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The Aquarium - What is the Mayor hiding?

Warwick Jones, Editor

What is the mayor hiding? The audited accounts of the Aquarium for its last fiscal year should have been available some months ago. Councilman Mr Robert George has asked Mayor Riley for a copy several times in recent weeks but his request has been denied. He followed up this request with a formal letter to the Mayor and Council which was given to us yesterday.

The tardiness of the Mayor is somewhat surprising. The law states that the 990 tax return form applicable to non-profits should be available for inspection by members of the public. This form is not what the Mr George requested but it does give a broad picture of the financial performance during the year and a summary of the financial standing. The tax return is supposed to be filed by the 15th day of the 5th following the end of the non-profit's fiscal year. In the case of the Aquarium, the 990 form should have been filed by mid May, and it should have been available for public inspection at the Aquarium thereafter.

However, it is not only the mayor that is tardy. We attempted to inspect the 990 form at the Aquarium on Friday last. We spoke to the Chief Financial Officer and asked to to see the 990 form. We were told it was not possible, send in a letter of request! We informed the CFO of the law but were told that he did not have time to argue. We sent the letter forthwith and are awaiting his reply. A letter is also going to the IRS which requests notification of companies that deny access. For the record, please access the IRS web site for a comment on the law and go to the following address. irs.gov/charities/article/0,,id=96430,00.html#9

So you ask why the tardiness? We can only presume that the financial performace of the Aquarium last year was dismal. A dismal result is probably the best that most of us expected, After all, attendance at many of Charleston's other tourist attractions was down last year, so why not at the Aquarium? Of course there have been comments by Aquarium and City spokesmen that things were on the mend, but most of us ascribed this to political hype.

Just for the record, the Aquarium generated revenue of $9.2 million in 2002, a figure which included $1.63 million of gifts and grants. Expenses amounted to $8.4 million leaving a deficit of $0.85 million. As in prior years, the Aquarium has relied on gifts and grants to make ends meet. We suspect that 2003 was no exception.

Below is a copy of Councilmember Robert George's letter to the Mayor and other council members.

August 12, 2004

Dear Council member

Each April for the past four years, I have requested a copy of the SC Aquarium's Comprehensive Annual Audit as provided in the Sublease Agreement between the City, owner of the SC Aquarium Building , and the SCA Corporation, lease holder and operating entity of the Aquarium.

The Sub lease agreement provides the City fiscal oversight of the SCA operations pursuant to Section 8(c) which states in part "SCA shall, at its sole costs and expense, have prepared in accordance with GAAP an annual certified audit by an independent accounting firm within 120 days after the end of each fiscal year of SCA, where upon SCA shall submit to the City copies of such annual certified audits together with all notes and exhibits thereon."

Over the past four years, I have evaluated each of the previous audits with specific attention to annual decreases and downward trends in total revenues, net revenue and net asset balances. Beginning in 2000 through year-end 2002, these key financial indicators have declined consistently at alarming rates. "Total support and Revenues" and "Net assets" have decreased 29.3% and 52.7% respectively while debt repayments on a large heavily drawn line of credit has been sporadic and problematic as demonstrated by a series of re-negotiations, term restructures and extensions.

This year, beginning in mid April, after a letter request and half a dozen follow -up calls with Mayor Riley and Steve Bedard, I was advised during a telephone conversation with Mayor Riley in late June that a copy of the 2003 SCA Annual audit would be provided to me by mid July. After returning from vacation in mid July, I called Mr. Bedard and was informed that SCA Board would not meet in July to approve and release the audit. He further stated that the next SCA Board meeting would probably be in September. I informed him that this failure to provide the audit in a timely manner as required by the terms of the sublease, was unacceptable and in my opinion constituted a material breach on the Sublease Agreement . Shortly thereafter, Mayor Riley called and advised that the SCA board would probably not meet to consider approval release of the 2003 audit until mid October. I restated my displeasure and serious concern that the SCA Board's inaction was unacceptable and constituted a material breach of the Sublease Agreement. I was shocked by the Mayor's apparent lack of concern and attempts to justify the SCA Board's inaction regarding this serious failure to provide the 2003 audit as required by the sublease

In all probability, the SCA Board 's delay until October will result in the audit not being available for Council review until mid November, over six months late and after the upcoming General Election and the half cent sales tax referendum.

I strongly believe that the primary responsibility of City Council is fiscal oversight and insistence upon open, full accountability from those holding the city's assets in trust. Recent events, both nationally and locally, demonstrate the extent to which fiscal accountability can degenerate when elected officials and corporate directors fail to perform their most critical functions to the fullest extent required. The City's recent "black eye" over a near million dollar embezzlement scandal is a classical example of what can happen when proper fiscal protocols and accountability measures are inadequate, non-existent, or not properly administered.

A recent Post and Courier editorial, "District's latest fiscal muff" published on Sunday July 11, makes a very clear argument for accountability for recent financial blunders by the Charleston County School District. The same level of fiscal oversight obligations required of the Charleston County School Board also applies to the SCA Board and City Council...."the Board has the responsibility of ensuring that the job is properly done and that the right people are in place to do it."

There is no acceptable justification for the City Administration's lack of concern regards the SCA board's non compliance, and in my opinion, material breach of the Sublease Agreement. Without exercising applicable and mandated fiduciary responsibility, the Administration and Council will demonstrate the same apparent lack of concern and regard for fiscal responsibility now demonstrated by the SCA Board,

If Council tolerates such reckless disregard from those it entrusts with the management and safekeeping of the City's assets, it will share in the ultimate fate of the irresponsible. Council must act immediately and demand full compliance with all terms of the SCA Sublease Agreement

Respectfully

G.Robert George , PLS PE
Councilmember District 12

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