This is a portion of the full report on the LA City Website at http://www.lacity.org/CTR/millennium.pdf
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EXECUTIVE SUMMARY
PROGRAM BACKGROUND
FINDING NO: 1 THE OBJECTIVE TO OFFER FIVE FAMILY-FOCUSED COMMUNITY FESTIVALS FOR
THE MILLENNIUM
CELEBRATIONS WAS MET
FINDING NO: 2 LACK OF ORGANIZATION CREATED PROBLEMS IN ALL ASPECTS OF THE
PLANNING, PROMOTING AND
STAGING PHASES OF THE MILLENNIUM EVENTS
Hollywood Sign
FINDING NO: 3 CULTURAL AFFAIRS DID NOT TAKE RESPONSIBILITY FOR INTERNAL CONTROLS
TO ENSURE PROPER
RECORDING OF FUNDS AND EXPENDITURES OF THIS EVENT
RECOMMENDATIONS
BACKGROUND NEW YEAR'S EVE EVENTS AT OTHER CITIES
PROGRAM BACKGROUND
On January 28, 1997, the Mayor stated, "Let's bring in the new century with a truly LA event, a cultural festival for everyone to enjoy." In April 1997, the
Cultural Affairs Department (CAD) submitted a proposal for a two-year Millennium celebration.
The CAD presented the Millennium celebration, also referred to as Celebrate LA 2000, to the City Council as citywide celebrations comprising five regional New Year's Eve festivals featuring live entertainment, family activities and children's workshops. The plan did not include one main site as a gathering point similar to the visual effect of a New York Times Square event. The CAD was believed to be the best City Department qualified to coordinate an event that the Mayor and the City Council wanted to do, which was a citywide cultural festival.
The CAD was in charge of the production committee for the five community events from the beginning of the project. The CAD did not assume leadership of all of the events until July 1999. Shortly after, the CAD signed Memoranda of Understanding with the Los Angeles 2000 Youth Foundation (LA2KYF) and the Los Angeles Sports & Entertainment Commission (LASEC). CAD General Manager Al Nodal acted as a representative in LASEC contracts and he co-authorized payments made from funds raised by LA2KYF.
Plans were also made for a special event at the Hollywood Sign. This event, which was to include fireworks, lasers, and lights, was reportedly created for the media, as a way of showing the world what Los Angeles had to offer. This event was not intended to be a gathering point for the general public as a celebration site. The committee to plan all the millennium celebrations went through three different leaders before the entire responsibility went to the CAD. A Steering Committee was formed in July 1999 and was made up of two representatives from the CAD, two representatives from the Mayor's Office, a volunteer, two representatives from the law firm of Riordan & McKinzie, and a philanthropist. The committee brought together representatives from the City, LASEC and LA2KYF, to ensure proper coordination for fundraising and production.
CONCLUSIONS AND OBSERVATIONS The Millennium Celebrations introduced First Night types of activities to Los Angeles. First Night celebrations seek to foster the public's appreciation for the visual and performing arts through New Year's Eve events that offer the community a shared cultural experience that is accessible and affordable to everyone. Alcohol is not allowed at these events. These types of events can successfully bring a community together in a safe, alcohol-free environment. The Celebrations benefited the City by offering its citizens and visitors a choice of five site events, all at no cost to the participants, providing convenience and creating a neighborhood setting. The activities available were family-oriented. All of the required elements for a cultural family event were available: family entertainment, arts and crafts for the children, all day and evening activities, food, and amusement rides at some locations. The approximate direct cost of the five events was $2.9 million, which was funded by City and private funds. This cost does not include City department reported expenses ($ 1. 5 million) because the departments did not report expenses by site or event. An estimated 18, 000 participants attended the events.
Other reported benefits to the City include the development of working partnerships with different governmental, public and private entities. The Celebrations attracted large corporations that were given the opportunity to advertise while providing funds for the community events and the Library Foundation benefit. Organizing the Celebrations allowed the CAD to capture the whole City all at once for the first time and, according to the General Manager, expanded the Department's way of thinking. The City also received worldwide exposure on television and the immediate press was favorable.
The events would have benefited from improved organization in the planning, promoting, and staging phases of the millennium events. There was turnover in the staff of one of the main event planning committees, and the CAD did not assume leadership of the entire project until July 1999. There was confusion throughout the project including:
Who was in charge
Fundraising and sponsorship
Limitations on the events
Last minute additions of new elements to events .
The lighting of the Hollywood Sign was reportedly created with the television viewing audience in mind and encountered many problems. Issues were brought forth by community groups and public safety officials who opposed the idea of using lasers and fireworks because of the drought the City was experiencing. Thus, many of the proposed elements of the event could not be incorporated.
The CAD did not take responsibility for internal controls to ensure all funds from sponsors and expenses related to the Millennium Celebrations were properly recorded and summarized for financial reporting. There were a number of groups involved in raising and spending funds with no central control. Auditors found:
Lack of documentation of fund raising by Grey Alliance
Payments which exceeded contracted amounts
Payments made without a contract
Without internal control procedures, we can not be reasonably assured that any funds were donated prior to LA2KYF's involvement, or that all funds donated were properly reported or allocated. Moreover, we can not be reasonably assured that all expenses were properly recorded and accounted for.
The lack of one organization being in charge of all of the fiscal functions required auditors to compile information on funds, receipts, and expenditures from numerous sources. In addition to delaying the report, this lack of fiscal controls left open the possibility that not all sources of receipts and expenditures were included in the compilation.
We recommend to the Mayor and Council:
1) Clearly define goals for future First Night activities or New Year's Eve events if future events are planned. Determine in advance if objectives include providing family-oriented, community events or a New Year's event showcasing the City of Los Angeles to the world. These recommendations generally apply to other City sponsored events as well.
2) After clearly defining goals:
a) The budget for administration should include adequate funding to obtain a
qualified person with experience in these types of events
who can provide stable leadership to ensure goals are met.
b) Sponsorship and fundraising for City events should be sought and obtained
before planning for specific events begin.
c) All proper approvals and permits, for such things as fireworks and lasers,
should be obtained in advance to avoid last minute
cancellation of events.
d) Any future events should have provisions to accommodate weather conditions,
such as rain or excessive heat.
3) If a goal is to have First Night events, multiple sites should continue to be used.
4) If a goal is to have a showcase event, event planners should consider having only one site (i. e., Hollywood Boulevard, Downtown) displaying all of the elements that make Los Angeles the entertainment capital of the world.
5) For future events, the CAD (or any other City department) should be identified as the entity in charge, to which all other involved parties should report.
6) Request LA2KYF to submit a Report of Results of Activity to the Charitable Services Section of the Commission Investigation Division of the Los Angeles Police Department. Note: Charitable Services stated it received this report on July 24, 2000, after our Office had requested it from LA2KYF.
We recommend the CAD or any other City department in charge:
1) Implement internal controls to ensure proper tracking of all contracts, and reporting of revenues and expenses for the events by the CAD and/ or the entity in charge, including entities used to raise or expend funds in the name of the City.
2) Verify any fundraising group raising funds on behalf of the City applies for the proper permits and files the required forms/ reports.
The objectives of our audit included:
1) To determine what resources were devoted to the planning, promoting, and staging of the City's millennium events and what the resulting costs and benefits were to the City.
2) To determine if financial transactions were properly recorded and categorized, and expenditures were properly charged to the LA Millennium Celebrations.
3) To make recommendations to improve future events, if warranted.
Documentation
We gathered and reviewed reports and documents pertaining to the Millennium, including Council Files, department files and other documents during our audit. We also reviewed accounting records and/ or other fiscal data from the CAD, LASEC, and the Mayor's Office, and acknowledgement letters to donors from LA2KYF.
Interviews
We interviewed representatives of City organizations and various cities, which included:
Cultural Affairs staff who were responsible for managing the events,
monitoring the contracts and producers, paying invoices, and accounting for the
expenditure of funds.
Representatives from the Office of the Mayor
A councilmember
Event producers
Staff from major cities throughout California and the Country
Representatives of the Donahue Group
Members of the Steering Committee
Representative of the Los Angeles Sports and Entertainment Commission
Representatives of the LA 2000 Youth Foundation
Other Sources
We gathered information from the Internet regarding First Night types of activities from various cities across the country. We also attempted to obtain costs of other New Year's Eve celebrations in locations worldwide, but such information was not readily available.
We performed our fieldwork between February 28, 2000 and July 21, 2000. The audit period covered January 1999 through January 31, 2000 and the audit was conducted in accordance with Generally Accepted Government Auditing Standards. To index
Cultural Affairs Department In 1975, Mayor Tom Bradley appointed an advisory committee on cultural affairs to study the state of the arts and artists in Los Angeles. The committee recommended creating a Cultural Affairs Department as a way to restructure the Municipal Arts Department (originally formed in 1925), which reorganized the City's responsibility in the arts, and integrated community arts centers. The Cultural Affairs Department was created by an act of the City Council on July 1, 1980.
The Cultural Affairs Department (CAD) administers a variety of cultural festivals, events, presentations, exhibitions, art courses, tours, and various types of live performances every year. Management of the Cultural Affairs Department is under a General Manager with 75 budgeted positions. The CAD is divided into nine Regional Arts Council areas.
The goal of the CAD is to strengthen the quality of life in the City of Los Angeles by stimulating and supporting cultural activities and ensuring access to such activities for residents of, and visitors to, Los Angeles. The mission of the organization is to enhance the quality of life for the City's 3. 5 million residents and 25.1 million annual visitors by developing, promoting, supporting and ensuring universal access to cultural activities.
In fiscal year 1999-00, along with the production of the Millennium Celebrations, CAD reports that it sponsored and produced six festivals, over 400 lectures and live performances, almost 20 art exhibitions, Architectural Design, Historic Preservation, a Citywide Art Collection, Citywide Mural Program, and special Communications Programs (telephone hotline, website, event calendar distribution, and numerous announcement mailings). Other reported activities included providing over 3,000 art courses and workshops, almost 2,000 tours of museums or various facilities and grant distributions to over 160 groups.
Millennium Celebrations
The CAD proposed a plan for a two-year Millennium Celebration in 1997. By June 1999, the final plan evolved into five community events focused on the family. These events were to be alcohol-free and include cultural events and festivals to allow a safe place for children and families to celebrate the new year and to create a sense of civic pride and local unity.
The event to light the Hollywood sign was finalized late in 1999 and was reportedly designed for the television audience. To index
The City's objective to offer five family-focused community festival events for the millennium celebrations was met. The goal was to create family-oriented New Year's Eve events in five areas of the City: Van Nuys Airport, Civic Center, Baldwin Hills Crenshaw Plaza, Grand Avenue and the Harbor area.
Five Community Events
While the theme for each of the event sites was different, the major elements that were required for each event were the same.
The following elements were offered at each event:
1. Daytime festival activities
2. Youth/ children's activities
3. Community involvement
4. Talent (Entertainment)
5. Special effects (fireworks)
6. Food booths
7. Arts and Crafts
In addition to the five events, the lighting of the Hollywood Sign and a closed circuit Interlink program were included as projects of the Millennium Celebrations when more funding was provided through public and private sponsorship.
The Hollywood sign midnight countdown event was a 15-minute light show in which the Hollywood Sign went through an array of colors. The letters were lit up in various types of patterns and colors once the ten-second countdown to midnight began.
The Interlink was a closed circuit television broadcast that connected all five sites and provided footage of live event performances of the Millennium Celebrations, the lighting of the Hollywood Sign and midnight countdown and other specially prepared footage.
Benefits to the City of Los Angeles
Although reviews by the media were not all favorable and the number of attendees was below expectations due to inclement weather and possibly Y2K concerns and terrorist threats, we found positive aspects of the five neighborhood celebrations.
The City of Los Angeles offered its citizens and visitors a choice of five site events, all at no cost to participants, providing convenience and creating a neighborhood setting. The activities available were family-oriented and were provided in a safe environment. All of the required elements for a cultural family event were available: family entertainment, arts and crafts for the children, all day and evening activities, food, and amusement rides at some locations.
Other reported benefits to the City include the development of working partnerships with different governmental, public and private entities. The Celebrations attracted large corporations that were given the opportunity to advertise while providing funds for the community events and Library gala. Organizing the celebration reportedly allowed the CAD to capture the whole City all at once for the first time and, according to the General Manager, expanded the Department's way of thinking. The City also received worldwide exposure on television and the immediate press was favorable.
Los Angeles has no history of holding a New Year's Eve event. It takes time for a tradition to be cultivated and for participation to increase. The five community events that were held on December 31, 1999, could be used as the groundwork for continued events, if the City chooses to do so. The City may also want to consider having one large event in a central location. To index
Although planning for the millennium events began in the spring of 1997, it was not until July 1999 that one organization (CAD) became responsible for managing all the events. There were four organizations involved in the millennium event including the planning, promoting, and staging of the events. One of the committees experienced turnover of management staff during the planning stages which impacted completion of tasks.
Another group had difficulty raising the necessary funds. Although the Cultural Affairs Department (CAD) was able to take over all of the final planning for the Millennium events in July 1999, better planning and organization from the onset could have avoided confusion over such things as:
Who was in charge
Fundraising and sponsorship
Last minute additions of new elements to events
Limitations on the events
PLANNING
Planning for the event started in the spring of 1997 when the CAD submitted their plan for a two-year Millennium celebration (July 1999 through June 2001). Originally, each of the CAD's nine Regional Arts Councils was to have a millennium celebration. The nine community events were scaled down to five sites because the CAD reported resources and staff were not available. The final goal was to have five community events.
A Request for Proposal (RFP) was issued on November 8, 1998. In January 1999, the RFP was changed to a Request for Qualifications (RFQ). Producers were required to have five years minimum experience in producing events for 100,000 or more people. The Millennium community events were described as outdoor cultural events or festivals. Producers were to book talent, design plan sites, take fiscal responsibilities, design and implement marketing, and perform fundraising.
Producers told auditors that many parts of the planning for the events were unclear. The planning of the Millennium Celebration was headed by four different chairpersons: Charles Young from the University of California, Los Angeles; Lucy McCoy, a Library Commissioner; Mark Kroeker, former Los Angeles Police Department Interim Chief of Police; and finally, Al Nodal, General Manager of the CAD. Many people believed that a person with an entertainment and event planning background should have been in charge from the beginning.
Mr. Kroeker was asked by the Mayor to organize the LA 2000 Youth Foundation. The foundation was incorporated on January 25, 1999 as a non-profit public benefit corporation. The foundation's responsibility was to coordinate private fundraising for the Millennium Celebrations and for the contributions made to the Library Foundation. A LA2KYF member reported to auditors that Mr. Kroeker was paid $129,000 to be chairman of LA2KYF.
Mr. Kroeker planned the City funded Millennium events from January 1999 through June 1999. His committee consisted of: the Goldbar Company, hired to produce the Hollywood Sign; Mr. Nodal, General Manager of the CAD, who would produce the five event sites; and Grey Alliance, hired to do the fundraising and sponsorship. Mr. Kroeker stated that he reported to the Mayor. Six months into the planning, the Millennium events that Mr. Kroeker had envisioned had changed with the addition of two co-chairpersons to the LA2KYF. The co-chairpersons had very different ideas of what the events should be and as a result, Mr. Kroeker left in June 1999, and Mr. Nodal took over all aspects of planning the millennium events.
It has been difficult for auditors to obtain information regarding activities of LA2KYF from January 1999 to June 1999. Numerous inquires have been made of the Mayor's Office and LA2KYF members to provide information. It was discovered in July 2000 that Mr. Kroeker had provided to the Mayor's Office and the LA2KYF a final summary report of his activities in June 1999. Despite repeated requests, auditors were not provided with this report, until after fieldwork was completed and a few days before the final report was issued.
Mr. Nodal reportedly held weekly meetings with the production committee, which consisted of the CAD staff, representatives from the Mayor's Office, General Services, Fire Department, and Department of Transportation. There were also separate weekly meetings held with the event producers.
The lighting of the Hollywood Sign was reportedly created with the television viewing audience in mind. It was not intended as one of the five family community events that had been scheduled across the City.
Some problems producers encountered were last minute additions of new elements to already planned events. Producers reportedly began to plan, organize, and book their talent in the beginning of 1999. As time went on and more money was raised, the CAD staff added additional activities that had to be uniform at all the sites. Producers encountered problems with last minute additions because many of their activities and entertainment had been planned for some time. These last minute additions required producers to continually change their agendas. While producers were able to adjust their schedules to allow for the various added activities, they told auditors they would have preferred to know about all the events from the onset.
BUDGET
Producers stated it would be difficult to determine how much to budget for the Millennium events. This was a unique event and costs for equipment and entertainment were at a premium. Producers reported that if the City wanted top entertainment and events, more money would need to be budgeted for such activities. In addition, producers stated that it should have been known in advance of the planning stage, how much money would be provided.
PROMOTING
The Steering Committee made the decision in July 1999 to have promotion of all Millennium Celebrations handled through the Donahue Group.
The Steering Committee wanted to have public relations centrally focused and producers were released from their obligations to create a marketing plan.
The Donahue Group was contracted to handle media relations and marketing for the five community events and the lighting of the Hollywood Sign in early September 1999.
The promotional instruments included newspapers, billboards, radio, television, press conferences, and a press breakfast held at each of the five sites of the community events. The local press from each of the five community sites was invited to participate in the breakfasts.
The Los Angeles Times, which was also a sponsor for the events, had a special insert section on the events distributed to 350, 000 household subscribers the Sunday before Christmas. The Times also donated six quarter-page ads in its Thursday Calendar Section.
Radio stations gave away Millennium T-shirts and tickets to promote the events. Many stations also provided Public Service Announcements (PSAs). Television stations aired PSAs that were produced by the Donahue Group.
Three press conferences and five press breakfasts were held in the four months leading up to the Millennium.
FUNDRAISING AND SPONSORSHIP
From January 1999 through July 1999, the CAD reported that Grey Alliance attempted to raise funds and obtain sponsorships. Grey Alliance was an advertising agency that assisted charities in raising funds through sponsorships. Whether Grey Alliance was able to or did raise money is unclear. While a member of the LA2KYF indicates it did, another member indicates it did not. Mr. Kroeker indicated that he provided a summary of his activities with LA2KYF to the Mayor's Office, which would have provided information as to what Grey Alliance was required to do and what it actually did. Auditors contacted representatives of the Mayor's Office and requested Mr. Kroeker's summary. This summary was provided after the completion of our fieldwork and a few days before our final report was issued.
Mr. Nodal and members of his staff reported that Mr. Kroeker wanted to make the initial approaches and requests to prospective sponsors and obtained the services of Grey Alliance. Mr. Kroeker developed the Los Angeles 2000 Youth Foundation, as a non-profit organization that would raise funds for the Millennium events. The Los Angeles Sports and Entertainment Commission (LASEC) was asked to be involved as a receiving repository of funds solicited for Celebrate LA 2000. LASEC was formed by the Los Angeles Convention and Visitors Bureau to do the bidding for and hosting of special sports and entertainment events in the City of Los Angeles. LASEC was selected for the Millennium because of its ties with the Los Angeles Convention and Visitors Bureau and local government.
During the time Grey Alliance was reportedly attempting to raise money, Mr. Nodal, members of his staff and event producers reported that producers were released from their contract requirement to do so. Mr. Kroeker has stated that everyone involved was responsible for fundraising. In September 1999, producers were allowed to raise funds; however, many stated it was too late because sponsors had already committed to other projects and producers had to rely on the City.
STAGING
Five Community Events The goals for all five community Millennium events, as established by the Mayor, Council and the CAD, were the same: to have alcohol-free events that would allow a safe place for children and families to celebrate the new year and to create a sense of civic pride and local unity.
The City of Los Angeles provided the type of entertainment for New Year's Eve that over two hundred cities and towns across the country have been doing for years under the title of First Night.
First Night Celebrations seek to foster the public's appreciation for the visual and performing arts through New Year's Eve events that offer the community a shared cultural experience that is accessible and affordable to everyone. Alcohol is not allowed at these events.
First Night type of events were created because cities were searching for a way to create a sense of community, bring together the family, decrease the practice of alcohol consumption on New Year's Eve, and create a public observation of New Year's Eve, while revitalizing the downtown areas.
The following is a chart that compares events of various cities, including those outside of California, with the events similar to what Los Angeles provided on New Year's Eve. The cities that are highlighted participate in First Night events.
NEW YEAR'S EVE EVENTS AT OTHER CITIES
LOS ANGELES ! !! !!!!!! Boston ! !!!!!!! Chicago ! ! * ! ! !!!!
New York ! !!!!!!! Santa Barbara ! !! !!!! ! San Diego
San Diego 1 st Night ! !!!!! ! San Diego 2000# ! !! !!!! Expo 2000 ^ ! ^ ! !! !!
San Francisco ! !! !! !
Year Long Celebration Alcohol-Free Various Venues Family Events Art & Crafts Entertain Fireworks Lasers Arts & Educational * Not all events were alcohol-free # This is a yearlong event starting after January 1, 2000 ^ One venue, three different events To index
The lighting of the Hollywood Sign was reportedly created with the television viewing audience in mind, and was not open to the public. In the beginning of 1999, the Goldbar Company was responsible for the planning of the Hollywood Sign event. After Mr. Kroeker and his committee left in June 1999, a new contract with a different contractor to produce the Hollywood Sign was signed in September 1999. The contract called for a Hollywood Sign midnight countdown event. The event was to include laser animation, gobo projection and moving strobe lights with a laser-projected digital countdown. There also were to be synchronized skydivers with nonflammable flares and colored smoke.
The event encountered many problems. The Hollywood Hills Homeowners Association was concerned with traffic and crowds in its neighborhood. In trying to work with the Homeowners Association, the skydivers and helicopters had to be taken out of the program. The Fire Department did not want fireworks or lasers of any kind, for fear of fire in the area. The gobo projections could not have worked well because of the weather conditions on December 31, 1999. The end result was a 15-minute light show in which the Hollywood Sign went through an array of colors. The letters were lit up in various types of patterns and colors once the ten-second countdown to midnight began. While some people criticized the show, others stated how much they liked it.
The Hollywood Sign event, as planned and hosted by the City, did not demonstrate a willingness or a capacity to put on a City-wide public gathering intended to gather a large crowd from the entire City in one area. In this respect, the Hollywood Sign event differed from that of many large cities around the country and the world.
If the City of Los Angeles wishes to develop a tradition of celebrating the New Year that would compare with that of Times Square in New York, it may need to re-examine this approach. However, it is important to note the Los Angeles celebration would be at a time when much of the world has already retired for the evening and the viewing audience would be limited to viewers in the western Americas and Hawaii, and those that view the highlights the next day.
Future event sites need to obtain approvals for activities before planning and promoting of the event begins. Consideration needs to be given to the conditions and limitations of the selected site.
Ticket Distribution
While all Millennium Celebrations events were free to the public, tickets were issued as a way of controlling the crowds per the request of the Police Department. An estimated 110,000+ tickets were reportedly distributed mainly through Ralph's, Food4Less, and the various libraries throughout the City of Los Angeles.
There were two complaints voiced with the tickets: First, many people and producers did not feel that tickets were necessary and viewed them more as a nuisance. Secondly, people could only obtain tickets for an event in the event's respective area. If people wanted to attend an event outside their area, it was generally understood that they had to go to that area to obtain a ticket. However, the CAD stated in its response that tickets were available via the CAD Millennium Telephone Hotline and website, and tickets would be mailed out as requested. The exact number of tickets distributed through the grocery store chains is not certain due to about 10,000 tickets being lost by the store chains and some stores not reporting their distribution numbers. According to CAD, over 67, 000 tickets were distributed through the store chains and over 18,000 through the libraries. Additional tickets were reportedly distributed as follows: over 39,000 were distributed by the CAD and event producers and over 600 were distributed by the Harbor Department.
Four of the event sites reportedly distributed more than 20,000 tickets each and one site reported slightly less than 20, 000 tickets were distributed. Many of the producers indicated that people who showed up without tickets were allowed entry. The following chart indicates the reported ticket distribution for the tickets that could be accounted for.
TICKET DISTRIBUTION 0 5000 10000 15000 20000 25000 30000
Crenshaw Grand Ave Van Nuys Alameda San Pedro Event Sites
# o f
Attendance
The number of people in attendance at the events varies slightly between the event producers' count and the CAD liaisons' count. Event producers estimate 18,700 people attended the five events. The CAD liaisons estimate that 17,300 people attended the five events. The following chart shows what the producers and the CAD liaisons estimated as attendance at each event site.
T i c k e t s
Event Participants 1000 2000 3000 4000 5000
Crenshaw Grand Ave Van Nuys Alameda San Pedro Producers CAD Liaisons
# o f
P a r t i c i p a n t s
Event Sites
Weather Conditions
All weather reports leading up to New Year's Eve indicated sunny and clear skies. On New Year's Eve, the National Weather Service indicated mostly cloudy with local fog, drizzle in the morning and partial afternoon clearing. The CAD staff and event producers reported the cool and rainy weather conditions reduced the number of attendees. Alternatives need to be made for future events that might be affected by rain or extreme heat.
RECOMMENDATIONS
We recommend to the Mayor and Council:
1) Clearly define goals for future First Night activities or New Year's Eve events if future events are planned. Determine in advance if objectives include providing family-oriented, community events or a New Year's event showcasing the City of Los Angeles to the world. These recommendations generally apply to other City sponsored events as well.
2) After clearly defining goals:
a) The budget for administration should include adequate funding to obtain a
qualified person with experience in these types of events
who can provide stable leadership to ensure goals are met.
b) Sponsorship and fundraising for City events should be sought and obtained
before planning for specific events begin.
c) All proper approvals and permits, for such things as fireworks and lasers,
should be obtained in advance to avoid last minute
cancellation of events.
d) Any future events should have provisions to accommodate weather conditions,
such as rain or excessive heat.
3) If a goal is to have First Night events, multiple sites should continue to
be used.
) If a goal is to have a showcase event, event planners should consider having
only one site (i. e., Hollywood Boulevard, Downtown) displaying all
of the elements that make Los Angeles the entertainment capital of the world.
To index
The staff of the CAD did not exercise adequate leadership over internal controls to ensure total receipts and disbursements related to the Millennium Celebrations were properly recorded and summarized for financial reporting. Good business practice dictates that management should implement internal control procedures designed to provide reasonable assurance that financial recording and reporting is reliable and that there is compliance with applicable laws and regulations.
Funding for the Millennium Celebrations came from many different sources, as shown in Attachment A. These sources included the City of Los Angeles (CAD and the Mayor's Office), public and private donors. Per information gathered during the audit, total funding provided by the City was $3,673,120, which included estimates of other City department costs and $495,000 in sponsorships, made by Los Angeles World Airports, and the Harbor and Water and Power Departments.
Other public and private sponsors donated services and a total of $2,427,522 in cash. The Grey Alliance was originally slated to secure sponsorships and alliance opportunities. Due to this group's inability to accomplish this goal, the Los Angeles 2000 Youth Foundation (LA2KYF) took over this function. LA2KYF raised funds from sponsors for both the millennium events and the Library benefit gala, which was to raise funds for the Library Foundation. The funds solicited by LA2KYF for the millennium events were to be forwarded to the Los Angeles Sports & Entertainment Commission (LASEC), which served as a repository for the funds, and issued checks to vendors upon the request and approval of the CAD and LA2KYF.
The CAD contracted with vendors for the five site events for activities within the original funds available from the City. Once LA2KYF was able to raise funds, LASEC entered into additional contracts with vendors at the five sites for additional activities and the Hollywood sign event.
Succeeding Mark Kroeker, CAD General Manager Adolfo Nodal became the chairman of the production committee in June 1999, and thus became responsible for contracts related to the five events, the Interlink and Hollywood Sign event. With the exception of contracts with the Mayor's Office, Mr. Nodal served as a representative on all contracts between producers and the City or LASEC. The Mayor's Office contracted with Shauna Clark for consulting services and the Donahue Group for public relations services.
We requested information from the CAD staff regarding the public and private contributions, and were referred to LASEC, the Mayor's Office (Shauna Clark), and LA2KYF. We contacted each of them and were referred back to CAD. The CAD staff insisted that CAD was not involved in the fundraising aspect and therefore, did not keep records for fiscal reporting.
For funding sources, we compiled all the sources of funds that we were able to find during our audit (see Attachment A). We tested 84 percent of funds reported as procured by LA2KYF, but we did not have access to LA2KYF accounting records. We interviewed a staff member of the Charitable Services Section of the LA Police Commission, which is responsible for granting permits for solicitation of money or property for charitable purposes. The staff member informed auditors that LA2KYF filed for a permit to solicit funds, as required by Chapter IV of the City Municipal Code, which prescribes that an entity can not solicit any charitable contribution without filing a written Notice of Intention with the Section. However, according to the Section, LA2KYF never submitted a Report of Results of Activity, which is required to be filed with the LA Police Commission 30 days after the close of solicitation. Therefore, we could not confirm that the amounts reported by LA2KYF were the only amounts received. A representative from the LA2KYF reported that a report was provided to the LA Police Commission and he would look for a copy to provide to the Controller's Office. A signed report missing the date of submission was faxed from LA2KYF to our Office on July 20, 2000, after the completion of fieldwork. (A Charitable Services Section representative stated that the report was received on July 24, 2000.)
We verified the allocations of donations to both the Millennium events and the Library Foundation benefit through copies of LA2KYF letters of acknowledgement to the donors. We also verified that all sponsors listed in advertisements had contributed funds or services to the program and found no exceptions. However, we did find the following:
In an attempt to determine if funds were raised by Grey Alliance, we inquired at the LA Police Commission Charitable Services Section and were informed that Grey Alliance never filed for a permit. If it did raise funds, then it did not follow City Municipal Code procedures; however, this does not confirm that Grey Alliance did or did not raise funds.
All donations received after LASEC became involved were not processed through LASEC as initially intended. Rather, sponsors made checks payable to either LASEC, LA2KYF or directly to vendors, and the CAD staff did not keep track or have complete records of these contributions. The source of one contribution of $25,000 was not found, nor could CAD, LA2KYF or LASEC provide us with confirmation of its origin.
The Mayor's Office prepared a Celebrate LA 2000 budget in January 2000, but the funding amounts listed on it did not match actual funds received per our audit, which showed a greater amount of funding by $716,506 (which does not include other City departmental costs).
For expenditures, we tested 55 percent of the total expenditures (not including City department costs) for Celebrate LA 2000. We verified authorization of payments, invoices or other supporting documentation, final financial reports, and other contract requirements. We found the following exceptions:
Information on the specific duties former Chairman Mark Kroeker performed, and how or from what source Mr. Kroeker was paid, could not be confirmed, as payments to him were not found in any expenses we reviewed. The CAD staff informed us that he was hired by the Mayor's Office and was an employee of the Los Angeles Convention & Visitors Bureau. However, the Mayor's Office contended that its only expenses were from its two contracts (the Donahue Group and Shauna Clark), and that Mr. Kroeker was paid by LA2KYF. LA2KYF representatives stated that Mr. Kroeker was, in fact, paid by LA2KYF. However, they initially refused to provide any copies of his contract or sources for the reported $129,000 in payments to him stating that it would be a violation of Mr. Kroeker's privacy and out of the scope of the Controller's audit. However, after reviewing the draft report, a copy of Mr. Kroeker's Employment Agreement with LA2KYF was faxed to our Office from LA2KYF on August 1, 2000, after the completion of fieldwork. Auditors obtained documents from California Community Foundation which showed payments made to LA2KYF for salaries of the President and Executive Assistant totaling $30,000. (Note: Our Office received copies of payroll records for Mr. Kroeker from LA2KYF on August 3, 2000, after completion of our fieldwork.)
Six final payments to vendors were made in advance of the time of payment specified in their contracts. However, CAD states in its response that extenuating circumstances existed for these payments. (see Attachment B)
Payments to the Donahue Group for promotional activities exceeded the amount allowed in the contract by $12,993. The contract amount was $75,000, with an allowance of up to $7, 500 for out-of-pocket expenses. Although LASEC was not a party to the contract between the Mayor's Office and the Donahue Group, at the direction of the Mayor's Office, and upon approvals by CAD and LA2KYF, LASEC made payments to the Donahue Group which ultimately exceeded the contract allowance.
Over $92,000 in payments were made to a vendor without a contract. Approval was given by both CAD and LA2KYF to LASEC to make payments on these invoices. However, they were in contrast to the Memorandum of Understanding between LASEC and CAD that states that funds are to be disbursed pursuant to the direction of the CAD General Manager under a vendor contract between LASEC and the independent contractor.
Although CAD and LASEC kept good records of expenditures, and LA2KYF was very successful in its efforts to solicit sponsorship, particularly in such a short period of time, no one entity was "in charge" or responsible for keeping complete records for the overall event.
Three individuals had the position of chairperson of the production committee before it was assigned to Mr. Nodal in June 1999. As a result, information about transactions prior to his tenure is sketchy or nonexistent. Once Mr. Nodal took over, there was a lack of coordination between members of the Mayor's Office, LASEC, LA2KYF and CAD. They all had meetings, but no one reported to CAD directly, which was the department in charge.
Without internal controls to ensure complete recording and reporting of all transactions, we can not be reasonably assured that any funds were donated prior to LA2KYF's involvement, or that all funds donated were properly reported or allocated. Moreover, we can not be reasonably assured that all expenses were properly accounted for and reported. To index
We recommend to the Mayor and Council:
1) For future events, the CAD (or any other City department) should be identified as the entity in charge, to which all other involved parties should report.
2) Request LA2KYF to submit a Report of Results of Activity to the Charitable Services Section of the Commission Investigation Division of the Los Angeles Police Department. Note: Charitable Services stated it received this report on July 24, 2000, after our Office had requested it from LA2KYF.
We recommend the CAD or any other City department in charge: 1) Implement internal controls to ensure proper tracking of all contracts and reporting of revenues and expenses for the events by the CAD and/ or the entity in charge, including entities used to raise or expend funds in the name of the City.
2) Verify any fundraising group, raising funds on behalf of the City, applies for the proper permits and files the required forms/ reports To index.