EXECUTIVE SUMMARYFINAL AUDIT REPORT IG11-34
Page 2 of 4May 31, 2012
calls for BPL to retain the first $14 million of “Arena Distributable Net Cash Flow” (Net CashFlow). Net Cash Flow in excess of $14 million is to be distributed between BPL and theCounty, with 60% of the excess amount going to BPL and the remaining 40% to the County.As of fiscal year 2011, Arena operations have generated no Net Cash Flow. As a result,there has been no distribution, in any year, either to BPL for the first $14 million of Net CashFlow or to the County for its 40% share of any Net Cash Flow in excess of $14 million.
Overall, the OIG audit found that the County has been poorly performing its contractadministration functions. This is not to say that the facility has been poorly managed—which we have no reason to believe—but that County administrators assigned theresponsibility to oversee the Arena have not taken much of an interest in the past 12 yearsin administering the Management Agreement and ensuring compliance with its variousterms. Our audit issues are chiefly attributed to a fundamental lack of communicationbetween the designated “County Representative” and BPL personnel regarding itsadministration, management, and operation of the Arena. BPL stated in its response to theOIG’s draft report that it engaged a lobbyist as its liaison to facilitate communicationsbetween itself and the County. However, none of the designated “County Representatives”that we spoke to, when queried specifically about communications with BPL, mentionedcontact with BPL’s liaison. At least at the critical contract administration level (budgetsubmission, tendering notices of legal action, financial reporting, capital expenditures, etc.),we found nothing to evidence this liaison’s involvement. Collectively, the lack ofcommunication by both parties is the overarching cause that has contributed, we believe, tomany (if not all) of our report issues.Our audit results are reported in four sections:
Section 1 BPL Budgets and Year-End Financial Reporting; Section 2 Management Agreement Terms; Section 3 Arena Revenues; and Section 4 Operating Expense Allocations and Costs
Each section has itsown findings and recommendations.In Section 1, we focused on three key issues: BPL’s Schedules of ManagementAgreement Computations, BPL’s Operating and Capital Budgets, and BPL Financial ReportComparisons. First, the Schedules of Management Agreement Computations is the keydocument produced by BPL showing whether the County will receive a share of “ArenaDistributable Net Cash Flow” (Net Cash Flow). Based on our interviews of County and BPLpersonnel, we determined that the County has never seriously studied this document’scontent nor approached BPL to discuss how it prepares this document. As a result, theCounty has little idea about the underlying conditions and financial issues that, to date, haveresulted in the Arena’s failure to generate sufficient reportable Net Cash Flow that wouldhave allowed the County to share in the distribution of Arena excess cash flow.Relating to the budgets, we noticed that the Annual Operating Budget wasconsistently being submitted late with no repercussion by the County. As for the AnnualCapital Budget (which is required to be submitted by the contract), County staff didn’t evenrealize—until the OIG pointed it out—that the County wasn’t receiving one. Next, for thebudget that it was receiving, albeit late, we determined that the County’s review process