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HomeMy WebLinkAbout1617-3 DCFE - Food and Beverage (3-24-2017)(FINAL)ver4-6-17Deschutes County Fair& Expo - Food and Beverage report #16/17-3 March 2017 Deschutes County Fair & Expo – Food and Beverage To request this information in an alternate format, please call (541) 330-4674 or send email to David.Givans@Deschutes.org Deschutes County, Oregon David Givans, CPA, CIA, CGMA Deschutes County Internal Auditor PO Box 6005 1300 NW Wall St, Suite 200 Bend, OR 97708-6005 (541) 330-4674 David.Givans@Deschutes.org Audit committee: Lindsey Lombard, Chair - Public member John Barnett - Public member Tom Linhares - Public member Daryl Parrish - Public member Michael Shadrach - Public member Wayne Yeatman - Public member Anthony DeBone, County Commissioner Nancy Blankenship, County Clerk Dan Despotopulos, Fair & Expo Director Deschutes County Fair& Expo - Food and Beverage report #16/17-3 March 2017 {This page left blank} Deschutes County Fair& Expo - Food and Beverage report #16/17-3 March 2017 TABLE OF CONTENTS: EXECUTIVE SUMMARY 1. INTRODUCTION 1.1. Background on Audit …………..………………………………………...…… 1 1.2. Objectives and Scope ………………….……………………………...…… 1-2 1.3. Methodology …………………………………….…………………...…...… 2-3 2. BACKGROUND ………………………………………………………………… 3-4 3. FINDINGS 3.1. Food and beverage observations …………..………………………..…… 5-8 3.2. Fiscal control observations …………………………………….………… 8-13 3.3. Survey observations ……………………………………………..……… 14-16 3.4. Compliance observations ……………………………………..………… 16-17 4. MANAGEMENT RESPONSES 4.1. Deschutes County Fair & Expo…..………………………………….. 17-20 Deschutes County Fair& Expo - Food and Beverage report #16/17-3 March 2017 EXECUTIVE SUMMARY Recommendations include:  enrolling in the state’s cooperative procurement program to leverage procurement for services and goods;  establishing sufficient segregation of duties related to food and beverage purchasing, receiving, and inventory;  identifying whether identified controls could improve operations in a cost effective manner;  expanding accounting to break out their main food and beverage activities (alcohol, catering, and concessions);  implementing a better customer survey for food and beverage to address services; and  complying with OLCC requirements for postings in accordance with their license. Deschutes County Fair & Expo (DCFE) – Food and Beverage This audit reviews how the new business model for management of food and beverage is working. What was found The food and beverage operation appears to be showing some modest growth in food and beverage net profits since taking over from the prior contracted food and beverage manager. Based on available accounting information, the sales of alcoholic beverages have continued to provide higher margins that help support the overall food and beverage operations. Estimated net profit margins have been declining for concessions and catering. Third -party catering contributes little net profit margin to food and beverage operations. {pg. 5} Food and beverage operations can take advantage of available purchasing discounts to strengthen their profitability. {pg. 8} Additional segregation of duties are necessary over purchasing, receiving and inventory for DCFE food and beverage operations, since many of the responsibilities are handled by the food and beverage manager. {pg. 9} Additional food and beverage internal controls should be explored in purchasing, receiving, inventory, alcohol, and menu costing. {pg. 10} DCFE could benefit from developing additional accounting for the major activities of alcohol, concessions and catering to help better inform management on how they are pricing their services and covering their costs. {pg. 11} A survey of the five third-party caterers yielded positive feedback on the current caterer arrangement. DCFE’s survey techniques for food and beverage are at a high level and could be improved. {pg. 14} It was noted that additional liquor licenses signage is needed for prohibited liquor sales areas as well as on entrances for minor control plans in place. {pg. 16} Deschutes County Internal Audit Deschutes County Fair& Expo - Food and Beverage report #16/17-3 March 2017 Page 1 of 20 1. Introduction 1.1 BACKGROUND ON AUDIT In September 2014, Deschutes County Fair & Expo (DCFE) management decided to take on the role of food and beverage management (previously outsourced to Premier Services Group). This included outsourced alcohol, concessions and catering sales. Under the prior arrangement, outside (third-party) caterers were generally not allowed. The new arrangement allows selected third-party caterers the use of the facility to bring in additional events. During the 2015 County Fair (July 29-August 2), internal audit performed an audit focused on the concessions at the Fair. Audit #15/16-2 2015 County Fair – Food & Beverage. Audit Authority: The Deschutes County Audit Committee authorized the review of how the new business model for in–house food and beverage management is working in the Internal Audit Program Work Plan for FY 16/17. 1.2 OBJECTIVES and SCOPE Objectives: The audit objectives include: 1) Analyses of food and beverage financial activities and results since inception (9/2014) and compare to the last 12 months of prior contracted operations utilizing County financial reports and information. Activities include: a) internal catering, b) outside catering, c) concessions, and d) alcohol. 2) For selected areas, utilize internal control questionnaires and procedures aimed at better understanding whether additional controls are necessary. Those areas identified included: a) purchasing, b) accounts payable, c) inventory (stores), d) alcohol, e) sales, and f) menu costing. 3) The DCFE third-party caterers are to be surveyed for satisfaction and observations with new arrangement. 4) Be aware of any issues with compliance with federal and state regulations and requirements, as may be applicable. a) OLCC requirements with Liquor license Scope: This audit work is focused on evaluation of food and beverage operations for the period of inception 9/2014 through 11/2016. For comparison purposes, the audit utilizes the prior twelve months of activity under the contracted arrangement. Due to the work during the County Fair (referenced above), work on cash handling controls were limited as well as analyses of County Fair food and beverage (which is incorporated into the DESCHUTES COUNTY INTERNAL AUDIT REPORT DESCHUTES COUNTY INTERNAL AUDIT REPORT Deschutes County Fair& Expo - Food and Beverage report #16/17-3 March 2017 Page 2 of 20 The periods used for comparison differ from the County’s fiscal periods. overall food and beverage analyses). Internal audit work on this project was primarily in November through February 2017. For comparison purposes, data was organized for three 12-month periods starting 9/2013 as follows: Food and Beverage Period Description Time period Year 1 with Premier Services Group (PSG) 9/2013-8/2014 Year 2 with DCFE operating (F&E) 9/2014-8/2015 Year 3 with DCFE operating (F&E) 9/2015-8/2016 The comparative analyses developed are estimates using actual revenues, expenditures, and net profits. Estimated activities were developed for areas not separately accounted for, including: alcohol, catering, and concessions. Some gross revenues needed to be developed for comparative purposes for alcohol, catering and concessions based on their effective commission rates. Due to their significance, the County Fair’s food and beverage activities were included in the analyses to better represent overall food and beverage activities. Some costs were developed based on the effective commission rates as well as allocat ions based on discussions with management. Costs for use of equipment and departmental overhead have not been incorporated since those are not included in the current accounting. These adjustment procedures were necessary to improve comparability of information between the periods. These analyses are for discussion and comparison purposes only. The significant laws, regulations and guidance identified for these audit objectives included OLCC rules and regulations as well as ORS 471. 1.3 METHODOLOGY Audit procedures included: 1) Analyses of food and beverage financial activities and results since inception (9/2014) and compare to prior 12 months of prior contracted operations for a) internal and third-party catering, b) concessions, and c) alcohol. 2) For the following selected areas, utilize internal control questionnaires and procedures aimed at better understanding whether additional controls are necessary. a) purchasing, b) accounts payable, c) inventory (stores), d) alcohol, e) sales, and f) menu costing. Note: Internal control questionnaire examples were derived from “Auditing The Food & Beverage Operation An Operational Audit Approach: Vol II” by Hans L. Steiniger (2008) DESCHUTES COUNTY INTERNAL AUDIT REPORT Deschutes County Fair& Expo - Food and Beverage report #16/17-3 March 2017 Page 3 of 20 3) Interview third-party caterers for satisfaction and observations with new arrangement. 4) Be aware of any issues with compliance with federal and state regulations and requirements, as may be applicable. 5) Review OLCC requirements for the associated Liquor license. We conducted this performance audit in accordance with generally accepted gove rnment auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. (2011 Revision of Government Auditing Standards, issued by the Comptroller General of the United States.) 2. Background TABLE I Food and beverage commission rate changes In 9/2014, the Deschutes County Fair & Expo (DCFE) took over catering and concessions sales from the long time contractor Premier Services Group (PSG). DCFE continues to provide on-site catering, concessions and alcohol sales for all events. An option was provided for catering from a select number of third-party caterers. All alcohol services and concessions are exclusively provided by DCFE. Historically, DCFE received a commission (percentage rate) on food and beverage sales provided by Premier Services Group (PSG). Towards the end of the contract, those rates had declined significantly. Service activity (PSG) Prior rate received (%) Ending rate received (%) Catering 24% 15% Concessions 33% 25% Alcohol - Catering Concessions 24% 33% - 44% (based on sales) 15% 30% Note: County fair rates were different. The contractor (PSG) also provided an additional 1% each for repairs and marketing. Up to the change, the commission rates earned had been on a decline due to economic pressures on the food and beverage business from the recession. DCFE management indicated they did not think they could secure such good commission rates if they went out to bid again. Deschutes County Fair& Expo - Food and Beverage report #16/17-3 March 2017 Page 4 of 20 GRAPH I Trend in Estimated County Fair and Fair & Expo Food and Beverage Gross Revenues ($ in thousands) DCFE identified Pros and cons for taking on the food and beverage operations Source: Analyses estimates Food and beverage estimated gross revenues have exceeded the gross revenues under the prior contractor by 17%. DCFE management indicates they have not had the large rally events in these last two years that they had in year 1 under PSG. DCFE management indicated the pros and cons of taking on the food and beverage operations were as follows: PROS CONS  More control  Less control  On-site management  No full time management  Kitchen management  Cost of goods sold  In-house consistency  Added FTE  Increased revenue stream 3. Findings No significant deficiencies were found in this audit. A significant deficiency is defined as an internal control deficiency that could adversely affect the entity’s ability to initiate, record, process, and report financial data consistent with the assertions of management in the financial statements. The findings noted were primarily compliance and efficiency matters. Audit findings result from incidents of non-compliance with stated procedures and/or departures from prudent operation. The findings are, by nature, subjective. The audit disclosed certain policies, procedures and practices that could be improved. The audit was neither designed nor intended to be a detailed study of every relevant system, procedure or transaction. Accordingly, the opportunities for improvement presented in the Deschutes County Fair& Expo - Food and Beverage report #16/17-3 March 2017 Page 5 of 20 report may not be all-inclusive of areas where improvement may be needed and does not replace efforts needed to design an effective system of internal control. 3.1 FOOD AND BEVERAGE OBSERVATIONS GRAPH II & III Trend in TOTAL Food & Beverage Estimated Net Profit ($ in thousands and %) Food and beverage operations show modest growth in net profitability. The analyses made to compare the periods for food and beverage operations1 indicated that net profits have shown some modest growth over the period. It also shows some weakness in overall estimated net profitability. As will be shown in subsequent graphs, alcohol revenues and profitability has been a strong contributor to the net profits and profitability. Overall net profit growth since Premier Service Group (PSG) has been 9%. Source: Analyses estimates Net profit percentage (%) overall has declined mostly because of additional overhead being incurred. The decline in profitability is less obvious given the increase in net profits. 1 Fair & Expo (Fund 618) and in County Fair (Fund 619) estimated food and beverage activities Deschutes County Fair& Expo - Food and Beverage report #16/17-3 March 2017 Page 6 of 20 GRAPH IV & V Trend in ALCOHOL Estimated Net Profit ($ in thousands and %) GRAPH VI & VII Trend in CONCESSIONS Estimated Net Profit ($ in thousands and %) Alcohol DCFE is the sole provider of alcohol services at the Fair & Expo center. Estimated alcohol profitability has shown strong growth and improved profit margins. Source: Analyses estimates Concessions Estimated concession profitability has shown weakness and declining profitability. Source: Analyses estimates Deschutes County Fair& Expo - Food and Beverage report #16/17-3 March 2017 Page 7 of 20 GRAPH VIII & IX Trend in CATERING Estimated Net Profit ($ in thousands and %) GRAPH X Trend in CATERING Estimated Gross Revenues (in thousands) Catering operations show weak performance. The analyses made to compare the periods for catering activities operations indicated that net profits have shown a recent decline. Some of this decline might be attributed to the decline in rallies in these periods. Profitability percentages show some weakness. Source: Analyses estimates The following estimated analyses break out the activity between third-party catering and internal catering activities. Some overhead was allocated in these analyses to third-party and internal catering. Source: Analyses estimates Deschutes County Fair& Expo - Food and Beverage report #16/17-3 March 2017 Page 8 of 20 GRAPH XI Trend in CATERING Estimated Net Profit % As indicated in Graph VIII above, the catering net profit has been on a decline. The above analysis (Graph X) shows a decline in overall catering revenues as well as internal catering. Source: Analyses estimates Estimated catering net profitability on third-party catering is marginal at best at 1-2 percent after overhead. DCFE receives from third-party caterers 12% or 15% of gross revenues depending on whether they utilize the kitchen. Internal catering has been on a decline but profitability appears to at a higher level than the effective commission rates with PSG. Based on these analyses alone, overall catering net profit could improve if all catering revenues were captured at the catering internal profit margins. However, it is not clear whether and to what extent the third-party catering business is contributing other business to the Fair & Expo events. This could allow for more revenues from alcohol as well as event revenue. 3.2 FISCAL CONTROL OBSERVATIONS Food and beverage operations can take advantage of purchasing discounts. Since the food and beverage operation came under DCFE management, the existing vendor purchasing arrangements have not been reviewed. The County is a member of the Oregon Cooperative Procurement Program (ORCCP) that is a division of Oregon’s Department of Administrative Services. The program leverages existing competitive state price Deschutes County Fair& Expo - Food and Beverage report #16/17-3 March 2017 Page 9 of 20 County departments can optimize purchases through public procurement processes as well as utilization of state procurement opportunities. contracts to purchase goods and services. DCFE had not explored these purchasing opportunities. Access to ORCCP was available to all County departments since 11/2014. DCFE’s review of this purchasing opportunity indicates the discount is significantly better than what they were receiving and should contribute to improved profit margins. DCFE indicates that with one of their largest food and supply vendors they could save an average of 9% (approximately $6 thousand in FY 2016). In utilizing these new arrangements, they may need to order in larger quantities than they do currently. It is recommended Fair & Expo make use of the County’s enrollment in ORCCP to leverage existing state procurement contracts for services and goods. DCFE has since enrolled in the program and is determining how it can take advantage of these opportunities. Segregation of duties provides checks and balances ensuring more than one set of eyes over operational areas. Additional segregation of duties are necessary for food and beverage operations. The food and beverage manager has significant unsupervised control over many facets of the food and beverage operations. These include responsibilities over purchasing, receiving and inventory. Many fiscal controls assume a certain level of segregation of duties. This effectively separates record keeping from authorization and/or custody.  segregation of duties over purchasing (food or alcohol) would include separating the purchasing of goods from receiving the product or processing the invoices.  segregation of duties over inventory (also referred to warehouse or stores) would include controlling custody and activity With the creation of these food and beverage activities and hiring of a food and beverage manager, there were not controls implemented to segregate duties performed by the food and beverage manager. DCFE has limited staffing overlap in the operation of the food and beverage operation. Insufficient segregation of duties may lead to theft. When too many duties are concentrated with any one person it may be difficult to sufficiently safeguard assets and assure proper accounting. Due to the extensive responsibilities of the food and beverage manager, the following recommendations Deschutes County Fair& Expo - Food and Beverage report #16/17-3 March 2017 Page 10 of 20 suggest some shifting of duties, improvements in procedures and/or controls. It is recommended DCFE establish sufficient segregation of food and beverage duties related to purchasing, receiving, and inventory. It is recommended for someone separate from food and beverage perform an analyses comparing food and beverage menu costing of food costs with actual accounting for food costs. Due to the limited staff levels for segregating duties, this might provide some ability to judge the reasonableness of costs incurred. It is recommended that someone separate from food and beverage receives purchases and compares it to the order log to be developed. The order requisition, receiving and payment process is going to be changed significantly in the County’s new accounting software system and this should reinforce some segregation of duties. Additional food and beverage internal controls should be explored. Utilizing the internal control questionnaires specifically designed for food and beverage operations highlighted a number of controls that management may want to implement. Those observations include: Purchasing/receiving:  Log orders placed so other staff can perform receiving or follow-up.  Consider having a floor model scale to confirm weights received. This could help with meats and produce and could be performed on a test basis.  Use the order log or create a credit log to post anticipated credits that can be compared to invoices showing that DCFE received the credit.  Consider whether DCFE needs to keep an office copy of all alcohol orders for compliance with OLCC rules. Warehouse/stores:  Consider installing alarms for freezers and coolers.  Consider whether some kind of surveillance (security cameras and/or key cards) over inventory access is warranted.  Someone independent of sales periodically counts the inventory. Deschutes County Fair& Expo - Food and Beverage report #16/17-3 March 2017 Page 11 of 20 Liquor stickers can help identify if uncontrolled liquor is used to circumvent controls over sales. o Count sheets should be signed off in ink.  Consider tracking the cost of spoilage that occurs. Alcohol:  Consider whether allowing tips creates an environment where there is over pouring and diversion of sales.  Consider periodic reconciliation of liquor sales to change in inventory.  Consider liquor (and possibly) beer metering/dispensing systems to control pours. Management indicates current OLCC license limits hard alcohol pours to one ounce.  Consider pre-numbered logoed liquor stickers to control hard liquor inventories. o Liquor stickers control the utilization of each bottle of liquor. This keeps outside bottles from being introduced that cannot be controlled. o Liquor sticker numbers would be tracked using a control log. o All liquor bottles are controlled.  Consider whether DCFE wants the additional information on alcohol activities (gross profit and net profit). Menu costing:  Complete menu costing for food and beverage operations so that cost accounting can be compared to profit margins. o Consider developing a spreadsheet that analyzes menu mix and costs to estimate overall profitability. o Variances between planned menu costing and actual costs should be explored. Based on initial discussions with DCFE food and beverage manager, some of these controls could be useful. They will likely need to explore and assess the cost and benefit of implementation. It is recommended DCFE determine whether some of the identified controls could improve operations in a cost effective manner. Consider whether additional activity breakout in food and beverage accounting warranted. If the analyses by activity developed for this report are found useful, the current accounting practices could be modified to separate activities for the food and beverage operations. Finance performs a number of Deschutes County Fair& Expo - Food and Beverage report #16/17-3 March 2017 Page 12 of 20 miss- posted food and beverage revenue could impact analyses adjustments to reflect ending inventory values and adjust food costs. There are sufficient revenue details for activities but not for expenditures. When testing activity revenues, there were some catering and concessions revenues miss-coded to fair and expo events. Based on discussions with management, this was an isolated incident as they routinely review entries being posted. The miss posting error for April 2016 understated food and beverage revenue by over $3 thousand (by about 8%). This error does not appear to be systemic, but it is possible this could have happened in other periods that were part of the analysis. Developing accounting for the major activities of alcohol, concessions and catering could help better inform management on how they are pricing their services and covering their costs. The organization might benefit from the additional information but it would require more work in accounting down to the activity level expenditures, labor (salary, benefits, and temporary labor) and overhead. It is recommended management consider whether they would like to further breakout accounting for expenditures for their main revenue activities (alcohol, catering, and concessions). It is recommended for management to establish a secondary review of revenue postings and that the accounting matches between their event software (EventPro) and the County's financial software (currently HTE). DCFE management indicates that persons responsible for entering transaction s into HTE will not enter into Event Pro. Once the receipt is produced from HTE, a copy will be given to the sales person responsible for Event Pro and they will double check the receipt to assure it was entered into the right area. A listing of areas will be provided to everyone. At the conclusion of each week (on Monday mornings), DCFE will meet and review the reports. There are insufficient written accounting policies and procedures over food and beverage operations. DCFE has developed written procedures for many of their functions, but has not established accounting policies and procedures over the food and beverage operations. Communication is an essential component of internal controls. Written policies and procedures are particularly effective for controls over accounting and financial matters. A well-designed and maintained set of policies and Deschutes County Fair& Expo - Food and Beverage report #16/17-3 March 2017 Page 13 of 20 procedures enhances accountability and consistency. The resulting documentation is also useful for training and cross-training personnel. The lack of comprehensive written accounting procedures can lead to inadequately planned controls, inadequate supervision, poor and inadequate training, and lack of adherence to stated control procedures. It is recommended for DCFE to develop written accounting policies and procedures for their food and beverage operations. The procedures should emphasize the areas of cash handling, procurement, inventory, menu costing and segregation of duties. These policies and procedures should be available to all employees and should detail the responsibilities of each employee. {DCFE is working on adding food and beverage practices into their procedures manual.} Food and beverage deposit preparation process inefficient. DCFE management routinely re-counts and prepares deposits on food and beverage activities. This requires them to re-open sealed deposits and have two people recount the monies and prepare a deposit slip. A more effective and efficient process is having food and beverage complete the entire deposit process and seal the monies in a tamperproof bag. This also limits DCFE access to monies and the risk that these deposits can be tampered with. This makes food and beverage staff accountable for the monies. With handoffs of monies, there is a risk that monies could be tampered with. In addition, the current process required additional staff support to complete the deposit process. DCFE thought they needed to validate deposits as part of the process. It is recommended for food and beverage to complete the deposit preparation by further completing the deposit slip, account coding and endorsing any checks. They should also periodically compare their deposits to the accounting entries (as well as the tamperproof bag numbering). Deschutes County Fair& Expo - Food and Beverage report #16/17-3 March 2017 Page 14 of 20 3.3 SURVEY OBSERVATIONS Third- party caterers had positive comments on arrangement. Third-party caterers provide positive feedback on access to Fair & Expo facility arrangement. A survey of the five third-party caterers yielded positive feedback on the current caterer arrangement. Are you satisfied with the catering arrangement? Any concerns? The third-party caterers indicated that communication with staff and coordination of events appears to be working well. Facilities appear to be meeting their needs. A couple of observations for minor supplies were made and passed on to DCFE management for resolution. Only one caterer thought they were bringing new business to DCFE, but most saw this arrangement as providing a new business opportunity. DCFE survey techniques could be improved. DCFE current survey process for catering events is to survey only the event coordinator and does not include those participating in the event. Rating scale: The current survey rating scale consists of the following alternatives: excellent very good good fair poor This survey scale is unbalanced as it provides three favorable and only one unfavorable response choice. Reporting is done on a percentage of good or better for all responses. This is an inaccurate method of presenting what is actually happening by area. Fantastic Very nice Great Yes No concerns No, everything fine No, not really Very good No Deschutes County Fair& Expo - Food and Beverage report #16/17-3 March 2017 Page 15 of 20 GRAPH XII Trend in event coordinator survey scores for food and beverage services Rating scale values: ------------------ 5=Excellent 4=Very Good 3=Good 2=Fair 1=Poor To be more effective, survey-rating scales should be balanced, with an equal number of favorable and unfavorable response choices. The typical Likert scales do this as well as provide a "not applicable" result. Many of these are also phrased more neutrally. An example could be: The quality of food is excellent: Strongly Disagree Somewhat Disagree Neutral Somewhat Agree Strongly Agree Not Applicable vs. Please rate quality of food: Excellent / Very Good / Good / Fair / Poor Source: Surveys collected by DCFE from event coordinators. Combined ratings for “Quality of food”, “Customer Service”, “Timeliness”, and “Food presentation” Using available survey information and recalculating the rating values indicates a decline in third-party caterer satisfaction whereas internal food and beverage values have been improving. Given the survey methodology, it is not clear these scores are meaningful. The survey could also better distinguish between concessions, catering and alcohol services provided. There are many other ways to gather feedback from event participants on food and beverage services. These surveys have gone mostly unchanged since the food and beverage was contracted out. In the absence of appropriate survey methodologies, the feedback might not properly reflect an assessment of the services provided. With the limited number of responses being received, the data can fluctuate. It is recommended for food and beverage to design and implement a survey that will better address service levels across those utilizing their services. Deschutes County Fair& Expo - Food and Beverage report #16/17-3 March 2017 Page 16 of 20 Other county departments are implementing customer survey tools. For example: Deschutes County Community Development (CDD) is one county department that has recently implemented a customer service survey (via iPad) at their front desk to collect feedback on quality of services. 3.4 COMPLIANCE OBSERVATIONS Additional signage required for having liquor license. The Fair & Expo center has a number of signs required by the OLCC that have not been posted. Those include  posting signs prohibiting liquor sales for the administration building and the maintenance shop;  posting signs on entrance to the facility outlining the existence of a minor control plan; and  posting minor control signs outlining the level of control in affect for the given event. DCFE’s liquor license outlines the requirements for postings. These are required for the continued sale of alcoholic beverages for the facility. Deschutes County Fair& Expo - Food and Beverage report #16/17-3 March 2017 Page 17 of 20 These signage requirements help to communicate to the public what is expected. It is recommended for DCFE management to review and comply with OLCC requirements for postings in accordance with their license. 4. MANAGEMENT RESPONSE 4.1 Dan Despotopulos, Deschutes County Fair & Expo Director March 14, 2017 To: David Givans From: Dan Despotopulos Subject: County Food & Beverage Audit Food and beverage fiscal observations: Since taking over the Food/Beverage program in September 2014 we have seen our profitability grow despite not having any of the large RV Rallies (August 2020). Our observations on catering profitability highlight the difficulty in allowing third-party caterers to take over part of the event catering business. We have not seen any growth in events with catering business from the third-party caterers. Our expectation was they would bring additional business/events; therefore it might be worth reevaluating as we move forward. Although the overall feedback from the third-party caterers was positive, they did have some recommendations to make the kitchen facility easier to work in. We have agreed with some of the recommendations and plan on implementing them soon, i.e.: smaller hose over dishwasher to clean dirty dishes, more trash receptacles and cleaning materials. Deschutes County Fair& Expo - Food and Beverage report #16/17-3 March 2017 Page 18 of 20 Fair & Expo Comments - continued Recommendations 1. It is recommended Fair & Expo make use of the County’s enrollment in ORCCP to leverage existing state procurement contracts for services and goods. We agree and have already enrolled in the program and will be able to report the amount of savings by the end of March. 2. It is recommended DCFE establish sufficient segregation of food and beverage duties related to purchasing, receiving, and inventory. We agree. 3. It is recommended for someone separate from food and beverage perform an analyses comparing food and beverage menu costing of food costs with actual accounting for food costs. We agree. The actual food cost percentages for all food and beverage are calculated on the monthly statement. This can be compared to the actual to the actual food costs sheets prepared by the F/B manager. The F/B manager will forward these forms to management to compare it to current pricing from our broad line supplier. 4. It is recommended that someone separate from food and beverage receives purchases and compares it to the order log to be developed. We agree. The F/B manager will develop an order log, which will be provided to management. Management will check in all food products and compare the invoice with the order log. 5. It is recommended DCFE determine whether some of the identified controls could improve operations in a cost effective manner. We agree. Purchasing/ receiving:  We have a 25 lb scale, which will be sufficient for this process.  The F/B manager will create a credit log to post anticipated credits that will be compared to invoices to show credits were received. Any credits will be identified on the invoice by the F/B manager and reviewed by management.  The F/B department will keep a copy of all invoices related to compliance with OLCC regulations. Warehouse/stores:  In place of alarms, the F/B manager will notify the operations department when the kitchen will be un-manned. Operations will log the temperatures on the temperature log outside each walk -in refrigerator or freezer. The logs are in place. Deschutes County Fair& Expo - Food and Beverage report #16/17-3 March 2017 Page 19 of 20 Fair & Expo Comments - continued  All locks and keys were replaced to the limited access areas.  Management along with the F/B manager will assist in taking inventory on a monthly basis. The count sheets will be signed by both parties involved in the countin g. In place already.  All items deemed spoiled, out of date or leftover at the end of an event will be tracked by the F/B manager. Alcohol:  Tips for bartenders are part of the process for alcohol service. We have ordered Tablecraft 2246 – 1oz. plastic pour spouts to limit each drink to a 1oz. pour. This will eliminate an overpour. $24.63 per doz.  A periodic check of liquor usage to sales will be calculated on a monthly basis and checked periodically at separate events. This process will include the F/B manager and management. The results will be kept on file for review. 6. It is recommended management consider whether they would like to further breakout accounting for expenditures for their main revenue activities (alcohol, catering, and concessions). We agree. DCFE would like improved accounting information in the following areas:  Revenue for concessions alcohol and catering alcohol  Direct cost of alcohol sales  Cost of sales as a percentage as it relates to alcohol 7. It is recommended for management to establish a secondary review of revenue postings and that the accounting matches between their event software (EventPro) and the County's financial software (currently HTE). We agree. This process is already being done. 8. It is recommended for DCFE to develop written accounting policies and procedures for their food and beverage operations. We agree and are working on updating our policies/procedures. 9. It is recommended for food and beverage to complete the deposit preparation by further completing the deposit slip, account coding and endorsing any checks. They should also periodically compare their deposits to the accounting entries (as well as the tamperproof bag numbering). We agree and have already started this process. 10. It is recommended for food and beverage to design and implement a survey that will better address Deschutes County Fair& Expo - Food and Beverage report #16/17-3 March 2017 Page 20 of 20 Fair & Expo Comments - continued service levels across those utilizing their services. We agree and are looking into the survey system and will have our IT dept. work on having th is done by mid – April 11. It is recommended for DCFE management to review and comply with OLCC requirements for postings in accordance with their license. We agree. All postings are completed and up to date. {End of Report} Please take a survey on this report by clicking on the attached link: https://www.surveymonkey.com/r/DCFE_Food_and_Beverage_1617 -3