OC Fairgrounds Organizational Needs Assessment Report

Board of Directors Agenda Report MEETING DATE: JUNE 26, 2014 ITEM NUMBER: 9D

SUBJECT: Presentation of Organizational Needs Assessment DATE: June 20, 2014 FROM: Doug Lofstrom, OCFEC CEO PRESENTATION BY: Bill Kelly, Kelly Associates Management Group ___________________________________________________________________ RECOMMENDATION Information item only. BACKGROUND Bill Kelly, Kelly Associates Management Group, will present and discuss the Organizational Needs Assessment. See attached.

32nd District Agricultural Association

An Organizational Needs Assessment of the Orange

County Fair and Event Center

Prepared by

June 26, 2014

June 26, 2014

Mr. Stan Tkaczyk

Board Chair

32nd

District Agricultural Association

88 Fair Drive

Costa Mesa, California 92626

SUBJECT TRANSMITTAL OF ORGANIZATIONAL NEEDS ASSESSMENT OF THE ORANGE COUNTY FAIR & EVENT CENTER

Dear Chairman Tkaczyk:

Kelly Associates Management Group LLC (“KAMG”) is pleased to present to you and the Board of

Directors our organizational needs assessment of the Orange County Fair & Event Center (“OCFEC”). We

were tasked to evaluate the efficiency and effectiveness of the current organization in terms of its

staffing, workload, processes and procedures, management, communications, flow of information, and

other matters and to make recommendations for possible changes.

The attached report begins by providing an Introduction regarding the purpose and scope of the study

as well as pertinent background information about the OCFEC. The Introduction is followed by a

summary of input received from our surveys and interviews with Board members, staff, stakeholders

and the community. We then document our findings and recommendations in the following categories:

x Board of Directors/Chief Executive Officer x Community Relations

x Organizational x Transparency

x Financial x Governance

x Facility

We appreciate the opportunity to serve the 32nd

District Agricultural Association and are prepared to

assist in any follow-up actions the Board may wish to pursue.

Sincerely,

KELLY ASSOCIATES MANAGEMENT GROUP LLC

William R. Kelly

President/CEO

Board of Directors Stan Tkaczyk, Board Chair Ashleigh Aitken, Vice Chair

Douglas La Belle, Member Joyce Tucker, Member Kristina Dodge, Member* Ali Jahangiri, Member* Nick Berardino, Member Gerardo Mouet, Member

Barbara Bagneris, Member Sandra Cervantes, Member

Bao Nguyen, Member Robert Ruiz, Member

*Former Members

Staff

Doug Lofstrom, Chief Executive Officer

Roger Grable, 32nd

DAA Counsel - Manatt, Phelps and Phillips

Consultants

Kelly Associates Management Group LLC

William R. Kelly, President/CEO

Christine E. Kelly, Executive Vice-President

David A. Gruchow, Principal

June 26, 2014

32nd District Agricultural Association

An Organizational Needs Assessment of the Orange County Fair & Event Center

Table of Contents Executive Summary ............................................................................................. i

Section I – Introduction and Overview ...............................................................1

Scope of Work ..................................................................................................1

Background ......................................................................................................2

Financial Overview ...........................................................................................4

Section II – Proposed Sale of Fairgrounds ...........................................................7

Overview of Proposed Sale ...............................................................................7

Sale of State-Owned Property .......................................................................7

Sale of OC Fairgrounds Moves Forward ........................................................8

Fair Sale Review Committee .............................................................................9

Establishing the Fair Sale Review Committee ................................................9

FSRC Findings and Recommendations ..........................................................9

Section III – Survey Input/Participant Feedback .................................................12

SWOT Analysis ..................................................................................................12

Executive Staff and Employees .........................................................................13

Stakeholders.....................................................................................................15

Community Meeting Participants .....................................................................16

Fair Sale Review Committee .............................................................................19

Section IV – Issues, Findings and Recommendations ..........................................21

Board of Directors/Chief Executive Officer .......................................................22

Recommendations ........................................................................................22

Organizational Issues ........................................................................................23

Organizational Impacts of Employee Perceptions .........................................23

Lack of Executive Leadership ........................................................................23

Staff Motivation ............................................................................................24

Organizational Structure ...............................................................................24


Financial Issues .................................................................................................27


Facility Issues ....................................................................................................29



Table of Contents

Community Relations .......................................................................................30


Transparency ....................................................................................................31


Governance ......................................................................................................32


Section V – Implementation ................................................................................33

Tier 1 - Immediate Action .................................................................................33

Tier 2 - Defer Until CEO Appointment...............................................................33

Tier 3 - Long-Term Initiatives ............................................................................34

Tier 4 - On-Going ..............................................................................................34

Appendices

Appendix A List of Participants and Correspondence Received

Appendix B Community Meeting Notice and Attendees

Appendix C Documents Reviewed

Executive Summary

On October 4, 2013, the 32nd

District Agricultural Association (“Association”) issued a Request

for Proposal to interested bidders/proposers to conduct an organizational needs assessment of

the Orange County Fair & Event Center (“OCFEC”). This needs assessment was intended to

coincide with the Association’s recruitment for a new Chief Executive Officer and to address a

number of organizational and staffing challenges the Association had been dealing with during

the past five years including the potential sale of the OCFEC site by the State of California.

The attached report begins by providing an Introduction regarding the purpose and scope of

the study as well as pertinent background information about the OCFEC. The Introduction is

followed by a summary of input received from our surveys and interviews with Board members,

staff, stakeholders and the community. We then document our findings and recommendations

in the following categories:

x Board of Directors/Chief Executive Officer x Community Relations

x Organizational x Transparency

x Financial x Governance

x Facility

In order to provide context on the necessity for an Organizational Needs Assessment, it is

important to understand the circumstances surrounding the 2003 proposal by Governor

Schwarzenegger to sell off the Orange County Fairgrounds in order to raise revenue to help

offset the State’s growing budget deficit. It is also important to note the events involving the

formation of the OC Fair and Event Center Foundation and the subsequent community and

political upheaval that resulted.

In the wake of the controversy surrounding the proposed sale of the Orange County

Fairgrounds, the OC Fair Board approved the formation of the Fair Sale Review Committee

(FSRC) on March 22, 2012 and tasked it to review the processes and actions taken by OCFEC

relative to the proposed sale of the OCFEC property and to obtain background information by

reviewing written documents and interviewing stakeholders and other interested parties.

In its January 14, 2013 report to the OC Board, the FSRC noted several instances where the

actions of some staff and OC Fair Board members were inconsistent with established OCFEC

policies and industry best practices, especially as they related to the sale of the Orange County

Fairgrounds. The nine recommendations made by the FSRC reflected the following:


Proposed Sale of Fairgrounds

i

Orange County Fair & Event Center

Organizational Needs Assessment

x Board member training of applicable governing policies and procedures (i.e., Bagley-

Keene Act, conflict of interest, etc.).

x Greater Board oversight of financial transactions

x Repealing the existing State statutes that permit the sale of the OC Fairgrounds.

x Clarifying the duties and authority of the Chief Executive Officer as well as his/her

relationship with the Board.

x Addressing the specific issues associated with the Fairgrounds sale controversy (avoiding

any Attorney General conflict of interest and exercising greater control over contracts

for political advocacy).

A major part of the ONA process involved reaching out to a wide universe of stakeholders for

the purpose of seeking personal viewpoints regarding current needs and issues, clarifying

historical events, establishing or confirming factual background information, understanding the

application of processes and procedures, and soliciting recommendations for improving the

OCFEC facilities, programs and management. This outreach effort employed one-on-one

interviews with the Board of Directors, the Executive Staff and selected miscellaneous

employees as well as with Fair vendors, producers and organizers. The CEO also advised all Fair

employees that they could contact KAMG via confidential e-mail to offer input. Several

employees availed themselves of this opportunity to provide comments and opinions.

KAMG also conducted an advertised community meeting on March 11, 2014 at the OCFEC

Administrative Offices which was attended by approximately 30 individuals who were

encouraged to provide their own input. In addition, KAMG received a number of e-mails and

letters from community members who were either unable to attend the community meeting or

became aware of the ONA process and wanted to participate.

While the individual issues and observations noted during the outreach process were extremely

varied, a number of noteworthy themes emerged among nearly all the participants:

x Board Member Involvement – Most of the feedback received reflected concern over a

general lack of control and oversight exercised by the previous OC Fair Board. It was felt

that the appointed OCFEC officials need to re-orient themselves toward compliance

with adopted rules, regulations, policies, procedures and to exercise greater care in its

dealings with the Chief Executive Officer.

x Executive Leadership – For many within the organization, there has been a perceived

disconnection between CEO’s office and the staff. Also, many comments suggested that

Survey Input/Participant Feedback

ii



the new CEO needs will need to continue to improve the professionalism of the

relationship with the Board.

x Staff Motivation – The controversy and upheaval resulting from the proposed

Fairgrounds sale, as well as recent executive staff turnover, has had significant negative

effect on employee morale and motivation.

x Organizational Structure – The OCFEC organizational structure has undergone several

adjustments in recent years with changes in reporting relationships, span of control,

resource allocation, workload, etc. Some now view the OCFEC organization chart as

excessively top-heavy and subject to adjustment based on an individual’s abilities and

skills. It is also apparent that several employees in the organization may be misclassified

given the duties and responsibilities assigned.

x Financial Issues – Both the FSRC Report and comments received during the outreach

process highlight the need for greater attention in regards to financial controls,

reporting, auditing, etc. While the Chief Financial Officer has made significant

improvements to the OCFEC’s financial administration, limited staffing continues to

impede the implementation of comprehensive solutions.

x Facility and Community Issues – The input receive from both OCFEC stakeholders and

interested members of the community centered on how the facility is utilized, its

physical appearance, its impacts on the surrounding neighborhoods (i.e., sound, traffic,

etc.), and its future in light of the recent sale experience. There were also concerns

expressed as to how the OCFEC interacts with the community including the kinds of

programming that should be pursued.

The primary goal of the Organizational Needs Assessment was to conduct a “constructive

versus destructive” analysis of the OCFEC. In its Request for Proposal, the Board made it clear

that the ONA was not simply to be an assessment of “what is”, but a roadmap of what the the

organization could/should be. The unfortunate recent history involving the proposed

Fairgrounds sale has cast a cloud over the property, the staff and the community at large.

Based on KAMG’s review of the data collected, the input received during the outreach

processes, and the application KAMG’s knowledge of industry best practices, a series of findings

and recommendations have been developed to address immediate, short-term and long-term

organizational needs. This Section IV organizes KAMG’s findings and recommendations by the

following subject areas:

x Board of Directors/Chief Executive Officer

x Organizational Issues

Issues, Findings and Recommendations

iii



x Financial Issues

x Facility Issues

x Community Relations

x Transparency

x Governance

This report suggests 25 structural, programmatic, administrative, and cultural changes for the

OCFEC in order to help it address the current and future challenges facing the organization.

Some of these recommendations involve changes that could be addressed immediately while

others should be held in abeyance pending the appointment of a new Chief Executive Officer.

Many of the proposed changes could be accomplished in a one to two year timeframe while

others would be long-term. Finally, some of KAMG’s recommendations, especially those dealing

with staffing allocations and employee classification issues, would require further study.

The next step in the process would be to review all of the recommendations, evaluate and

prioritize those changes that would have the greatest impact, and develop measurable goals

and objectives for implementation. Such an implementation plan would establish specific

timeframes for completing objectives as well as designating specific responsible staff members.

Implementation

iv

Section I – Introduction and Overview

This Introduction and Overview Section provides a summary of the purpose and scope of the

Organizational Needs Assessment (“ONA”) as well as a contextual overview of the organization.

On October 4, 2013, the 32nd

District Agricultural Association (“Association”) issued a Request

for Proposal to interested bidders/proposers to conduct an organizational needs assessment of

the Orange County Fair & Event Center (“OCFEC”). This needs assessment was intended to

coincide with the Association’s recruitment for a new Chief Executive Officer and to address a

number of organizational and staffing challenges the Association had been dealing with during

the past five years including the potential sale of the OCFEC site by the State of California.

Kelly Associates Management Group LLC (“KAMG”) submitted its proposal to the Association on

November 15, 2013 and was awarded a contract by the OC Fair Board of Directors on

December 19, 2013. Actual work began in January 2014. Under the terms of this contract,

KAMG was tasked to evaluate the efficiency and effectiveness of the current OCFEC

organization in terms of its staffing, workload, processes and procedures, management,

communications, flow of information, and other matters and to make recommendations for

possible changes. The scope of KAMG’s engagement with the Association reflects the following

tasks:

x Monthly Status Meetings – KAMG Project Manager will meet with Association staff on a

monthly basis to provide status updates.

x Data Collection – Conduct meetings with OC Fair Board members, OCFEC staff,

stakeholders and the community to solicit input on organizational needs (including a

SWOT-type analysis). Also, gather and review data sources such as budgets, workload

indicators, policies and procedures, etc.

x Data Analysis – From the data and information collected, perform an analysis of

organizational strengths and weaknesses, evaluate current practices and procedures,

and assess perceived and actual communication shortcomings (internally, publicly and

with the Board).

x CEO Profile - Develop a management profile for a new Chief Executive Officer including

follow-up interviews with each member of the OC Fair Board of Directors.

Scope of Work


1



x Delivery of Final Report - Prepare and deliver the final Report of Findings and

Recommendations to the OC Fair Board of Directors and make a formal presentation at

the Board’s pleasure.

KAMG’s scope of work envisioned delivery of the final report and presentation to the Board by

the end of May 2014. Difficulties in scheduling and conducting stakeholder interviews and

community meetings caused these deadlines to slip by approximately three weeks.

The OCFEC is located on a 150-acre site in the City of Costa Mesa, California, and serves as the

site for the Orange County Fair, Centennial Farm and Pacific Amphitheatre. In all, some 150

different events are staged at the facility each year, attracting over four million visitors. The

Orange County Fair runs for 23 days each summer with an

average attendance of 1,103,233.1

In 1890, the original Orange County Community Fair

Corporation organized the first fair in the City of Santa Ana.

While the early focus was on agricultural/livestock exhibits

and horse racing, organizers began introducing carnival

entertainment after 1900. With the exception of brief stints

in Huntington Beach and Anaheim, the Fair remained in

Santa Ana until 1949 when it was moved to its present

location, the site of the former Santa Ana Army Air Base.

The property had been purchased by the State of California after it had established the 32nd

District Agricultural Association to operate the fair.

The California Department of Food and Agriculture (“CDFA”), through its Division of Fairs &

Expositions, oversees the 52 active state-wide District Agricultural Associations (DAA’s) and the

network of 79 annual fair events. The purpose of these Associations is to “(hold) fairs,

expositions and exhibitions for the purpose of exhibiting all of the industries and industrial

enterprises, resources and products of every kind or nature of the state with a view toward

improving, exploiting, encouraging, and stimulating them” and for "Constructing, maintaining,

and operating recreational and cultural facilities of general public interest.”2 The nine-member

Boards of Directors in these Associations are appointed by the Governor of California to four-

year overlapping terms. The essential duties and responsibilities of the Board are:

1 “History – Past 12 Years: Themes and Attendance”, Orange County Fair & Event Center, accessed April 23, 2014

http://www.ocfair.com/ocf2/about/History.aspx 2 California Food and Agricultural Code § 3951

Background

2



x Fix the term of office, the amount of bond, salary, and prescribe the duties of the

secretary and of the treasurer

x To manage the affairs of the Association

x To make all necessary bylaws, rules, and regulations for the government of the

Association

x To arrange for and conduct all activities on

Association property

x To delegate, as it may deem advisable, any of the

powers which are vested in the Board to its officers

or employees3

The Association is bound by the various State laws that

regulate expositions and fairs, particularly Division 3 of the

California Food and Agricultural Code. This includes the body

of rules promulgated by the CDFA for California fairs. In

addition, the management of the organization is subject to

the same laws, procedures and regulations that govern other

State departments and agencies such as civil service rules

and the Bagley-Keene Open Meeting Act. The OC Fair Board

of Directors has also adopted bylaws and governing policies not otherwise provided for under

other provisions in order to address specific operational requirements.

The CDFA performs the following functions for DAA’s

x Approve annual operating budget

x Conduct fiscal and compliance audits

x Review annual end-of-year statement of operations

x Provide consultation to boards and staff on state policies and procedures

x Facilitate personnel transactions

x Analyze fair related legislation

x Approve contracts and carnival bid packages

x Emergency service coordination

The OCFEC is a class level VII operation which is the highest level and is based upon operating

revenues. There are only 5 level VII fairs in the state. The other level VII sites are the California

State Fair and Exposition, San Diego Fair, Alameda County Fair, and the Los Angeles County Fair.

3 California Food and Agricultural Code § 3965

3



The Association’s fiscal year begins on January 1st

and ends on December 31st

. For the 2014

fiscal year, the adopted operating budget is $29.7 million against estimated operating revenue

of $32.9 million. In addition, the Board has authorized some $1.5 million for major projects and

capital expenditures, leaving an operating cash balance of $1.7 million for the year. Exhibit 1

shows actual and budgeted operating revenues and expenditures since 2010.

Figure 1 OCFEC Operating Revenue and Expenses

Source: Orange County Fair & Event Center 2014 Operating Budget and Capital & Major Projects Expenditure Plan

Revenue projections are based on a rolling four-year average and are adjusted for any known

variations from the previous year. Budgets for full-time staff reflect the anticipated full year

costs for these positions while part-time temporary staffing is budgeted at the previous fiscal

year’s actual cost. Non-personnel related expenses are based on a 3% increase over the

previous fiscal year’s estimated actual cost. All budgeted expenses that are based on previous

years’ experience have been adjusted for any known variations in the new fiscal year.

Exhibit 2 shows the distribution of 2014 operating expenses by major category:

Financial Overview

4



Figure 2 Distribution of 2014 Operating Expenses

Source: Orange County Fair & Event Center 2014 Operating Budget and Capital & Major Project Expenditure Plan

For 2014, the OCFEC has budgeted 92 full-time and 147 full-time equivalent seasonal part-time

employees. In addition, over 1,500 individuals are hired each year to support the Orange

County Fair events. Based on the 2014 organization chart, the OCFEC functions are divided into

two major management levels reporting to the Chief Executive Officer with a series of

“department charters” at the next level. Management and departmental levels are depicted in

Table 1 below:

Table 1 OCFEC Management Levels

Chief Financial Officer Chief Business Development Officer Director of Accounting Director of Marketing

Director of Events Director of Community Relations

Director of Human Resources Director of Entertainment

Director of Facilities Director of Communications

Admissions Director of Planning/Presentation

Business Services CPMG Contractor

Creative Services

The OCFEC’s operating budget is organized into five business units:

x Self-Produced Events

x Year-Round Events

x Market Place

5



x Pacific Amphitheater

x Support Services/Outreach

Of the total annual operating revenue realized by the OCFEC, some 64% is generated by the

two major self-produced events: the annual Orange County Fair and Imaginology (formerly the

Youth Expo). Exhibit 3 shows the allocation of fiscal year 2014 revenues and expenses among

the business units.

Figure 3 2014 Operating Revenue and Expenses by Business Unit

Source: Orange County Fair & Event Center 2014 Operating Budget and Capital & Major Projects Expenditure Plan

6

Section II – Proposed Sale of Fairgrounds

In order to provide context on the necessity for an Organizational Needs Assessment, this

Section provides a discussion regarding the State’s proposal to declare the Orange County

Fairgrounds property surplus and sell it off. It also summarizes the issues surrounding the

establishment of the OC Fair and Event Center Foundation and the appointment of the Fair Sale

Review Committee.

SALE OF STATE-OWNED PROPERTY4

Shortly after his election in 2003, Governor Arnold Schwarzenegger and his administration

began to actively seek alternatives for overcoming the growing deficit in the State’s budget that

did not include raising taxes and fees. In May 2004, he ordered a review of the State’s process

for disposing of publicly-held land and the identification

of potentially high value properties that were considered

to be underutilized.

Just prior to the Governor’s initiative, former

Assemblyman John Campbell floated the idea of possibly

moving the Orange County Fair from its Costa Mesa

location to the new Great Park development on the site

of the former El Toro Marine Air Station in Irvine. It was

suggested by Assemblyman Campbell that such a

relocation would allow for the sale of the existing

fairgrounds, making the proceeds available for helping to

reduce the State deficit. It was speculated at the time

that such a relocation and sale could net the State some

$200 million.

In the summer of 2004, the California Performance

Review Commission circulated its report for review and comment. Among the 1,200

recommendations, five related to the sale of property. The report also noted that the

Commission’s belief that the Orange County Fairgrounds were underutilized conflicted with the

stated position of the Department of Food and Agriculture. Shortly after the release of the

4 Much of this Overview is excerpted from the report by the Fair Sale Review Committee, submitted to the OC Fair

Board on January 14, 2013.

Overview of Proposed Sale


7



report, the OC Fair Board conducted a public hearing on the issue of utilization and adopted a

resolution stating that the fairgrounds were highly utilized and should not be sold as surplus

property.

As a result of the actions taken by the OC Fair Board, the final Commission report submitted to

the Governor acknowledged the cultural and educational value of the property, as well as its

role in regional disaster preparedness, and found that it was not underutilized property.

Five years later, the Governor again began entertaining the notion of selling certain “landmark

properties” throughout the state in order to raise funds for deficit reduction (including the

Orange County Fairgrounds). As before, the proposal was met with widespread public criticism

and was subsequently dropped.

SALE OF OC FAIRGROUNDS MOVES FORWARD

Notwithstanding the 2004 California Performance Review Commission findings regarding the

utilization of the Orange County Fairgrounds, the California Legislature adopted ABX4 on July

23, 2009. This was a budget trailer bill which allowed for the sale of the Fairgrounds and

established a mechanism for the sale. The bill did not include any other landmark properties.

Concurrently, the OC Fair and Event Center Foundation filed for incorporation with the

California Secretary of State. The Foundation, which ultimately included a majority of the Board

of the 32nd DAA, was formed for the purpose of purchasing the Fairgrounds.

Subsequently, three efforts to sell the

fairgrounds were undertaken. These included an

auction won by Craig Realty in January 2010, a

negotiated sale process to the City of Costa

Mesa in partnership with FMW running through

spring and summer of 2010, and a sealed bid

won by FMW in October 2010. In November

2010, a lawsuit was filed by vendors of the

OCFEC and a temporary restraining order was

issued halting the sale.

Although ABX4 22 is still technically in effect, none of the sales were completed and Governor

Brown has indicated that the disposal of the fairgrounds is not currently being considered.

8



ESTABLISHING THE FAIR SALE REVIEW COMMITTEE

In the wake of the controversy surrounding the proposed sale of the Orange County

Fairgrounds and the establishment of the OC Fair and Event Center Foundation, the OC Fair

Board approved the formation of the Fair Sale Review Committee (FSRC) on March 22, 2012. A

scope of work for the FSRC was then adopted which included:

x Complete an independent review of the processes and actions taken by OCFEC relative

to the proposed sale of the OCFEC property.

x Review written documents and conduct interviews with stakeholders and other

interested parties to obtain background information.

x Prepare a report for submittal to the OC Fair Board that includes findings, conclusions

and recommendations for the Board’s consideration and action.

The 12-member FSRC was chaired by a former police chief and included four former Orange

County city managers, two members of the Fair Preservation Society, two OC Marketplace

vendors, a member of the equestrian community, an OCFEC employee, and a neighbor who

lives in close proximity to the Fairgrounds. Three other OCFEC employees were also assigned as

staff support.

The FRSC completed its work and submitted its

report to the OC Fair Board January 14, 2013.

FSRC FINDINGS AND RECOMMENDATIONS

During its review, the FSRC found several

instances where the actions of some staff and

OC Fair Board members were inconsistent with

established OCFEC policies and industry best

practices, especially as they related to the sale

of the Orange County Fairgrounds. The FSRC

made the following recommendations5:

1. That all Board members when appointed

and executive staff should participate in

annual training regarding the Bagley-Keene

5 Report of Fair Sale Review Committee, January 14, 2013

Fair Sale Review Committee

9



Act, all applicable State requirements, ethics training, conflict of interest, public records

requests and Board Policies. (Recommended to be accomplished within 90 days). Advisory

sub-committees of any size should be properly noticed and open to the public in

accordance with State Law.

2. That every expense billed through a Joint Powers Authority (JPA) be reviewed and

approved retroactively by the Board as part of the monthly Consent Calendar, and the

Association maintain all copies of associated contracts and billing statements on site.

x The Board of Directors should carefully review all contractors/sub-contractors

arrangements in light of the LSA circumstances as identified in the report.

x The Board of Directors should request an investigation by the Brown administration to

review the role of California Construction Authority (CCA) now doing business as

California Fairs Financing Authority (CFFA) working within California Fair Services

Authority (CFSA) relating to the sale of the OC Fairgrounds and recommend policies and

procedures to improve.

x The Board of Directors should put into place safeguards to insure that there is complete

understanding of the State entities that provide services to the 32nd DAA and provide

oversight as needed.

3. That staff should continue the current practice of including a list of warrants paid each

month in materials provided for each Board meeting.

4. That the Board of Directors work towards repealing ABX4 22, permitting the sale of the

fairgrounds and the establishment of the 32a District Agricultural Association.

5. That the Board of Directors retain an independent forensic auditor to determine if any

public funds were spent for the formation and or the benefit of the OC Fair & Event Center

Foundation or its members. This audit would also attempt to determine the total amount

spent by the Board of Directors to promote the sale of the fairgrounds. Suggested

expenditure of $10,000. The board should consider expanding the audit to examine

additional contracts to determine whether similar arrangements occurred.

6. That the DAA adhere strictly to Policy 3.1 (only officially passed motions of the Board are

binding on the CEO) regarding direction of the Executive office from the Board of Directors.

7. That the Board of Directors adopt a policy stating: The Board of Directors shall take no

action which would result in the withdrawal of representation by the Attorney General’s

office as a result to individual board conflicts.

8. That the Board of Directors adopt a policy stating: any contract for political advocacy must

be pre-approved by the Board of Directors.

9. That the Board of Directors should continue to review the CEO signing authority on an

annual basis.

10



Following receipt of the FSRC report, the OC Fair Board voted to adopt Recommendations 1, 2,

3, 4, 6, 7, and 8 as stated (Recommendation #1 was modified to include a request to the

Attorney General for clarification as to committee structures). In addition, those

recommendations regarding operational oversight have also been incorporated into the Board

of Directors Governing Policy Manual.

The Board’s action relative to Recommendation #5 (conducting a forensic audit) was to turn the

FSRC report and all supporting documentation over to the Orange County District Attorney with

a recommendation that that Office conduct the forensic audit. These documents were sent on

March 18, 2013. For Recommendation #9 (CEO signature authority), the Board voted to

establish a limit of $50,000 for non-budgeted expenses and $300,000 for entertainment

guarantees (this was also incorporated into the Governing Policy Manual).

11

Section III – Survey Input/Participant Feedback

A major part of the ONA process involved reaching out to a wide universe of stakeholders for

the purpose of seeking personal viewpoints regarding current needs and issues, clarifying

historical events, establishing or confirming factual background information, understanding the

application of processes and procedures, and soliciting recommendations for improving the

OCFEC facilities, programs and management. This outreach effort employed one-on-one

interviews with the Board of Directors, the Executive Staff and selected miscellaneous

employees as well as with Fair vendors, producers and organizers. The CEO also advised all Fair

employees that they could contact KAMG via confidential e-mail to offer input. Several

employees availed themselves of this opportunity to provide comments and opinions.

KAMG also conducted an advertised community meeting on March 11, 2014 at the OCFEC

Administrative Offices which was attended by approximately 30 individuals who were

encouraged to provide their own input. In addition, KAMG received a number of e-mails and

letters from community members who were either unable to attend the community meeting or

became aware of the ONA process and wanted to participate.

All comments and opinions have been incorporated into this report and a listing of participants

is included in Appendix A.

In order to assess the factors that both constrain and enable the OCFEC organization, KAMG

employed a SWOT analysis approach to the participant interviews and community meeting. The

goal of a SWOT analysis is to help specify organizational or project goals, identify internal and

external factors that can help or hinder goal achievement, match strengths and opportunities,

and convert weakness and threats to strengths and opportunities. While most of the comments

and observations generated through this process tended to

focus on the issues surrounding the proposed fairground

sale, it was not uncommon to hear input regarding the

streamlining of OCFEC processes, strengthening

interpersonal relationships and community outreach,

controlling costs, improving communications (both internal

and external), and dealing with the Fair’s impacts on the

surrounding community (i.e., noise, traffic, etc.). Many of

the “Opportunities” identified were largely viewed by the

participants as actions that the organization should take to

address current challenges and threats.

SWOT Analysis


12



The following will present the perceptions and viewpoints of the OCFEC’s strengths,

weaknesses, opportunities and threats as expressed by the participants. It is organized by major

group.

Interviews were conducted with the Executive Management Team (EMT) and Strategic

Management Team (SMT). In addition, other employees from various levels of the organization

were interviewed.

STRENGTHS

x Staff has significant institutional history

x Strong customer service attitude

x Cooperation among fair staff

x Know how to run a FAIR

x Good core values by the employees

x Location is great

x Employees work very hard

x Good mid management employees

x Passionate and dedicated staff

x Excellent product

x Good financial position

x Good budget management

x Good “branding” of the FAIR

x Administrative building great place for community meetings

x Employees typically handle the “stress” fairly well

x “Fair time is fun time’

x During the “sale” process the staff kept their heads down and did their job

x Focused, dedicated and creative staff

x Team work and community awareness

x Like a family

Executive Staff and Employees

13



x Flexibility of staff operations with full and part time employees

WEAKNESSES

x Have to use the State of California rules and procedures

x Too many layers of supervision, with a lack of trust coming down to employees

x Ideas are not allowed to “trickle up”

x No operational side of the organizational chart

x Management is not familiar with employees functions or tasks

x Tension between fair emphasis and agricultural interest

x Not using the property assets year round

x Too much free use by non-profits

x Marketing and Communications are split

x Too many contractors versus FAIR employees

x Employees need more training and development

x Events and facilities should be 1 unit

x Need annual employee evaluations

x Need evaluation of supervisors by employees

x Sub cultures between 2 sides of the organization (silo effect)

x Poor vertical communication i.e. it’s always down

x People leave the organization w/o any explanation

x Past sale issues still linger

x Too many changes without reasons why

x State salary cap and low wages

x Difficult state laws and procedures

x Hard to recruit with State hiring procedures

x Past history of sale still has staff on “edge”

x Politically appointed Board of Director’s

x SB 741 – Sale of the property legislation still pending

x Turnover of CEO and Executive staff

x Parking at peak events over whelms on and off site locations

14



x Supervisors with no employees

x Not enough written procedures

x Internal processes take too long/very bureaucratic…tendency to become “risk adverse”

x Certain employees are self-centered, not team oriented

x Lack of organizational vision

OPPORTUNITIES

x Need to celebrate accomplishments/source of togetherness

x Hire more seasonal employees

x Need succession planning

x Need strategic vision

x Move Human Resources to CEO’s office

x Analyze retirement schedules and impacts

x Need position cross training to maximize a small number of employees

x Reach out more to the community

x Provide more educational and charitable activities/opportunities

x With a new CEO coming, hopefully there will be a new positive environment

x Need to provide partnerships with schools, museums and other fairs

x Change perception of the OCFEC from just the fair time to all year round activities/uses

THREATS

x State of California “sale”

x Not growing the opportunities because of limited thinking

x Continuing risk adverse decision making

x Employee “malaise” caused by the sale politics

x Not getting “ahead” of the message

This group represented the vendors at Market Place, amusement operators, show and event

producers, the operators of the equestrian center and concessionaires.

Stakeholders

15



STRENGTHS

x Staff has significant institutional history

x Employees are great to work with

x Employees go the ‘extra mile”

x Family oriented facility

x Location/Location/Location

WEAKNESSES

x Get mixed messages periodically i.e. make a decision then it gets changed up the ”line”

x Changing executives and then changing directions/policies

x Micro management of issues

x Conflicts between Board Members

OPPORTUNITIES

x Implement the Master Plan

x Close Gate 8

x Move the Farm closer to the equestrian center

x Think “outside” the box

x Be more creative

THREATS

x Not being open to outside input from users/vendors

x Not thinking from a private business viewpoint

Among the approximately 30 individuals who participated in the March 11, 2014 Community

Meeting were residents living in proximity to the Fairgrounds, members of the Orange County

Fair Preservation Society, local business interests, etc.

STRENGTHS

x Being a State/public agency keeps the property in the public eye

Community Meeting Participants

16



x Re-emergence and growth of the Equestrian Center

x Yin/Yang - On one side is the parking and the fact that it makes money. On the other

side are the equestrians and the free style of the property

x Animals on site

x Working farm

x It is a public facility

x It is in a good location in that it is freeway close and it allows traffic to be disbursed

quickly

x It has flexible exhibit space

x Saving the Gardens Building and making it a Veteran’s Museum

x The Veteran’s Day events

x Fair Board is responsible to neighbors

x We have a Board now that cares

x The Orange County Marketplace is a tenant that provides opportunities for the growth

of small businesses

x The new Board is doing a good job

WEAKNESSES

x The public meeting was not noticed on the OCFB Facebook page

x Too much of the fairground areas is asphalted (paved)

x The OCFB wants to make more money, versus protecting an agricultural asset for the

community

x The OCFB Mission Statement is unclear, too long, and as a result, their vision is lost in

the words. In particular, more emphasis was on the words, “…and with results that

justify expenditure…” however, the historic vision was a vision of an economic engine

for small crafts and businesses

x Not enough emphasis on animals, i.e. 4H-goats

x The Board positions are political appointments, not long term with a vested interest

x Gate 8, at Arlington and Tewinkle, is a safety and traffic hazard...There are no crosswalks

nor are there any traffic control measures for those waiting to park…This negatively

impacts access to the neighborhood…Fair gates used to be open for just two weeks, but

now they are open all year long...The Board should consider using Newport access

instead

17



x The word “agriculture” was a last minute add to the Mission Statement

x The executive staff (that was present during the sale) retaliates….there is a need for the

foundational problems of what happened to be corrected

x This is more than a Fair. The Fair started as 17-days and is now 5-weeks..the traffic

problems now last too long

x The Master Plan is not being followed

x LED lights are too bright and the public does not like the sign...they are distracting and

create a “cognitive capture”

x Sand rails for off-road vehicles…the Monster Trucks were a noise problem (are they

gone or not)...the Speedway noise is also a problem and is getting louder.

x Certain uses of Hanger can be noisy and disruptive to the nearby neighborhood

x During the recession the Executive staff tried to close the Fairgrounds…they took

productive weekends away from the Marketplace in 2008…the hours of operation were

not consistent…the Marketplace did not receive support from the Executive staff

x The OCFEC became too greedy (i.e. they started charging for parking)

OPPORTUNITIES

x The property should be more of a rural environment and the agriculture and farming

should be expanded

x Honor Veterans when they come home

x Centennial Farms – Master Plan shows there is room for it to expand

x Raise goats etc. for the enjoyment and education of children

x Allow children more access to Centennial Farms

x The Fair Board mindset should be that, “Agriculture is first and foremost”

x The Fair property should be to enhance the experience and education of children

x An onsite circulation analysis needs to be prepared in order to address traffic and

circulation issues

x The Equestrian Center should be changed back to the 1985 Plan…this will close Gate

8…the Equestrian Center has been reduced from 15-acres to 7 ½ -acres

x It should be called Fairgrounds, not Fair

x The Orange County Fair Board should unwind what has been done

x Former Fair Board member and former staff should be interviewed…some of the new

employees were not part of the Ellis regime

18



x Do not have as many concerts

x Have concerts not attached to the Fair

x Get more community input on the Master Plan…get the input during the Fair and focus

on the Agricultural Heritage

x Take down the two large billboards along the 55-Freeway…they are an urban blight

x Emphasis should be on being a good neighbor, and on the noise and traffic impacts

x Support the long-term tenants at the Marketplace

x Explore Wi-Fi options for the entire property

x The Fairground activities are a chance to reunite and rejuvenate the family structure, i.e.

teenagers with parents…there is something provided for all members of the family

x Invite the neighbors to see what is happening at the Fairgrounds

x Open communications and increase outreach efforts and be open to input from the

community (i.e., prepare and distribute a neighborhood newsletter)

x The agricultural fair should not be viewed as a profit center

x The Executive staff and Fair Board need to “…get in line with the community”

x The Orange County Fair organization needs leadership

x The new CEO should be A-political

x Have an area reserved for horse police for Costa Mesa Police...This will institutionalize

the history

THREATS

x The Amphitheater – sound, traffic, programming, etc. creates traffic log jams and

community issues

x Year-round Amphitheater operation

x Sound mitigation is sensitive and requires a competent sound engineer

x The confusion over who owns and operates the property, the Fair Board or the State

In order to follow up with the Fair Sale Review Committee, an invitation to meet was circulated

and four (4) of the original 10 members met to participated in a SWOT analysis and discuss the

ONA and CEO profile.


19



STRENGTHS

x Publicly owned, freeway access

x Multi use site

x Significant county history

x Regional emergency services center

x Agricultural and history center

WEAKNESSES

x Recent political turmoil

x Transparency (public records/salaries/benefits and related information)

x Agricultural/equestrian uses loosing impact and value

OPPORTUNITIES

x Public property to offer regional educational services

x Focus on Agriculture, historical and educational activities

x Restore community respect for the OFCEC

THREATS

x State of California legislation still pending to dispose of the property

x Lack of creative visioning processes

x Too much bad history about the sale keeps coming up!

x Not implementing the ONA

20

Section IV – Issues, Findings and Recommendations

The primary goal of the ONA was to conduct a “constructive versus destructive” analysis of the

OCFEC. As previously discussed, the ONA is not simply an assessment of “what is”, but a

roadmap of what the OCFEC could/should be. The unfortunate recent history involving the

proposed Fairgrounds sale has cast a cloud over the property, the staff and the community at

large.

The OCFEC offers a place to gather, celebrate and reflect on Orange County’s agricultural roots,

its historic impacts and its contribution to a growing county. At the same time, the Fairgrounds

can offer new opportunities for educational connections, technological demonstrations and

community events and activities.

Part of the assessment was also to examine other fair operations and seek out “best practices”

relative to organizational structures, goals and objectives, and processes and procedures.

Several fair centers were reviewed and KAMG concluded that the Los Angeles County Fair

(FAIRPLEX) and the Calgary Stampede provided good examples for consideration. Although

these fairs are not operated under the jurisdictional umbrella of a statewide agency such as the

DAA, their operations, goals, venues and activities closely resemble the OCFEC. FAIRPLEX and

the Stampede are 2 institutions that have positive professional reputations and have significant

community support and appreciation.

Based on KAMG’s review of the data collected, the input received during the outreach

processes, and the application KAMG’s knowledge of industry best practices, a series of findings

and recommendations have been developed to address immediate, short-term and long-term

organizational needs. This Section IV organizes KAMG’s findings and recommendations by the

following subject areas:

x Board of Directors/Chief Executive Officer

x Organizational Issues

x Financial Issues

x Facility Issues

x Community Relations

x Transparency

x Governance


21



In order to move forward in a positive fashion, the path to the future must be made clear.

Without a vision of where you are going, an organization loses momentum and drifts. In their

book “Leaders, the Strategies for Taking Charge”, University of Southern California faculty

members Warren Bennis and Burt Nanus observed that American organizations are over

managed and under lead and that “mangers do things right, but leaders do the right thing”.6

Given the fact that the OCFEC now has several new Board members and is recruiting for a new

Chief Executive Officer, it is a good time to begin creating the new vision, provide direction,

establish new goals and plot the path to the future.

All organizations need to engage in some form of strategic planning in order to define their

vision for the future. This planning process causes the organization to look at itself and define

goals, then create the vision, and establish core values. The following are some basic

definitions for these concepts:

x Goals: Need to acknowledge that the property is State-owned, is in the public interest

and trust and that the governance must be totally open.

x Vision: The statement must be made clear to avoid ambiguity or misperception. The

property was established with an agricultural goal and must reflect the past, present

and future needs of the citizens of the State, the County of Orange and the City of Costa

Mesa.

x Core Values: These values need to put in place to insure that the community,

employees, vendors and operators as well as event attendees are respected and

treated with the utmost courtesy and attention.

RECOMMENDATIONS

x Recommendation BD/CEO 1: Implement a visioning/strategic planning effort which

will address goals, the vision and establish core values. An emphasis should be placed

upon innovation, inclusion and diversity, and community education and service.

x Recommendation BD/CEO 2: Conduct a team-building exercise for the Board and

Executive staff.

x Recommendation BD/CEO 3: Insure that all Board Members upon appointment and

annually review the 32nd

DAA Bylaws, the CDA “Guidance for Fair Directors”, the OCFEC

6 Bennis, Warren G., and Burt Nanus. Leaders: The Strategies for Taking Charge. New York: Harper & Row, 1986,

pg. 29

Board of Directors/Chief Executive Officer

22



Board of Directors Governing Policy Manual, the most recent CDA “Rules for California

Fairs and the Bagley Keene Rules and Regulations.

KAMG’s assessment of organizational issues stemmed from the comments received during the

outreach efforts, its review of existing policy and procedure documents, and its analysis of

industry best practices as compared with current OCFEC operations. The following are KAMG’s

findings and observations followed by specific recommendations for changes.

ORGANIZATIONAL IMPACT OF EMPLOYEE PERCEPTIONS

When identifying organizational strengths, the SWOT analysis consistently noted the exemplary

work of both the full-time, part-time/seasonal OCFEC employees.

Despite the changes in the chief executive and certain upper level staff positions, there is an

accepted belief among a segment of the staff that favoritism, unfair treatment, and ongoing

whistleblower lawsuits are continuing to inflame negative feelings and opinions throughout the

organization. While KAMG could not establish the credibility of allegations, appropriate review

needs to occur to address the underlying issues.

LACK OF EXECUTIVE LEADERSHIP Because of the changes at the CEO level, there has been a noticeable lack of consistent

leadership. As a result, the “team” continued to functioned but with no vision resulting in a

ebbing of confidence and commitment. The Board realized it needed an interim solution while

the ONA was being conducted and while a new CEO was being recruited. The present CEO

(former VP of the OCFEC) was retained by the Board to “calm the waters”, improve the

professionalism of the relationship with the Board and give the employees a seasoned,

respected executive. From all indications during the outreach process, this goal has been

achieved.

Given all of the changes occurring at the executive levels, organizational processes have

become somewhat reactionary and incremental with several new rules and procedures being

promulgated in direct response to immediate issues without benefit of discussion or input from

those affected. This has sometimes resulted in the perception that change was occurring for

change’s sake alone without any reason or rationale. This situation has been exacerbated by

the fact that the organization has come to rely on “position knowledge” of operational

practices and methods without adequate written rules or procedures.

Organizational Issues

23



STAFF MOTIVATION

Since the OCFEC is part of a larger bureaucracy that is governed by the State personnel rules

and procedures, its opportunities to address staff motivation issues through compensation

adjustments, benefits or career advancement are constrained. Alternative means for creating a

stronger employee team would include the institution of annual employee assessments,

opportunities for employee development and training, job sharing and cross training, as well as

a comprehensive succession planning program. Given the potential for significant future staff

turnover due to retirements, the OCFEC needs to explore and implement other programs to

stimulate employee attitudes and satisfaction.

ORGANIZATIONAL STRUCTURE Numerous comments and opinions were also offered that pointed to an organizational

structure that is top heavy and organizationally confusing. It was also noted that there were

supervisors without any direct reports, while some supervisors appeared to have too many

direct reports. After a review of several years of different OCFEC organizational charts, it

appears that the structures have been periodically changed to accommodate and match

individual(s) skills

To better understand fair operations, KAMG reviewed the organizational structures of the Los

Angeles County FAIRPLEX and the Calgary Stampede. During this review, we noted structures

organized around facilities/operations, marketing and customer relations, and finance/

accounting. In the case of the OCFEC, there tends to be confusion about the roles and

responsibilities of the two current operating groups (Financial and Business Development). This

confusion also extends down to the position descriptions for all of the senior executives and

managers. For example, the current marketing, communication and creative functions are

mixed between both operating groups which has the effect of reducing efficiency and

operational expediency for lower level staff members.

After reviewing these issues and applying appropriate spans of control, KAMG recommends

that all marketing and communication functions be consolidated into one group and that the

finance and accounting functions be consolidated into a second group. We also suggest that a

third group be established that would include all maintenance and facility operations functions.

The SWOT analysis that KAMG conducted indicated that during the organizational upheaval

resulting from the Fairgrounds sale controversy, many OCFEC employees began to sense a

disconnection between the CEO and the staff. This “credibility gap” continues to fester despite

the efforts put forward by the present CEO, the CFO and the Director of Human Resources to

correct inappropriate processes and behavior. Consequently, KAMG recommends that the

Human Resources function be placed under the CEO’s auspices until such time as the new Chief

Executive can review this function and address the issues identified in the ONA. KAMG believes

24



that such a reassignment of the Human Resources function will help reestablish the credibility

of the CEO’s office.

Further, the Executive Assistant position that currently provides support to the CEO’s office

appears to be performing complex and technical duties more often associated with a

Management Assistant or Administrative Analyst position. KAMG recommends that this

position be reviewed in regards to a possible reclassification.

The following is a brief summary of suggested functional divisions with their new names:

Figure 4 Suggested OCFEC Functional Allocation

Division Functions Chief Executive Officer x Administration

x Human Resources

Marketing and Communications x Business Development

x Public and Customer Relations

x Communication Designs

x Government Relations

x Education

x Vendor/Entertainment Coordination

Finance and Administrative Services x Accounting

x Budget

x Purchasing/Contracts

x Information Technology

Maintenance and Facility Operations x Public safety

x Parking

x Facility Management and Maintenance

x Food & Beverage Administration

Based on the employee feedback received during the outreach process, there is a notable

perception that the current placement of Human Resources under the Chief Financial Officer

has created a sense of disconnection between the employees and the CEO.

The proposed allocation of functions enumerated above would produce the following

organization chart:

25



Figure 5 Orange County Fair and Event Center

Proposed Functional Organization

Since most of the subordinate managers of the functions beneath each Division are already

classified as “Director”, it is recommended that head of each of these Division be assigned a

new classification title as follows:

x Executive Director of Finance & Administration

x Executive Director of Marketing & Communication

x Executive Director of Maintenance & Facility Operation.

RECOMMENDATIONS

x Recommendation ORG 1: Implement the proposed organizational structure as outlined.

With the implementation of the new structure, review each of the Executive Director

and subordinate Director position descriptions and make amendments as necessary to

26



reflect new and/or changed responsibilities. Evaluate the Executive Assistant position

relative to reclassification to a Management Assistant/Administrative Analyst.

x Recommendation ORG 2: Perform a span of control study to determine appropriate

reporting relationships, re-organize and reclassify appropriately.

x Recommendation ORG 3: Create a team of executive, middle management and

miscellaneous employees to address Succession Planning.

x Recommendation ORG 4: Create an Employees Advisory Committee (EAC) to advise the

CEO on programs/activities/communication tools that can be used to open

organizational wide communication and foster employee improvement.

x Recommendation ORG 5: Initiate client centric training for employees to improve

communications and interactions with vendors, exhibitors, teachers, non-profits, etc.

x Recommendation ORG 6: Place the Human Resources function within the CEO’s office

until such time as a new CEO has an opportunity to review this function.

x Recommendation ORG 7: Develop, where necessary, appropriate written rules and

procedures to reduce the organization’s reliance on “position knowledge”.

x Recommendation ORG 8: Institute annual Performance Evaluations for full time and

regular part time employees.

x Recommendation ORG 9: Analysis of the use of part-time and seasonal employees to

determine the cost effectiveness of transitioning functions to full time positions.

According to the California Department of Food and Agriculture (CDFA) there are 79 fairs and

76 fairgrounds throughout the State. The CDFA monitors the District Agricultural Associations

(DAA’s) which constitute about two-thirds of the network. Until recently, the CDFA’s Division of

Fairs and Expositions annually provided financial assistance to fairs whose income was

insufficient to meet operating and capital expenditures. The money came from the Fairs &

Expositions Fund which was largely supported by the State’s General Fund through the

allocation of pari-mutuel horse racing revenues. However, beginning in fiscal year 2011-12, this

funding was eliminated and fairs will have to depend completely on their self-generated

revenues to operate beginning January 1, 2012.7 Consequently, a significant number of

California fairs are currently at risk of insolvency.

The CDFA utilizes a system for classifying fairs based on a five-year average of total operating

7 California Department of Food and Agriculture, Network of California Fairs 2011 /2012 Expenditure Plan, April 28,

2011, pg. 2

Financial Issues

27



revenues for each fair, not including state allocations, one-time funds (grants and extraordinary

events). As of fiscal year 2011-12, there were seven Class VII fairs in California with annual

revenues over $10 million:

x San Diego County Fair

x Orange County Fair

x Alameda County Fair

x Los Angeles County Fair

x California Exposition & State Fair

Unlike cities and counties that receive sales tax, fairs do not receive any apportionment of the

sales tax generated on their properties. The OCFEC is completely dependent on annual

revenues generated through its operations to support operating and capital expenses.

In its January 2013 report, the Fair Sale Review Committee noted several unusual financial

transactions that occurred between the OCFEC, other State agencies and certain consultants.

These observations pointed out the need to implement reforms in the OCFEC’s accounting and

reporting procedures including Board review of expenses, approval of monthly warrant lists, a

forensic audit, CEO signature authority, etc. Although some of these recommendations are still

under review, many corrective actions have been taken by the Board of Directors to prevent

similar actions in the future.

Since the Fairgrounds sale crisis, the Chief Financial Officer has made significant improvements

to the OCFEC’s financial administration. However, limited staffing continues to impede the

implementation of comprehensive solutions other than administrative and procedural issues.

Greater fiscal oversight is critical given the multi-faceted operations on the property and the

diversity of financial transactions that occur (from cash to credit cards). Although a series of

very good fiscal reports are now being prepared, there is still a need to insure that the Board

and the public has an understanding of operational expenditures and revenues within the

context of organizational efficiency and accountability. The CDFA performs a somewhat cursory

annual review of each Fair’s financial operations (cash, expenses, reserves, etc.), but does not

conduct an annual audit. Comments received during the outreach process , as well as the

findings of the Fair Sale Review Committee, suggest a need for additional audit/best practices

review. KAMG suggests that an outside financial/auditing firm be retained to assist the Finance

and Administrative Division address some of the existing issues that have been identified.

RECOMMENDATIONS

x Recommendation FIN 1: Solicit proposals from finance/accounting firms to conduct an

in-depth audit of the OCFEC, with an emphasis on cash management, policies and

procedures and suggestions for best practices implementation, including performance

28



reports for capital projects and reporting system for compliance purposes for any 501c3

users of the OCFEC.

A Master Plan was

adopted in 2003 which

set forth the vision for

the physical

improvements to the

OCFEC property. During

the development of the

Plan, a high priority was

given to reaching out

and including the

community. An

important element of

the Plan was to emphasize the Fair’s agricultural/historical importance. Presently, the OCFEC

Board has focused on creating community-oriented monuments to Orange County’s veterans

and workers and encouraging additional outreach initiatives for the Centennial Farm, a

signature element of the OCFEC.

With the exception of the Pacific Amphitheatre, the various exhibit halls, the Administration

Buildings and other appurtenant facilities, the site is predominately made up of asphaltic

concrete used for parking. The Master Plan divides the 150-acre property into the following

areas:

ͻ EQC

ͻ Amphitheatre

ͻ Northwest Village

ͻ Central Village

ͻ South Village

ͻ Festival Grounds

ͻ Southwest Village and

ͻ Northeast Village

In addition, the Master Plan approved by the Board addressed parking, circulation, signage and

infrastructure issues and provided for a phased implementation. Plan improvements have been

Facility Issues

29



proceeding based upon scheduling and the availability of funds. At present, the most significant

project under construction is the improvements to the Pacific Amphitheatre.

During KAMG’s outreach process, several

facility-related comments were received

dealing with the use/design of Gate 8, a

need for onsite directional signage to activity

centers, a lack onsite landscaping and issues

concerning noise from automotive/

motorcycle racing events.

RECOMMENDATIONS

x Recommendation FAC 1: Continue with the implementation of the Master Plan based

upon available funding.

x Recommendation FAC 2: Review the use/design of Gate 8 with the EQC users/

operators, the adjacent homeowners association in the area and the City of Costa Mesa.

x Recommendation FAC 3: Review the signage element of the Master Plan, inclusive of

the need for onsite “way finding” signage to certain activity areas (i.e. Centennial Farms,

the EQC and other venue locations).

x Recommendation FAC 4: Review the noise impacts of the vehicular venues by doing

noise testing before the activities are scheduled as well as during the events themselves

to mitigate neighborhood impacts.

The OCFEC property is both a local and regional community asset. It is widely known for its

annual Orange County Fair and Imaginology and the weekly “Market Place”, as well special

concert events at the Pacific Amphitheatre and other unique sporting and sales events.

Ironically, despite its historical roots the Fairgrounds are less known for agricultural,

educational or equestrian uses. Recently, the OCFEC has engaged in significant marketing

efforts to promote these last identified uses, generating very positive community and regional

interest.

Marketing and exposure is the key to adding success and value. This is especially important now

that California fairs must be financially self-supporting. A good recent example is the OCFEC’s

invitation to elected and appointed officials from Orange County cities and the County to tour

the facility, learn about the Fair’s operations and discuss future opportunities. Such outreach

allows for greater exposure and solidifies connections to local government. Additional proactive

efforts to the community and stakeholders should be explored.

Community Relations

30



There is a concern expressed by external parties that 4-H and Future Farmer activities are

receiving less attention. Although this could not be substantiated, it needs to be addressed.

RECOMMENDATIONS

x Recommendation COM 1: Create a Community Advisory Committee comprised of HOA

representatives, neighbors and interested citizens.

x Recommendation COM 2: Create a Civic Advisory Committee comprised of

representatives (elected and appointed) from the City of Costa Mesa, the Costa Mesa

School District, the Orange County

Community College District (OCC) and

the County of Orange.

x Recommendation COM 3: Create a

User Advisory Committee comprised of

representatives from the Fair

Preservation Society, Equestrian Users,

Wine Society, Vendors, nonprofits (4H

and related).

x Recommendation COM 4: Create an

Educational Advisory Committee

comprised of representatives from the Costa Mesa School District, the OCC, the

University of California Irvine, Cal State Fullerton, Chapman University and other Fairs

and institutions.

Public transparency websites allow public administrators and elected officials to be held to a

higher standard of accountability; not only among citizens but also amongst themselves. The

access afforded by online reporting promotes scrutiny and analysis which can ultimately help

combat financial mismanagement and fraud. In the long term, public transparency drives

improvements in the quality of governance, making a lasting impact across social, economic,

and political boundaries.

In light of the observations above, the OCFEC web pages are effective within the context of

marketing events and activities on the property. Most of the feedback KAMG received indicated

that users are able to navigate the events and activities pages very well. What is not so easy to

locate is information about the OCFEC organization. Board meeting dates and agendas could be

found, but information pertaining to financial/budget data, organization charts/structures,

salaries, etc. was either not accessible or very difficult to obtain.

Transparency

31



RECOMMENDATIONS

x Recommendation TRAN 1: On the “About Us” drop down menu on the OCFEC website,

add a single link to a new OCFEC governance page which would include Board meeting

information (i.e, meeting dates, agenda’s, meeting minutes), organization charts, the

adopted operating and capital budgets, audit reports, employment opportunities, salary

ranges for full-time, part-time and seasonal employee classifications, memorandums of

understanding or equivalent with bargaining groups, warrants paid by vendor name and

amount, RFQ’s/RFP’s, lobbyists retained, expense reports, etc.

The issues associated with the proposed Fairgrounds sale, along with the resultant Fair Sale

Review Committee Report, generated serious mistrust of the previous Board of Directors and

Executive staff by both the public and other OCFEC stakeholders, including employees. The

major themes that eventually came out of this situation focused on the need for the OCFEC

Board of Directors to conform to state meeting laws and to address a lack of transparency from

a public policy perspective. Since that time, a new Board has been put into place, recruitment

has begun for a new CEO and an organizational needs assessment was ordered to hopefully

begin in a positive direction. Further, as recommended in the Fair Sale Review Committee

Report, the Board’s relationship with the CEO has been redefined and his/her approval

authority for retaining professional services and approving contracts has been clarified.

RECOMMENDATIONS

x Recommendation GOV 1: Implement the recommendations in this report.

x Recommendation GOV 2: Follow-up on the recommendations contained in the Fair Sale

Review Committee Report including the on-going training of Board Members about

their legal responsibilities as to the Bagley Keene laws, financial reporting, conflicts of

issue, ethics, etc.

x Recommendation GOV 3: In the past, the OCFEC Board utilized a system of committees

whereby three members were appointed to address various topics and issues facing the

OCFEC. KAMG recommends that the Board evaluate the benefit of returning to this

practice in order to vet issues with the CEO, provide the Board with additional oversight,

and to expedite OCFEC business. Possible Board committees may include Finance,

Employee Relations, Legislation, and Construction.

Governance

32

Section V – Implementation

This report suggests 25 structural, programmatic, administrative, and cultural changes for the

OCFEC in order to help it address the current and future challenges facing the organization.

Some of these recommendations involve changes that could be addressed immediately while

others should be held in abeyance pending the appointment of a new Chief Executive Officer.

Many of the proposed changes could be accomplished in a one to two year timeframe while

others would be long-term. Finally, some of KAMG’s recommendations, especially those dealing

with staffing allocations and employee classification issues, would require further study.

Recommendation GOV 1: Implement the recommendations in this report, reflects the overall

direction suggested by KAMG for the OCFEC. The next step in the process would be to review all

of the recommendations, evaluate and prioritize those changes that would have the greatest

impact, and develop measurable goals and objectives for implementation. Such an

implementation plan would establish specific timeframes for completing objectives as well as

designating specific responsible staff members.

The first five recommendations are those which could be implemented immediately and

include the following:

x Recommendation ORG 6: Relocate Human Resources function to CEO’s office

x Recommendation ORG 8: Institute employee Performance Evaluations

x Recommendation FIN 1: Conduct financial and performance audit

x Recommendation TRAN 1: Implement website modifications

x Recommendation GOV 3: Establish OCFEC Board committees

The Tier 2 Recommendations are those which should be reviewed and managed by the new

CEO. Consequently, KAMG suggests that they be deferred until a new CEO has been appointed

and that they be addressed within 6 to 12 months after that individual takes office.

x Recommendation BD/CEO 1: Engage in strategic planning

x Recommendation BD/CEO 2: Offer team-building for Board and Executive staff

Tier 1 – Immediate Action


Tier 2 – Defer Until CEO Appointment

33



x Recommendation ORG 1: Implement proposed organizational structure

x Recommendation ORG 3: Prepare Succession Plan

x Recommendation ORG 4: Form Employees Advisory Committee

x Recommendation COM 1: Form Community Advisory Committee

x Recommendation COM 2: Form Civic Advisory Committee

x Recommendation COM 3: Form User Advisory Committee

x Recommendation COM 4: Form Educational Advisory Committee

The Tier 3 Recommendations are long-term initiatives which should be addressed over the next

1 to 2 years:

x Recommendation ORG 2: Review span of control

x Recommendation ORG 5: Implement client-centric training

x Recommendation ORG 7: Adopt written rules and procedures

x Recommendation ORG 9: Analyze use of part-time and seasonal employees

x Recommendation FAC 2: Review the use/design of Gate 8

x Recommendation FAC 3: Review the signage element of the Master Plan

x Recommendation FAC 4: Review the noise impacts of the vehicular venues

The Tier 4 Recommendations represent shifts in organizational cultural that should be

encouraged on an on-going basis:

x Recommendation BD/CEO 3: Board member review of governing documents

x Recommendation FAC 1: Continue implementation of the Master Plan

x Recommendation GOV 2: Follow-up on FSRC recommendations

Tier 3 – Long-Term Initiatives

Tier 4 – On-Going

34



OCFEC Employees1 Sharon Augenstein , CFO

Nick Buffa, Guest Relations Supervisor

Jerry Eldridge, Director of Facilities

Dan Gaines, Director of Entertainment

Roger Grable – Legal Counsel (Manatt, Phelps and Phillips)

Tamara Goddard, New Business Development

Joan Hamill, Director of Community Relations

Jason Jacobson, Director of Planning/Presentations

Bianca Kulbrick, Director of Human Resources

Elaine Kumamoto, Director of Accounting

Ruby Lau, Marketing Director

Teresa Mason, Events Coordinator

Jason Pope, Plumber

Michelle Richards, Chief Business Development Manager

Sabrina Sakaguchi, Communications Coordinator

Howard Sandler, Director of Events

Robin Wachner, Communications Director

Jeff Wilson, Executive Assistant to the CEO

Evy Young – Guest Relations Supervisor

Stakeholders Rick Hanson, EQC Tom Hatch, City of Costa Mesa CEO

Guy Leavitt, Ray Cammack Shows

Tamara Letourneau – City of Costa Mesa Asst. CEO

Andre Lopez Lopez Works

Ryan Miller, OC Market Place

Mike Robbins, Paradise Cigars

Jeff Thornberry, Pristine Systems


Sandra Genis

Lisa Reedy

Mike Robbins

Lisa Sabo

Theresa Sears

Others Interviewed

James Henwood, President/CEO, Los Angeles County FAIRPLEX

Vern Kimball, CEO, Calgary Stampede


Letters Received2

Debbie Cook

Friends of Harbors, Beaches and Park

Community Meeting SEE APPENDIX B

1 Additional emails were sent from employees on a confidential basis

2 Additional unsolicited emails were received from other unidentified residents and other interested parties

Appendix B Community Meeting Notice and Attendees



x By-Laws of the 32nd

District Agricultural Association

x California Food and Agricultural Code §3001 et. seq.

x California Department of Food and Agriculture, Network of California Fairs 2011/2012 Expenditure Plan

x California Department of Food and Agriculture, Division of Fairs and Expositions, Recommended Guidance for Fair Directors

x California Department of Food and Agriculture, Division of Fairs and Expositions, 2013 Rules for California Fairs

x Fair Sale Review Committee Report January 2013

x Los Angeles County FAIRPLEX 2030 Strategic Vision

x OCFEC Board of Directors Governing Policy Manual

x OCFEC Master Plan 2003

x OCFEC 2014 Operating Budget and Capital and Major Projects Plan

x OCFEC Organizational Charts 2011 to 2014