HomeMy WebLinkAboutI. B. REVIEW OF THE VIRGINIA AQUARIUM & MARINE SCIENCE CENTER 9.3.24Review of the Virginia Aquarium & Marine
Science Center
September 3, 2024
Purpose and Scope
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This review focused on the current
operating agreement between the
Aquarium and the Virginia Aquarium
& Marine Science Center Foundation,
Inc. (Foundation).
FY 23
•Sports Center
•Convention Center
•Sandler Center
FY 24
•VB National Golf Course
FY25
•Virginia Aquarium
•Amphitheater
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This Audit is Part of the Scheduled Review Of City Assets
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Background
•The Aquarium opened June 14, 1986, and
began as a 41,500 square-foot facility on a 9-
acre site for a total cost of $8 million and an
800-visitor capacity.
•The Aquarium is now 172,000 square feet,
utilizing 48 acres, and has a daily visitor
capacity of over 3,600.
•The City owns the Aquarium’s buildings,
grounds, and related facilities. Funding for the
Aquarium comes from a combination of
sources, including admission fees, retail store
revenue, memberships, grants, and
sponsorships.
•Education: Educating the public about
marine life and ecosystems through
engaging exhibits, interactive displays, and
educational programs .
•Conservation: Supporting and promoting
marine conservation efforts, both locally
and globally.
•Research: Conducting and supporting
scientific research to advance knowledge
about marine species and habitats.
•Tourism : Being an economic engine for the
City.
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Aquarium’s Mission
Table 1. City Revenue and Expenditures – FY22 Through FY24
Office of the City Auditor 5Source: OFC, Budget, and MLT
Budget Actual Actual Actual
FY24 FY24 FY23 FY22
Revenue:
Operating Revenue 12,883,794$ 15,047,136$ 13,503,440$ 18,224,790$
Admissions Tax 944,125$ 912,776$ 944,126$ 992,126$
Sales Tax (City Portion)147,523$ 159,019$ 147,524$ 151,773$
Total Revenue 13,975,442$ 16,118,931$ 14,595,090$ 19,368,689$
Expenditures:
Operating Expenditures 16,021,491$ 15,420,007$ 14,075,348$ 12,598,950$
Utilities 960,720$ 960,720$ 960,720$ 960,720$
CIP Appropriations 2,818,840$ 2,818,840$ 2,034,540$ 2,034,540$
Debt Service (Estimated Principal)621,741$ 621,741$ 621,741$ 621,741$
Total Expenditures 20,422,792$ 19,821,308$ 17,692,349$ 16,215,951$
Difference (6,447,350)$ (3,702,377)$ (3,097,259)$ 3,152,738$
Foundation
The Foundation was formed and has functioned for many years
for the purposes of:
i.Supporting the Aquarium and its programs;
ii.Acquiring, leasing or otherwise holding real estate
necessary for the purposes of the Aquarium;
iii.Assisting in the identification, acquisition and construction
of exhibits, including the animals comprising such exhibits;
iv.Providing financial support;
v.Receiving gifts, bequests, monies, bonds, grants, scientific
equipment, and objects of art in support of the Aquarium;
and
vi.Increasing public knowledge of the marine environment.
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Table 2.
Foundation
Revenue and
Expenditures –
FY22 through
FY24
Table 2. Foundation Revenue and Expenditures
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FY24 FY23 FY22
City Actual Actual Actual
Total Revenue 16,118,931$ 14,595,090$ 19,368,689$
Total Expenditures 19,821,308$ 17,692,349$ 16,215,951$
Net (3,702,377)$ (3,097,259)$ 3,152,738$
Adjusted for one-time ARPA grant -$ -$ (4,486,715)$
Adjusted Net (3,702,377)$ (3,097,259)$ (1,333,977)$
Sources: OFC and Budget
Foundation Preliminary Actual Actual
Operating Revenue 6,075,832$ 5,358,949$ 5,169,218$
Operating Expenditures 5,248,789$ 4,890,296$ 4,342,236$
Net 827,043$ 468,653$ 826,982$
Sources: Preliminary unaudited
financial information for FY24;
Audited F/S for FY23 and FY22
Combined
Total Revenue 22,194,763$ 19,954,039$ 20,051,192$
Total Expenditures 25,070,097$ 22,582,645$ 20,558,187$
Net (2,875,334)$ (2,628,606)$ (506,995)$
Table 3. Combined Revenue and Expenditures – FY22 Through FY24
Finding 1. Operating Agreement Can Be Enhanced and Clarified
I.Include the Required Right-to-Audit Clause in the Agreement
While the Foundation provided us with the required documents as stated in the agreement,
additional information requested such as detailed revenue/expense transactions was not provided.
Since the required right-to-audit clause was not in the signed agreement, we could not require the
Foundation to provide this additional information.
As a result, we could not review and test internal controls or determine the appropriateness of any
Foundation revenue/expense. A review of these records would have been helpful because all
activities of the Foundation impact the Aquarium, both directly and indirectly.
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Finding 1. Operating Agreement Can Be Enhanced and Clarified
– cont’d.
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II.Review the Distribution of Concessions and Program Revenues and
Expenditures Going Directly to the Foundation Instead of the City.
Although the City is the operator, the agreement requires many operating activities to go directly to
the Foundation, as opposed to the City.
The following revenues and related expenditures, per the agreement, go directly to the Foundation:
•Concessions: Café, vending, catering, Adventure Park, souvenir photos, penny smash
machines, etc .
•Program Revenue: Revenue from temporary exhibits, boat tours, behind-the-scenes tours,
classroom programs, and various specialty programs.
•The only operating revenue split between the Foundation and the City is facility rental
income, which is one of the smaller revenue line items of the Foundation. The City’s share
for FY23 was $25,680.
Finding 1. Operating Agreement Can Be Enhanced and Clarified
– cont’d.
III.Serving in Dual Roles as Aquarium Director and Foundation Executive Director
Presents Inherent Risk
The agreement calls for the Director of the Aquarium to also serve as the Executive Director of the
Foundation.
While the Director has successfully held both roles for many years this requirement inherently increases
the risk, in fact, or appearance, of a conflict of interest.
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Finding 1. Operating Agreement Can Be Enhanced and Clarified
– cont’d.
IV.Accreditation Should Be Done Under the Name of the Aquarium and Not the
Foundation
The Aquarium is currently accredited by three professional organizations:
•Association of Zoos and Aquariums (AZA)
•Alliance of Marine Mammal Parks and Aquariums (AMMPA)
•World Association of Zoos and Aquariums (WAZA)
The City is the owner and operator of the Aquarium and pays all insurance coverage for the
Aquarium, yet the accreditations are under the name of the Foundation
The Foundation covers all costs associated with the Aquarium’s accreditations, including the fees
for evaluation and the preparation of necessary documentation
The Foundation receives and owns the accreditation reports and access to the reports by the City,
as well as the public, is controlled by the Foundation
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Finding 1. Operating Agreement Can Be Enhanced and Clarified
– cont’d.
Recommendations:
City management should work with City Council and the Foundation to address all the issues specified in Finding 1 to include:
•Add City required audit clause (City Code Section 2-468) to the agreement so that the City Auditor can have access to all necessary information while ensuring the confidentiality of donors.
•Review the distribution of concessions and program revenue and expenditures.
•Review the pros/cons of the Aquarium Director and Foundation Executive Director serving in dual roles.
•Ensure accreditation of the Aquarium is done under the name of the Aquarium and not the Foundation.
•Make all necessary changes to update the agreement.
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#Operating Agreement Criteria Finding
1 Section 1 No definitions are listed for "Exhibit", "Temporary Exhibit", and
"Permanent Exhibit".
2
Section 2 states "Subject to the approval of the City Manager
and the Board of Trustees of the Foundation, the Director shall
also serve as Executive Director of the Foundation but shall have
no voting rights with respect to Foundation business or affairs."
Section 13 contradicts this and states the Foundation is not
subject to the control of the City.
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Section 4 states "With the City Manager's approval, the Director
and City employees authorized by the Director may, at the
request of the Foundation, solicit donations on behalf of the
Foundation."
Section 13 contradicts this and states the Foundation is not
subject to the control of the City.
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Section 5 states "Revenues collected by the City in the Aquarium
Store directly from the sale of Foundation merchandise, less any
applicable taxes, shall be remitted by the City to the Foundation
at the end of the fiscal year in which such revenue is received by
the City."
The section is no longer applicable. Foundation merchandise is no
longer sold.
5
Section 5 states "The portion of the revenue from Conservation
Society purchases in excess of the cost of the corresponding
Membership Level benefits included in Conservation Society
memberships shall belong to the Foundation."
The section is no longer applicable. All membership revenue
belongs to the City.
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Section 5 states in part "The City shall operate the Aquarium
admission facilities and sell admission tickets and theater tickets
to the Aquarium and shall receive the revenue therefrom…"
The section is no longer applicable. The IMAX theater is no longer
in operation.
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Section 5 states "The Foundation shall be responsible for, and
shall retain all revenues it receives from, Food and Beverage
Services, boat trips, photo concession, and Adventure Park
activities."
These are common operational functions, yet the City neither
operates nor receives revenue from these activities, despite
owning the land.
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Section 5 states in part "The Foundation shall reimburse the
City, no less frequently than quarterly, for the cost of the salaries
paid through Budget Unit 27029, (Aquarium Foundation)…"
The reimbursement is currently made through Program 28908 and
not 27029.
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Section 7 states "The Foundation shall be responsible for the
operation and maintenance of all Attractions and Concessions,
or contracting for the same, except as may be specifically
designated to be operated by the City in this Agreement or an
amendment thereto."
These are common operational functions, yet the City neither
operates nor receives revenue from these activities, despite
owning the land.
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Section 7 states in part "With the prior written permission of the
City Manager, the Foundation shall be authorized to utilize such
portion or portions of the Park and Entertainment Land and
other property identified in Section 1 of this Agreement..."
Section 13 contradicts this and states the Foundation is not
subject to the control of the City.
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Section 7 states "The Foundation shall be responsible for the
operation and maintenance of the Adventure Park as an
Attraction, or contracting for the same, on so much of the Park
and Entertainment Land or other property as shall be approved
in writing by the City Manager."
Section 13 contradicts this and states the Foundation is not
subject to the control of the City.
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Section 8 states the City shall operate and maintain the
Aquarium and shall repair and, as necessary, replace at its sole
expense, any item, facility, or portion of the building occupied by
the Aquarium that is part of the original or subsequent capital
improvement projects to construct the buildings that constitute
the Aquarium and are funded and constructed by the City.
The Aquarium is not the accredited entity even though the City
operates and maintains the Aquarium.
13 Section 8 Location and Address of Stranding Center The property located at 1213 Southern Boulevard is no longer
used. The property at 1008 Bells Road is now being used.
14 Section 12 states the City shall provide liability insurance
coverage for the Foundation.
The Aquarium is not the accredited entity even though the City
provides liability insurance coverage for the Foundation.
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Section 13 states "The City and the Foundation acknowledge
that neither entity is the agent, employee, partner, joint venture
or associate of the other.”
The City and the Foundation commonly refer to each other as
"partners," this is contradictory to Section 13.
Finding 2: City
Must Work with
State/Federal
Governments to
Seek Additional
Sources of
Funding
City has invested about half a million dollars
annually in operating the DMACC. This building,
which is not available for the public to visit,
functions as a:
1.Rehabilitation center for injured marine
animals
2.Provides crucial acquisition and quarantine
space for all Aquarium animals
3.Serves as a hub for scientific research and
education
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Table 4. Darden Marine Animal Conservation Center Operating Costs
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Although acquisition and
quarantine make up the
majority of operating
costs, stranding response
programs are vital and
reach beyond the borders
of Virginia Beach.
T he Stranding Response
Team’s area of
responsibility for stranded
marine mammals and sea
turtles encompasses over
7,200 miles of the state’s
coastal shorelines.
Recommendation: City management should work with City Council
to include an initiative in the next Legislative Agenda Package to
seek Federal/State funding to further augment the City’s cost of
providing statewide education, conservation, stranding, and
research efforts .
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Stranding Response FY23 FY22 FY21
Marine Mammal Stranding
Response 92 113 79
Sea Turtle Stranding
Response 333 156 213
Sea Turtles Rehabilitated
and Released 79 45 27
Finding 3. Survey and Discussions Reveal Concerns About Morale,
Condition of the Aquarium, and Communication
Morale
•“Short staffed – can’t replace many staff as some won’t take jobs while unsure about future.”
Physical Condition of Facility
•"From an infrastructure standpoint, the North Building is aging. Ceilings leak, guests comment on
how "outdated" we are, and we have to take the criticism with little means to fix the situation."
Communication
•While there are currently two City Council liaisons, this has not always been the case. This has led
to a lack of communication and proper understanding of the status of the needs of the Aquarium.
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Recommendations
1.To address low morale stemming from concerns
about the future of the aquarium, City leadership
should engage in transparent communication,
actively involve employees in strategic planning,
and provide reassurance through clear,
actionable steps that demonstrate a
commitment to navigating challenges together.
2.To address concerns about the longevity of the
building, leadership should proceed with
obtaining a detailed assessment of the building’s
condition, outline any planned maintenance or
upgrades, and ensure ongoing communication to
reassure employees.
3.Continue to annually appoint City Council
liaisons to the Foundation.
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THANK YOU
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