The City of Orange accommodates the annual international street fair because it is a fruitful fundraiser for local nonprofits. The city wants to make sure that Orange-based organizations receive priority for booth space.
City wants international street fair to put Orange nonprofits first
Photo by Tony Richards
By Tina Richards
“Orange first” is the mantra delivered to the Orange International Street Fair Association (OISF) by the city council, following an audit of the organization’s policies, procedures and accounting practices.
The City of Orange accommodates OISF, a nonprofit that produces the annual Labor Day weekend food fest held around the Old Towne Plaza, because it provides a lucrative fundraising opportunity for local nonprofits. In recent years, however, Orange-based charities have complained that they are not granted booth space while many “out-of-towners” are.
Orange Councilman Mike Alvarez encouraged the third-party review because of those complaints, and to ensure that the primarily cash business was following appropriate accounting practices. Audit results were presented to the city council, March 12, ahead of its pending decision to extend OISF’s contract for one year to allow this fall’s fair.
The review, performed by the accounting firm Nigro & Nigro, indicated that many OISF policies and procedures weren’t followed, that records were incomplete and accounting practices haphazard. City staff, however, assured the council that it was “not concerned” about the association’s operation of the street fair. “I think staff is not concerned,” Alvarez says, “because everything can be fixed. That was the point of the review. We want to fix it and go forward.”
Alvarez and the rest of the city council stressed that identified discrepancies must be corrected by conditions attached to the one-year contract. While agreeing that a few longtime non-Orange fair participants could be grandfathered in (for now), Orange nonprofits should be given priority for booth space, and licenses to sell beer should be alternated among them every year.
“Orange first is prime,” Mayor Mark Murphy emphasized. “Orange nonprofits should be offered the opportunity to sell beer every other year, as the policy says.”
Touch and go
The review was not an in-depth financial audit, but an attempt to reconcile that what was being said, was what was being done. “We looked at what is normal for a nonprofit, and what isn’t,” Alvarez explains. “We want the public to have confidence in the street fair organization.” The accounting firm looked at vendor selection, alcohol sales rotation, complaint resolution and distribution of funds by “testing” random samples from 2016-18.
While fair participants are required to be recognized nonprofits, only six of 12 passed that test. Only four of 12 possessed California resale permits. A review of the waitlist indicated that, over the last three years, two organizations had obtained booth space, but there was no documentation or board minutes reflecting how or why they were accepted.
OISF has 16 alcohol licenses that it divides between the ethnic streets making up the fair. Of 13 streets, 11 have one license, American Street has three, and Mexican Street has two. The policy requires those licenses to be alternated between participants on a given street every year, but that is not always the case. If there is only one participant on a street, then that vendor gets the license. If other vendors on a street with multiple participants decline the opportunity, then the license is not rotated.
Nigro & Nigro was unable to verify the rotation policy. On American Street, two vendors rotate annually; the third license is given to the same participant. On Mexican Street, two licenses are given to the same participants every year. Five streets appeared to have one vendor each in the rotation, and four streets had none. The firm recommends that all 16 licenses be available each year, and not determined by which street a vendor is on.
OISF’s accounting practices are also inexact. The sampling indicated that not all deposits for booth space could be traced to invoices; some invoice numbers were out of sequence; and some deposits were collected and recorded without descriptions that would allow them to be verified.
Wristband sales for alcohol are cash-only. The cash is always handled by at least two people – the seller and an OISF representative – and counted twice by two other people before being deposited into the bank. Nigro & Nigro reports that it could not verify that all cash collected was properly deposited, because it was not given pre-count sheets completed by the organizations selling wristbands.
The only way is up
Adam Feliz, OISF president and one of four board members who did not resign during the audit, can explain the apparent disconnect. For example, an Orange nonprofit on the waitlist may choose not to participate when a space opens up, so fair organizers offer it to the next in line. Sometimes the next in line is not from Orange. He attributed the accounting discrepancies to computer updates that were not retroactive. OISF’s vendor management system identifies the current price for booth space as $75 per foot; invoices pulled by the accounting firm from previous years reflected $65 a foot, the cost for those years. “It wasn’t an error,” Feliz said. “We were willing to provide that clarification to the CPAs, but they didn’t ask for it.” OISF subsequently met with city staff to clarify many of the accounting disconnects that Nigro & Nigro identified.
Feliz also noted that a few non-Orange vendors have been with the fair since the 1970s, and believes they should be allowed to stay. But, he told the council, OISF is open to any recommended changes that the city wants to include in the 2019 contract extension. “The audit will help us improve,” he said. “We want to reaffirm our partnership with Orange.”
“It’s Orange first,” Alvarez restated. “There are five or six vendors who clearly are not Orange. You’re going to have to say goodbye. Tell them 2019 is their last year.” Alvarez has a long list of conditions. They range from hiring a bookkeeper, to complaint resolution, to transparent policies and procedures, equitable rotation of alcohol licenses, consistent handling of incoming cash and check disbursements and continued audits. “If OISF doesn’t agree to all of them,” he says, “I’m not going to sign the contract.”