CITY COUNCIL AGENDA REPORT
City of Anaheim
CITY MANAGER’S OFFICE
DATE: FEBRUARY 13, 2024
FROM: CITY MANAGER’S OFFICE
SUBJECT: CITY RESPONSE TO STATE AUDIT ON OVERSIGHT OF
TOURISM RELATED CONTRACTS
ATTACHMENT (Y/N): YES ITEM # 06
GOVERNMENT CODE § 84308 APPLIES: NO
RECOMMENDATION:
That the City Council, by Motion, receive and file the City of Anaheim’s response to the California State Auditor’s draft report regarding oversight of tourism related contracts in the City of Anaheim.
DISCUSSION:
On August 4, 2023, Assemblymember Avelino Valencia asked the Joint Legislative Audit Committee to approve an urgent state audit to review public funds that were disbursed to Visit Anaheim and Anaheim Chamber of Commerce. This request came shortly after an internal investigation, commissioned by the City of Anaheim, contained findings that alleged potential misuse of public funds by Visit Anaheim and the Anaheim Chamber of Commerce.
On August 12, 2023, Assembly Audit Committee Chair David Alvarez asked the State Auditor to prioritize Assemblymember Valencia’s request for an audit. After working with staff from the State Auditor’s over the next several months, the completed audit report was released on January 30, 2024. Among the findings in the report, the State Auditor found that the City lacked meaningful contract monitoring process in order to properly manage tourism related contracts and funds.
As part of their report, the State Auditor made four key recommendations to the City.
On January 11, 2024, the City provided a formal response to the State Auditor, welcoming the recommendations and providing initial steps for implementation. The four key recommendations and city’s responses are outlined below:
Recommendation 1: The Anaheim City Council should designate an advisory board by July 2024 to make recommendations regarding how such funds should be expended.
The board should include, at a minimum, some of the owners of the assessed properties within the tourism district, legal counsel, and a person knowledgeable in government finance.
200 S. Anaheim Blvd.
Suite #733
Anaheim, CA 92805
Tel: (714) 765-5165
Fax: (714) 765-5164
www.anaheim.net
City Response to State Audit on Oversight of Tourism Related Contracts February 13, 2024
City Response: The City of Anaheim will begin exploring the process for establishing an independent advisory board to assist the City in the oversight of ATID expenditures and activities.
Recommendation 2: Anaheim should develop a contract management, monitoring, and oversight process that aligns with the practices set forth in the corresponding provision of the State Contracting Manual by January 2025. The city should implement policies and procedures for its professional service contracts that require it to track contract deadlines, deliverables, and contractors’ use of funds, as well as perform periodic compliance audits and reviews of contractors’ financial records.
City Response: The City of Anaheim supports the conclusion that there is always room for improvement in our existing contract oversight procedures and will begin work on adopting a set of policies and procedures specifically for professional service contracts.
Recommendation 3: The city should renegotiate the contract with Visit Anaheim by January 2025 to improve oversight and to ensure that it does the following:
Include key performance indicators to allow the city to better gauge how effectively Visit Anaheim is using tourism assessment funds. These benchmarks should include, at a minimum, hotel occupancy rates, convention center bookings, and the number of presentations made to convention center executives.
Require Visit Anaheim to track all expenditures related to the contract and prohibit from commingling tourism district assessment funds with other revenue sources. Prohibit Visit Anaheim from transferring tourism district assessment funds to another entity without the city's prior approval and full compliance with the subcontracting provisions of the tourism district assessment contract. Require Visit Anaheim to develop a plan for oversight of any subcontractor and provide documentation of this oversight annually to the city.
City Response: The City of Anaheim supports this recommendation and has already started the dialogue with Visit Anaheim in order to improve the management of these funds and the reporting that is necessary to ensure that performance indicators and benchmarks are being properly established and met annually. The City will begin discussions with Visit Anaheim about specific changes to the contract that could be considered in a timely fashion.
Recommendation 4: The city should assess whether it received adequate consideration for the 2019 economic development contract or the 2020 shop and dine local contract. If the city finds that it did not receive adequate consideration, then the city should explore its restitution mechanisms under contract law to obtain a return of those funds.
City Response: The City of Anaheim and our Audit Division will begin exploring the audit provisions within these two agreements to further assess whether restitution is appropriate.
City Response to State Audit on Oversight of Tourism Related Contracts February 13, 2024
As outlined in our responses, the City is in the process of implementing all four recommendations made by the State Auditor. Staff is planning to bring these items to council as soon as they are ready for consideration and staff anticipates they will all be completed well within the timeframes outlined by the State Auditor.
IMPACT ON BUDGET:
There is no budgetary impact.
Respectfully submitted,
Jim Vanderpool
City Manager
Attachments:
1. City Response to State Audit
2. State Audit Report