Appendix B. Sonoma County Advertising Fund Procedures Applied and Associated Findings For the Fiscal Year Ended June 30, 2011

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1 ATTACHMENT A-1 Appendix B Sonoma County Advertising Fund Procedures Applied and Associated Findings For the Fiscal Year Ended June 30, 2011 Overview There were forty-five (45) agreements awarded to community-based organizations and local governments from the Advertising Fund in the fiscal year ended June 30, Agreement amounts ranged from $450 to $153,000. The total of funds awarded was $934,641. Recipients selected for review were granted a total of $167,476 funds awarded, which represents approximately 18% of the overall total awarded. Certain Advertising Fund recipients were reviewed at the request of the Sonoma County Administrator s Office in addition to those recipients found to have had an auditor finding during fiscal year ended June 30, In addition to procedures applied to selected recipients Advertising Fund revenues received and associated expenditures, recipients were reviewed for compliance with the established indicators of the specific services to be provided by each recipient organization. Procedures Applied Receipt of Advertising Fund Revenue For each recipient listed in Appendix A, amounts claimed for reimbursement on County of Sonoma white claim forms were reconciled with the recipient s bank statement to confirm deposit of Advertising Fund revenue received. We also verified that amounts deposited reconciled with the recipient s general ledger and agreement made with the County of Sonoma. We identified no exceptions as a result of these procedures. Procedures Applied Advertising Expenditures For each recipient listed in Appendix A, general ledger detail relating to advertising expenditures was obtained in order to confirm that the recipient had expenditures in the amount of funding received, per County of Sonoma white claim forms submitted and per contract agreement. From general ledger detail provided, we judgmentally selected expenditures in order to determine that there was adequate supporting documentation and to ensure that it was recorded in the proper period. We confirmed that the amount recorded in the general ledger agreed with the associated invoice and cancelled check. For staffing expenditures we confirmed that amounts claimed for reimbursement reconciled to the general ledger, employee timecards and cancelled checks. For membership matching we confirmed that amounts submitted for matching funds recorded in the general ledger were received in the correct period and deposited into the bank. 2

2 ATTACHMENT A-2 We identified four recipients with exceptions as a result of these procedures. Associated Findings Earth Dance International We determined that Earth Dance International did not meet the requirements of Category H of the Advertising and Promotions Policy. Earth Dance International s contract falls within Category H of the Advertising & Promotions Policy which states among other things that the recipient must have advertising expenses that exceed $25,000 and an advertising request that does not exceed 50% of total advertising expenses for the event of the cultural organization. Per review of the Earth Dance International General Ledger for the Period July 1, 2010 June 30, 2011 and conversations with Andy Fusso, former Executive Director of Earth Dance International responsible for the advertising claim, Earth Dance International incurred $19, of advertising expenses and received $13,500 of Advertising Fund awards. The award amount equates to 70% of the total advertising expenses incurred. The failure to reach $25,000 in advertising expenses and the receipt of an award amount that exceeds 50% of total advertising expenses does not meet the Category H Policy requirements. We recommend that Earth Dance International comply with the requirements of the Advertising and Promotions Policy for the Category in which it applies. Earth Dance International Response: Earthdance International (EDI) agreed to serve as the nonprofit applicant for TOT grant funds for the Harmony Festival in 2010 and In 2010 we took the place of Association for the Creative Endeavor (ACE) (the previous nonprofit applicant). This involved many hours of consultation and review with county, ACE and Harmony Festival staff. Our goal was always to ensure compliance with all requirements and to provide professional management of grant funds. According to the Advertising and Promotions policy dated May 10, 2011, section H.3.c.,...major events (emphasis added) must meet the guidelines...(including) advertising expense that exceed $25,000. The audit report faults EDI for separately spending less than $25,000 on advertising; however, if the combined event advertising expenses of EDI and Harmony Festival are considered, this criteria clearly has been met. Therefore we disagree with the audit report s conclusion. No mention of such a requirement was made during extensive conversations with county staff, and in fact, the county approved our payment after we provided substantial supporting backup including exhaustive documentation of every transaction and copies of advertising material. Our claim clearly noted the amount of our expenditure. We agree with the audit recommendation that these unclear guidelines be revised and included within the contract which is the primary guidance. The process is unnecessarily complex, bureaucratic and confusing as it now exists. 3

3 ATTACHMENT A-3 We therefore request an exemption from repayment of any amounts of this grant, and appreciate the County Administrator s support of this exemption. Earthdance International does not intend to apply for Sonoma County TOT grants in the future. County Administrator s Office Response: The County Administrator s Office recommends granting a one-time exemption from repayment for Earthdance International. The organization is now well aware of the requirements of their event category per the policy and repayment will be required in the future should similar audit findings be found related to the Health and Harmony Festival event grants. Additionally, the County Administrator s Office has amended the Advertising Program grant contract agreement as well as the grant application to prevent this type of issue going forward for all entities. The contract has been amended to clearly specify which category each entity is receiving a grant under, and specify that should the entity fail to meet the requirements of the policy and category under which the grant is received, repayment may be required. The grant application also requires the applicant to specify the category they are applying under and that they understand all requirements of the category and policy, and to specify the previous year s advertising expenditures, to demonstrate they have met any expenditure thresholds in the past and will have the ability to do so in the future. This will also clarify that it is the applicant organization that must meet the expenditure thresholds. The audit is not conducted on all entities advertising for a specific event, only the entity that received the Advertising Program grant and this entity must meet the requirements of the policy under which they apply and sign the contract.. The new application process requiring detailed advertising expense breakout and monitoring of advertising expenditures by Earth Dance International will reduce the risk of such noncompliance in the future. Russian River Chamber of Commerce and Visitor Center - Events The Russian River Chamber of Commerce and Visitor Center submitted a Wine Country Radio claim for the 4 th of July event that included charges for two different advertising periods. Some of the radio spots were run on or before June 30, 2011, the end of the advertising period for under review, and some were run after June 30, 2011 up to the date of the event, the subsequent advertising period. The County Administrator s Office did identify this issue at the time of claim submission but unfortunately there was an error in calculating the allowable reimbursement amount and consequently the Russian River Chamber of Commerce and Visitor Center received $100 more than actually incurred for the advertising event reviewed. Per review of the other expense invoices provided by the Russian River Chamber of Commerce and Visitors Center for all of the events awarded during the period under review, we were able to 4

4 ATTACHMENT A-4 identify that there were more qualifying expenses incurred than Advertising Funds received from the County. We recommend that the Russian River Chamber of Commerce and Visitor Center confirm the dates of the activities being sought for reimbursement to ensure that only expenses qualifying for the correct advertising period are submitted. Russian River Chamber of Commerce and Visitor s Center Response: The Russian River Chamber of Commerce stated that the reimbursement claims will be reviewed to ensure only expenses incurred in the correct advertising period will be submitted for reimbursement. County Administator s Office Response: The County Administrator s Office has decided to allow the Russian River Chamber of Commerce and Visitor Center to offset the $100 over-payment from the 4 th of July event against the other qualifying expenses that were in an amount greater than awarded from the other events. The additional review by the Russian River Chamber of Commerce and Visitor Center will reduce the risk of such erros in the future. Society for Advancement The Society for Advancement submitted a claim for reimbursement for a Press Democrat Savor advertising expense that was greater than the actual invoice amount. The claim amount was for $600 but the invoice payment amount totalled $ Per review of the other expense invoices provided by the Society for Advancement for the period under review, we were able to identify that there were more qualifying expenses incurred than Advertising Funds received from the County. We recommend that the Society for Advancement implement a reconciliation mechanism to ensure that submitted reimbursement claim amounts agree with the amount of the actual invoices. We also recommend that the Society for Advancement include the reconciliation along with copies of the original invoices with each reimbursement request. 5

5 ATTACHMENT A-5 Society for Advancement Response: The Society for Advancement s Office Manager responsible for the oversight of the Advertising Fund submissions will create a spreadsheet listing all invoices being submitted for reimbursement and will include copies of the original invoices with the claim submission to easily identify the charges on each invoice to mitigate the likelihood of erroneous claim submission amounts. We believe that the implementation of this reconciliation mechanism will mitigate the risk of incorrect invoice amounts being submitted in the future. Historical Landmarks Commission (Includes Diana Painter, PhD Contractor) We identified that there were several hours worked after the end of the Advertising Fund period of June 30, There were 133 hours worked after June 30, 2011 to complete the projects assigned. Per discussion with Lisa Posternak, PRMD Planner III responsible for overseeing the Landmarks Commission Advertising Fund work, Diana Painter was granted an extension to the signed services agreement. This extension however was verbal and not a formalized amendment. Per discussion with Diana Painter we were able to determine that there were miles submitted for reimbursement that were incurred while driving a rental car. We also determined via review of the submitted mileage log that there was a lack of detail with the descriptions included to obtain assurance that the miles driven were in fact for Historical Landmarks Commission work. Additionally, we identified that there was a computational error regarding the mileage reimbursement amount submitted with one of the Diana Painter invoices. Lastly, we identified that the final invoice submitted for services agreement payment did not identify the number of hours worked or mileage expenses being sought for reimbursement but was merely an exercise in math subtracting what was previously billed with the award amount remaining on the services agreement. Per Paragraph 2 Payment under Section 1 Scope of Services specifically states that The bills shall show or include (i) the task(s) performed; (ii) the time in quarter hours devoted to the task(s); (iii) the hourly rate or rates of the persons performing the task(s), etc.. With the mileage reimbursement issues identified, we did not consider any of the mileage expenses when calculating total expenses incurred. However, the amount of labor dollars alone exceeded the amount of the Advertising Funds awarded. We recommend that any changes to signed services agreements going forward, whether they be time extensions or changes to the scope of work, be formalized in writing with a copy being provided to the County Administrator s Office for their records. 6

6 ATTACHMENT A-6 We also recommend that more detailed descriptions be included in consultant mileage logs to provide better transparency and that PRMD staff recalculate the submitted mileage claim amount to ensure the correct amounts are paid. Finally, we recommend that invoices being submitted for payment include the detail required by the signed services agreement, including but not limited to, (i) the task(s) performed; (ii) the time in quarter hours devoted to the task(s); (iii) the hourly rate or rates of the persons performing the task(s). PRMD may want to consider requesting the actual timesheets prepared by Diana Painter to accompany the invoices as support. PRMD s Response: PRMD agrees that verbal agreements are not acceptable for changes to the scope of work or deadline extensions on signed services agreements and a formal amendment will be created and signed. PRMD also will ensure that the County Administrator s Office recieves a copy of any future services agreement amendments. PRMD will ensure that consultant mileage logs include detail such as Landmarks Commission project name and/or number and that timesheets are submitted with the invoices to confirm the amounts requested for reimbursement. Diana Painter s Response: In the future, any changes to the Scope of Work and/or schedule will be in writing and better mileage log records will be maintained. Invoices submitted for payment will include the necessary detail included within the Payment paragraph under Section 1 Scope of Services within the signed services agreement. Implementing the above identified processes will mitigate the risk of non-compliance with signed services agreements and create better transparancy for the miles driven and work performed. County Administrator s Response: The County Administrator s Office concurs with the Auditor-Controller s response and directs PRMD to have any future changes to work, terms, etc. be in writing and documented. 7