The Civil Grand Jury said more oversight is needed for the organization which keeps losing money
SAN JOSE — The 150-acre Santa Clara County Fairgrounds is a “gem,” but bad financial practices and poor oversight continue to plague its management.
That’s the conclusion of a recently released Santa Clara County Civil Grand Jury report that calls for more oversight of Fairgrounds Management Corp., a nonprofit that operates the fair and fairgrounds on the county’s behalf. The report faults Fairgrounds Management for issuing inaccurate and misleading financial reports and violating local bingo regulations, among other issues.
Despite being the largest county in the Bay Area, Santa Clara’s fair consistently draws the lowest attendance for its population. This year’s county fair — the 75th — takes place Aug. 1-4.
“Although the Fair is a core responsibility of [the Fairgrounds Management Corporation], and contributes to youth agriculture programs, it runs only four days, has very low attendance and loses money,” the grand jury report states.
A previous grand jury that investigated the fairgrounds in 2010-2011 alleged poor fiscal management resulted in years of financial losses. Many of those issues still dog the organization, the latest report concludes.
The fairgrounds and county staff say last year was the first time in almost 30 years that the fair itself turned a profit. In past years, the fair has operated at a loss and had to be subsidized.
But the grand jury report disputes that the fair made money last year, arguing that while management reported a small $13,000 profit, it actually lost money in 2018 and lost more money in 2017 than it reported.
“The amount of the subsidy is not known to the public for any given year because the financials are opaque,” according to the report.
Abe Andrade, director of the Fairgrounds Management Corp. for the last 18 months, declined to comment on the grand jury report, saying he and the group’s other board directors have yet to review it.
A county spokeswoman said the Board of Supervisors will approve a county response to the report in August.
In a report to county supervisors in June, county staff attributed a “resurgence” of the fair to efforts by new management.
“…the current leadership of the Fairgrounds Management Corporation has produced financial stability and exciting new year-round community enrichment at the Fairgrounds through new partnerships…and new corporate event rentals,” the staff report states, noting the fair has booked the performance group Cirque du Soleil for 2019. “The 2018 Fair’s attendance nearly doubled that of the 2017 fair.”
The grand jury took issue with a number of accounting and tax reporting practices by the nonprofit, finding that revenue from monthly bingo events were reported inaccurately to the county and IRS. The report also disputes past filings by the nonprofit that claim it owns land and buildings, when those assets are actually owned by the county.
Oversight by the county executive’s office is cursory at best, the report states.
“Certainly, the level of review does not appear to have uncovered the financial reporting issues identified in this report, issues that have been prevalent for several years,” according to the report.
The report also questions whether the main sources of revenue for the management corporation — including rental income from businesses such as a car auctioneer and paintball facility, and an on-site RV Park — have anything to do with the fairgrounds’ main mission of hosting and promoting the annual fair.
“The money used to fund FMC comes primarily from the RV Park and RV/boat storage, and anchor tenants, which in reality benefit few residents of the County,” the report states.
Concerns were also raised about how fair management, which is obligated to maintain facilities at the fairgrounds, will address $7.6 million in deferred maintenance expenses.
The county spent upwards of $5 million in 2009 and 2010 on improvements, $300,000 in 2018 and will spend $200,000 more this year on upgrades.
“There is no realistic chance that FMC will have sufficient financial ability to address the backlog of deferred maintenance,” the report says.
As the county’s agreement with the Fairgrounds Management Corporation is set to expire at the end of this year, the report urges the county to come up with an aggressive oversight plan.
“It is time to polish the County’s diamond in the rough,” according to the report.
July 6, 2019
The Mercury-News
By Thy Vo
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