VIRGINIA BEACH — An audit of the Virginia Aquarium & Marine Science Center revealed the city fell short by $3.7 million in revenue last fiscal year, and the city doesn’t have access to the detailed financials of the nonprofit that owns the exhibits and animals.
The review comes on the heels of an intense meeting last week when Virginia Aquarium Foundation President Dan Peterson addressed the council for the first time about the group’s desire to partner with the city on the facility’s future. The City Council, after learning the aquarium needs major renovations to the tune of hundreds of millions of dollars, has been considering leasing it to a private third-party.
City Auditor Lyndon Remias presented the findings to the City Council today.
The audit revealed that the city operating expenditures were nearly $20 million in fiscal year 2024, and the city fell short with a $3.7 million loss in revenue. Despite the shortfall, the city had anticipated a worse scenario, setting aside nearly double that amount as a subsidy in the budget.
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The foundation’s expenses topped out at $5.2 million, but it was able to stay in the black with an estimated $827,000 in revenue after expenses.
The group is not required to provide the city with detailed revenue and expense transactions, according to the audit. One of Remias’ recommendations is to add a “right-to-audit” clause to the agreement between the city and the foundation so that his office can require the foundation to provide those numbers.
At the Aug. 27 council meeting, Peterson said the foundation didn’t provide financial information that’s not required in the agreement because he was not told how the city planned to use it.
“I have a fiduciary responsibility not only to the foundation but to all of our constituents, especially our volunteers and especially our donors, to ensure that that information would be utilized in a manner that takes into consideration the best interests of the foundation,” Peterson said.
Council members are expected to vote Tuesday night on whether to share the cost of an initial $100,000 inspection with the foundation — at the nonprofit’s request — to figure out the extent of renovations needed on three large tanks, which hold shark, seals and sea turtles. The audit recommends moving forward with a detailed assessment.
The city owns the aquarium’s buildings and grounds and operates its facilities. The foundation owns the exhibits and the animals. Funding for the aquarium comes from a variety of sources, including admission fees, memberships, retail sales, grants and sponsorships.
The audit also notes that per the agreement the foundation retains all revenues from concession sales, boat trips and the aquarium’s Adventure Park activities. Remias recommends a review of the revenue distribution given the fact that the city owns the facilities.
Virginia Aquarium currently utilizes 48 acres of land, operates out of three buildings, including one that is closed to the public, and has a visitor capacity of approximately 3,660 per day. It’s key components include marine life exhibits, nature trails, educational programs and research.
Remias recommends that the aquarium’s three animal care accreditations, which are currently held by the foundation, be transferred to the aquarium itself, so that the city can control that aspect, especially since the city pays insurance coverage on the facility. Such a change could also make the aquarium’s animal records available to the public.
The audit also delves into the aquarium’s Stranding Response Team. Its area of responsibility for stranded marine mammals and sea turtles encompasses over 7,200 miles of the state’s coastal shorelines. Remias recommends seeking federal and state funding for the aquarium’s rescue, research and conservation efforts. The foundation’s research and conservation expenditures in fiscal year 2023 topped out at $1.3 million, according to the audit.
Remias also recommended considering the pros and cons of requiring the aquarium director to also serve as the foundation’s executive director as outlined in the agreement.
“Inherently, you’re putting the director in two roles,” said Remias. “That increases the risk, in fact or appearance, of a conflict of interest.”
Part of the review focused on a survey of aquarium employees and foundation members, many of who became unnerved when the city pursued privatization options earlier this year and felt left out of the conversation.
In March, City Manager Patrick Duhaney had recommended that the city continue to engage third parties to figure out what kind of offer can be brought forward while communicating with the foundation. Meanwhile, some aquarium employees resigned amid the turmoil.
Remias’ audit recommends ways to address “low morale.”
“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,” the audit states.
Cynthia Whitbred-Spanoulis, aquarium director, responded to the recommendations in an interoffice memorandum.
“The aquarium leadership team was not significantly involved in the discussions and decisions made over the past year regarding the future of the facility,” she wrote. “For accuracy, the term ‘leadership,’ in this context, should refer to the City Manager’s office.”
The audit was part of a scheduled review of city assets, but several council members agreed it was timely given the ongoing conversations about next steps.
“We should certainly take these recommendations into account,” said Councilman Worth Remick.
Stacy Parker, 757-222-5125, stacy.parker@pilotonline.com
