Grand Jury report details multi-year reporting discrepancies by Visit Lompoc LLC

LOMPOC, Calif.– A Santa Babara County Grand Jury report released Friday details that over the last five years, more than $500,000 has been under-reported by Visit Lompoc LLC in required annual reports submitted to the City of Lompoc.

According to the Grand Jury Report (entitled "Lompoc Tourism Improvement District Management Agreement 2019-2028), currently there is $800,000 transferred to Money Market accounts that may earn a higher level of interest, but are not accounted for in required reports to the Lompoc City Council.

Per California's Property and Business Improvement District Law of 1994, that money can only be spent on tourism enhancement projects and can not be used for general purposes.

The primary finding of the Grand Jury report is that the City of Lompoc does not have an adequate system of checks and balances to confirm Visit Lompoc LLC's accounting methods detail the report.

The report provides a series of recommendations that the Lompoc City Council must respond to in 90 days that are detailed below.

In 2018, the City of Lompoc and Visit Lompoc LLC established the Lompoc Tourism Improvement District Management Agreement 2019-2028 (Management Agreement) stating the primary purpose of the Management Agreement is to promote tourism and business opportunities in Lompoc state the report.

The Management Agreement, in addition to outlining various responsibilities for both the City of Lompoc and Visit Lompoc LLC, also details the process wherein each hotel in Lompoc will collect a fee equal to three percent of its revenue.

That provided revenue is then passed to the City of Lompoc which claims a one percent administrative fee of the total revenue and submits the balance of the funds to Visit Lompoc LLC which is only allowed to use those funds for purposes set forth in the Management Agreement detail the report.

The Grand Jury of 2011-2012 issued a report which previously identified the City of Lompoc's failure to monitor the control of those funds provided to the non-profit Lompoc Housing and Community Development Corporation.

The oversight in that instance led to an estimated loss of $1.8 million in taxpayer funds and that previous report recommended that Lompoc adopt a non-profit audit policy state the Grand Jury report.

According to the latest Grand Jury report, the City of Lompoc responded to that previous recommendation by agreeing to implement a policy requiring annual audits prepared by an independent auditor.

The Grand Jury of 2013-2014 determined that the City of Lompoc had taken no steps to implement the policy recommendation state the latest Grand Jury report.

Visit Lompoc LLC is required to submit annual reports to the City of Lompoc under the Property and Business Improvement District Law of 1994 and the Management Agreement between the two Lompoc-based entities mandates those reports be provided to the city within two months of the end of a calendar year explain the latest Grand jury report.

Visit Lompoc LLC has never met that Management Agreement mandate state the Grand Jury report.

Using financial data from Visit Lompoc LLC's reports yielded the information below:

The Grand Jury highlighted a discrepancy value based on submitted balances that were less than carryover numbers published by Visit Lompoc LLC beginning in CY2020 an resulting in a cumulative discrepancy of over $500,000 that is not mentioned in any annual report from CY2020 going forward.

According to the Grand Jury report, a representative of the Visit Lompoc LLC Board volunteered to have an independent audit of the organizations financial records during a meeting of the Lompoc City Council.

No evidence was submitted to the 2023-2024 Santa Barbara County Grand Jury that any such audit had been requested nor completed state the latest Grand Jury report.

Additionally, the Grand Jury discovered that a total of $800,000 had been transferred out of Visit Lompoc LLC's checking account and into a separate Money Markey account and that those Money Market account funds are not reported in the annual reports submitted to the City of Lompoc.

Members of Visit Lompoc LLC's board were interviewed by the Grand Jury over the above discrepancies and neither concurred nor disagreed with the findings, but did agree to have the firm that manages their accounts review the data detail within the Grand Jury report.

The analysis from that review showed similar results to those calculated in the Grand Jury report and calculations from the Grand Jury, the City of Lompoc, and Visit Lompoc LLC's financial services firm all show a difference of more than $500,000 between carryover value reported annually and the actual savings/loss amount state the Grand Jury report.

Notably, the financial services firm used by Visit Lompoc LLC and cited above does not prepare Visit Lompoc LLC's annual reports submitted to the City of Lompoc and instead, Visit Lompoc LLC contracts with consulting firm Civitas Advisors on a year-to-year basis detail the Grand Jury report.

Visit Lompoc LLC transferred $800,000 out of its regular checking account and into a Money Market account through two separate transfers, one at the end of 2022 in the amount of $700,000 (the Grand Jury report notes that Visit Lompoc LLC's total budget for 2022 was $734,000) and another transfer of $100,000 was transferred in May/June of 2023 detail the Grand Jury report.

According to the Grand Jury report, the 2023 contingency budget reported by Visit Lompoc LLC for unexpected expenses is $54,000 and that money is currently in a Money Market account and the approximately $712,000 resides in a separate Certificate Account with no indication of any interest income.

While Visit Lompoc LLC is not required to provide the City of Lompoc with its financial statements, the City of Lompoc is allowed access to that information under the Management Agreement between the entities explain the Grand Jury report.

A member of Visit Lompoc LLC board was questioned by the Grand Jury about the $800,000 to which the person confirmed the transfers of fund as well as the value in Money Market accounts, but had no explanation as to why those funds were not declared in annual reports submitted to the City of Lompoc detail the Grand Jury report.

According to the Grand Jury report, while it was evident that a perceived conflict of interest may exist, the body could not confirm whether a specific conflict exists.

Additionally, the City of Lompoc does account for this possibility by "adjusting its consent calendar when necessary and ensuring applicable recusals are effected when appropriate" detail the Grand Jury report.

The 2023-2024 Santa Barbara County Grand Jury has tasked the City Council of Lompoc to instruct Visit Lompoc LLC to have an independent audit performed of their Annual Reports as well as its Financial Statement and present the results of those audits to the City Council no later than mid-2024.

The Grand Jury recommended Visit Lompoc LLC use excess funds under its control to fund both audits.

Additionally, the Grand Jury recommended that the City Council of Lompoc amend the Management Agreement with Visit Lompoc LLC to require the reporting of all funds or mandating that all excess funds be utilized for purposes related to enhancing tourism.

The Grand Jury further recommended the Lompoc City Council create a formal review process to ensure the accuracy of Visit Lompoc LLC's reporting before the submission of the 2024 Annual Report.

The Grand Jury noted there are no specific guidelines concerning how Visit Lompoc LLC shall expend its funds exists and made the following recommendations in response:

• By the end of 2024, Lompoc City Council shall re-evaluate the terms of the existing Management Agreement
• By the end of 2024, Lompoc City Council shall determine if it should have an increased ability to direct unused funds for tourism enhancement projects
• By the end of 2024, Lompoc City Council and Visit Lompoc LLC shall create a joint ad hoc committee potentially including private citizens and other business owners within Lompoc to develop and implement projects using excess funds to further enhance tourism

Pursuant to the California Penal Code, the Grand Jury requested that each entity respond to the Findings and Recommendations within the report in 90 days of its publication on Friday.

In response to your News Channel's coverage of the Grand Jury report, a statement was provided by Visit Lompoc's Special Counsel Michael Colantuono that read in part, "The Grand Jury has its own ideas about how Visit Lompoc should keep its books and what it should report to the City. We are happy to consider those suggestions in dialog with the City. But it is simply wrong to say there are “discrepancies” in Visit Lompoc’s books or that any funds are “unaccounted for.” Every penny is accounted for even if annual reports focus on what Visit Lompoc spends, not what it is saving or why."