OFFICE OF THE AUDITOR

Transcription

1 OFFICE OF THE AUDITOR VEND ONE, INC. REVENUE AND CONTRACT COMPLIANCE AUDIT FEBRUARY 2008 Dennis J. Gallagher Auditor

2 Dennis J. Gallagher Auditor City and County of Denver 201 West Colfax Ave., Dept. 705 Denver, Colorado , FAX February 21, 2008 Kevin Patterson, Manager Ms. Kimberly Bailey, Manager Mr. Larry Anderson, CEO Department of General Services Department of Parks and Recreation Vend One, Inc. City and County of Denver City and County of Denver 6723 E. 50 th Avenue Commerce City, CO Dear Mr. Patterson, Ms. Bailey, and Mr. Anderson: Attached is the Auditor s Office Audit Services Division s revenue and contract compliance audit report of Vend One, Inc. s contract dated September 16, The audit was for the period January 1, 2004 through December 31, The purpose of the audit was to determine whether Vend One, Inc. and the City and County of Denver complied with the terms of the contract and whether internal controls in place were adequate. The audit revealed reportable weaknesses related to revenue reporting, internal controls, and contract compliance. These weaknesses are disclosed in detail within the accompanying report. If you have any questions, please contact Kip Memmott, Director of Audit Services Division at Sincerely, DJG/kh Dennis J. Gallagher Auditor cc: Honorable John Hickenlooper, Mayor Honorable Members of City Council Members of Audit Committee David Fine, City Attorney Lauri Dannemiller, City Council Staff Director Kelly Brough, Chief of Staff Claude Pumilia, Chief Financial Officer Chris Henderson, Chief Operating Officer Beth Machann, Controller The prudent stewardship of Denver s finances, resources and financial records! We are also committed to improving accountability, efficiency, effectiveness and performance in city government. We will scrupulously protect the taxpayer s interests and work collaboratively with all concerned to improve our city and its government 1

3 TABLE OF CONTENTS Transmittal Letter 1 Table of Contents 2 Auditor s Report 3 Executive Summary 4 Background, Scope, Objective, and Methodology 6 Findings, Recommendations, and Responses 9 Schedule of Amounts Due and Paid and Related Notes 14 Exhibit A - Vend One Response 16 Exhibit B - Purchasing Division Response 21 Exhibit C - Parks and Recreation Response 25 2

4 Dennis J. Gallagher Auditor City and County of Denver 201 West Colfax Ave., Dept. 705 Denver, Colorado , FAX AUDITOR S REPORT We have completed a revenue and contract compliance audit of the agreement dated September 16, 2002 between Vend One, Inc. (Vend One) and the City and County of Denver (City). The purpose of the audit was to determine whether Vend One and the Purchasing Division of General Services (Purchasing) complied with various terms and conditions of the contract as well as City rules and regulations. This audit was included in the Auditor s Office Audit Services Division s 2007 Annual Audit Plan and is authorized pursuant to the City and County of Denver Charter, Article V, Part 2, Section 1, General Powers and Duties of the Auditor. We conducted our audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance that Vend One and Purchasing complied with the terms of the concession agreement. An audit includes examining, on a test basis, evidence supporting compliance with the contract and City rules and regulations. The audit disclosed Vend One did not comply with certain terms of the contract related to revenue and financial reporting. With respect to Purchasing, we noted weaknesses in internal controls related to monitoring and enforcing all contract provisions. We extend our appreciation to the personnel who assisted and cooperated with us during the audit. Audit Services Division Date: February 21, 2008 Staff: Dick Wibbens, CPA, Audit Manager Philip Cummings, CPA, CFE, Audit Supervisor Mike Widner, Lead Auditor Manijeh Taherynia, CPA, Senior Auditor Kip R. Memmott, CGAP, CICA Director of Audit Services The prudent stewardship of Denver s finances, resources and financial records! We are also committed to improving accountability, efficiency, effectiveness and performance in city government. We will scrupulously protect the taxpayer s interests and work collaboratively with all concerned to improve our city and its government. 3

5 VEND ONE, INC. EXECUTIVE SUMMARY FOR THE PERIOD JANUARY 1, 2004 THROUGH DECEMBER 31, 2006 This summary highlights the revenue and contract compliance audit findings of the Vend One, Inc. contract which focused on proper reporting of gross revenues, timeliness of payments due the City, and compliance with other contract terms. The audit disclosed Vend One was not in compliance with certain contract provisions related to revenue reporting, timely remittance of payments due, insurance coverage, and financial reporting. Additionally, Purchasing did not effectively monitor the vendor s performance pertaining to timeliness of payments and financial reporting requirements. Further, Parks and Recreation did not adequately monitor compliance with the requirements concerning mural projects. The Findings and Recommendations section of the report beginning on page nine further describes these issues in detail. The responses from Vend One and Purchasing to these findings are contained in Exhibits A & B, respectively. The response from Parks and Recreation is shown in Exhibit C. Finding I - Underreported Revenue VEND ONE Our test of snack revenue disclosed Vend One underreported snack revenue by $2,096 for the period June 1 through December 31, As a result, the vendor owes the City $314 for the underreported snack commissions as well as late payment interest charges of $41. We recommend the vendor reconcile total snack revenue to the amount shown on reports generated from the vending machine software and check the accuracy of calculated snack commissions. Finding II - Interest Penalties on Late Payments Our audit revealed the City received 11 out of 12 quarterly payments of guaranteed annual fee later than the due date specified by the contract. As a result, the vendor owes the City interest penalties of $2,515 on these late payments. We recommend Vend One utilize certified mail to guarantee payments are submitted by the contract due dates. Finding III - Contract Compliance Issues We noted the insurance certificates submitted by Vend One lacked contractually required workers compensation coverage for the period June 1, 2005 through December 31, Also, the vendor failed to provide annual statements of revenue prepared and certified by a certified public accountant (CPA), as required by the contract. Inadequate insurance coverage increased the City s risk of potential third party liabilities. In the absence of CPA certified statements, the City could not obtain adequate level of assurance that revenues from all vending machines were properly recorded and reported. We recommend the vendor carefully review the contract and the amendatory agreement and take necessary measures to comply with all provisions. 4

6 EXECUTIVE SUMMARY VEND ONE, INC. VEND ONE AND PARKS & RECREATION Finding IV - Unresolved Issues for Mural Projects According to the contract, the vendor is required to fund the creation of two murals per year at City parks. The locations and content of the murals are determined by the Manager of Parks and Recreation or a delegate. However, the contract does not stipulate any specific dollar amount for these projects. Our audit inquiries determined that from January 1, 2003 through December 31, 2006, Parks and Recreation completed a total of four murals at City recreation centers. While the vendor paid the City $6,000 for mural projects on May 31, 2006, we did not identify any documentation between Parks and Recreation and the vendor indicating agreement as to whether this payment satisfied the terms of the contract. In fact, as of date of this report, the parties disagree as to whether the vendor has fulfilled this contract requirement. We recommend Parks and Recreation and the vendor meet to resolve these issues and document their agreements related to pending and future obligations. Finding V - Contract Monitoring Issues PURCHASING Purchasing did not closely monitor Vend One s performance to ensure full compliance with the contract provisions. We noted the agency did not time stamp all payments and quarterly financial reports submitted by the vendor to ensure timeliness and follow up on past due payments and reports. Additionally, the agency did not identify snack revenue reporting errors on the vendor s submitted revenue reports for a six month period in Further, the agency did not maintain copies of the insurance certificates or request the vendor to submit an annual statement of revenue certified by a CPA. We recommend Purchasing develop and utilize an effective method to track due dates, date stamp receipt of all payments and financial reports, follow up on late payments and reports, and retain all documentation required by the contract. 5

7 VEND ONE, INC. BACKGROUND, SCOPE, OBJECTIVE, AND METHODOLOGY FOR THE PERIOD JANUARY 1, 2004 THROUGH DECEMBER 31, 2006 Background Vend One entered into an agreement with the City on September 16, 2002 to exclusively provide beverage and snack vending products at certain City facilities. The contract extends through December 31, 2017, but may be terminated after October 1, 2007, without cause by the City or the vendor upon 90 days written advance notice. The contract was amended on February 7, 2003 to clarify provisions related to the commencement date, auditing, and interest charges on late payments. The list of locations, number of machines to be installed and product pricing were stipulated in the original contract. However, the actual machine number and locations have been updated. Most of the beverage and snack machines were installed by early 2003 and a few machines were subsequently removed due to low sales. As of December 31, 2006, a total of 188 beverage machines and 31 snack machines operated under the contract. Since the inception of the contract, the Mayor s Office of Economic Development (MOED), Public Office Buildings (POB) and General Services - Purchasing have been charged with monitoring the contract. Purchasing was the primary monitoring agency during our audit period. However, Parks and Recreation has monitored the vendor s performance related to the creation of two murals per year at City sites. All machines only accept cash payments. By December 31, 2005, all snack machines were equipped with a computer capability that allows plugging a handheld reader into the vending machine for a few seconds during service visits to download stored sales data. This technology eliminated manually recording sales data. Beverage machines still rely on the vendor to record sales data from an installed meter. Vend One operates the snack machines and subcontracts beverage machine operations to Coca Cola Enterprises Bottling Co. (Coca Cola). Vend One receives beverage sales reports and related payments from Coca Cola and submits them to Purchasing with the payments. The contract payment terms consist of the following: Vend One must pay a guaranteed annual fee of $200,000 in four quarterly installments of $25,000 for the first three quarters and $125,000 for the last quarter. For beverage sales, Vend One submits commissions from Coca Cola on the basis of 25% and 30% on sales of 12 oz and 20 oz beverages, respectively, after the sale of 24,000 cases. The reported number of cases sold during our audit period never reached this threshold. As a result, the vendor did not pay beverage commissions. Vend One pays commissions of 15% from the sales of snack products. 6

8 BACKGROUND, SCOPE, OBJECTIVE AND METHODOLOGY VEND ONE, INC. The contract requires the vendor to make three additional commitments for charitable and community service purposes. These requirements are as follows: Vend One provides 500 tickets annually to establish a local youth night at Coors Field, or like promotion with similar value. Vend One funds the creation of two murals per year at City parks, as determined by the Manager of Parks and Recreation. Vend One designates one month per year in which it will donate to one or more charities of the Director of Purchasing s choice, five cents of every case of carbonated and non carbonated Coca Cola sold in all Denver stores of a major retailer. The contract also requires the vendor to submit quarterly revenue reports and annual statements of revenue certified by a CPA, and maintain certain amounts of insurance for general business and automotive liability, and workers compensation. Scope The audit of the Vend One Inc. contract (PeopleSoft fund/org / ) was for the period January 1, 2004 through December 31, The audit focused on evaluation of control over collecting cash, proper reporting of revenue and stock sold, and timeliness of payments of guaranteed annual fees and commissions. The audit also examined the vendor s compliance with insurance, financial reporting, and the three charity related commitments described above. Objective The objective of our audit was to determine whether the vendor was in compliance with the terms of the contract, revenue was properly reported, and all amounts due were paid in full and in a timely manner. We also assessed Purchasing and Parks and Recreation s performance in monitoring the contract and their compliance with City rules and regulations. Methodology The evidence gathering and analysis techniques used in order to meet the objectives included, but were not limited to: Collection of information about the number of machines placed in operation during the audit period Observation and evaluation of inventory counts and cash collection process for snack and beverage machines Evaluation of internal controls over recording and reporting cash from vending machines Reconciliation, on a test basis, of cash reported from snack machines to meter readings and data retrieved electronically using handheld computer Review snack commission calculations for accuracy and completeness 7

9 BACKGROUND, SCOPE, OBJECTIVE AND METHODOLOGY VEND ONE, INC. Verification of payments due for guaranteed annual fee and snack commissions Analysis of relationship between reported number of stock sold and cash reported from beverage machines during the audit period to ensure reasonableness of reported number of cases sold Testing of computer processed data Determination of timeliness of payments Discussions with management Review evidence of insurance and compliance with additional requirements related to charity and community services Review and verification of required reports 8

10 VEND ONE, INC. FINDINGS AND RECOMMENDATIONS FOR THE PERIOD JANUARY 1, 2004 THROUGH DECEMBER 31, 2006 Finding I - Underreported Revenue VEND ONE, INC. Our tests of snack revenue determined the vendor failed to report revenue from three snack machines in the amount of $2,096 for the period June 1 through December 31, As a result, the vendor underpaid commissions of $314 to the City and incurred related late payment interest penalties in the amount of $41. The contract requires the vendor to provide a quarterly report of all sales from vending machines within 15 days of each quarterly payment. The vendor must pay snack commissions of 15% on a quarterly basis. Also, the contract allows the City to assess late payment interest of 18% per annum if the vendor does not submit payments by the fifth calendar day following the quarterly reporting due date. Recommendation: In order to ensure accuracy and complete recordation of snack revenue and commissions, we recommend the vendor verify all machines operating at City locations are included on the revenue reports. The vendor should review and reconcile the total revenue generated by these machines to the vending software reports and make any necessary adjustments. Also, the vendor should verify the accuracy of the snack commissions prior to submitting the payments to the City. The vendor should remit payment to the City of $314 in underpaid snack commissions and $41 in related late payment interest. Purchasing should collect these amounts in a timely manner. Finding II Interest Penalties on Late Payments Our audit determined that the vendor submitted 11 of 12 quarterly payments for the guaranteed annual fee after the contract due date as evidenced by either the time stamp or issuance date of the check. The days late ranged from four to 224 days. As a result, the vendor owes the City a total of $2,515 in late payment interest fees. The contract requires the vendor to submit three quarterly payments of $25,000 each and one payment of $125,000 for a total of $200,000 related to the annual fee. The vendor must submit these payments by the 15 th day of the month following the end of each calendar quarter. Recommendation In order to ensure the City is paid according to the terms of the contract and avoid interest charges, we recommend the vendor implement an accounts payable reminder procedure and 9

11 FINDINGS AND RECOMMENDATIONS VEND ONE, INC. submit each payment through certified mail or hand deliver to Purchasing. The vendor should account for all payments from both their snack machines and from beverage sales received from their subcontractor, Coca Cola. The vendor should remit payment to the City of $2,515 in late payment interest charges. Purchasing should collect this amount in a timely manner. Finding III Contract Compliance Issues Based upon our examination of insurance policies, we noted the vendor did not submit a certificate of insurance with coverage for workers compensation for the period June 1, 2005 through December 31, Appropriate types and levels of insurance protect both the vendor and City from potential liability claims from third parties. We also noted Vend One failed to submit annual statements of revenue prepared and certified by a CPA for the years ended December 31, 2004 through Accurate and certified financial statements provide the City with additional assurance the vendor is reporting gross revenue in accordance with the terms of the contract. Contract provisions require Vend One to keep specific levels of workers compensation during the term of the contract. Additionally, the contract requires the vendor to submit an annual statement of revenue prepared and certified by a CPA by February 28 th following the end of the previous calendar year. Recommendation In order to protect the City from potential claims by third parties, we recommend the vendor review their insurance policies in accordance with the coverage required by the contract. The vendor should submit new insurance policies to Purchasing to resolve any current deficiencies. In order to provide the City with accurate and timely information related to their financial records and performance, we recommend Vend One submit the required certified statements of revenue to Purchasing by the February 28 th due date for 2007 and each year thereafter for the term of the contract. VEND ONE, INC. AND PARKS & RECREATION Finding IV Unresolved Issues for Mural Projects Section 4(b) of the contract states the vendor shall fund creation of two murals per year at City parks, the location and content to be directed by the Manager of the Department of Parks and Recreation or his/her authorized representative. This is all the direction, monetary requirements, and detail presented in the contract related to this mural project. 10

12 FINDINGS AND RECOMMENDATIONS VEND ONE, INC. Audit work determined that there were no murals initiated by Parks and Recreation during the first three years of the contract, 2003 through As a result, Vend One did not provide any funding for the contractual mural project requirement during this same time period. Under the terms of the contract, by the end of 2005 six murals funded by Vend One should have been created by Parks and Recreation. However, we did not identify any communication or evidence of discussions between the two parties regarding this matter for the first three years of the contract. During the summer of 2006, local artists and children in art programs designed and created four individual murals at Glenarm, Montebello, Green Valley, and College View recreation centers. On May 31, 2006, the Deputy Manager for Recreation received a check for $6,000 as payment for the murals from Coca Cola, the subcontractor to Vend One and supplier of the beverage concessions. However, no documentation was provided detailing any estimated or actual costs for any or all of these murals and Parks and Recreation did not issue any invoices to Vend One for the costs of these murals. Subsequently, in March of 2007, Parks and Recreation sent Vend One a letter regarding budgeted costs for two additional murals in the amount of $2,500 each as part of summer programs for However, no documentation or communication was provided indicating that the vendor responded to the request or that Parks and Recreation conducted any follow up to the initial funding request. According to Parks and Recreation personnel there were no murals created during With respect to monitoring compliance with the contract provisions, Parks and Recreation failed to initiate mural project for 2003 through Available internal correspondence between Parks and Recreation personnel indicate a lack of defined roles and responsibility, knowledge about the intent and terms of the contract, and of effective communication with the vendor regarding detailed budget estimates and actual costs for completed murals. At this date, Vend One has indicated they do not recognize this provision as an ongoing contractual obligation. Recommendation: Currently, it appears both Parks and Recreation and Vend One are at an impasse with respect to the mural project. In retrospect, it is obvious that the contract provision lacked sufficient details with regard to time lines, party obligations, due dates, and especially specific dollar amounts to be funded by Vend One. It is also clear that there has been a lack of effective and timely communication between Vend One and Parks and Recreation. Nonetheless, the contract requires annual obligations and responsibilities for both Vend One and Parks and Recreation to create murals at City parks. Moreover, the mural project provides creative and beneficial activities to the summer youth programs of the Denver recreation centers. 11

13 FINDINGS AND RECOMMENDATIONS VEND ONE, INC. Therefore, we recommend the Manager of Parks and Recreation and the Operations Manager of Vend One or their delegates meet to discuss a resolution to the current impasse and an equitable method to promote and continue the mural project. The meetings should attempt to resolve past amounts paid or due by the vendor, provide the structure and detail for the program that is lacking in the current contract, define time tables and obligations for each party, and construct the manner in which effective communication can be achieved by both parties throughout the life of the contract. All meetings should be memorialized in writing and all resolutions and future plans fully documented. The two parties should explore whether a new contract amendment is necessary to resolve past differences and disagreements over future obligations. Finding V - Contract Monitoring Issues PURCHASING Our audit of the contract between Vend One and the City noted Purchasing did not fulfill their responsibility in monitoring and enforcing the vendor s compliance with several contract requirements. We identified the following four contract items where Purchasing needs to increase their monitoring efforts: a. Purchasing did not obtain or maintain copies of the vendor s insurance policies in their files nor did they note that the vendor did not have adequate insurance coverage for workers compensation. b. Purchasing did not consistently date stamp receipt of the vendor s quarterly snack and beverage financial reports, guaranteed annual payments, and commission payments during the entire audit period. We noted 25 of 44 (79%) of these reporting documents and payments maintained in Purchasing s files lacked a date stamp. c. Purchasing did not thoroughly review all of the vendor s revenue reports for completeness and accuracy. Our audit disclosed $2,096 of underreported snack revenue during a six month period in 2006 related to omission of three machines from the revenue reports as discussed in Finding No. 1 for Vend One. Also, some of the beverage revenue reports lacked sufficient information related to the number of cases sold for that period. d. Purchasing did not monitor or enforce vendor compliance related to submitting a certified statement of annual revenue during the audit period. Also, four of the quarterly beverage revenue reports in the files maintained by Purchasing during our audit period could not be located. Recommendation We recognize that the contract does not clearly assign vendor compliance responsibility to Purchasing nor does Purchasing normally monitor vending revenue contracts. We believe other 12

14 FINDINGS AND RECOMMENDATIONS VEND ONE, INC. personnel within the Department may be better suited to perform these duties and recommend the Manager of General Services evaluate the feasibility of assigning other divisions within the Department, such as Asset Management, this assignment. However, under the current situation, we recommend Purchasing take the following steps to increase vendor compliance and accountability with respect to this contract: a. To protect the City against potential liability claims from third parties, we recommend Purchasing obtain all required insurance documents from the vendor and review them for appropriate types and adequacy of coverage under the terms of the contract on at least an annual basis. All insurance policies should be monitored for timeliness, date stamped upon receipt, and maintained in the vendor s file. If necessary, Purchasing personnel should contact qualified employees from Risk Management or the City Attorney s Office to assist with the document review process. b. In order to ensure vendor compliance with timely financial reporting requirements and to accurately assess interest for late fee and commission payments, we recommend Purchasing assign personnel to monitor contract due dates for these documents and time and date stamp each one upon receipt. Further, we recommend Purchasing copy all vendor payment checks before deposit and keep all required documents in the vendor s files. Additionally, we recommend that Purchasing notify the vendor in a timely manner regarding any past due financial reports or payments and assess interest charges for payments received after the contract due date. c. In order to help ensure reliability of financial information and to accurately determine amounts due the City for fees and commissions, we recommend Purchasing assign qualified personnel to review all financial reports for completeness, compare revenue amounts with past quarterly reports for reasonableness and trends, and recalculate the vending commissions due the City. Personnel should periodically compare their list of machine numbers and locations with those presented with the revenue reports. Purchasing should contact the vendor if there are omissions or discrepancies in the revenue reports or commission amounts. d. In order to assist Purchasing in determining the reliability of the quarterly revenue reports, we recommend personnel mandate that the vendor submit the certified annual report of gross revenues by the contract due date each year. The agency should reconcile these statements to the quarterly reports for the year and report any variances to the vendor for resolution. The certified statements and revenue reports should be maintained in the vendor s files for historical trends and reconciliations. 13

15 VEND ONE, INC. SCHEDULE OF AMOUNTS DUE AND PAID FOR THE PERIOD JANUARY 1, 2004 THROUGH DECEMBER 31, 2006 (Note 1) (Note 2) Revenue Category Amount Due Amount Paid Balance Due 2004 Guarantee Annual Fee $200,000 $200,000 $ - Snack Commissions 19,261 19,261 - Late Payment Interest Penalties Total: $220,025 $219,261 $ Guarantee Annual Fee $200,000 $200,000 $ - Snack Commissions 17,763 17,763 - Late Payment Interest Penalties Total: $218,725 $217,763 $ Guarantee Annual Fee $200,000 $200,000 $ - Snack Commissions 20,578 20, Late Payment Interest Penalties Total: $221,408 $220,264 $1,144 The accompanying notes are an integral part of this schedule. 14

16 NOTES TO SCHEDULE OF AMOUNTS DUE AND PAID VEND ONE, INC. 1. Amounts Due A. Guaranteed Annual Fee - In accordance with Section 3(a) of the contract and Paragraph 3 of the amendatory agreement, guaranteed annual fee in the amount of $200,000 is payable in four quarterly installments of $25,000 for the first three quarters and $125,000 for the last quarter. B. Snack Commissions According to Section 3(c) of the contract and Paragraph 4 of the amendatory agreement, snack commissions of 15% are due quarterly on cash collected from all sales of snack from the vending machines. C. Late Interest Penalties Paragraph 4 (d) of the amendatory agreement states any payment not made when due shall accrue interest at the rate of 18% per annum, commencing on the 5 th calendar day after the due date. 2. Amounts Paid Amounts paid include those billed and/or due during the audit period and collected in the ordinary course of business whether or not within the audit period. 15

17 EXHIBIT A VEND ONE, INC. RESPONSE 16

18 EXHIBIT A VEND ONE, INC. RESPONSE 17

19 EXHIBIT A VEND ONE, INC. RESPONSE 18

20 EXHIBIT A VEND ONE, INC. RESPONSE 19

21 EXHIBIT A VEND ONE, INC. RESPONSE 20

22 EXHIBIT B PURCHASING RESPONSE 21

23 EXHIBIT B PURCHASING RESPONSE 22

24 EXHIBIT B PURCHASING RESPONSE 23

25 EXHIBIT B PURCHASING RESPONSE 24

26 EXHIBIT C PARKS AND RECREATION RESPONSE VENDONE, INC. AND PARKS & RECREATION Responses to Findings and Recommendations Finding IV Unresolved Issues for Mural Project Monitoring and ensuring compliance with the Mural Project aspect of this agreement was difficult due to several factors. As stated in the findings, the contract language related to the Mural Project was not specific but Parks and Recreation was not a party to the contract negotiations so we are unable to respond to this finding. In addition, Parks and Recreation is not a signatory on the agreement and therefore is not the primary Agency responsible for compliance matters. During the term of the agreement, Parks and Recreation was in communication about the Mural Project with both the vendor and the city agencies primarily responsible for compliance with this contract s provisions. Multiple attempts were made to bring Vend One into what the department felt was appropriate compliance with the Mural Project terms of the agreement. Parks and Recreation acknowledges that much of this communication was verbal and should have been memorialized in writing. Recommendation P&R agrees with the recommendations. P&R will initiate a meeting with the vendor to attempt to identify and resolve the issues related to past, present, and future contractual mural requirements. P&R will also provide the vendor with a detailed schedule of costs for each individual mural and attempt to come to an agreement regarding the monetary range of the annual mural funding requirement. If a contract amendment is initiated, P&R will attempt to clarify the contractual requirements regarding the vendor s obligation to annually fund murals. 25