Larry's Letter to the City
May 14 2003
Mr. Larry Stein
Oxnard, Ca 93033
To/ --- Oxnard City Clerk
I am concerned about how several items are being accounted in the City of Oxnard, Golf Course Enterprise Fund. The River Ridge Golf Course is operated 100% by the private entity, High Tide and Green Grass. The contract has created in essence what has been as described by the courts "as the biggest black hole in the City's budget".
I have discovered numerous issues that should be addressed in the City of Oxnard's CAFR but are missing:
1. The financial records prepared by High Tide and Green Grass for River Ridge Golf Course do not match those of the Golf Course Enterprise Fund, and there are no footnotes to explain how the reconcile between the audited reports and the High Tide and Green Grass financial information. Why are there no footnotes?
2. The contract with the City and High Tide and Green Grass demands the "joint sharing of the cash account". This cash bank account is to be managed jointly by the City and High Tide & Green Grass. High Tide & Green Grass is required to submit monthly invoices to the City from which it is reimbursed for appropriate expenses. Yet, the City Treasurer has not established in writing, as required by California Government Code, any deputies to sign on the City's "joint checking account" with High Tide & Green Grass. The audit does not address that High Tide & Green Grass has not established this joint checking account or the fact that proper procedures for establishing such an account have not been documented. During a year there are millions of dollars of transactions that occur under the contract. Certainly this is a material breach of the operating contract and as such should be noted in both the opinion and in the footnotes. Why wasn't it?
3. The balances in the accounts do not match between the Enterprise Fund and High Tide and Green Grass financial statements and should be explained. Please explain why.
4. According to the operating contract of the golf course, High Tide and Green Grass is to provide all of the services, why are there expenses for wages and salaries (53,828 (YE 6/ 30/2000 CAFR), 31,337 (YE 6/30/2001 CAFR), and 29,276 YE 6/30/2002 CAFR) and General and Administrative (89,237 (YE 6/30/2000 CAFR), 587,328 (YE 6/30/2001 CAFR), and 79,082 (YE 6/30/2002 CAFR)? How can there be Wages and Administrative expenses if there are no employees (Personnel Summary Oxnard Budget)? The contract demands that High Tide & Green Grass perform all of the functions needed to keep the golf course enterprise operating. It appears that a potential violation of the operating contract is being documented without any footnote to explain this situation. Why?
5. While it is not unusual to transfer funds from the General Fund to most other funds without recording a liability, which means that taxpayers money is transferred to other government funds and thus no receivable is booked in the General Fund, it is my understanding that Enterprise Funds are intended support themselves from the revenues generated for services performed. The "Transfers In" from the General Fund to the Golf Course Enterprise Fund should be recorded as a loan and not a "gift or grant or subsidy" to the Golf Course Enterprise fund. Is there a recorded resolution approved by the City Council that establishes that the City Council intended to "gift or subsidize" the golf course enterprise each year since 1993? The "Transfers In" are a material amount as stated in the Statement of Cash Flows YE 6/30/1998 (355,424), 1999 (929,019), 2000 (972,739), 2001 (732,049), and 2002 (947,981). Why on page 25 of the 2002 CAFR is the Transfer IN 947,981 and on page 26 the Transfer In is 2,717,981? There were no Transfers Out (transfers back) to the General Fund. Why are these cash infusions not treated in the manner expected by the taxpayers of Oxnard&ldots;as a loan?
6. The Debt Service does not include the debt service for the parking lot at River Ridge Course. How can one play golf without parking a car? The financial statements for High Tide and Green Grass do not reflect the debt service that is a result of this integral part of the Enterprise Fund. The principal and interest from the Statement of Cash Flows is as follows: YE 6/30/1998 (480,000 748,627), 6/30/1999 (495,000 726,181), 6/30/2000 (515,000 709,281), 6/30/2001 (545,000 755,229) and 6/30/2002 (565,000 708,995). The courts recognize that debt service is normal in the course of business. It is apparent that High Tide and Green Grass does not recognize neither the debt service associated with the Enterprise Fund nor the debt service for the parking lot. But why does the City not recognize the debt service for the parking lot, this is a legitimate cost to the golf course enterprise?
7. Public (City Council Members) and Senior Management (City Manager and City Finance Manager) officials have stated publicly, that the golf course is making money. Upon reading the financial information, audited by your firm and the financial information of High Tide & Green Grass, I draw a different conclusion. I realize that the scope of the audit does not include High Tide and Green Grass.
8. The operating contract with the City and High Tide & Green Grass requires that the City receive from High Tide & Green Grass an audit (a complete audit of all financial statements is stipulated not just a revenue "audit") of that entity each year. Why has the City's auditors not looked at that audit? Why has the City not received such an audit? Why has the City's auditors not called this item out as a material breach of the operating contract?
9. Please provide a copy on the Income statement and Balance sheet of the Golf Course for the periods ending 12/31/2002 and 3/31/2003.
10. On page 18 of the CAFR for period ending 6/30/2002, the item Property Available for Resale has a balance of $7,263,384. I asked for a schedule of this item. The schedule given only totaled to $5,072,331. Since this is an audited figure, what happened to the balance? This item represents property the public can submit bids to purchase. The contract mentions a parcel within the golf course property that 1s considered surplus property.
11. Since the item Property Available for Resale was off by over 30%, please provide a schedule for this item for periods ending 6/30/2001 and 60/30/2000 as well.
12. Since the item Property Available for Resale was off by over 30% for the year ending 6/30/2002, please provide the schedule for Cash and Cash Equivalents, Investments with Fiscal Agents, Accounts and Other Receivables, Internal Balances, Due from Other Governments, and Notes Receivable for the periods ending 6/30/2002, 6/30/2001, and 6/30/2000. Please explain any variance between the schedules and the amounts provided in the respective CAFR
Mr. Larry Stein