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City Auditor Blasts Qualcomm Stadium Management Over Missing Files, Gross Mismanagement, Unverified Revenue

San Diego’s City Auditor is out with an audit report on Qualcomm Stadium concluding that if the Chargers leave town, as is widely expected, taxpayers will have to shoulder $21.4 million in remaining debt.

The report also concludes that the stadium operates at a loss, is being grossly mismanaged, lacks “administrative policies and procedures,” and that the city is literally letting the place fall apart: “the current condition of the Stadium facilities will continue to deteriorate without adequate and continuous maintenance and improvements.”

“The Qualcomm Stadium Manager (Stadium Manager) admits that there is no formalized business plan for the Stadium; however, he contends that a formalized business plan is not necessary for the Stadium to operate effectively,” according to the report.

Financial record keeping is so bad, the auditor says, that nobody can say for sure how much revenue the stadium is really generating.

“Our analysis of the accounting records maintained by Stadium staff do not reconcile to the reported amounts within the City’s centralized accounting records. In particular, Stadium records for special event revenue for Fiscal Year 2006 and 2007 do not contain the supporting detail necessary to verify reported revenue amounts. Without an accurate reconciliation of Stadium accounts on a periodic basis, the Stadium cannot guarantee the accuracy of revenues earned when monitoring and assessing revenue agreements.”

“A review of Stadium revenue audits performed by the City Treasurer’s Office shows that audits of certain Stadium events, including Chargers games, are completed at the individual tenant level years after most events have taken place.”

Auditors discovered that important financial records had gone missing:

“During our review of the special event revenue files, we found instances of event files that were not adequately maintained or complete. Our review noted that several event files from fiscal year 2006 through 2008 could not be located or were incomplete. In March 2008, the City Treasurer’s Office Revenue Audit division also noted this deficiency when it completed a special review of the Racelegal organization.”

“Of the 24 use agreement files that were available for review, 11 had rental rates that were lower than the established Stadium rental rates (discounted events). Of these 11 discounted events, four were not charged any rent (non-charged events).”

“Three of the discounted events were noted as being granted by the former Stadium Manager, with one of these three events given a 95% discount off of the established rate for commercial filming. This event featured Chargers players and was produced by Real World Productions, a producer of reality television shows for MTV Networks.”

“The Stadium does not have an accountant on staff with the responsibility of reconciling Stadium revenue and expense accounts on a periodic basis.”

On the question of the Chargers' departure:

“Should the Chargers exercise their early termination right during any termination window after 2010, the termination fee that the Charges are obligated to pay would not be sufficient to cover the outstanding balance of the City’s Stadium Renovation Bond obligation,” the report says.

“In the case of an early termination by the Chargers, the City would retain the balance of the Stadium Renovation Bond reserve account which is currently $5.8 million.

“However, should the City apply the entire termination fee and debt reserve account balance toward the redemption of Stadium Renovation Bond principal, the City would be left obligated to pay approximately $21.4 million in Stadium Renovation Bond principal outstanding without retaining collection rights on future Chargers game revenues.”

The audit says that “annual Stadium expenses are budgeted to outpace revenues in fiscal year 2009. Our analysis of Stadium financial reports revealed that significant amounts of Stadium revenue is either paid back to the Chargers Football Company, LLC in cash, or is offset by agreed-upon rent credits.”

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San Diego’s City Auditor is out with an audit report on Qualcomm Stadium concluding that if the Chargers leave town, as is widely expected, taxpayers will have to shoulder $21.4 million in remaining debt.

The report also concludes that the stadium operates at a loss, is being grossly mismanaged, lacks “administrative policies and procedures,” and that the city is literally letting the place fall apart: “the current condition of the Stadium facilities will continue to deteriorate without adequate and continuous maintenance and improvements.”

“The Qualcomm Stadium Manager (Stadium Manager) admits that there is no formalized business plan for the Stadium; however, he contends that a formalized business plan is not necessary for the Stadium to operate effectively,” according to the report.

Financial record keeping is so bad, the auditor says, that nobody can say for sure how much revenue the stadium is really generating.

“Our analysis of the accounting records maintained by Stadium staff do not reconcile to the reported amounts within the City’s centralized accounting records. In particular, Stadium records for special event revenue for Fiscal Year 2006 and 2007 do not contain the supporting detail necessary to verify reported revenue amounts. Without an accurate reconciliation of Stadium accounts on a periodic basis, the Stadium cannot guarantee the accuracy of revenues earned when monitoring and assessing revenue agreements.”

“A review of Stadium revenue audits performed by the City Treasurer’s Office shows that audits of certain Stadium events, including Chargers games, are completed at the individual tenant level years after most events have taken place.”

Auditors discovered that important financial records had gone missing:

“During our review of the special event revenue files, we found instances of event files that were not adequately maintained or complete. Our review noted that several event files from fiscal year 2006 through 2008 could not be located or were incomplete. In March 2008, the City Treasurer’s Office Revenue Audit division also noted this deficiency when it completed a special review of the Racelegal organization.”

“Of the 24 use agreement files that were available for review, 11 had rental rates that were lower than the established Stadium rental rates (discounted events). Of these 11 discounted events, four were not charged any rent (non-charged events).”

“Three of the discounted events were noted as being granted by the former Stadium Manager, with one of these three events given a 95% discount off of the established rate for commercial filming. This event featured Chargers players and was produced by Real World Productions, a producer of reality television shows for MTV Networks.”

“The Stadium does not have an accountant on staff with the responsibility of reconciling Stadium revenue and expense accounts on a periodic basis.”

On the question of the Chargers' departure:

“Should the Chargers exercise their early termination right during any termination window after 2010, the termination fee that the Charges are obligated to pay would not be sufficient to cover the outstanding balance of the City’s Stadium Renovation Bond obligation,” the report says.

“In the case of an early termination by the Chargers, the City would retain the balance of the Stadium Renovation Bond reserve account which is currently $5.8 million.

“However, should the City apply the entire termination fee and debt reserve account balance toward the redemption of Stadium Renovation Bond principal, the City would be left obligated to pay approximately $21.4 million in Stadium Renovation Bond principal outstanding without retaining collection rights on future Chargers game revenues.”

The audit says that “annual Stadium expenses are budgeted to outpace revenues in fiscal year 2009. Our analysis of Stadium financial reports revealed that significant amounts of Stadium revenue is either paid back to the Chargers Football Company, LLC in cash, or is offset by agreed-upon rent credits.”

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