HomeMy WebLinkAboutAudit Reports - Public - John Q Hammons Agreement - Audit Follow-up - 1/24/2018
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City Auditor’s Office JQ Hammons Agreement Follow-up
Date: January 24, 2018
To: Kevin R. Phelps, City Manager
From: Candace MacLeod, City Auditor
Subject: Audit Follow-up: John Q Hammons Agreement
As part of the FY16 approved audit plan, the City Auditor’s Office completed an audit
of the John Q Hammons (JQH) Management and Lease Agreement (Agreement) in
January 2016. This was the second audit of the Agreement by the City, as the initial one
was performed in 2012. The 2016 report included 35 recommendations to strengthen
controls. An audit follow-up was conducted in March 2017. The 2017 follow-up
indicated that out of the 35 recommendations in the 2016 audit, 26 were addressed
and nine remained open.
An additional audit follow-up was conducted in January 2018. The 2018 follow-up
indicated that management has taken action to address the remaining open items.
Please let me know if you have any questions.
Attachment
cc: Michael D. Bailey, City Attorney
Lisette Camacho, Assistant Director Budget and Finance
Tom Duensing, Assistant City Manager
Jack Friedline, Assistant City Manager
Terri Garrison, Fire Chief
Vicki Rios, Director of Budget and Finance
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City Auditor’s Office 1 JQ Hammons Agreement Follow-up
Recommendation
Management
Response March 2017
Management Response
January 2018 Status
1.5 The CMO should
assign staff to
determine whether
the City should be
earning interest on
quarterly revenue-
based rent payments
in the City’s bank
account.
Budget & Finance will
review the interest
rate on the Bank of
New York Mellon
account by July 31,
2017.
Budget and Finance
contacted the Bank of
New York Mellon and
reviewed the interest rate
on the account.
Closed
1.6 The CMO should
work in conjunction
with the City
Attorney’s Office to
clarify JQH’s rights to
utilize the Media
Center.
The Contracts
Program Manager
was hired in October
2016. The Contracts
Program Manager will
work with the City
Attorney’s Office to
clarify JQH’s rights to
utilize the Media
Center by September
30, 2017.
After review, Term 5.1 of
the agreement, states the
Lessee at its expense shall
arrange for all Utilities of
the Managed Property.
This includes the
Conference Center, the
Expo Hall (as defined as
“the 30k square feet area.
. . together with the third
floor and fourth floor
observation deck of the
Media Center”), and the
Parking Facility. JQH
arranges for the Utilities to
be paid and the City pays
for the other portions of
the Media Center not
managed by JQH.
Payments are calculated
as is the common
practice, which includes
daily meter reading.
Closed
1.7 The CMO should
work in conjunction
with the City
Attorney’s Office to
determine whether a
contract
amendment is
needed to clarify
responsibilities of JQH
and the City to
address compliance
and performance
issues.
The Contracts
Program Manager
was hired in October
2016. The Contracts
Program Manager will
work with the City
Attorney’s Office, the
City Manager’s
Office, and
representatives of
JQH to determine
whether a contract
amendment is
The Contracts Program
Manager was hired in
October 2016. The
Contracts Program
worked with the City
Attorney’s Office, the City
Manager’s Office, and
representatives of JQH
and together determined
it is not in the best interest
of the City at this time to
amend the contract.
Additionally, compliance
Closed
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City Auditor’s Office 2 JQ Hammons Agreement Follow-up
Recommendation
Management
Response March 2017
Management Response
January 2018 Status
needed to clarify
responsibilities of JQH
and the City to
address compliance
and performance
issues by September
30, 2017.
and performance issues
have been addressed
through contract
management measures.
3.2 The CMO should
exercise the City’s
right to conduct a
financial audit JQH’s
records.
We have notified JQH
of the City’s right to
exercise a financial
audit, but are not
moving forward with it
at this time. The City is
reviewing the
contract to see if
amendments will be
needed by
September 30, 2017.
The City notified JQH of
the City’s right to exercise
a financial audit. JQH has
been a willing and
cooperative partner in
addressing compliance
and performance issues.
If there is a future audit
finding, the City will
exercise its right to
conduct a financial audit
of JQH’s records.
Closed
3.4 The CMO should
ensure audit clauses,
including the
requirement to
submit annual
audited financial
statements to the
City, are included in
City agreements, as
applicable.
The City will review
the contract to see if
amendments will be
needed by
September 30, 2017.
The Contracts Program
Manager worked with the
City Attorney’s Office, the
City Manager’s Office,
and representatives of
JQH and together
determined it is not in the
best interest of the City at
this time to amend the
contract. Additionally,
each agreement is
evaluated separately to
determine if an annual
audited financial
statement should be
required.
Closed
4.1 The CMO should
assign staff to
perform a physical
inventory of City-
owned AV
equipment located
at the JQH facility,
ensure all City capital
assets are tagged,
recorded and follow-
A Media Center
physical inventory was
performed by Budget
and Finance on
January 6, 2017. Asset
addition, disposal,
and transfer forms
were reviewed and
updated as part of
the process. There is
A physical inventory was
performed by Budget and
Finance on January 6,
2017 of the Media Center.
Asset addition, disposal,
and transfer forms were
reviewed and updated as
part of the process.
Additionally, there was a
physical inventory
Closed
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City Auditor’s Office 3 JQ Hammons Agreement Follow-up
Recommendation
Management
Response March 2017
Management Response
January 2018 Status
up on any missing
assets in accordance
with Finance’s
capital asset
procedures.
high activity at JQH
during the spring and
early summer months
and access to the
Convention Center
and Expo Hall will be
limited. Budget and
Finance will complete
the physical inventory
check of the
Convention Center
and Expo Hall by
September 30, 2017.
performed in July 2017 by
Public Works and Budget
and Finance of the
Convention Center and
Expo Hall.
5.1 The CMO should
assign staff to work in
conjunction with JQH
to develop a Capital
Maintenance
Schedule and
accounts, as
appropriate.
This process was
started in January
and will be
completed by
September 30, 2017. A
capital maintenance
schedule will be
developed after a full
inventory is
completed.
Under Term 9.1(a), the City
is to create an account
for deposit and
disbursement of Capital
Maintenance
Contribution. However,
since the threshold has not
been reached (Term
1.1.16), the opening of an
account, which would not
be used for the
foreseeable future, would
incur fees to the City with
no benefit to JQH nor the
City. Under 7.3(b), the
Lessee is responsible to
perform all necessary
Capital Maintenance. As
the threshold has not
been reached, JQH
budgets and pays for
necessary capital
maintenance. JQH has
shared their annual plan
for capital maintenance.
Closed
6.1 The CMO should
assign staff to
perform a physical
inventory and tag
and record City-
owned physical
assets at the
A Media Center
physical inventory was
performed by Budget
and Finance on
January 6, 2017. Asset
addition, disposal,
and transfer forms
A physical inventory was
performed by Budget and
Finance on January 6,
2017 of the Media Center.
Asset addition, disposal,
and transfer forms were
reviewed and updated as
Closed
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City Auditor’s Office 4 JQ Hammons Agreement Follow-up
Recommendation
Management
Response March 2017
Management Response
January 2018 Status
Managed Facility, in
accordance with
Capital Assets
Procedures.
were reviewed and
updated as part of
the process. There is
high activity at JQH
during the spring and
early summer months
and access to the
Convention Center
and Expo Hall will be
limited. Budget and
Finance will complete
the physical inventory
check of the
Convention Center
and Expo Hall by
September 30, 2017.
part of the process.
Additionally, there was a
physical inventory
performed in July 2017 by
Public Works and Budget
and Finance of the
Convention Center and
Expo Hall.
10.1 The CMO should
designate staff to
meet with JQH
regarding special
events held at the
Managed Property.
The City is reinstituting
a process to have a
Fire Inspector review
the plans for special
events by September
30, 2017.
The Fire Department
confirmed there have
been no compliance
issues over the last annual
year. An inspector
reviews JQH plans and
makes an annual visit to
oversee compliance.
Closed