$921,330: Details emerge from a close look at the Red River Valley Fair's books
This is a story about details. A financial audit released in January found the Red River Valley Fair had poor financial controls and did not properly track cash flowing out of its coffers. What the report didn't detail was just how much cash the ...
This is a story about details.
A financial audit released in January found the Red River Valley Fair had poor financial controls and did not properly track cash flowing out of its coffers.
What the report didn't detail was just how much cash the fair doled out on a routine basis.
Using open records requests to gain access to the information, The Forum examined the fair's check registers for the past three years and then talked to people who could help provide answers to the questions they raised.
What we learned:
- The fair wrote checks for cash totaling $921,330 in the three-year period from October 2002 to September 2005.
Most of that cash was earmarked for three categories: entertainers, ATM replenishment and "start funds" for making change during events.
- Leftover tickets from the 2005 World of Outlaws sprint car races were burned, not allowing the fair to properly account for those ticket sales.
- The sum of payments - both check and cash - to fair entertainers for the three years exceeded by $190,950 the amounts spelled out in contracts kept by the fair.
The fair provided The Forum with all of the contracts in its files from 2003, 2004 and 2005, totaling $1.24 million. The fair's record of payments from that time, both by cash and check, totals $1.43 million.
The fair has no receipts or supporting documentation for the discrepancy in cash paid to entertainers.
In December, the fair board fired 15-year manager Bruce Olson amid growing awareness of the fair's financial troubles.
Olson and the fair are suing each other - both over broken trust.
Olson claimed to be in the middle of a seven-year contract when he was fired. The board, which denies Olson's claims, says Olson is responsible for at least $292,000 that can't be accounted for.
But, for years, the two sides appeared to trust each other fully.
Last fall, after a poor showing at the annual June fair, the association's nine-member governing board hired Bismarck-based Great Plains Benefits Group to conduct a performance review of both the board and Olson.
The board voted not to renew Olson's contract three weeks after consultant Roger Krueger delivered a stinging report: Despite the board's willingness to grant Olson free rein over the checkbook for years, a majority of fair board members no longer trusted him.
About half of the seven employees interviewed by the consultant said they were scared of Olson because of "angry outbursts, threats of being fired or actually being fired, and belittling comments."
That wasn't all. Several employees told Krueger that they had been instructed to conduct financial tasks not normally done in other places, such as issuing checks and cashing them without sufficient documentation.
Olson told Krueger that it was normal to pay a portion of entertainers' fees in cash, which may not be reflected in the fair's accounting program.
"How can you disburse money from a corporation in the form of cash without some paper trail?" Krueger told The Forum in March. "That's chapter one, verse one, small business accounting."
Fair board President Kyle Anderson turned down The Forum's repeated requests to interview him and other executive committee members about the fair's financial records and board actions resulting from them. Olson did not return a message left this week on his cell phone seeking comment. His attorney, Tom Fiebiger, said Olson declined to speak.
The Red River Valley Fair is a nonprofit corporation considered tax exempt under a 501 (c) 5 status. It's a public body because Cass County regularly gives it taxpayer money - $104,400 this year.
An examination of the fair's check registers from the past three years showed 138 checks written to State Bank and Trust. Both Anderson's and Olson's signatures were on the checks using what appears to be a stamp.
The fair's check registers show that about 10 of the checks were written to the bank for payment to the fair's pension plan or its loan.
The rest of the checks made out to State Bank were for cash, said longtime office manager Judie McKay. The Forum calculated $921,330 in checks written to cash during that time. Only 18 of those had a notation on the memo line.
Nearly half that money - $432,750 - went to start funds. An example of a start fund is the cash people get before they hold a rummage sale to make change for customers.
The fair uses start funds at events such as speedway races, the annual fair and Big Iron, a farm show every September.
The majority of the start-fund checks, about 30, were for between $1,000 and $10,000. Eight were for under $1,000.
In one case, the fair wrote a start-fund check to cash for $72,000. Two checks were written for each $45,000 and $50,000, earmarked for start funds.
Myron Hovden, a retired Fargo bank vice president who works part time as the fair's cashier, said it was his job to track start funds.
Here's how he says he did it:
Before a fairgrounds event, Hovden calculated how much money he'd need to start the event, and in what denominations. McKay wrote the check and Hovden went to the West Fargo branch of State Bank and Trust to cash it.
Hovden did not endorse the check and said State Bank did not require that of the fair.
Hovden gave each fair worker a bag with a set amount of recorded cash and, if necessary, tickets. He said he counted the money to those workers.
At the end of the event, workers brought their money bags to Hovden's office. During the fair, Hovden and up to three other people re-counted the money.
They separated the start funds from the rest of the cash. Hovden often put the start funds in a safe, to be used again at subsequent events. He started a new start fund monthly and for different kinds of events.
Profits from each event were immediately deposited in the bank, he said.
Start funds always balanced, Hovden said.
The January auditor's report, which called the fair's cash handling a "material weakness," a major problem, recommended start money be documented in writing on a cash reconciliations sheet for each event.
The report also recommended the fair prepare requests for replenishment of the ATMs, to keep track of the date, time, check number, machine and the person who filled each ATM.
Auditors said they did not receive supporting documentation to track the cash placed in ATMs, but office manager McKay said the numbers balanced.
The Forum's analysis found $171,000 in checks written to cash for ATMs over the three-year period.
McKay said fair workers who filled ATMs entered a number into the machine indicating how many bills they put in.
But they didn't enter the number correctly, she said. When refilling the machines, workers were supposed to enter the total number of bills in the machine. Instead, they typed in just the number of bills they added.
McKay said she knows the amount cashed to put into the ATMs, and she receives reports showing how much money went out.
Wellington Technologies, a firm that partners with the fair on the ATMs, sends a monthly report detailing the daily transactions at the fair's two ATMs.
As an example, McKay provided The Forum with a copy of the May 2005 transactions.
Customers withdrew a total of $1,460 from the ATMs that month.
Those funds, along with the fair's share of the ATM fee, show up on its monthly State Bank and Trust statement.
Over time, the ATM withdrawals put back into the fair's account match the cash withdrawn to fill them, McKay said.
"That is always balanced to the nickel," she said.
Because of the complexity of the transactions, the Forum was unable to verify that the funds matched.
The fair's cash handling problems over the last three years were compounded by its record keeping.
In some cases, financial records appear not to have been kept, such as receipts for cash payments to entertainers.
Olson often did business by a handshake rather than by putting things down on paper, McKay and others said.
For example, at an April governing board meeting, West Fargo resident Jason Gustofson said Olson told him his deposit to rent a building at the fairgrounds for fireworks sales this year was covered by work he did on signs at the fairgrounds last year.
Gustofson wasn't sure if he wanted to rent the building anymore because board members raised his rate. Gustofson said Olson had given him a deal because Gustofson sold the fair land to keep developers from encroaching.
At the same meeting, Larry Thompson of Valley Karting complained to board members they had leased the go-kart track to his competitor when he had built it. He never had anything in writing.
"It was a handshake and a verbal contract," Thompson told board members.
Those contracts simply don't exist. Other crucial financial documents are alleged destroyed.
Most people The Forum spoke with since January, including Hovden and many governing board members, either didn't know or refused to say what documents were destroyed.
In December, longtime fair attorney Jonathan Garaas requested the Cass County Sheriff's Department investigate a possible $6,500- $7,500 overpayment to the Doobie Brothers for playing the fair in 2005.
Cass County Sheriff Don Rudnick forwarded the request to the state Bureau of Criminal Investigation because his department is closely linked with the fair. Rudnick is a fair board member; some off-duty, high-ranking sheriff's officials worked staff security during the fair.
In the letter to Rudnick, Garaas mentioned the audit, which he expected to be finished shortly.
"I am not optimistic about the result due to the destruction of certain documents and records by Mr. Olson witnessed by another fair employee," Garaas wrote.
Consultant Krueger's report notes crucial documents that were "removed and presumed destroyed prior to the end of the fiscal year."
Krueger said two people alluded to destroyed documents when interviewed for his report, but they didn't tell him exactly what they were.
McKay, the bookkeeper, said one of the allegations of destroyed records deals with leftover World of Outlaws tickets. They were burned before being balanced, "which is a no-no," she said.
"Those you have to reconcile because it's all reserved seating and you should be able to tell what you have money for and what tickets are left," McKay said. "We never could because the tickets were burned."
Records weren't properly tracked in other years, either, McKay said.
"What we were given was 'Here's the money.' Right or wrong, we had no way to check it," McKay said. "It was just turned in with nothing to back it up."
Neither the fair's check logs nor its entertainment contract files show a clear record of the total amounts most grandstand entertainment acts were paid.
In many cases, the fair wrote checks to an act for the entire amount called for on the contract. In others, the fair wrote a check to the band or an agency for part of the contracted amount.
Check registers show that over the last three years, the fair wrote eleven checks to cash totaling $180,100, with notes saying the money was for entertainers.
For eight of the checks, the fair's logs say "cash entertainers," "cash for entertainers" or "cash for GS entertainers."
The other three mention specific acts. Of those three checks, only one adds up to the contracted amount.
That was in 2003, when TBA Entertainment brought Lorrie Morgan and Poison to the fair for $97,500.
TBA collected a check for $94,500. The fair's check register noted a check to cash for the remaining $3,000, earmarked for Lorrie Morgan.
The other two are a different story.
Among them is payment to ZZ Top for a June 17, 2005, performance. The contract called for a flat $120,000. Fair records show a check was issued to TBA Entertainment Group for $115,000, with an additional $15,600 in cash earmarked for the band.
When asked about the contract, Bob Romeo, whose firm TBA Entertainment booked acts for the fair for years, said he was at the fair for that concert and accepted the payment.
He called his accountant, Harlan Burggraaf of Crescent, Iowa-based TBA Fairs and Festivals, who told The Forum that TBA Entertainment's records show receipt of a check for $115,000 and $5,000 in cash.
That means there's $10,600 unaccounted for with the ZZ Top show.
The Doobie Brothers case, which the North Dakota Bureau of Criminal Investigation has been asked to look at, is similar.
The Doobie Brothers contract called for a $50,000 flat guarantee, plus an extra $1,000 if the act brought certain equipment.
The fair issued a June 25, 2005 check to Doobro Entertainment for $42,500. It wrote another June 25 check, this one to cash, for $14,000. The check register lists it as for Doobro Entertainers.
Garaas, in his request for the investigation, wrote that he called the firm listed atop the contract, Monterey Peninsula Artists, and was told the extra payment was probably "'road money,' undoubtedly approved by the road manager of the Doobie Brothers."
Garaas wrote that even if the contract was valid, Olson used an extra $6,500 in cash without any accounting later to the Red River Valley Fair Association.
Garaas also notes that the fair does not have any receipt of Doobro Entertainment receiving extra payments.
Romeo said the Doobie Brothers were paid exactly what the contract spelled out.
He provided The Forum with a copy of a letter Doobie Brothers road manager Ed Ryan sent him.
Ryan writes that at the fair, a show representative named Steve Owen introduced him to Olson, who paid Ryan $42,500 in a fair check plus a cash payment of $7,500 for the rest, then later $1,000 in cash for sound equipment.
"The total I received that day was $51,000, as per the contract," he wrote.
Romeo thinks the rest of the cash probably went to pay someone else, especially considering the Doobie Brothers was the last concert of the fair.
"I think it somehow got logged out wrong in that fair office," Romeo said.
Office manager McKay said she made checks out to cash and for the bands following Olson's instructions. Hovden then took the check for cash to the bank. Hovden gave Olson the cashed funds, both Hovden and McKay said.
McKay doesn't know what happened to the money from there, including who paid the acts.
"It was given to Bruce and that was it," she said.
In a December report to fair board members, Olson wrote that he sometimes paid acts partly by check and partly by cash, but insisted acts were never paid more than the contracted amount.
The Forum called or e-mailed agencies or representatives of all the grandstand acts that played at the last three fairs. Those who responded said they were not or would not have been overpaid.
Gary Bitzer, whose Bitzer Agency books local acts at the fair, said his bands were always paid by check.
"All of my business with the fair was on the up and up," he said.
Kevin Krug, who owns the local country act Avalanche, said the band played at the fair for several years.
"It was not a cash deal," he said. "We did get a check."
Romeo said bands on the road sometimes request part or all of their payment in cash.
The cash helps bands cover expenses while they're on the road. It's often worked out in advance of the show and isn't necessarily in the contract, Romeo said.
"I would say probably 60 percent of our shows, there's some sort of cash involved," Romeo said.
But he said none of his acts was paid more than what was listed on their contracts. The check-and-cash combinations given to bands or agents do not exceed the contracted amount, Romeo said.
Other costs associated with a band are usually noted with contracts. For example, "riders" included in some entertainment contracts usually make specific requests for catered food but, in some cases, the fair instead gives them money for meals.
"I've never, in 32 years of doing business, had an act get overpaid," Romeo said.
What happened to the extra money?
No one could tell us.
Readers can reach Forum reporter Andrea Domaskin at (701) 241-5556 and Managing Editor Matthew Von Pinnon at (701) 241-5579