The Recreation and Park Department generates revenues and incurs costs from conducting recreational activities that are entirely outside the existing City structure for operating recreational programs. These recreational activities have been in existence for years, have not been approved by the Recreation and Park Commission, and have not had fees codified in the Park Code by the Board of Supervisors, as required by Section 2.109 of the City Charter. Further, the revenues and expenditures are not annually appropriated by the Board of Supervisors. Total revenue from the unauthorized recreational activities for the period of FY 2001 through FY 2006-2007 was $794,421.   Programs operated by the Recreation and Park Department for which fees are collected at the program sites include: (i) two youth soccer programs; Futsol and Seven-a-Side Soccer, (ii) two women's programs; women's volleyball and women's basketball and (iii) a tennis program. Fees for these activities are collected on site, transported to the Parks Trust, and credited to Parks Trust accounts established for the benefit of the Recreation and Park Department.   The Parks Trust, founded in 1971 and formerly known as Friends of Recreation & Parks, is a nonprofit organization that supports San Francisco parks, recreation centers and open spaces through funding major capital projects, such as raising approximately $12 million of the estimated $19.2 million for the reconstruction of the Conservatory of Flowers, funding smaller restoration and renovation projects such as the Golden Gate Park Carrousel, the Japanese Tea Garden and the 6th Avenue entrance to Golden Gate Park. Funding from the Parks Trust affords small park groups for the opportunity to make physical improvements and support special projects in neighborhood parks and operating programs such as the annual Opera in the Park, Park Partners program and Golden Gate Park Tours.   The revenues generated by these unauthorized recreational activities and deposited in Parks Trust accounts are disbursed through an informal system that is also used to disburse monies properly deposited in Parks Trust accounts from gifts to the Recreation and Park Department. Total revenues from the unauthorized recreational fees ($794,421) and authorized gifts/ grants ($1,902,747) total $2,697,168 for period of FY 2001-2002 through FY 2006-2007. Total expenditures for those fiscal years were $3,141,349, or $444,181 in excess of the revenues. The $444,181 was funded by fund balances in Parks Trust accounts carried forward from previous years.   Many of the disbursements from the Parks Trust accounts are for nursery and recreational items such as plants, athletic equipment and trophies. However, the Budget Analyst's review disclosed that a total of $834 was paid for catered lunches and incidental costs for Recreation and Park Department staff - costs that in the professional judgment of the Budget Analyst should not be borne by recreational fees or gift or grant revenue.   The Budget Analyst emphasizes that most of the programs paid for Parks Trust accounts appear worthwhile. However, the expenditures of fees and revenues which were never authorized by the Board of Supervisors are a direct violation of the City Charter

General

This section of the cash handling follow-up audit report evaluates the current status of recommendations made in the 2006 Recreation and Park Department Audit Report concerning cash handling at recreation centers and cash handling practices outside the formal policies and procedures, including informal petty cash funds and payments to individuals to perform services.

The implementation statements directly opposite each finding quoted from the Budget Analyst's 2006 Recreation and Park Department Audit Report is a direct quote of the authorized representative of the Recreation and Park Department.

Cash Handling at Recreation Centers

When the 2006 Recreation and Park Department Audit Report was issued, the Recreation and Park Department was in the process of converting its existing program scheduling and revenue collection system for its recreational programs to the electronic CLASS System.¹ Recommendation No. 10.1, while still valid, was made in a cash or check payment environment that significantly changed with the implementation of the CLASS System.

10.1 Direct the Director of Operations and the Director of Administration and Finance to revise the cash-handling policies and procedures to (a) identify all staff who are responsible for handling cash, (b) [establish] procedures for receiving, recording, keeping, transporting, and depositing cash and other revenues, and (c) [provide] training for all staff required to handle cash or revenues.

Implementation: The Department has updated the cash handling policy and distributed it to all field staff. Implementation of CLASS has reduced the amount of cash collected (credit cards are now accepted) and resulted in clearly defined policies regarding daily reconciliation of cash drawers as well as additional improvements to cash handling, including a significant reduction in the number of sites in which cash is collected.

The Budget Analyst agrees that implementation of CLASS and the reduction in the number of sites at which cash is collected has greatly reduced the amount of cash collected at recreation centers and resulted in much improved programming, scheduling and revenue collection processes. However, as discussed in the remainder of this section, unauthorized revenue generation on a much larger scale has been occurring at athletic fields and recreation centers.

Revenue from Unauthorized Recreational Fees

The 2006 Recreation and Park Department Audit Report reported the existence of petty cash funds created from revenues received informally by recreation center staff. Recommendation No. 10.2 was developed to correct this situation, as follows:

The Recreation and Park Department General Manager should:

10.2 Direct the Director of Operations and the Director of Administration and Finance to identify and end all cash handling practices outside of the formal policies and procedures, including informal petty cash funds and payments to individuals to provide services.

Implementation: The Department has updated and distributed the cash handling policy to field staff. The policy clearly states that all informal petty cash funds and payments to individuals are prohibited.

In this follow-up audit the Budget Analyst did not observe or otherwise learn of the continued existence of petty cash funds at recreation centers. However, during the audit the Budget Analyst confirmed that the Department generates revenues and incurs costs from conducting recreational activities that are entirely outside the existing City structure for operating recreational programs. These recreational activities have been in existence for years, have not been approved by the Recreation and Park Commission and have not had fees codified in the Park Code by the Board of Supervisors, as required by Section 2.109 of the City Charter. Further, the revenues and expenditures are not annually appropriated by the Board of Supervisors.

Table 2.1 below shows revenues generated from the unauthorized recreational activities for the six-year period of FY 2001-2002 through FY 2006-2007. Total fee revenue for that period was $794,421.

Table 2.1
Revenues Generated by Unauthorized Recreational Fees
FY 2001-2002 through FY 2006-2007

Source: Parks Trust Statements of Activity

The Department's Director of Administration and Finance has provided the Budget Analyst with the fee schedule for certain of the unauthorized fees for recreational activities for FY 2006-2007, as shown in Table 2.2 below.

Table 2.2
FY 2006-2007 Schedule of Unauthorized Fees
For Recreational Activities

Activity	Fee
Women's Basketball	$500 per team in league, collected by Athletics' Division
Women's Volleyball	$200 per team in league, collected by Athletics' Division
Futsol2 Adults	$450 per team in league, collected by Recreation Division
Futsol Youth	$250 per team in league, collected by Recreation Division
Seven a Side Soccer - Adults	$400 per team in league, collected by Recreation Division
Seven a Side Soccer - Youth	$250 per team in league, collected by Recreation Division
Tennis	Group and Private Lessons taught by Recreation and Park Department employees of the Athletic Division using rates authorized for professional instructors under contract with the Department, as listed in Section 12.41 of the Park Code.

Source: Director of Administration and Finance

Fees of $115,112 for FY 2006-2007 were generated from the following recreational activities, as shown in Table 2.3 below.

Table 2.3
Detail of FY 2006-2007 Revenues Generated
by Unauthorized Recreational Fees

Source: Parks Trust accounting records.

The revenues collected by Recreation and Park Department employees of the Athletic Division and the Neighborhood Services Division are transported to McLaren Lodge and deposited in accounts established by the Parks Trust for receiving such revenues.

The Recreation and Park Department uses the revenues generated from the unauthorized recreational activities that it deposits with the Parks Trust to pay costs of officiating league games to procure materials and supplies and for various other contractual and consulting services. The General Manager of the Recreation and Park Department has acknowledged the existence of the unauthorized recreational activities and in a letter to the Budget Analyst, a copy of which is attached to this section of this audit report, has stated that Recreation Department staff will 93develop a fee structure and an expenditure budget for each of these programs to be included in RPD's 2008 - 2009 budget submission to the Mayor's Office.94 The General Manager has also stated that the current unauthorized system was developed, in part, to manage the need to hire officials for league games, due to the challenges posed by the City's purchasing system to pay game officials, who are often individuals. Further, the General Manager has stated that the Camp Mather senior fees have been codified and that those revenues now flow directly to the City's accounts.

Disbursement of Gift Funds and Unauthorized Fee Revenues

The 2006 Recreation and Park Department Audit Report reported that the Parks Trust established a voluntary program in which friends groups or other community groups could set up an account to support various Recreation and Park Department programs. Deposits to the gift accounts in FY 2006-2007 totaled $91,094. Recommendation No. 10.3, cited below, was developed in order to formalize the process.

The Recreation and Park Department General Manager should:

 

10.3 Develop a formal policy, defining and reconciling policies and procedures for cash donations to the Department's gift fund and the San Francisco Parks Trust accounts.

Implementation: The Recreation and Park Department has drafted a policy for internal review.

The revenues generated by the unauthorized fees for recreational activities discussed above and deposited in Parks Trust accounts are disbursed through an informal system that is also used to disburse monies also properly deposited in Parks Trust accounts from gifts to the Recreation and Park Department.

Table 2.4 below shows revenues for FY 2001-2002 through FY 2006-2007 from the unauthorized program fees, revenues deposited in Parks Trust accounts from gifts, transfers, and other sources, and the sums of those revenues and expenditures by the Recreation and Park Department.

As shown in Table 2.4, total revenues from the unauthorized recreational fees ($794,421) and gifts/ grants ($1,902,747) total $2,697,168 for the six-year period of FY 2001-2002 through FY 2006-2007. Total expenditures for those fiscal years were $3,141,349.

Table 2.4
Revenues and Expenditures related to Unauthorized
Fee Activities and Gifts/Grants

Source: Audited financial statements and accounting records of the Parks Trust.

The process developed for disbursing funds from both the unauthorized recreational fee accounts and the gift fund accounts requires that a Department staffmember complete and submit a Check Request Form through his or her manager and submit the completed form to the Director of Administration and Finance, who then signs and submits the form to the Parks Trust for disbursement of a check. Based on detailed accounting information provided by the Parks Trust, there were a total of 456 individual disbursements from the gift/grant funds and the unauthorized recreational fee fund accounts in FY 2006-2007 in the total amount of $257,611. In addition, there were a total of 654 individual unauthorized recreational fee payments in the total amount of $115,112.

Many of the disbursements are for nursery and recreational items such as plants, athletic equipment, and trophies. However, the Budget Analyst's review disclosed that a total of $834 was paid for catered lunches and incidental costs for Recreation and Park Department staff - costs that in the professional judgment of the Budget Analyst should not be borne by recreational fee or gift/grant revenues.

Noncompliance with the Nondiscrimination in Contracts Provision

The Human Rights Commission, in its administration of Chapters 12B and 12C of the Administrative Code, Nondiscrimination in Contracts, and Nondiscrimination in Property Contracts, respectively, requires that contractors entering into contracts with the City for accumulative sums in excess of $5,000 per fiscal year complete a Nondiscrimination in Contracts and Benefits form. The vendor's information is entered into the City's Financial Accounting and Management Information System (FAMIS) where it is available to City departments.

The Budget Analyst reviewed the nine contractors who had received payments in excess of $5,000 from the Parks Trust on behalf of the Recreation and Park Department during fiscal year 2006-2007 for the purpose of determining whether the contractors were compliant with the provisions of nondiscrimination provisions of the Administrative Code. The Budget Analyst's review revealed that four of the contractors were not certified as being compliant with the Administrative Code provisions.

The Office of the City Attorney has advised the Budget Analyst that the provisions of the nondiscrimination provisions of the Administrative Code do not apply to the expenditure of gift and grant funds provided to the Parks Trust for the benefit of the Recreation and Park Department. However, the Parks Trust administers the unauthorized recreational activity fees, which are subject to the provisions of the Administrative Code, and the authorized gifts/ grant revenue through a project structure that allows comingling of the two revenue sources. For example, the accounts for accruing revenues and making disbursements for the Junior Tennis, Nursery Fund, and Seven-a-Side Futsal Soccer programs all contain both authorized gift/ grant funds and unauthorized fee revenue. Therefore, pending approval of a fee structure by the Board of Supervisors for the currently unauthorized recreational activity fees and transfer of the fee revenues from the Parks Trust to the City, the Recreation and Park Department should comply with the requirements of Chapter 12B and 12C for all expenditures from Parks Trust accounts that contain unauthorized program fee revenue.

Conclusions

The implementation of CLASS and the reduction in the number of sites at which cash is collected has significantly reduced the amount of cash collected at recreation centers and resulted in much improved programming, scheduling, and revenue collection processes. As noted in the Introduction to this audit report, the Department is aggressively installing CLASS in multiple programs and in multiple facets, for example, Point-of-Sale, revenue tracking, and tee sheet management at the City's golf courses. The Budget Analyst urges the Department continue installing CLASS into its business processes, particularly those processes that facilitate patron convenience while enhancing revenue control.

The General Manager has expressed the intent of developing and submitting to the Board of Supervisors a fee structure and proposed ordinance for currently unauthorized recreational fee collections, thereby bringing the Department into compliance with the City Charter and policies and procedures concerning fees. That effort should include any and all activities currently generating revenue without an approved fee structure. Developing an efficient means of employing the services of recreational officials and individuals who provide services for recreational activities will be a challenge, but one that can be achieved. There are means employed by various City departments to legally employ such individuals, such as the Municipal Transit Agency fulfilling its school street-crossing responsibilities by employing 137 as-needed City employees. That method may or may not be appropriate for the Recreation and Park Department's situation, but satisfactory methods do exist, or can be created.

Recommendations

The Recreation and Park General Manager should:

2.1 In accordance with the stated intent, develop and submit to the Board of Supervisors a fee structure and proposed ordinance for currently unauthorized recreational fee activities and then terminate all recreational activities that do not have an approved fee structure.

2.2 Request appropriation authority in the FY 2008-2009 Budget for the gifts, grants and other funds received throughout the year from the Parks Trust for "S.F. Recreation & Park Dept. Programs."

2.3 Request expenditure authority in the FY 2008-2009 Budget for the materials and supplies, consultant and contractor costs and other costs incurred from operating the currently unauthorized recreational activities.

2.4 Direct the Director of Administration and Finance to ensure that approved payment requests to the Parks Trust are for goods or services that benefit program activities.

2.5 Direct the Director of Administration and Finance to ensure that the requirements of Chapters 12B and 12C of the Administrative Code, Nondiscrimination in Contracts and Nondiscrimination in Property Contracts, respectively, are complied with.

Costs and Benefits

The Budget Analyst's recommendations can be accomplished within the Recreation and Park Department's existing appropriated funding and authorized staffing levels and would enable the Department to operate in compliance with City policies and procedures, concerning expenditures from the gift fund and the operation, revenues, and expenditures resulting from the currently unauthorized recreational activities.

Implementation would further insure compliance with Chapters 12B and 12C of the Administrative Code.

1 The Introduction to this audit report provides information on the CLASS System.

2 Futsol is a variation of soccer played indoors.

3 Rink Management Services operates the ice rink located in Justin Herman Plaza each winter. According to the Parks Trust, Rink Management Services submits monthly payments based on the number of skate rentals.