The Deschutes County Fair & Expo Center brought in $1.2 million last year, and a recent county audit found that some of that money could be vulnerable to fraud or theft because of ineffective or nonexistent cash-handling policies.

The audit, which was released Tuesday, looked at Deschutes County Fair & Expo business practices from October to December 2023. Mostly, the audit focused on event revenue, said Elizabeth Pape, the county’s internal auditor.

The fair and expo center lacks documented financial policies, which exposed it to potential fraud and theft, according to the audit. However, no instances of fraud or theft were identified, even though employees shared passwords and some financial processes have had issues for years.

“It didn’t happen, but someone could have — some criminal mastermind — could have come up with a way to take all of the deposits in that account and put them into another bank account,” Pape said.

Fraud, theft and security risks on the fairgrounds

The audit called out high-risk business activities, incomplete financial processes and internal controls that were missing altogether.

“Policies governing cash controls are in place to keep people from stealing money from the County, but they can also seem redundant or inefficient,” the audit said. “Without documented policies staff may engage in high-risk activities that seem to increase efficiency but also increase the likelihood of fraud.”

The audit described fair and expo employees sharing a single password to access event invoicing and payment software, which is against county policy and produces a significant security risk. However, that was likely the most efficient way for staff to complete tasks at the time, Pape said.

Since the audit began, staff have created their own user profiles, and now only the county’s chief financial officer can change the bank account, the audit said.

“But these improvements did not address the underlying cause, management had not documented data security controls, including system access and who can execute transactions,” the audit said.

Employees — not an auditor — are on the front line when it comes to recognizing fraud or theft, Pape said.

That’s why documented processes are important, Pape said. The audit recommended five measures to address concerns, which included conducting a formal fraud-risk assessment, identifying conflicting staff duties and more detailed documentation of financial processes.

Fifteen-year-old cash-handling problems

Some issues in the center’s cash-handling processes date back almost 15 years, when the last audit took place in 2007, according to the audit.

“Certainly the way we operate today is vastly different than the way we operated in 2007,” said Geoff Hinds, director of the Deschutes County Fair & Expo Center.

The center held almost 270 events last year and saw almost 1 million visitors, Hinds said. The fairgrounds has the capacity to host events as small as a wedding or as large as a music festival.

The audit only looked at cash-handling for the fair and expo center. It did not include an evaluation of funds from the annual fair and rodeo, food and beverage funds or the RV park.

Hinds said the audit is an opportunity for the fairgrounds to evolve.

“We never want to consider ourselves a fully educated organization,” he said. “These efforts allow us to continue to improve and understand.”

Hinds joined as director of the fairgrounds in 2019. Revenue, staff size and interest in the fairgrounds has fluctuated during that time — largely due to the pandemic — but all have increased overall.

Not only has the number of events at the fairgrounds increased in recent years, but the size and scope of those events have too, said Bill Kuhn, a fair board member and the Deschutes County treasurer. As treasurer, Kuhn manages the county’s investment portfolio but is not in charge of the day-to-day financial duties.

“Fair and expo hasn’t been through an audit of this type for quite some time,” Kuhn said.

But that isn’t surprising. The center has been relatively low on the county’s list of priorities for audits. Other funds and departments handle significantly more money and staff.

“We’re all trying to do more with less,” Kuhn said.

All while managing taxpayer dollars, he added.

The county’s internal audit department will be following up on the recommendations with Hinds and fair and expo center staff in nine months, Pape said.

The audit is expected to be discussed at a March 8 county audit committee meeting and at the next fair board meeting, which is scheduled for March 14.