California’s Fair Problem was a Long Time Coming

California’s Fair Problem was a Long Time Coming

The 2007 Subprime Mortgage Crisis and ensuing Great Recession set a ticking time bomb in California’s fair system, and it waited until the 2020s to finally explode.

When a massive housing bubble collapsed in the United States, leading to mass foreclosures, widespread unemployment, a debt crisis in Europe that persists to this day, and the failure of some of the oldest institutions in world banking—in short, the greatest economic calamity since the Great Depression—state governments across America were faced with unprecedented budget shortfalls. Those state governments bridged these cavernous gaps via a variety of strategies, cutting services, raising taxes, and making a host of unpopular difficult decisions that were necessary in the face of extraordinary financial duress.

In his letter to the Senate and Assembly of the California Legislature which introduced his 2011-2012 budget, then-California Governor Jerry Brown, a Democrat, used language that seemed calculated to soften the axe blow of the cuts he’d proposed. “This budget proposes a far-reaching realignment of government functions,” Brown wrote. “We make the tough decisions now, and put our accounts in order… this is a tough budget for tough times.”

Brown’s task that year was to try to close a gap of more than $25 billion, in the face of a budgetary stalemate brought about by a bickering partisan legislature. One budget item that got the axe that year was in the California Department of Food and Agriculture (CDFA)—$32 million that until that time had been earmarked for support of the network of 78 California fairs. In that year’s budget, that amount fell from $32 million to zero.

In a report published in 2019, the CDFA stated that the loss of this funding forced them to eliminate thirty key positions, including its auditors—in other words, the individuals who would be responsible for pointing out incidents of a fair staff’s non-compliance with regulation, and recommending corrections to bring them into compliance. According to the I2019-4 report, in 2015 the CDFA regained a small fraction of that previous funding, allowing the agency to add back a single auditor position. When the CDFA was able to bring back that lone auditor, the agency directed them to “prioritize the most sensitive and critical compliance audits,” not necessarily to get around to every last one of the state’s 78 fairs. In 2024, it should be noted, they do employ more than one. The State Auditor’s office recommended in the I2019-4 report that the CDFA should conduct biannual compliance audits of state fairs. But California is a big place.

A central complaint from supporters of Jen McGuire, the recently-deposed CEO of the Eastern Sierra Tri-County Fair, is that the fair had not received an audit since 2009. Given the CDFA’s recent history outlined above, this is perhaps not surprising. According to state documents, because of those post-recession budget cuts made early in the decade, for the first half of the 2010s they did not employ a person whose job it was to conduct audits. For a good part of the second half of the 2010s, they employed exactly one.

As noted above, approaching the mid-2020s, this is no longer true. The agency has a staff of auditors again. And, at least from the outside looking in, they appear to be playing catch-up. There was a long stretch of time in which audits basically weren’t being conducted, of an industry—putting on local fairs—that is largely staffed by non-professional volunteers and hobbyists, often a group of local retirees that rotate in and out from year-to-year. Passionate and intelligent though these folks may be, one might envision how there wouldn’t be a perfect unity of accounting practices from year-to-year, event-to-event. Now the auditors are back, and the story unfolding in the Eastern Sierra looks eerily familiar to those playing out in other fairs across the state.

From the Times Publishing Group, October 17, 2022: “Longtime Santa Cruz County CEO Dave Kegebein, who led a financial turnaround during 11 years at the helm, has lost his job after a state audit found the fair had no receipts and had no supervisory review for $163,442 of purchases from 2017 to 2021.”

From the Fresno Bee, May 25, 2023: “A state audit of finances at the Big Fresno Fair revealed about a dozen irregularities and violations of state law that the fair’s board of directors is vowing to correct … Auditors who prepared the report expressed concern about a cozy and at times confusing financial relationship between the fair and The Friends of the Big Fresno Fair Foundation…”

From Bakersfield Now, Sept. 26, 2019: “A California State audit found that the Kern County Fair CEO Mike Olcott and maintenance supervisor Joe Hebert reportedly allowed—and often participated in—the gross mismanagement of state resources…”

From The Sacramento Bee, Feb. 28, 2022: “In the past year its acting chief executive [of the Sacramento County Fair] has been the target of state auditors who discovered numerous financial irregularities…the CDFA, which oversees the fair, told The Sacramento Bee it has dismissed Pamela Fyock as acting CEO…”

From the Voice of OC, March 11, 2019: “OC Fairgrounds CEO Kathy Kramer is under scrutiny over a 2016 audit, which uncovered a potential illegal severance agreement with a fired employee that led to an overpayment that state auditors now say could be illegal.”

From the Visalia Times Delta, March 15, 2022: “The Tulare County Fair Foundation changed its name and continued fundraising amid a damaging audit of the Tulare County Fair that found financial irregularities, as well as problems with how the fair and its nonprofit conducted business together.”

There are a number of ways one could choose to interpret the foregoing paragraphs, in regard to their relevance to the issues faced by the Tri-County Fair. Supporters of McGuire might argue that this bears out the idea that overzealous auditors are bringing the full brunt of their office down onto local festivals staffed, again, by non-professional, mostly-unpaid hobbyists. After a decade of extremely scarce oversight, irregularities are perhaps bound to occur. It would seem that loose accounting practices are reasonably common in the running of local fairs. A detractor might counter that a handful of the dozens of fairs across the state does not constitute “common,” and plenty of fairs have not had their CEOs removed by a state agency. A counter to that counter might go that we don’t know if that’s simply because the CDFA’s auditors have yet to reach those other fairs. Reporters from Eastern Sierra NOW tried, and failed, to find an audit where the CDFA told a local fair that they were running a tight ship. If such a document exists, we could not find it.

We have recently left an era of California fairs where there was little oversight, and now that oversight has returned. Of that much, we can be sure. From there, two narratives emerge. Either that lack of oversight contributed to a permissive atmosphere of financial malfeasance in these local fairs, or that lack of oversight and training allowed bookkeeping SNAFUs to compound into greater sins against the regulatory regime, unintentional and innocently-intentioned though they might have been.

Whatever the reality in every fair dealing with the consequences of a harsh state audit, the era of low state involvement in local fairs would appear to be over for the time being.

–

If you would like to contact Kevin McCormick, email [email protected]. 

For more on the Tri-County Fair, click here.

Kevin McCormick