'Management errors' to blame for fair losses

LoRenzo Bates (Upper Fruitland), chairman of the council's Budget and Finance Committee, says the Navajo Nation Fair lost more than $400,000 over two years due to "administrative management errors."

An audit of the 2008 and 2009 fairs went before the B&F committee June 15, along with Parks and Recreation Department Director Ray Russell, who administers the event.

Russell told the committee that he supports the audit findings and that corrective actions were taken for the 2009 fair.

Acting Auditor General Elizabeth Begay noted that Russell has until July 15 to submit a corrective action plan to her office, which would then be reviewed and presented to the committee if it shows that audit recommendations would be implemented.

The committee voted unanimously to accept the audit report and directed Begay to provide a list of the government departments that donated $523,565 to the fair.

Committee Vice Chair Leonard Chee (Birdsprings/Leupp/Tolani Lake) and member Pete K. Atcitty (Shiprock) both questioned why departments were giving some of their operating funds to the fair.

Chee said that during the annual budget process, departments request additional funds but the departments that are giving money to the fair must have "well-padded budgets."

Chee said departments that give money to the fair are not using their budgets for the intended purposes.

Atcitty said the donations should not be counted as fair revenue in order to give a more accurate picture of the fair's losses.

Bates also asked the auditor to find out if the fair had ever made a profit.

He also advised Russell to answer a specific question in his corrective plan: Should the fair be a profit-making event or an event for the people? An event for the people would mean accepting losses but keeping those losses in check.

The audit cited four findings:
• The 2008 and 2009 fairs made $2.42 million in revenues but had total expenses of $2.83 million, leaving a deficit of over $400,000.

Auditors reported that in both years Russell paid a professional rodeo organization $112,000 to host a one-day rodeo. However, the revenues generated by the event, which came from parking fees and ticket sales, amounted to just $57,000.

The loss would be even greater if expenses charged to the overall fair budget, such as wages, security, law enforcement, lodging and food and transportation, were included, the audit noted.

The report does not name the organization, but the only professional rodeo organization to host a one-day event at the fair during those two years was Championship Bull Riding, founded by four-time world champion Tuff Hedeman in 2002. Asked Wednesday to name the organization, Russell dropped or disconnected the Navajo Times' call, and then was "in a meeting" and unavailable, according to a receptionist in his office.

According to auditors, Russell also paid the rodeo organization $70,000 to advertise the Parks and Recreation Department at its event.

Russell justified the $182,000 paid to the one-day rodeo to publicity received, which he estimated was worth $330,000. The exposure included 48 telecasts or 300 hours of cumulative TV coverage, two minutes of telecast exposure during the fair event, print media, post logos, magazine ads, Web site logos and links, announcer mentions, and signage exposure at the event, he said.

• The 2008 rodeo had loose financial controls over revenues and tickets sold on credit, resulting in a loss of about $36,000 in uncollected receivables and $5,000 in missing cash.

The audit cited $6,607 in unpaid booth rental fees; $16,200 in entry passes, called "badges," sold on credit; $8,300 in unpaid parade entry fees, and $4,960 in unpaid online ticket sales. Bates ascribed these losses to "management errors."

"Regardless of whether or not the fair's going to be profitable or not, those are management errors," he said. "The $4,960 of unpaid online ticket sales is just beyond me as to how that could occur because those of you with experience in online sales know they ask for everything before they even deliver. I understand that."

Auditors credited Parks & Rec for making "significant improvements" in 2009, which included no outstanding receivables and payments made by check instead of cash.

"However, controls over expenses remain deficient," the auditors stated.

The uncontrolled expenses included the improper classification of expenses and paying exempt employees additional compensation for working at the fair, which Navajo law prohibits.

Bates said he had grave concerns about Russell paying fair workers $100,000 in cash in 2008 and not reporting those wages to the Internal Revenue Service, a violation of federal tax regulations, according to the auditors.

• Auditors reported that two inspections of the fairgrounds and facilities in 2008 and 2009 revealed "numerous problems that posed health risks to fair patrons."

"However, despite these inspection reports, no real improvements have been made," the audit stated. "In the absence of major capital improvements, there is no assurance the fairground is safe for its patrons."

• $7,982 could not be accounted for in spending for the fair's exceptional rodeo, which was started by Council Delegate George Arthur (Nenahnezad/San Juan/T'iistsoh Sikaad) in 2005 "to welcome and embrace Navajos with disabilities during the Navajo Nation Fair."

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