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Audit Findings: The Details
“Kegebein” from page 5
Kegebein told the auditors that he brings tools from home to the fairgrounds every day, so he considered that mileage a business expense. The audit said expenses from commuting from home to work are not allowed under state code.
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The audit said Kegebein was informed that if he uses his personal vehicle for business-related travel, this requires paperwork, Form 261 filed annually, plus a monthly travel expense claim with the dates, locations, and business purposes. Those forms were not completed or submitted.
Board President
Fair board president Don Dietrich said via email that the audit began “around February.”
He first “learned of the issues including inappropriate use of the credit/debit cards during the August exit interview with the auditor.
That prompted him to immediately implement “procedures that restricted the use of any charge account, credit, debit or cash transaction without prior review and approval by a board member.”
He recalled Kegebein reporting during board meetings that he “made some corrections to procedures as he was made aware of things during the audit process, however, it was a broad statement with little detail so I cannot comment on specific changes made.”
Dietrich added, “My opinion is the CEO is the person directly responsible to ensure that state rules and policies are being followed by all staff. The only employee who the board has oversight over is the CEO.”
Two board members, Bill Barton and Jody Belgard, are assigned to the Finance Committee, whose duties include regular review of the fairgrounds financials.
Since Dietrich joined the board, every president has assigned those two to the Finance Committee “due to their financial background as professionals,” Dietrich said.
Asked if the fair, which employs a bookkeeper, would benefit from a Certified Public Accountant, Dietrich had “no comment at this time.”
In his letter, Kegebein contended the CDFA staff, accompanied by Highway Patrol officers at the Oct. 4 board meeting, persuaded the 9-member volunteer board to fire him, alleging a threatened state takeover and their dismissal.
All fair board members are appointed by the governor.
Eight appointees — not Dana McRae, appointed in November 2021 — have terms that have expired, and the governor’s office in July said “appointees serve at the pleasure of the governor until a successor has been appointed.”
The governor’s press office did not respond to a query from the Aptos Times on the issue.
The Aptos Times asked Kegebein via email if he was familiar with the state’s accounting manual and when he realized the fair was out of compliance. He did not respond.
In reviewing the Santa Cruz County fair, auditors from the California Department of Food and Agriculture focused on 2019 and 2020, expanded their review to five years when requested documentation was not provided, interviewed staff and found: • Of the $163,442 in purchases, $108,869 were made by the CEO. • $2,237 in debit card purchases for the
CEO’s vehicle maintenance, with only five invoices totaling $835. • Spending of $5,905 for food for employee birthdays, lunches, holiday dinners and chamber mixers, which the state deemed unallowable. • Travel expenses of $1,352 with no receipts. • No travel expense claim form filed by the CEO as required. • Travel expenses of $564 to a fair convention in Texas, one of 22 states for which California bans travel. • $4,671 of debit card purchases at retailers with no receipts and $1,352 of travel expenses paid via debit card with no receipts. • $68,489 in equipment purchased by the
CEO for the nonprofit Santa Cruz County Fairgrounds Foundation when state employees are not allowed to conduct business for an outside entity on state time. • A 2020 lease agreement for equipment signed by related individuals, Dave Kegebein and his stepmother, Jeannie Kegebein, who heads the Foundation,
when the state requires an arm’s length agreement to avoid a conflict of interest. • Not getting a share of revenue from Foundation events at the fairgrounds, when typically there is a revenue split. Holiday
Lights, which raised $285,478, or the Crab
Feed, which raised $65,773. • Not charging the Foundation for office space at the fairgrounds, a loss of revenue for the fair. • No documentation on alcohol sales by the
Foundation when the fair requires 5% of sales go to the fair. Lacking fair records, the auditors researched the Foundation’s 2019 and 2020 tax returns, reporting alcohol sales of $333,819 based on concession receipts and an underpayment to the fair of $3,437. • Improperly requiring the Speedway to donate $7,500 per year for the Fairgrounds
Foundation as part of its lease. • Failure to conduct an annual CPA review, as required. • No log for $5,914 of propane; half the initials on logs of the fuel tanks could not be identified by fair staff. • Eight contracts over $5,000 not bid, as required. • 84 employees worked more than 8 hours in the day without overtime. • CEO accrued 684 hours of vacation time; the state cap is 640 hours. • Property register not provided; inventory is required every three years. • No information on free tickets or courtesy and credential passes, as required.
Response to Audit
Asked about the Highway Patrol at the board meeting where Kegebein was fired, Dietrich said, “I have never felt threatened by law enforcement. The officers were there to ensure the safety of all those in attendance.”
As a new appointee to the board in 2012, Dietrich had suggested Kegebein be hired in 2013 with salary and benefits after his efforts as volunteer manager made the 2013 fair a success.
In a 3-page letter to CDFA chief auditor Ron Shackelford dated Sept. 21, prior to the Oct. 4 fair board meeting, Dietrich, as fair board president, did not contest any of the 12 audit findings.
“As a result of the information you provided during the exit interview, I, as Board President, put the following controls in place as a temporary measure until a permanent policy can be developed and ratified by the full Board,” Dietrich wrote. “The temporary controls require that all purchases made on any account or with any debit or credit card be authorized in advance by either Director Dietrich, Director Belgard or Director McRae.”
He added, “Credit and debit cards are kept locked in the safe with access through the 14th DAA bookkeeper. A spreadsheet documenting the purchases has been developed and is inspected biweekly by me. This spreadsheet will be provided to the board as part of the Board Meeting Packet each month for review.”
He continued, “The long-term response is to develop a policy that provides controls over use of accounts and credit/debit cards in conformance with the requirements contained in the Accounting Procedures Manual…A policy will be adopted to ensure use of personal vehicles by any employee are strictly within the guidelines for use of personal vehicles as outlined in the Accounting Procedures Manual. Lastly, I will recommend that the Board seek legally permissible recovery efforts relating to the misuse of debit/-credit cards by Employee A (CEO).”
Dietrich then addressed each finding, explaining how the fair will comply.
He pointed out the board is made up of unpaid gubernatorial appointees who meet monthly, a schedule that will be impacted by the approaching holidays, and does not employ permanent staff “with the skill set to develop draft policies as recommended by the Audit Office. With that in mind, the board will work diligently to attempt adoption of the necessary policies and procedures …within the 6-month time frame.”
Asked if he spoke with the fair CEO before composing that letter,” Dietrich responded,
“I didn’t speak with Mr. Kegebein about my written response to the audit as it was tasked to me to respond on behalf of the board.”
Foundation
Michele Bassi, president of the 20-yearold Santa Cruz County Fairgrounds Foundation, said via email, “Dave Kegebein has given his time, talent and treasure to the Santa Cruz County Fairgrounds. We are truly disappointed in the outcome of Tuesday’s meeting.”
She pointed out the Santa Cruz County Fairgrounds Foundation is a 501c3 nonprofit, not a state agency, and raises money “to ensure our community has a vibrant, healthy fairgrounds. We are responsible to our donors and will continue to fiscally support the fairgrounds so it is ready for times of need as well as celebration.”
Funds raised through fundraising events, campaigns, and alcohol sales go to the betterment of the fairgrounds, work that will continue, she added.
“Our audited financials confirm that we adhere to strict financial standards and audits,” she noted.
Dennis Osmer, executive director of Central Coast Energy Services, said he had worked with Dave Kegebein when they were both members of the Pajaro Valley Water Management Agency board.
“Dave is more interested in achievement than paperwork,” Osmer said, adding the audit is “no reason for termination, it’s reason for correction.”
Osmer also asked, “Where was the board?”
Fair Audits Elsewhere
The Santa Cruz County Fair is not the only one to face CDFA scrutiny.
A 2018 state audit of the Orange County Fair found officials spent more than $220,000 in state money on food, beverage and catering without documentation of state business, paid for travel to states prohibited under the Attorney General, and didn’t report a suspected embezzlement of more than $9,000. The fair CEO was fired in 2019.
In 2019, a state audit found the Kern County Fair CEO allowed more than $300,000 in questionable spending between 2016 and 2018, much of it for travel, expensive meals, and alcohol. The audit did not identify the county but multiple sources told Eyewitness News it was Kern County.
The fair had no receipts for $132,000 worth of credit card purchases, $30,000 in “excessive and unauthorized” out of state travel, and $1,200 spent on alcohol.
The audit said more oversight by the board of directors and the CDFA is in order.
This year, the acting CEO of the Sacramento County Fair was fired after a state audit revealed she was unable to show documentation for $107,230 in reimbursements in Sacramento County and $73,973 in Tulare County where previously she was fair CEO. She reimbursed herself for $3,503 in food and meals she said were for business purposes but did not provide a list of people at the dinners required by Accounting Procedures Manual. She did not provide documentation for $4,392 in vehicle mileage reimbursement, and she didn’t keep attendance or vacation time records. n •••
The Santa Cruz County Fair audit is posted on the fair website: www.santacruzcountyfair. com/images/stories/agenda/2022/oct/14th-DAA_ Final-Compliance-Audit-Report_22-006.pdf
