A review of the agreement governing the relationship between the city and Virginia Aquarium’s foundation found some operational gaps, but didn’t offer any more clarity on how a private owner could take over the city’s role.
City Auditor Lyndon Remias reviewed the 2019 agreement between Virginia Beach and the Virginia Aquarium Foundation that lays out how the two entities should work together to operate the Aquarium.
The review is part of a multi-year audit schedule of several of the city’s assets.
While the city owns the Aquarium’s building and grounds, the foundation raises money for it, paying for things like the animals and exhibits. Remias said the setup described in the agreement is “muddled,” but could be fixed.
“It could easily be un-muddled just by clarifying roles,” Remias said. “Because ideally you do want one organization that runs and operates and then one that serves as a fundraising arm.”
The city said last year it was looking at handing the aquarium over to private owners after they were told the facility needed $250 million in renovations and repairs. Since then, there have been some public discussions and movements that appear to favor exploring private ownership, but the official city word is that it’s on pause.
“The timing is probably good to have your opinion at the same time we're looking at these other issues, and now we can look at all of it together,” City councilmember Barbara Henley told Remias at a council meeting.
Remias’ report didn’t go into which body should have authority over decisions related to the aquarium — he emphasized several times his office only reviewed what is laid out in the current agreement — but it did suggest a number of changes.
Even though the city owns the Aquarium, the majority of the money spent inside the building goes directly to the foundation, the review says.
That includes money from concessions, catering, temporary exhibits, tours, classroom programs and souvenir photos.
The city and foundation share facility rental income “which is one of the smaller revenue line items of the foundation,” the audit report says. The city, for example, received $25,680 from Aquarium facility rentals last fiscal year.
Audit staff wrote the city and foundation should review the distribution of these funds.
According to the audit, in two of the last three years, the city has spent $3 million more on maintaining the Aquarium than it was making. The single year it wasn’t operating in the negative was a year it received funding through the American Rescue Plan Act, Remias said.
The foundation operated with a small profit of just under a million dollars annually over the last three years.
Combined, the Aquarium has operated at a net loss for the last three years, Remias said.
Financial information in the audit was limited because the foundation didn’t turn over all the requested information, Remias wrote in the report. His office requested detailed revenue and expense transaction information, but that’s not required to be disclosed under the 2019 agreement between the city and foundation, so it wasn’t provided.
“Because we only received limited documentation, we could not review and test internal controls or determine the appropriateness of any Foundation revenue/expense,” Remias wrote. “A review of these records would have been helpful because all activity of the Foundation impacts the Aquarium, both directly and indirectly.”
Known issues — like the need for state funding to support the Aquarium’s stranding response and rehab program — were noted.
But issues within the Aquarium were also highlighted, many of them exacerbated by the unresolved discussions about the institution’s future.
Staff reported in a survey some employees have left because they don’t know what the fate of the Aquarium will be and replacing them is difficult for the same reason.
One comment noted some exhibits have been the same for decades, while another noted when visitors comment on aging parts of the building, employees don’t have information on when things will get repaired.
“With the aquarium's ownership in question, I fear that the exhibits will remain outdated until that question is answered,” the employee wrote.
Remias told the Council the survey made it clear staff don’t want to commit to a place where the future is unknown.
“There’s a human aspect to it, these are our employees, they feel it,” he said.
Aquarium director Cynthia Whitbred-Spanoulis responded to Remias’ report in writing.
She wrote Aquarium leaders shared staff’s confusion: “To clarify, the Aquarium leadership team was not significantly involved in the discussions and decisions made over the past year regarding the future of the facility.”
Following the Aquarium audit presentation, Virginia Beach leaders agreed to pay up to $50,500 for a facility inspection at the Aquarium to evaluate the condition of tank exhibits. That, with the audit, is part of the city’s process of getting more information about the operation model at the Aquarium and needs at the facility.
