A state legislative committee voted unanimously Wednesday to conduct a far-reaching audit of the nonprofit association that runs the Los Angeles County Fair, a review that will focus in part on executive salaries and whether the organization has drifted too far from its tax-exempt mission of promoting local agriculture.
The Joint Legislative Audit Committee action came in response to a November Los Angeles Times investigation that found the head of the L.A. County Fair Assn. had collected nearly $900,000 in total compensation in 2013. That was the fourth straight year the organization had reported financial losses, according to tax filings.
Over the years, the association has received millions of dollars in government grants and other taxpayer support. The pay and benefit packages awarded to CEO James Henwood Jr. and four of his senior managers dwarfed those of other fair executives in California, Internal Revenue Service records and state figures showed.
"The taxpayers deserve a comprehensive review of the Los Angeles County Fair Assn.'s finances and business practices to find out if public funds have been misused," Assemblyman Freddie Rodriguez (D-Pomona) — who proposed the audit — said in a statement Wednesday. Rodriguez's district includes the roughly 500-acre county-owned fairgrounds known as the Fairplex.
In an email, an association spokeswoman said the organization "will cooperate with the audit as it does with all such requests."
Henwood and other executives have said their pay levels are appropriate and that the organization's red ink reflected depreciation and interest expenses, not a poor financial performance. They also have said the group remains committed to promoting agricultural interests — through, for example, a 5-acre educational farm at the Fairplex as well as vocational programs.
Rodriguez said the examination, which was approved by an 11-0 vote in Sacramento, was expected to get under way March 1 after completion of an audit ordered by the county Board of Supervisors.
"We welcome the state's investigation," Supervisor Michael D. Antonovich said in a statement Wednesday, adding that it would "ensure that the county is receiving its fair share of the revenue generated at this venue."
The association runs a hotel and conference center, a catering company, a trailer park and other businesses at the Fairplex that have little or nothing to do with agriculture.
The annual fair has stopped featuring demonstrations by 4-H clubs and instead emphasizes carnival attractions, concerts and shopping.
State Auditor Elaine Howle said the review would look at the association's spending of public dollars, compensation policies and accounting practices, as well as its nonprofit status.
Henwood and four members of his managerial team collected a combined $2.8 million in bonuses from 2010 to 2013, boosting their total compensation to $8.75 million, IRS records showed. During those four years, the association reported total losses of $6.25 million.
Rep. Norma Torres (D-Pomona) has asked the IRS and the state attorney general's office to launch inquiries into whether the association's tax exemption should be rescinded.
The agencies declined to comment on whether they had opened investigations.