UDC to act on recommendations from audit of St Ann attractions

Senior staff reporter

Friday, January 04, 2019

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THE Urban Development Corporation (UDC) says it will, within two weeks, act on recommendations coming out of an independent forensic audit into allegations of fraud and corruption at Dunn's River Falls and Park and two other tourist attractions managed by the St Ann Development Company (SADCO).

The UDC-commissioned audit has uncovered significant long-term fraud control failures, financial misstatements, insufficient processes, and gaps in information technology controls at the attractions, which are managed by the UDC subsidiary. The audit was initiated in response to long-standing allegations of fraud and corruption at the attractions.

The UDC said the two boards have already taken immediate action to address the key findings that will help to limit the risk of leakage and instil a culture of accountability and transparency at Dunn's River Falls and Park, Ocho Rios Bay Beach and Pearly Beach.

According to the audit report, which the UDC released yesterday, its financial risk is estimated from half a million United States dollars to more than $1 million in annual revenue if the measures are not implemented to address the situation.

“The UDC's decision to share the findings were in the spirit of transparency and accountability since delivering the report and recommendations to the relevant authorities, and taking further steps to remedy the long-standing allegations of fraud and corruption at Dunn's River Falls and Park, in particular,” the Government agency said in a statement yesterday.

The corporation said that it had performed a high-level trend analysis of ticket sales, which highlighted inaccurate or inappropriate activity, and that it was based on this and other factors that it commissioned the audit to probe and analyse, among other things, high-risk areas such as free ticket distribution, resident versus non-resident ticket sales, advanced payments, and tour operator tiers for 2014-2018.

The report said the investigations had identified 32,000 communications “of interest”; analysed documents included in e-mail attachments and computer images; carried out forensic analysis on server e-mail for SADCO management, and 15 computers and mobile devices from eight unique custodians.

The auditors pointed out that in at least one instance, the investigation was intentionally impaired: “One individual provided a test phone for imaging rather than the individual's company-issued device on inventory. When the individual eventually provided their device, the majority of content appeared to have been deleted.”

The report said that when documentation was requested to substantiate transactions, including revenue and expense figures for the three locations, management and staff said these were not available.

It said the following documents could not be provided: resident tickets; information to support resident ticket volumes; tour operator contracts; and information regarding event pricing.

The report said events are not consistently priced, pointing to allegations of fraud and corruption in the pricing of events, specifically at Pearly Beach. It said revenue for events is documented at approximately US$150,000 annually, but the data was not available regarding event attendance.

“Therefore we were unable to agree whether revenues collected were appropriate. Further, event details used to develop event price quotes could not be provided upon request. The event register, a log of monthly events, was not consistently documented. Management indicated it was not maintained if no events occurred,” the auditors said.

At the same time, the auditors report that proof of authorisation for free ticket issuances are not retained, and that tickets for Ocho Rios Bay Beach are printed as free with no documentation to support actual free tickets versus paying customers.

The audit also found that while resident ticket sales for the Dunn's River attraction have grown by 67 per cent year over year, compared with seven per cent for non-resident and prepaid ticket sales, no evidence was available to validate the accuracy of the resident classification. Resident ticket sales increased from 126,000 to 210,000 annually from 2016 to 2017.

The report pointed to allegations that cashiers, in some instances, collected non-resident ticket prices and entered resident ticket sales into the point-of-sale system. It said similar allegations were raised regarding adult and child tickets.

It outlined that: “Evidence is not maintained to support resident ticket sales figures and interviews indicated that certain local holidays are exempt from resident verification. While wristbands are printed based on ticket data input into [POS], no control exists to prevent cashiers from selling resident tickets and collecting payment for non-resident tickets. Specific supervisors and cashiers issue significantly higher volumes of resident tickets than the overall average.”

If growth rates were made consistent across all classes of ticket sales, annual revenue could have been $300,000 to $400,000 higher, the auditors asserted.

“Contracts for tour operator volume requirements and discounts could not be provided and have not been renegotiated in at least 14 years,” the report also outlined.

Tour operator tiers determine the discounted price at which they purchase tickets, with tier five having the most favourable rates, and tier one the least favourable.

“The threshold to achieve a tier-five rating is currently 12,000 tickets per annum, or 1,000 tickets within an individual purchase. Of the 26 tour operators noted as active in (the point of sale system), 15 qualify as tier five with average quantity sales of over 30,000 tickets, representing 96 per cent of pre-paid ticket sales. This suggests that the thresholds used should be re-aligned with current trends”.

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