Grand jury says Lompoc tourism district under-reported $500k to city
Visit Lompoc, the city’s Tourism Business Improvement District, under-reported more than $500,000 in annual reports to the city over the last five years, the Santa Barbara County grand jury has determined.
The 2023-24 grand jury also discovered that Visit Lompoc had transferred $800,000 out of its checking account into a separate money market account without reporting it to the city as required.
Despite the funds being unaccounted for in mandated yearly reports from Visit Lompoc to the city, the City Council approved the documents, the grand jury says in a report released March 22.
“Starting in CY2020 there is a difference in the balance of funds as compared to the reported value,” the report says. “Those annual discrepancies exceed $500,000.
“There is no mention of these potential accounting discrepancies in the annual report for CY2020 or any subsequent reports,” the report says.
The city and Visit Lompoc did not respond to requests for comment.
The yearly reports are required under a 2019-2028 agreement between the city and Visit Lompoc primarily to promote tourism and business opportunities for Lompoc.
The agreement continues the intent of the original agreement executed in 2013.
The pact documents a process wherein each of the hotels in Lompoc will collect a fee equal to 3% of its revenue.
That revenue is then passed on to Lompoc which, in turn, claims a 1% administrative fee of the total revenue and submits the balance of the funds to Visit Lompoc.
Under the agreement, the money can only be spent on tourism enhancement projects and cannot be used for general purposes.
The grand jury report lambastes the city for allegedly not having sufficient oversight of the funds.
“Lompoc does not have an adequate system of checks and balances to confirm that Visit Lompoc’s accounting methods are accurate and complete,” the report says.
“There has been a consistent lack of oversight by Lompoc,” it adds.
The grand jury castigates Visit Lompoc too.
“Visit Lompoc LLC has failed to follow through on a commitment to submit to an independent financial audit,” the report says.
Additional oversight by Lompoc, in conjunction with Visit Lompoc, “is needed to optimize the intent of the management agreement between these entities,” the report says.
The report notes that when a member of Visit Lompoc’s board was questioned by the grand jury about the transfer of the $800,000 into the money market account, the unidentified individual “had no explanation as to why those funds were not declared in the annual reports submitted to Lompoc.”
The grand jury said it also discovered reports from previous Santa Barbara County grand juries outlining the failure of Lompoc to enact an auditing policy for non-profit organizations to which it provides funds.
For instance, the 2011-12 grand jury said Lompoc was negligent in monitoring control of funds to the non-profit Lompoc Housing and Community Development Corporation.
The oversight led to an estimated loss of $1.8 million of taxpayer funds, the 2011-12 grand jury said.
That grand jury recommended Lompoc formally adopt a non-profit audit policy.
In its response, the City Council expressed regret about its inaction and agreed to implement the recommendation.
However, the 2013-14 grand jury determined that Lompoc had not taken steps to establish such a policy.
The 2023-24 grand jury concludes its report by saying that transparency in the reporting of funds collected from Lompoc businesses for tourism enhancement should clearly show how the monies are being used to promote Lompoc.
The grand jury advocates for a mutual agreement between Lompoc and Visit Lompoc that results in ongoing third-party audits of the 2019-2028 agreement.
It recommends that the City Council formally establish a review process to ensure there is no inaccurate or incomplete reporting on behalf of Visit Lompoc before the submittal of the 2024 annual report.
“Accounting is not a disappearing act and neither cash nor accrual methods cause year-over-year carryover discrepancies of this magnitude,” the report concludes.
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