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Posted on: January 30, 2024

Anaheim shares state audit, supports recommendations with adoption underway

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ANAHEIM, Calif. (Jan. 30, 2024) — Anaheim has shared a state audit critical of contract and funding oversight involving Visit Anaheim and the Anaheim Chamber of Commerce and welcomes the report’s recommendations with adoption already underway.

 

The report, released today by California State Auditor, criticizes how funding and contracts were overseen and recommends additional oversight, contract review and adoption of the state contracting manual, a policy and procedure guide used by the state of California.

 

“We welcome this audit as we continue to move Anaheim forward,” Mayor Ashleigh Aitken said. “Oversight and accountability are vital to public trust, and we should always be expanding and improving. Along with our recent tightening of lobbying rules, commissioning of a city ethics officer and enhanced rules for city communications, public records and City Council calendars, the audit’s recommendations will be part of a comprehensive set of reforms to guide Anaheim.” 

 

“Oversight of public money is a top priority for me and our entire City Council,” Mayor Pro Tem Norma Campos Kurtz said. “Anaheim is already a better city today. But our work to improve is never done. These recommendations are a welcome addition to the changes we’ve put in place, and I look forward to joining with my Council colleagues in making them best practices for Anaheim.”

 

The audit looks at oversight of contracts and funding for Visit Anaheim, the Anaheim Chamber of Commerce and the Anaheim Tourism Improvement District, known as ATID.

 

You can see a fact sheet with history and background here.

 

Here’s a summary of state auditor recommendations and Anaheim’s implementation: 

  • Designate a city advisory board for ATID spending by July 2024: in process with initial City Council consideration expected as early as February.
  • Adopt California’s state contracting manual by June 2025: adoption has been directed by Anaheim’s city manager, is in process by the city’s purchasing division and expected no later than mid-2024.
  • Amend Anaheim’s agreement with Visit Anaheim by June 2025 with more performance indicators, all expenditures, barring of transfers and oversight of any subcontractors: Anaheim has notified Visit Anaheim that the contract will be amended with City Council consideration expected by mid-2024.
  • Assess 2019 and 2020 Anaheim Chamber of Commerce contracts to see if any money needs to be returned: The city manager has directed Anaheim’s audit division to review chamber contracts with expected completion by mid-2024.

Other Anaheim actions taken independently prior to the audit: 

  • Anaheim Chamber contracts: Anaheim stopped major involvement with the chamber in 2022, has no active chamber contracts and has not since 2021.
  • Visit Anaheim ATID transfers to the Anaheim Chamber of Commerce: Anaheim’s city attorney in August demanded a halt to Visit Anaheim ATID transfers to the chamber with transfers stopped in September.
  • Visit Anaheim pandemic funding: Anaheim has called for the return of $1.5 million in city pandemic relief funding brought into question and continues to evaluate its options.

The audit

 

The state audit follows a 2023 city-commissioned investigation of issues that came to light in 2022.

 

In August, former Anaheim City Council member and state Assemblymember Avelino Valencia requested a state audit of funding involving Visit Anaheim and the Anaheim Chamber of Commerce.

 

In the second half of 2023, Anaheim staff from the city manager’s office, audit division, city attorney’s office and the convention, sports and entertainment and finance departments took part in interviews with state auditors.

 

Draft findings and recommendations were shared with the city in late 2023 as part of preparing a city response to the audit.

 

You can read the audit here.

 

Anaheim Tourism Improvement District

 

The audit covers oversight of funding for the Anaheim Tourism Improvement District, or ATID.

 

The district is made up of 94 hotels and motels in The Anaheim Resort near the theme parks and convention center and in the Platinum Triangle near the stadium and Honda Center.

 

ATID hotels and motels assess themselves 2 percent of visitor stays, in addition to Anaheim’s 15 percent city hotel-stay tax.

 

The district was created in 2010 by a vote of the Anaheim City Council with approval of a management plan, district maps and related items.

 

ATID’s self-assessment relieved the city of Anaheim of paying $6 million in yearly funding for the Anaheim/Orange County Visitor and Convention Bureau, known today as Visit Anaheim.

 

A 2010 agreement made Visit Anaheim ATID operations manager.

 

ATID assessments are considered public money for a specific, restricted use. They are collected on behalf of ATID by Anaheim along with the city’s hotel-stay tax.

 

Assessments are not available to the city with spending directed by independent boards.

 

For the 12 months through this June, ATID is projected to collect $30.6 million from assessments.

 

Three-quarters of ATID funding goes to Visit Anaheim to book conventions, hotel rooms and to market visits to Anaheim.

 

Visit Anaheim is projected to see $22.8 million in ATID funding for the 12 months through this June.

 

A quarter of ATID funding goes toward transportation projects in The Anaheim Resort or Platinum Triangle, projected at $7.8 million for the 12 months through June.

 

No more than 1 percent of ATID funding goes to Anaheim for collection costs.

 

ATID: oversight

 

ATID spending by Visit Anaheim is overseen by a 22-member board made up of hoteliers and including Anaheim’s city manager and executive director of convention, sports and entertainment.

 

ATID transportation funding is overseen by a three-person transportation committee that meets monthly and made up of a hotelier chairman nominated by Visit Anaheim’s board, a Disneyland Resort representative as the largest ATID contributor and Anaheim’s assistant city manager.

 

Audit findings: ATID

 

From 2012 to 2022, the state audit found Visit Anaheim paid $4.4 million to the Anaheim Chamber of Commerce under a 2010 subcontract.

 

The audit believes some funding to the chamber was used for “unallowable political activities or advocacy” with a list of examples provided without detailing activities.

 

The city of Anaheim shares concerns about how ATID funding may have been used and welcomes any additional detail.

 

The city has addressed the issue through its demand to end ATID funding of the chamber, which stopped in September. 

 

Anaheim is in the early stages of adopting the audit’s recommendation of creating a city advisory board for ATID spending, which will provide added oversight.

 

Audit findings: Visit Anaheim pandemic funding

 

In 2020, the Anaheim City Council voted to provide $6.5 million in pandemic recovery funding to Visit Anaheim from the city’s convention, sports and entertainment department fund.

 

The funding was allocated to keep Visit Anaheim staff in place to rebook postponed conventions and to market Anaheim upon reopening after a 60 percent Visit Anaheim staff furlough in 2020.

 

The city-commissioned 2023 investigation indicated that $1.5 million of the $6.5 million was transferred to the Anaheim Economic Development Corp., part of the Anaheim Chamber of Commerce.

 

The transfer was unknown to the city before 2023 and went beyond the direction of the City Council’s funding vote.

 

In August, Anaheim demanded return of the $1.5 million.

 

Visit Anaheim responded in November that the chamber funding was from its operating cash and not city funding.

 

The audit raises questions about Visit Anaheim’s accounting of the chamber payment and its use of operating cash other than for tourism promotion for its members.

 

The city supports the audit recommendation of increased accountability and oversight of Visit Anaheim through a city advisory board and more detailed reporting of performance, expenditures and any subcontractor oversight.

 

Anaheim also continues to question the $1.5 million transferred to the chamber and evaluate its options.

 

Audit findings: chamber contracts

 

Anaheim agreements with the Anaheim Chamber of Commerce are also covered by the audit: 

  • 2020: a $500,000, one-year shop, dine, buy local contract awarded by the Anaheim City Council to promote shopping, dining and business services during the pandemic.
  • 2019: a $425,000, one-year contract awarded by the Anaheim City Council for economic development and business promotion services.
  • 2015: a $225,000, one-year contract awarded by the Anaheim City Council for economic development and business promotion services.
  • 2012: a $2.9 million, five-year contract awarded by the City Council to administer enterprise zones in the city under a state program, with about $550,000 spent.

The audit criticizes the Anaheim Chamber of Commerce for being unable to document some services under the contracts and ATID money received from Visit Anaheim.

 

In 2022, Anaheim halted major involvement with the chamber with no current agreements in place.

 

Anaheim supports the audit’s recommendation of reviewing the 2019 and 2020 chamber contracts, with early work underway by the city’s audit division.

 

Audit findings: conflicts of interest

 

The audit found no conflicts of interest or personal financial interest among the city, City Council members and the chamber and Visit Anaheim, according to the audit.