,000" $7,554 ‘Anchorage Centennial Dept ID: 1115 250,000 560 ° 0 ‘Anchorage Centennial Dept ID: 1111 59,070 ° 10,570 48,500%"? 0 Mayor . Dept 1D: 1113, 25,000 0 0 25,0008" ° Community Development Coordinator 94,953 188,296 ° (63,343) Business Aecount'** Anchorage Downtown Partnership 8.24 76,193 0 1456 Tota: $834,070 $251,127 $596030 $573,500, ($84,333) Source: Auditor analysis of unaudited accounts. ‘Note 1: These finds were granted to the Alaska Humanities Forum to fund Centennial Legacy projects less administrative overhead of $104,000. Note 2: These finds were granted to the Anchorage Convention & Visitors Bureau to fund the Coordinator's position less an administrative overhead of $2,450. ‘Note 3: These funds were granted to Greater Anchorage, Inc. who then provided the funds to the Coordinator, less a handling fee of $1,250. The Coordinator deposited the funds into her business account. Note 4: Coordinator business account revenue excludes potential revenue and did not include funds from items sold and refunded (See Revenues, Item 4 and Expenses, Items 6 and 7).Centennial Celebration Funds December 2, 2015 Page 7 Recommendations ‘We recommend that the Administration should consider: + Following-up on the two payments totaling $24,654.25 that could potentially be returned to the Municipality to assist in paying the unpaid expenses. * Obtaining all unsold inventory and assets purchased with Centennial funds. The Administration may be able to sell some inventory to help pay expenses. + Following-up with the Coordinator to ensure that refunds and sold items are properly recorded. + Recovering any unspent funds in the business account. + Ensuring that contracts are properly administered