Overview
Numerous deficiencies in billing and settlement records went undetected by the Authority. As a result of these problems, the Authority cannot be certain that MGM Springfield is properly accounting for all event revenue and expenditures.
We reviewed a random sample of 33 event folders, containing the billing and settlement records for 16 convention center rentals, 11 entertainment events, 4 hockey games, and 2 community events, and found the following problems.
Convention Center Rentals
- Eight of the 16 events had at least one advance payment made after the contract due dates (though before the events). The numbers of days late ranged from 3 to 214. The dollar amounts ranged from $500 to $13,200.
- Three of the 16 events had advance payments received after the contract due dates and after the events. The numbers of days late ranged from 5 to 81. The dollar amounts ranged from $13,500 to $25,400.
- Nine of the 16 events had discrepancies between the billable hours submitted by the staging vendor on MassMutual Center (MMC) manual time logs to the event manager and the billable hours later invoiced by the staging company.
- Fourteen of the 16 event folders were missing documents such as event contracts, event cost estimates, third-party invoices, advance deposit invoices and proof of payment, and invoice approval forms.
- For 12 of the 16 events, invoice approval forms were not properly completed and/or approved.
Entertainment Events
- Five of the 11 event folders were missing documents required for billing, such as event contracts and license agreements, third-party invoices, and invoice approval forms.
- Ten of the 11 invoice approval forms were not properly completed and/or approved.
- Two of the 11 events were not insured sufficiently: one was uninsured, and one was underinsured by $1,000,000.
Hockey Events
- None of the four invoice approval forms was properly completed and approved.
- Two of the four hockey events had discrepancies between the billable hours submitted by the staging vendor to the MMC event manager and those invoiced by the staging vendor and paid by MGM Springfield.
- Final payments for two of the four hockey events were made late (i.e., more than 15 days after the invoice date). A $10,375 payment was 36 days late, and an $8,931 payment was 228 days late.
Authoritative Guidance
Section 16.2.3 of the management services agreement (MSA) between the Authority and MGM Springfield for MGM Springfield to manage the MMC states that the Authority’s contract administrator “shall be responsible for the monitoring and assessment of the quality of services provided by the Manager [MGM Springfield] and contract compliance by the Manager.”
Section 2.2.2 requires MGM Springfield to do the following:
Use the previously approved . . . user/rental agreements and license agreements. Manager shall not materially deviate from the terms contained in such forms without obtaining the prior approval of the Authority.
The approved agreements include requirements for timely receipt of deposits and rental fees.
Section 2.2.9 requires MGM Springfield to ensure the following:
That all material vendors and licensees of the Facility execute vendor/license agreements containing standard indemnification and insurance obligations on the part of each such vendor/licensee.
Finally, Section 2.2.15 requires MGM Springfield to “maintain detailed, accurate and complete financial and other records of all its activities.”
Reasons for Issue
At the beginning of the audit period, MGM Springfield fully assumed the responsibility of managing the MMC from Spectra Venue Management. This transition resulted in turnover in several positions that were responsible for billing and settlement activities. In addition, the Authority did not ensure that MGM Springfield had financial policies and procedures to clearly articulate day-to-day event billing and settlement requirements for MMC events. Therefore, the Authority could not monitor the quality of services provided by MGM Springfield consistently throughout the audit period.
Recommendations
- The Authority and MGM Springfield should complete and implement financial policies and procedures to oversee billing and settlement of events at the MMC.
- The Authority should monitor the settlement and billing process to ensure compliance with these guidelines.
Auditee’s Response
The Authority and MGM Springfield have taken several significant steps to improve financial activities and procedures at the MassMutual Center and these efforts were already underway during the audit period. These improvements included changes related to MGM Springfield organization chart and staffing plan for the MassMutual Center as well as updating and revising the MassMutual Center’s manual for financial reporting and controls. The Authority previously provided the auditor team with evidence of these efforts which demonstrate the Authority had already been implementing steps that are now recommended in this report. The Authority takes the suggestions noted in this audit very seriously, and it is important to note that there has been no material loss to the Authority.
Itemized below are policies and procedures that have been implemented and demonstrate the improvement in MGM Springfield’s reporting and controls over the audit period:
- MassMutual Center Management Manual: October 2018 version and updated June 2019 version with change in organizational structure to better staff and provide the adequate oversight/controls by MGM Springfield at the MassMutual Center.
- “Procedure for Invoicing & Collection of Event Advanced Deposits & Final Payment” to streamline the event billing process and ensure adequate backup documentation is included in all event folders. This procedure will mitigate delays in advance payments collections and ensure accuracy with contracted timelines and amounts.
- “Event Invoice Approval” form and “Procedure for Event Folder Completeness” to ensure all necessary documentation is included in event folders as well as all reviews/signatures by department heads are obtained. Final review is done by the MGM Springfield’s General Manager and Finance Manager to confirm all requirements have been met.
- Weekly Update: Additionally, in August of 2019 a copy of all weekly updates that MGM Springfield sends to the Authority was provided to the State Audit team. These weekly updates include a Finance section which details the new policies and procedures that were being implemented and their progress during the audit period. Examples directly from the weekly reports include such activities as:
- “Created revenue/cost reconciliation for third party services billed to clients”
- “Updated event advanced deposit tracking sheet and sent out all deposit invoices for upcoming events”
- “Creating standardized workflow for monitoring and communicating open purchase orders/accruals with management”
Auditor’s Reply
The Office of the State Auditor (OSA) acknowledges that during the audit, Authority officials told us that they were taking steps to improve financial activities and procedures at the MMC. However, as noted above, during our audit period, the Authority’s and MGM Springfield’s controls over the financial activities we reviewed were deficient, and they resulted in the deficiencies in billing and settlement records that we identified and disclosed in this report. OSA acknowledges that the transaction amounts in question may not be material in terms of the total dollar amount of the transactions MGM Springfield processed during the audit period. However, the numerous exceptions we identified indicate significant control deficiencies that could result in material billing errors and other errors occurring and going undetected. It is important that such deficiencies be identified and corrected in a timely manner.
Based on its response, the Authority has taken measures to address our concerns in this area.
| Date published: | February 16, 2021 |
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