State Audit Of Big Fresno Fair Reveals Financial Concerns, Violations Within Operations

© ERIC PAUL ZAMORA/Fresno Bee/TNS The Pogo Stunt Team performs at the 2022 Big Fresno Fair on its opening day Wednesday, Oct. 5, 2022 in Fresno.

A state audit of finances at the Big Fresno Fair revealed about a dozen irregularities and violations of state law that the fair’s board of directors is vowing to correct.

The state Department of Food and Agriculture earlier this month made public the audit of the 21st District Agricultural Association, the agency that runs the Big Fresno Fair. Auditors who prepared the report, which covers a two-year period from January 2020 through December 2021, expressed concern about a cozy and at times confusing financial relationship between the fair and the Friends of the Big Fresno Fair Foundation, a separate nonprofit corporation.

Among the key findings were conditions in some contracts that required bidders for contracts with the fair to also commit to making donations to the foundation to the tune of more than half a million dollars over a four-year period; improper payments and gift cards distributed to fair managers and employees by the foundation; use of state-owned vehicles by several fair employees for their daily commutes between work and home and other personal trips; use of fair-owned fuel and credit cards and of fuel from tanks at the fairgrounds for personal use of state vehicles; and trips to states including Texas for which state-sponsored travel has been prohibited.

“Our office noted weaknesses and deficiencies within the 21st DAA’s administrative controls and operating practices,” auditors wrote in their report. “We have identified 13 areas containing reportable conditions. … In addition, we have provided 30 recommendations to improve the 21st DAA’s internal controls, operations and compliance with state laws and regulations.”

The irregularities and violations covered in the report occurred during the leadership tenure of John Alkire, who served as the chief executive officer of the Big Fresno Fair from 2004 through September 2020, when he stepped down to become the CEO of the Friends of the Big Fresno Fair Foundation.

Alkire was succeeded at the fair by his deputies, Lauri King and Stacy Rianda. Rianda was hired by the Ventura County Fair as its CEO last summer, and King — who has worked for the fair since 2003 — was named CEO in July 2022.

“From 2018 through 2021, the 21st DAA improperly agreed to $554,843 in payments being made to the Foundation from various contractors doing business with (the fair),” auditors wrote. “Specifically, 12 contracts included language … that required the contractor to donate funds directly to the Foundation.”

The legal office at the state Department of Food & Agriculture concluded that “donations from the contractor directly to the Foundation are improper as a condition of a contract” between the contractor and the fair. As a result, the arrangement “caused the 21st DAA to lose revenue as payments from contractors were made directly to the foundation.”

Improper cash payments, gift cards to fair managers, employees

Through interviews and documents, auditors determined that the Friends of the Fair Foundation provided almost $90,000 in cash and gift cards to fair employees between 2017 and 2021, and information indicated that the practice had actually been going on for at least 12 years.

Additionally, the report notes that the fair’s managers and other employees, as employees of a state agency, did not report those payments and gifts to the California Fair Political Practices Commission as required.

State law indicated that “state employees shall not receive or accept money or any other consideration from anyone other than the state for the performance of his or her duties as a state employee.”

Three fair managers and eight other fair employees, none of whom are named in the audit report, were given checks amounting to more than $68,000 from the foundation. Interviews revealed that “the Foundation sought advice from Employee A (a manager) at their board meetings for which (fair) employees should receive payments from the Foundation.”

The foundation would then write checks to fair employees and Employee A would deliver those to the employees. The report adds that unnamed Employee A “retired from the 21st DAA in August 2020 and became an employee of the Foundation in September 2020.” That person continued to deliver Foundation checks to fair employees in 2021.

Another $21,400 worth of gift cards, valued at $100 each, were purchased by the foundation and given to employees over a five-year period.

Most of the employees who received the cards “thought the gift cards were from the 21st DAA and not the Foundation since Employee A handed out the gift cards,” the audit report stated.

While state law prohibits state employees, including employees of the fair association, from accepting outside payments, the Friends of the Big Fresno Fair Foundation’s bylaws include a provision that “when deemed appropriate by the Board of Directors, on advise from the Fair manager, cash grants may be made to employees of the Big Fresno Fair for extraordinary effort on behalf of this organization.”

Improper use of state vehicles and fuel for personal travel

The same three unnamed fair managers and two other employees were criticized in the audit for improperly using state-owned vehicles to commute between their homes and the fairgrounds “while also using gasoline paid for by the DAA.”

Because the fair did not require employees to complete vehicle travel logs, auditors could not determine a precise number of miles driven by the five workers for personal use, but “based on distances between the employee residences to the fairgrounds, the five employees are estimated to have commuted 26,064 miles with state vehicles between 2017 and 2021. “The employees also stated that the use of state vehicles for commuting purposes has been going on for many years prior,” auditors wrote in the report.

The audit cites state law in noting that “no state officer or employee shall use, or permit the use of, any state-owned motor vehicle other than in the conduct of state business.”

The same employees also filled the tanks of the state vehicles using fuel paid for by the state — either from fuel tanks at the fairgrounds, or through company fuel and credit cards. An examination of fuel and credit card statements revealed that the employees bought more than $27,000 worth of gasoline; the audit also estimates the cost of about 1,340 gallons of fuel pumped from the fairgrounds tanks at about $4,671.

A wide range of other findings discovered by auditors

The audit report outlines a series of additional concerns over a lack of financial controls and other irregularities in financial practices for the 21st District Agricultural Association:

• Improper purchases and lack of controls for use of the fair district’s credit cards, including a lack of supervisory review for purchases put on the cards. Auditors identified 235 food purchases amounting to more than $21,000 using the fair district’s cards by the three managers and two other employees, without providing needed documentation to justify the purchases. There was no documented review by fair managers for most of the more than $660,000 in credit card charges during the audited period.
• Lack of required documentation to justify almost $156,000 worth of food and beverage purchases by fair officials from its concessionaire for public relations and promotional purposes. One purchase involved $1,308 for wine served in the fair directors’ dining room, but the state Fair & Exhibitions accounting procedures manual “specifies that purchases of alcoholic beverages are inappropriate uses of state funds and are unallowable.
• Lack of written agreements between the fair district and the Friends of the Fair Foundation to clarify the relationship between the two entities. The foundation, for example, has its office on the fairgrounds, but auditors were “unable to determine if the 21st DAA was due any revenue from this arrangement.” The Foundation has also performed work to improve the fairgrounds, but a lack of internal accounting controls for that work means there is no documentation of the construction amounts, contracting services or other measures.
• Underpayment of the fair’s obligation to the state employees retirement system for permanent employees in 2020 and 2021, amounting to a shortfall of almost $19,500; phone reimbursement stipends to two permanent employees for teleworking while state policies did not allow stipends for telework.
• Noncompliance with sick-leave accrual policies for temporary fair employees, causing employees to be shorted on their accumulated sick leave.
• Improper travel to prohibited states, circumventing policies over state-funded or state-sponsored travel by having the Foundation, rather than the fair district, pay for employee travel costs to attend the International Association of Fairs and Exhibition’s annual conventions in Texas in 2018, 2019 and 2021.
• Weaknesses in accounting for equipment owned by the fair district in tracking property including computers, tablets and tools that can be easily lost or stolen. A property register provided to auditors had not been updated since 2010. The district also did not comply with state policies for disposing of equipment that had outlived its usefulness, including inoperable forklifts and vehicles.
• Failure to notify the state’s Fairs & Exhibitions division of sponsorship agreements valued at more than $100,000. or have a term of two or more years. “Our office identified five sponsorship agreements … that exceeded $100,000 in value or were for multiple years for which the F&E was not notified,” auditors wrote.
• Lack of compliance with established policies for bidding on contracts, including about 20 contracts for more than $5,000 for which no bidding documentation could be found by auditors or provided by the fair district.

Fair board’s president pledges compliance with recommendations

In the fair’s response to the audit, and included in the report, Big Fresno Fair board president Terry Gonsalves pledged to achieve full compliance with the audit recommendations.

“CDFA has my personal declaration that the entire Fair team and our board are committed to directly aligning with all Compliance Audit corrections,” Gonsalves wrote, “and working alongside state officials to advocate for enhanced management education to ensure compliance among all fairs.”

In his response letter, Gonzalves said “I personally found the audit process to be informative and instructive, as records indicate the last CDFA compliance audit took place in 2010. …”

He added that the COVID-19 pandemic that began in early 2020 was a complicating factor in the fair’s operations and management, including Alkire’s retirement and a reduction of the fair district’s staff from 26 full-time employees to its current level of nine.

“California’s fifth largest fair operated in 2020-21 with minimal full-time staff, the majority new trainees,” Gonsalves said. “The accounting department alone rotated in and out four different employees to manage financial responsibilities.”

Among the steps that have already been taken are revoking all fair-owned vehicles from employees to be used only for official state business and not allowing district fuel cards to be used for personal gasoline purchases. Gonsalves added that the fair district will seek reimbursement from those who used the cards for personal travel, as well as for fuel pumped from the fairgrounds tanks.

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