Report finds management control – with some exceptions –in review of Ocean Institute’s lease.
SANTA ANA — Business has been anything but usual at Dana Point Harbor during the past 12 months. The second week of May 2016 featured the first of four planned audit reports on Dana Point Harbor operations. Orange County Auditor-Controller Eric Woolery’s first audit report met with the resignation of Harbor Director Brad Gross.
Woolery’s office announced the release of the fourth and final report on May 3 – almost a full year after the first audit was released.
The fourth audit report – titled “Revenue Generating Lease Audit: OC Community Resources/OC Parks – Ocean Institute” – revealed control findings in each of the reviewed objectives.
Auditors looked at the county’s operation of Ocean Institute – a tenant of county-managed Dana Point Harbor – between March 1, 2015 and Feb. 29, 2016.
Orange County and Ocean Institute entered into a 35-year lease agreement in June 1999; the agreement was updated in 2011.
“The purpose of the agreement is for Ocean Institute to develop and operate county approved facilities and programs specifically related to marine science research, marine-related cultural activities/events, protection and conservation of the marine environment, and maritime and marine science education,” the county audit report stated.
County officials had three objectives in auditing Ocean Institute’s operations at Dana Point Harbor: review the organization’s records of monthly gross receipts and rent payments reported to the county; determine compliance of accounting methods and payments, per the lease agreement; and, identify possible internal control weaknesses.
Ocean Institute reported $4,109,488 in gross receipts and $36,206 in paid rent for the year ending Feb. 29, 2016, according to the audit report.
The following findings were listed in the audit report:
Rent & Gross Receipts
Ocean Institute, in general, maintained adequate records of gross receipts reported to the county and properly remitted rent payments to the county. However there were some exceptions, according to the audit report.
“We identified four control findings related to unpaid rent for miscellaneous income, a room rental that was misclassified as a donation, rent not paid on gross receipts, and deposits for public cruises were not reported as gross receipts when received,” county officials stated in the audit report.
The organization, according to the audit report, specifically did not report $32,850 in gross receipts, resulting in Ocean Institute owing $3,285 to the county. Ocean Institute also owed the county $16.67 for underreported rent, the audit report stated.
The organization was found to be mostly in compliance with provisions within its agreement with the county. Three control findings, however, were reported in the county’s audit.
“These findings include failure to submit nonprofit IRS Form 990, the security deposit is not current, and the audit provision within the lease was activated,” the audit report stated.
County officials will be implementing a process to ensure lease security deposits are made in a timely manner and in accordance with new requirements, according to the audit report. Ocean Institute will also submit Form 990 to county officials, authors of the audit report stated.
Auditors also stated Ocean Institute, but for a few exceptions, “had sufficient internal controls.”
“We identified three Control Findings relating to cash registers are not equipped to number transactions or lock in sales, the rental calendar is not reconciled to customer deposits, and boarding passes for public cruises are not pre-numbered,” county officials stated.
The audit report also found Ocean Institute should have collected $116.90 in facility rent and underreported $3,419 in rent.
O.C. Parks reportedly concurred with each of the audit reports recommendations.
The fourth audit report is the last of a planned review of Dana Point Harbor operations. Woolery’s office published the first audit report in May 2016, coinciding with the resignation of then-Harbor Director Brad Gross.
Another 10 months would pass before Woolery and his staff published the second audit report; the next two reports were made public a few weeks later.
Nina K. Jussila photo