Results of a new audit show that bookkeeping by management at Levi’s Stadium is inadequate to justify financial reporting given to the Santa Clara Stadium Authority.
At a special meeting of the Stadium Authority Board Tuesday night, the Board heard from Timothy Gillihan, a certified public accountant with JS Held. The Board hired the firm, which is working under a $100,000 contract with Hagen, Strieff, Newton, & Oshiro Accountants, to piece together financial activity from 2015 through 2017 at the stadium to see if it jibes.
For 2015 and 2017, Gillihan said, the company found an explanation for the discrepancy in revenue. However, he noted adequate documentation does not comment on whether the expenditure was “correct or proper.” The firm was unable to substantiate adequate documentation for 2016.
“We are not saying the results are inaccurate nor are we saying they are accurate, but from an accounting standpoint, we are unable to say whether or not they are accurate because the underlying supporting documents are not sufficient,” Gillihan said.
Further, JS Held found that year-end adjustments should be further investigated to determine whether they are proper and that documentation for non-NFL events is sufficient to ensure accurate reporting.
To help ameliorate these issues, the firm made several recommendations. Those changes included having accounting policies that are consistent, well-documented and shared between the 49ers Stadium Management Company (ManCo) and the Board. It also recommended improving bookkeeping, having revenue be more descriptive and segmented and breaking out direct costs, indirect costs and operating expenses.
There needs to be better policies designed to “make things more clear,” Gillihan said.
“It is clear there is confusion between the parties,” he said.
Other recommendations included not lumping revenue and expenses together, making expense categories consistent year-to-year and having a Stadium Authority employee oversee ManCo’s reporting.
Board Member Raj Chahal said the Board needs to accept some responsibility for the situation between the two parties.
“We are not getting the proper documentation, and we have not had proper oversight,” Chahal said. “If we had corrected these things on time, we would not be having these issues.”
But Chahal’s attempts to play peacekeeper were derided by Mayor and Board Chair Lisa Gillmor who called his approach “naive.” Gillmor said ManCo is deliberately hiding information from the Board because it is mismanaging the stadium — and it knows it.
“Everyone needs to wake up. They don’t want to give us the information,” she said. “They are making millions and millions of dollars, and we are not. This is not right. There is something wrong there. They don’t want transparency.”
The Board voted unanimously to accept the report and extend the contract with JS Held to dive deeper into the 2016 financials and begin looking into 2018, 2019 and 2020.
Stadium Debt Dwindles, COVID Takes Its Toll On Stadium Revenue
The Stadium Authority Board also noted and filed the quarterly financial status report.
Kenn Lee, Director of Finance, detailed for the Board the impact of COVID-19, saying it has cost the Stadium Authority $15.7 million. The lion’s share of that loss is from the absence of the NFL ticket surcharge — $8.66 million — and the loss of $4.95 million in lost rent from two canceled NFL games.
While Lee’s office has taken measures to bridge that gap, it is still waiting to see if $12 million in credit will come through. If it doesn’t, he said the Stadium Authority will have to dip into its operating reserves, which stand at $11.6 million.
On the plus side, 133 stadium builders licenses (SBLs) sold last quarter. Lee also said the Stadium Authority is slated to pay $25.6 million on its stadium debt, which now stands at $297.9 million.
Capital improvement projects are also still halted due to issues surrounding prevailing wages at the stadium. However, the report also showed that the 49ers Stadium Management Company (StadCo) is still withdrawing money from the revolving loan fund, a behavior that has chagrined the Board since it began.
“They are paying themselves with public funds without any backup, without compliance, without proper procurement,” said Board Member Debi Davis.
While the Board denied several expense requests from Jim Mercurio, General Manager at Levi’s Stadium, Lee said withdrawal from the revolving loan fund has reached $6.9 million to date and could top $9 million in 2021.
Brain Doyle, Attorney for the Board, said the matter is tied up in litigation and that the Board is impotent to prevent the withdrawals.
“There is not much we can do until a court orders them to stop this,” he said. “They just do what they do, and they pay themselves as they see fit.”
The Council meets again Tuesday, Dec. 8 in the Council Chambers at City Hall, 1500 Warburton Ave. in Santa Clara.
Members of the public can participate in the City Council meetings on Zoom at https://santaclaraca.zoom.us/j/99706759306; Meeting ID: 997-0675-9306 or call 1(669) 900-6833, via the City’s eComment (available during the meeting) or by email to PublicComment@santaclaraca.gov
The 49ers utilizes an accounting system called FloQast which sits atop company managed, and manipulated, spreadsheets. FloQast has hundreds of very small customers who aren’t necessarily in industries with high regulatory or compliance mandates as this recent article explains: https://dot.la/how-a-scrappy-startup-using-the-pandemic-to-take-on-a-big-competitor-in-the-valley-2645928143.html
Internal and external auditors who regularly look for notes and documentation to support reconciliations and journal entries typically recommend better platforms like TrinTech (TX) or BlackLine (CA) that conenct directly to ERPs and allow logins for auditors who can review year round, 24/7. The latter is also the industries #1 and was even chosen by industry independent analyst firm Gartner as their Record to Report accounting platform: https://www.gartner.com/en/documents/3970502/magic-quadrant-for-cloud-financial-close-solutions
You mean to say that the 49ers…the 49ers don’t know how to document revenue and expenditures. Ridiculous. Embarrassing. Criminal.