The ongoing investigation does not impact money received by the NCHA last year, including funds used in payouts at December’s 2012 NCHA Futurity, Beutenmiller said. How ongoing issues are resolved could impact early spring’s NCHA Super Stakes, July’s NCHA Summer Spectacular and late fall’s NCHA Futurity. It also could substantially impact the status of future State of Texas and City of Fort Worth funding to the NCHA, which will be considered during this year’s Texas state legislative session.
Recent press reports, including a Jan. 8 report on Dallas/Fort Worth television station WFAA, Channel 8, reported the City of Fort Worth has asked the NCHA to reveal more of its financial information regarding application information used to receive the money. That includes projections on how much money NCHA events bring in to Fort Worth and the surrounding North Texas area each year, a key factor in receiving the funds.
The NCHA and the City of Fort Worth have been working with each other recently to try and resolve the discrepancies.
The following is a letter from the NCHA Executive Board, sent to all association directors, following a Jan. 8 Executive Board meeting:
Update on Review of Applications for Funding from Major Events Trust Fund
Based on allegations made in a lawsuit brought by Alan Steen [NCHA Executive Director from June through late August], in early September, the NCHA Executive Committee decided to have the economic impact studies reviewed by an independent certified public accounting firm that had not previously provided services to the NCHA.
A decision was made to review the most recent half of the studies, including all studies in the most recent application made by the City of Fort Worth to the State of Texas. That application was for the Major Events Trust Fund, as opposed to the Special Events Trust Fund used for applications prior to 2011. After the results of that review were analyzed, a decision was to be made regarding the review of additional studies from earlier years.
Sanford, Baumeister & Frasier (SB&F) was selected to perform the procedures to determine the appropriateness of all information supplied by the NCHA to Dr. Gerald Grotta for the economic impact studies, as well as the mathematical accuracy of the computations included in the studies. The purpose of the review was not to test the economic theories used in the studies, since the State had originally approved the model developed by Dr. Grotta. The report of SB&F was provided to the NCHA on Oct. 11, 2012. While there were miscellaneous errors (both positive and negative), the results of the SB&F review indicated that the tax impact had been under-reported in the aggregate in the application filed in July, 2012 (covering 2009 through 2011 shows) by a total of $18,320, which is 0.18% of the total impact (i.e. less than 1/4 of 1 percent). Based on those findings, the Executive Committee determined not to extend the review to prior years.
A meeting between NCHA officials and City officials was held on November 12 to review the findings of SB&F. Internal auditors from the City met with the partner of SB&F in early December. The City’s internal auditors then came to the NCHA on December 12 to review the underlying records used to provide information for the studies. As of January 8, the City’s internal auditors are still requesting information in order to complete their report.
On December 19, Kirk Slaughter from the City [Fort Worth, Texas] called Rick Ivey [NCHA Treasurer] and verbally informed him that the City and State [Texas] were awaiting the report from the City’s internal auditors before they would release any funds. Rick Ivey contacted the NCHA President to inform him of the content of that conversation.
On January 3, Rick Ivey was encouraged by Kirk Slaughter to review the 2010 Summer Show again. Rick Ivey had conversations with both SB&F and Dr. Grotta. All agreed that the 2010 Summer Show did not have an unresolved issue. Mr. Slaughter was insistent, so Dr. Grotta agreed to determine if the information sent from the NCHA had been accurately reflected in the studies for all years. He contacted Rick Ivey late in the evening of January 3 to inform him that he had incorrectly typed in the number of contestants on the 2008 Summer Show (i.e. a number different than NCHA staff had provided to him). Dr. Grotta indicated that all other studies appeared to be correct. Rick Ivey contacted NCHA officials to inform them of the issue. A decision was made immediately for SB&F to review all studies, starting with 2008 and moving backwards. The impact of the input error made by Dr. Grotta has not yet been determined. We expect that the review performed by SB&F will be complete within two weeks.
On January 4, the NCHA received an email from Kirk Slaughter documenting Kirk’s understanding of the chain of events from December 13 through January 4. The NCHA has requested a meeting with the State Comptroller’s Office on January 18 to discuss the findings of SB&F as well as any findings by the City’s internal auditors.
As additional information becomes available and is verified, we will continue to keep the directors updated.