Clearwater lost $263,000 due to contract changes, bad bookkeeping, audit says

CLEARWATER — The Parks and Recreation Department changed a city contract in pencil, then lost out on about $263,000 in public money on a city-backed event — all without asking the City Council for permission.

That’s the top finding of an unsparing city audit of one event, the June 2, 2018 ZZ Top and John Fogerty concert. The 61-page report, dated Sept. 6 and made available last week after a records request, detailed a stunning lack of oversight in the department’s Special Events division.

City auditor Yvonne Taylor found the department did not routinely keep records like certain sales receipts, invoices and statements used to reconcile revenues and expenditures. For example, a city ticketing vendor’s software showed $24,448 in cash ticket sales on the day of the event. The city only deposited $12,775 into its bank account. No documentation exists that can explain the discrepancy.

The city’s financial practices were so suspect, the audit concluded that even months later, “management was uncertain about the total number of tickets sold for the event.”

Related story: Clearwater auditor to scrutinize Parks and Recreation’s special events division

The problems began months before ZZ Top took the stage at Coachman Park. The concert was a collaboration between the city, AEG Presents and Ruth Eckerd Hall. A contract divided financial responsibilities between the three entities. Kevin Dunbar, the Parks director, signed the contract on April 23, about three weeks before the council could approve it, the audit said. The department also did not get the contract approved by the city’s legal team.

On May 17, 2018, the City Council approved the contract amounts, allowing Clearwater to pay $100,000 of the total $300,000 performance guarantee fee. Ruth Eckerd Hall and AEG would also chip in $100,000 apiece.

On June 2, the day of the concert, Parks and Recreation unilaterally tripled the city’s financial commitment to $300,000. The department made its changes in pencil, then backdated the document to make it look as though the $300,000 figure was originated April 23, the audit said. None of this happened with council approval, a flagrant violation of city rules.

Read the full audit here:

Parks and Recreation deputy director Art Kader mounted a defense of his department in the pages of the audit. He contended that the contract, which he acknowledged was “flawed,” did not reflect the spirit of the partnership between Ruth Eckerd Hall and the city.

The city didn’t actually pay all of the $300,000 performance guarantee fee, officials from the city and Ruth Eckerd Hall said. The city controlled the box office receipts from the concert, but those revenues belonged to all three parties, AEG included. Clearwater was always going to allow its partners to recoup their $100,000 shares of the total $300,000 performance guarantee.

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Related story: Clearwater Parks and Recreation department mishandled cash. Again.

“It is inconceivable that anyone would partner with the city on a concert event where they had no opportunity to recoup their expenses,” Kader wrote. “The partner in this case was just as negligent as the city/special event staff for signing and agreeing to a faulty contract.”

In a statement, Ruth Eckerd Hall President and CEO Susan Crockett said all three partners understood “the expectations of one another and the intent of the agreement.”

“The report gives the impression that the city bore the burden paying for everything from city funds, which is incorrect,” Crockett wrote. “The city had no claim on the ticket revenue until the obligations were fulfilled.”

The city did not make Taylor, the auditor who wrote the report, available for comment.

The city’s overspending didn’t stop at the performance fee, the audit showed. The city also assumed a number of financial responsibilities that should have fallen to Ruth Eckerd Hall or AEG, under the contract. For example, the city never collected about $23,000 from AEG or Ruth Eckerd for municipal services such as fire, security and police.

All in all, if the city had followed its contract, it would have pulled in almost $719,000 in gross revenue. Subtract the $430,500 or so in expenses the city would have faced, and the city should have made about $288,500, the audit said. Instead, the city made $25,151.

When asked whether the city planned to try to collect the $263,000 difference from its partners, City Manager Bill Horne said it would not.

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“The intent was that we weren’t going to have that cost ascribed to them, we just didn’t get the approval to do it,” Horne said. “I think there was sufficient public benefit to justify us absorbing that cost.”

The ZZ Top episode is the latest in a series of managerial mishaps at Parks and Recreation, the city’s second-largest department.

Last year, the city found out that a Parks employee, Bob Carpenter, had stolen over $100,000 in public money by pocketing certain cash payments and stealing ticket sales. A city audit later found that there were “no procedures or regulations in place” to make sure employees were accurately entering financial transactions into the city’s payment software, RecTrac.

After the theft, Horne fired Carpenter’s supervisor and wrote Dunbar and a top lieutenant formal letters of admonishment for their “failure to ensure appropriate oversight and internal control.”

Just a few months later, Dunbar got another letter of admonishment from Horne. It came after the city auditor found Dunbar had misused his position during a 2017 incident in which Dunbar had two employees repair his home sprinkler system after work hours without paying them.

“Another breach of my confidence will result in termination of your employment regardless of basis in findings or facts,” Horne wrote in the second letter.

When asked whether Dunbar would face discipline after his department’s most recent misstep, Horne said he didn’t know yet. But he defended Parks and Recreation overall.

“Sometimes things happen in twos and threes. It doesn’t mean that it’s a trend that’s ongoing that’s reflective of a deeper problem,” Horne said.

The allegations of rule breaking and financial malpractice could hardly come at a worse time for the Parks and Recreation department — or the city. The department is currently asking city, county and state taxpayers for nearly $70 million to pay for a refurbished Clearwater Phillies stadium. And early next month, the city will take preliminary plans for a sparkling new downtown park to residents to get feedback. The park, the centerpiece of the city’s $64 million Imagine Clearwater plan, will include a 4,000-seat amphitheater for concerts like the ZZ Top show.

Related story: How much are the Phillies worth to Clearwater? The city’s answer just changed.

The city did not make Dunbar available for comment. When asked why Clearwater didn’t feel the director needed to answer for the audit, Horne said that the director was answering — in the form of substantive policies to correct what went wrong at last summer’s concert.

The city provided a document that spelled out dozens of reforms that will help prevent another debacle.

For example, the ZZ Top audit found that certain financial documents related to the concert “were inadequately controlled or did not exist,” making it impossible for the city to fully reconcile the event’s revenues with its expenses. In order to fix that, the city has set a standard for how it reconciles and settles event payments, the document showed.

“We don’t have the same mistakes occurring twice,” Horne said.

See how the city says it is fixing its mistakes here: