A lack of financial oversight during its first year of operations left the Mesa Arts Center with accounting discrepancies that made it hard for city auditors to track and document ticket revenue, an internal audit revealed.
The audit, completed last summer, was one of several recent internal probes that criticized center management for lack of oversight. Another audit released last month raised questions about the number of complimentary tickets handed out by the arts center.
Acting Auditor Gary Ray said his office decided to conduct an audit on ticket revenue earlier than he expected after budget officials informed him that the $2 million in ticket revenue received by the arts center did not appear in the city’s own accounting records.
That means the city would not have an up-to-date record of how much money was in the Mesa Arts Center’s account. And other financial reporting flaws identified in the audit could have put the city at risk to lose ticket revenue.
Since then, it’s been determined that no revenue was lost, and the arts center management has tightened its accounting procedures.
But the audit criticized the arts center for not designating someone to be accountable for financial reporting, which led to a “lack of basic accounting and financial planning ... and monitoring.”
“Finance and accounting issues were not considered a priority, and their initial suggestions beginning in meetings in September 2004 were ignored,” the audit says.
The audit states that in some instances, receipts from ticket sales were not deposited for days. Sometimes, deposits from multiple days were lumped together, and were not always placed into the proper accounts. In one case, the City Auditor’s Office found $200,000 of ticket revenue sitting in the bank that could not be accounted for in the city’s general ledger.
Ray said proper account coding and revenue recognition is important for budgeting purposes. The fact that cash often sat in drawers for days was also a concern because it created the risk of someone taking the money.
“There wasn’t any money missing,” Ray said. “We were pretty sure we had the money in the bank. We just weren’t accounting for it correctly and we had discrepancies.”
Those discrepancies were mainly between the amount of revenue reported in the Mesa Art Center’s software system and the city’s own electronic balance sheets, said Randy Vogel, the performing arts center’s administrator.
The Mesa Arts Center tracks information about all ticket sales, which includes the sale of both tickets for Mesa shows as well as the shows produced by outside theater companies that rent space at the theater.
But the two different software systems showed account balances that did not match.
“There are a lot of different systems,” Vogel said. “They needed to be integrated.”
For instance, a sales tax and a $2 restoration fee are attached to all tickets sold. The restoration fee is collected to pay for capital improvements. The arts center treated the restoration fee as a sales tax instead of a separate figure and lumped the entire amount into one price, which later made it difficult for city auditors to track the revenue.
In addition, the audit also criticized the city for allowing other theater companies access to its ticketing software database without first signing written agreements.
Companies that rent space from the center and stage shows were selling tickets and entering the data into Mesa’s system. That arrangement could have allowed those companies to see personal information of arts center patrons, such as credit card numbers.
Gerry Fathaurer, the arts and cultural director of the center, said her department was well aware of the financial difficulties even before the audit was conducted and began working to correct them as the audit was under way.
The center later hired several people to help to reconcile the money to the appropriate accounts and it is still trying to follow the auditors’ advice and hire someone to serve as a chief financial officer.
In one year, the Mesa Arts Center went from generating about $250,000 a year to about $4 million a year, Vogel said. He said he was glad the audit was conducted because it helped the center make the financial component a “top priority.”
In January, the City Auditor’s Office found the center was not properly recording and monitoring complimentary tickets. About 17,000 free tickets were handed out last year, many of which were handled by other companies that rent space from the center. That audit focused on the fact that city employees failed to maintain a paper trail of all the free tickets distributed. That problem has since been corrected, city officials said.