Fair board discusses ‘deficiencies’ identified in state report
By Joe Tash
A state report released earlier this month identified what it called eight management “deficiencies” in the operation of the San Diego County Fair, including improper payouts to employees for accumulated leave time and failure to adequately document free meals, fair and concert tickets given to fair board members.
The report was issued by the California Department of Food and Agriculture’s audit office, regarding the operations of the 22nd District Agriculture Association, which runs the state-owned Del Mar Fairgrounds. The report looked at fairgrounds operations during 2008 and 2009.
“During our analysis of the internal control structures of the 22nd DAA and compliance with state laws and regulations, we identified eight areas with reportable conditions that are considered weaknesses in the Fair’s operations,” said the report.
Other areas of deficiency highlighted in the report included a lack of compliance with a furlough program for state employees, a lack of “accountability and transparency” for an employee recognition program and inadequate tracking of hours and days for temporary employees.
Fair board members discussed the state report at their Nov. 8 meeting, focusing primarily on the issue of leave buyback for district employees.
“Since 2005, the Fair has improperly allowed its employees to cash out compensated leave hours, such as vacation, annual leave and personal leave without receiving the proper approvals from the Department of Personnel Administration,” the report said.
The report noted that between Jan. 1, 2008 and Jan. 14 of this year, the fair allowed employees to cash out $354,161 of compensated leave. Of that amount, managers and supervisors cashed out $312,893 worth of leave, while rank-and-file workers cashed out $41,268. From 2005 to 2007, the fair allowed employees to cash out an additional $244,000 in leave.
The report called for 22nd DAA to comply with state payroll regulations, and collect back from employees the unauthorized payouts they received.
Adam Day, board president, noted that the district is already in compliance the first part of the state’s demand, since he instructed fairgrounds CEO and General Manager Tim Fennell to suspend the leave buyback program when he learned of the state’s concerns.
In a prepared statement, director Tom Chino said most of the leave was cashed out for management and supervisorial personnel, rather than lower-paid employees. “So, I presume, we can set up a payback program that is not a hardship,” he said.
But director Russ Penniman objected to making the employees pay back the money.
“I will be on the opposite side of the fence from today till Hell freezes over on this,” Penniman said.
He and Day said the district is legally required to pay out the leave time if the employees leave the district.
“It’s their money, they’ve earned it,” Day said.
In its official written response to the state, the district said, “Most cash-outs were made due to financial hardships of the employees, and each cash-out was approved only after confirmation that sufficient leave balances remained.”
The response said leave buy-backs are common in both public and private employment, and that “staff was not aware of any governmental code or (personnel department) rule that prohibited this practice.”
“We are that round peg trying to fit in a square hole,” said Fennell. “We’re asked to run a business like a business, but frankly some of the regulations prevent us from doing that.”
Several board members, including Chino and David Watson, questioned whether the district’s response to the state report was adequate.
“Right now we have a document that says we’re in violation of several different rules and regulations. I just don’t like that,” Watson said.
At the Nov. 8 meeting, board members Watson, Chino and David Lizerbram agreed to work with district counsel on a draft of a supplemental letter responding to the state report, which will come back to the full board next month for consideration. Among items the trio will research is what penalties the district might face if it does not fully comply with the state’s requests, such as forcing employees to pay back the money they received in leave cash-outs.
The report also takes the 22nd DAA to task for providing $72,000 worth of meals to board members and their guests during the 2008 and 2009 county fairs, without completing proper documentation to determine whether the dinners qualify as allowable promotional or public relations expenses.
Also, the report stated that district officials did not fully comply with either state regulations or the district’s own ticket policy regarding fair admission and concert tickets. The report said the district only reported on some of the concert and fair admission tickets received by board members, and failed to report 92 admission tickets and 537 concert tickets.
In addition, the report noted that the district reported giving out $12,500 worth of $25 gift cards to employees in 2008 and 2009 through two employee recognition programs, the “Hats Off” and safety awards. Because of a lack of documentation, “awarding the gift cards to employees can be deemed as a gifting of state funds.”
The district’s response noted that log sheets were kept of who received the gift cards, but the logs were discarded after the district’s financial audits for 2008 and 2009, before state agriculture department auditors conducted their review.