State Auditor Issues Management Letter To Everett Public Facilities District

December 31, 2018

Everett Government

arena

The Arena masts in a sunrise from 2012

Over the years we’ve reported on the financial condition of the arena in downtown Everett, Washington. Today the Washington State Auditor issued a Management Letter dated December 18, 2018 after reviewing the 2017 financial statements of the Everett Public Facilities District. The PFD operates the Angel of the Winds Arena in downtown Everett. The letter outlined some concerns the Auditor found with the way some financial things have been handled there and also notes steps the PFD has taken to try and improve the situation. Here is an excerpt of the findings.

The City of Everett created the Everett Public Facilities District in 2001 to operate an arena and conference center. In the previous five audits, we communicated financial condition concerns to the District in a letter to management. This audit found that the Board dedicated more time to monitor and evaluate the District’s financial condition and has taken steps to increase its operating revenues. However, some issues from previous audits remain unresolved. Specifically, the District’s net position (the difference between assets and liabilities) remains negative and did not improve significantly from the prior period. The table below shows the District’s ending net
position over the past five years:

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In addition, we noted the District’s operating margin (the difference between operating revenues and expenses – excluding depreciation, a noncash expense) declined in 2017. The table below shows the District’s net income over the past five years:

chart

The District is aware of the concerns regarding its financial condition and has taken the following steps to address its financial condition:

 The District refinanced its Limited Tax Series A Bonds in November 2018. The payment schedule was extended from 2026 to 2041. This will save the District about $1 million in average bond payments annually.

 The Board appointed one member to be on site each week to discuss arena operations with contracted management.

 The District continued to analyze its budget and decrease expenses when revenue is below expectations. The District adopts an annual budget, but it meets regularly to modify the budget to adapt to changing circumstances.

 The District has made staffing changes when necessary to ensure it has employees with a proven track record of booking events.

 The District negotiated a new agreement with one of its tenants. This agreement requires the tenant to provide $500,000 in funding for capital improvements at the District over the next five years.

Without continued financial support from the City of Everett, the District would be unable to operate at its current service levels. Further, the District is unable to meet its financial obligations without the City’s assistance.

We recommend the District continue to monitor and evaluate its financial activities closely. In addition, we recommend the District strive to operate as a self-sustaining organization.

The Auditor also noted some internal processes with employee expenses that they did not like.

In addition, although expense reports were reviewed and approved by employees’ supervisors, we noted two instances when the employee submitting the travel approval form, approved the form. Without an independent person approving the request, the District is at increased risk that purchases could be made for unallowable purposes without being detected quickly, if at all.

While testing expense reports, we identified one instance when the employee approving the expense report for recognition expenses was the employee receiving the gift. In addition, we identified three purchases totaling $107 that were made for employee going-away gifts; however, District policy did not indicate an employee would be recognized for leaving employment.

You can click the link below to see the Auditor’s full Management Letter.

PFD Management Letter

Again the actions noted covered the period from January 1st – December 31st of 2017.



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About myeverettnews

My Everett News is a hyperlocal news website featuring breaking news and events in Everett, WA. We also cover City of Everett information and items of interest to those who live and work in Everett. It's written by Leland Dart a former Snohomish County based radio reporter born and raised in Everett.

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