DENVER – The operator of the gift shop and café at the Buffalo Bill Museum failed to implement audit recommendations to improve its cash registers and accounting system — despite the city signing a new contract with the vendor, according to a follow-up report out this month from Denver Auditor Timothy M. O’Brien, CPA.
In two follow-up reports on concessions revenue, auditors found that the Department of Parks and Recreation and Flog LLC at the Willis Case Golf Course implemented most of the agreed-upon changes to ensure financial accountability for the city-owned property. That was not the case, however, for Pahaska Tepee Concessions, which operates at the city-owned Buffalo Bill Museum and Grave at Lookout Mountain Park in Golden.
“The implemented recommendations at the golf course show what we asked these vendors to do was not unreasonable or too much of a burden for a small business,” Auditor O’Brien said. “Pahaska’s attempt to update how it does business and to more reliably report revenues as required by the contract with the city was half-hearted at best.”
In the original August 2018 audit of Pahaska, the team found concerns with inaccurate reported revenue. In this case, the company had an unreliable and outdated point-of-sale system that hindered accurate reporting of revenues. The registers recorded sales on paper rolls, which were difficult to read and which could get lost or damaged. When errors were made at the register, Pahaska’s employees could not appropriately correct the mistake. As a result, the company relied upon daily bank deposits to estimate gross revenues to report to the city, resulting in inaccurate reporting.
When auditors circled back this year to see if improvements were made, they found Pahaska installed new registers months later than management officials said they would, and the new point-of-sale system was not set up properly. Employees say they are unsure how to correctly run financial reports, and some tried to delete data necessary for correct revenue reporting and audit purposes. Further, reported amounts from the system do not reconcile to the monthly revenue statement, monthly tax return or documentation for Pahaska’s percentage payment to the city.
The audit team found instances where Pahaska was clearly not in compliance with revenue reporting terms established in the contract, including the annual gross revenue report going unaudited by a CPA as required.
Auditors also found every register, almost every day, had differences between cash on hand and cash that should be in the register. The accountant for Pahaska said bank deposits don’t match the detail she is sent.
“At the time of follow-up, it is clear Parks and Recreation still doesn’t have a complete understanding of Pahaska’s systems and is not properly monitoring compliance,” Auditor O’Brien said. “Pahaska’s system is not set up correctly, and revenue is inaccurate on a daily basis. The system of bookkeeping is not acceptable.”
The 2018 audit also wasn’t the first time Pahaska’s revenue reporting has been faulted. A 2007 audit included recommendations to address its revenue reporting noncompliance through its point-of-sale system — the same issues addressed in the 2018 report.
The minimal and haphazard attempts to comply with the recommendations to our 2018 audit — and to the previous audit in 2007 — increase the risk that revenue reported to the city is inaccurate.
In fact, revenue reported for June 2019 was incorrect. The risk remains that payments to the city will continue to be inaccurate and not in the best interest of taxpayers and the city.
In contrast, Flog LLC at the Willis Case Golf Course largely took our recommendations to heart, implementing a new point-of-sale system that automatically generates sales revenue reports in compliance with its contract with the city. These actions reduced the risk of errors due to manual calculations.
Further, Flog met with Parks and Recreation to review requirements and the point-of-sale system and to adjust its contract.
“While there are still some outstanding accounting issues related to sales tax reporting, overall the golf course vendor is working with Parks to track its sales as required,” Auditor O’Brien said.