07.04 Orange International Street Fair 1 . SUBJECT
Orange International Street Fair; Inc. audit updafe. .
2. SUMMARY
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Provide a:sfatus update for the examination::of: policies and procedures and certain
financial documehts of the Orange Inte.rnational Street Fair, Inc.
RECOM.MENDED ACTION -
Rec.eive and file: _ ::.
4.
FISCAL IMPACT :
None.. : . .
5. STRATEGIC PLAN GOALS
Goal 3:. Enhance and promote,:quality of life in the community :
e: Develop and strengthen colfaborative partnerships to enhance and promote
ualit of life ro ram,,projects, and services., .
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6. DISCUSSION AND BACKGROUND
The: Oran e Inter.national Street Fair: Street Fair is :an: annual event,: produced b the :
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Oran e International Str.eet Fair Inc. OI:SF , held in the Oran e Plaza area over the
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Labor: Day weekend. This'popular event draws hundreds of thousan s o visitors over
the:three-day period:requiring mo.nths:of:planning and:coordination. The production and.
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cost reimbursement of the event is governed by:an agreement between the City and the
OISF, The most recent muJti=year agreement, number 1071.1,:expired on December 31,
201:7. A one-year extension of the agreement was:approved by the City Council on June
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12, 2018. In. addifion to the approval of the agreement extension, the City Councif
requested. staff to perform an:au.dit of the OISF's:records as autho.rized in Section 5.1 of
the:agreement. Specifically,the Gity Council requested an examination of records related
to:the:OISF's finanaial transactions in the production of the Street Fair, as well as Board : : :
policies.related to the selection of non-prof.it participants, cash_handling, contract awards,
and other operational practices.
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ITEM = 02/12/2019
Due to the nature and intricacies of a non-profit organization, as well as the broad
application of the term "audit" within the agreement, the City hired Nigro & Nigro, PC, a
CPA firm, to perform Agreed Upon Procedures (AUP) as to the policies, procedures, and
financial management of the OISF. An AUP engagement asks for the CPA to issue a
report of findings based on specific procedures performed on an entity's documents. In
this case, Nigro & Nigro are not engaged to provide an audit opinion, but instead a listing
of findings based upon certain tests they perform on documents provided by the OISF.
Nigro & Nigro was selected to conduct the AUP based on their experience with auditing
similar non-profit events.
A meeting was held on December 3, 2018, with representatives of Nigro & Nigro, OISF;
and the city to discuss the process, timeline, and documents requested from OISF.
Through the month of January, OISF began to provide many of the requested working
documents including OISF by-laws, bank statements, tax returns, expense receipts,
vendor agreements, proof of insurance, and policies and procedures addressing ,
participant selection, complaint resolution, and alcohol booth rotation. As a result of their
review of the documents provided to date, Nigro & Nigro has followed-up with OISF to
request clarification and additional materials.
Once all materials are provided, the documents will be read, evaluated and refined to
obtain a thorough understanding of their content. From that understanding, Nigro & Nigro
will then examine the underlying supporting documents to ensure policies are enforced
as described, and those financial transactions will be tested to ensure compliance with
the recommended procedures. While it is too early to report on any conclusions with
regards to OISF's operations, staff will return to City Council at the March.l2, 2019 City
Council Meeting with Nigro & Nigro's final findings and recommendations.
While the AUP is in process, the OISF has requested another one-year agreement
extension. Their request is due tb several reasons including the ongoing audit and
procedural review, recent vacancies within their Board of Directors, and their evaluation .
of how to address the increased City pass-thru costs. The pass-thru cost for the 2018
Street Fair was significantly higher than prior years as for the first time the city captured
pre-planning staff time, equipment, and materials costs in addition to the cosf '
accumulated the week of the event. While city staff believes the increased pass-thru cost
reflects the true cost of the city's involvement in the event, it resulted in the pass-thru cost
increasing from $196,575 in 2017 to $256,200 in 2018. Note that OISF was advised in
advance of executing the 2018 agreement that city costs would likely be increasing due
to better tracking of city expenses. Depending on the result of the audit and the continued
full cost recovery by the city, the OISF acknowledges there may be cause for a potential
increase in fees charged to Street Fair vendors and participants.
Should the City Council agree in concept to a one-year agreement extension, staff will
return to City Council at the March 12, 2019 meeting with a draft agreement. Such an
agreement will include any language amendments as directed by the City Council.
7. ATTACHMENTS
1. Letter from the OISF requesting a one-year agreement extension
ITEM 2 02/12/2019
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� �� S � ORANGE INTERNATIONAL STREET FAIR, INC
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�� Honotablc Mayor and Members of ihe City Coancil,
The Orange International Street Fair,Inc.(OISF)respectfully requests for a year extension to the current contract between
the City of Orunge and OISF.
, The request for the exter�sion is due ta the following reasons:
1. Ongoing Audit and Procedural Review.Depending on the outcome of the audit it could requirc review of fees and or
participant contracts.
� 2. Fees for Participants would need to be coUectcd prior to finatization of contruct negalions
3. Cantrnctual agrecmenks between OISF nnd Participant would need to be executed prior to finaJization of conLuct
negntions.
OISP would]ike tn continuc with conhact negations in tandam with the Audit and Procedurnl Review. The goal would be to
have a fully executed cantraet prior to the current year's fair,with a contract commencement dute of Septemher 3'd,20]9 for
the new contraet.
]f therc are eny furt}ier qucstions,please do not hcsitate to contact us.
Ad Fe)iz
Pr ident
Oran�e[nternutionul 5treet fnir,Inc
C:714.9I7.9781
E:afeliz�la orangestreetfair.org
CC:01SF Board of Directors,i,aw Offices of Philip tlummel
I12 E,Chapman Avenue Suite G j Orange,CA 928G6�P:714.633.4816�F:714.633.4615 f www ornnaestree�fairor�