Critical Audit Report On Chattanooga Visitors Bureau Was Never Released

Monday, June 19, 2017

A critical audit of the Chattanooga Visitors Bureau by a staffer at the county auditor's office was never issued, but the office instead substituted one that found no problems at the agency that this fiscal year is slated to get $8.2 million in hotel/motel taxes.

Jenneth Randall, who became county auditor when Bill McGriff retired, said, "A number of people have worked on the audit in question; drafting, writing, revising, editing and reviewing before producing the finished product."

The staffer's report says the CVB was out of compliance on a requirement that it submit periodic reports to the County Commission and the county mayor's office on spending of the total county portion of the visitor tax.

It says: There is no record of reports being received by the County Commission, county finance department or County Auditor's office during the time period in question. State law states that "any non-profit organization which desires financial assistance from the county legislative body or governing body of the county shall file with the county clerk a copy of the annual report of its business affairs and transactions which includes, but is not limited to, a copy of an annual audit, its program which serves the residents of the county, and the proposed use of the county assistance."

That audit stated that Bob Doak, CVB president, on Jan. 6, 2016, said in an email, "During the last nine years we have kept the County Mayor and the County Commission updated on the status of Tourism. I also deliver a State of the Industry address during our annual luncheon."

It said: The CVB is non-compliant with this provision of the resolution.

The audit that was released said: According to Bob Doak, the County Mayor and the County Commission have been updated on the status of tourism. Mr. Doak also delivers an annual "State of the Industry" address. Although written reports were not located, per Bob Doak, written reports were submitted. This office requested and received all reports deemed necessary for a review including audited financial statements from Wilkins, Crews & Associates, P.C.

Both reports noted that Chattanooga tourism economic benefits have increased, according to Mr. Doak, from around $650,000 in 2005 to over $1 billion.

At the same time, hotel/motel tax income to the agency went up sharply - going from under $4 million in 2008 to over $8 million in the upcoming fiscal year. The CVB gets some additional income from membership charges and advertising.

The staffer report says the Knoxville Visitors Bureau in 2014 reported getting $2.5 million in government aid and achieving $988 million in tourism economic benefit. The total Knoxville budget was $4 million.

It says Huntsville was operating on about $2 million and claimed it had reached the $1 billion tourism impact plateau.

The report says Nashville has a budget of over $20 million and claims $5 billion in tourism dollars.

The staffer audit says the CVB fell short by more than $1.4 million in covering a requirement to fund the net operating deficit of the Carter Street Corporation that runs the Convention Center. It said city officials had no knowledge they had an obligation to pay 50 percent of the operating loss, but had paid amounts based on budgets submitted annually by Carter Street.

That report says the city in 2012 stopped funding the Sports Committee, which is now housed with the CVB. It says the CVB "funds more than the equal amount without explanation."

The audit that was not issued says the CVB had net losses in 2013 and 2014. The loss in 2013 was $573,945 and in 2014 was $66,602. It says the CVB increased salaries in 2013 by 24 percent though revenues decreased by four percent.

It says the CVB spent $22,790 on local restaurants in 2011 and that was up to $43,400 three years later.

The staffer report listed "other expenses that came to our attention which we believe should be disclosed. Those included Fresh Market $1,500, Grandview Catering $3,219; Hair a Go Go $190, Pin Strikes $1,102, The Spa at the Chattanoogan $1,222, SQ Young Sugar's Catering $2,570, Shoe Department $76, Black Creek Club $696, City of Dalton Golf $356, Six Flags $489, Colorado Springs $85.20 and Jax Liquor $300.

None of those items were in the audit that was released.

The staffer report said CVB travel was over $121,000 for July 2013 to the end of June 2014.

"More noteworthy expenses" included Miami Hilton $992, Atlanta Marriott $996, Grand Rapids $1,573, Los Angeles $1,449, Milwaukee Marriott $2,009, Des Moines Marriott $1,333, Toronto Westin $1,232, Oklahoma City Renaissance $1,668 and $2,428, Phoenix Renaissance $2,717, Santa Monica Redwood Grill $3,000, Los Angeles Sheraton $1,167, Atlanta Maggianno's Italian      $400, Nashville Maggianno's Italian $500, Oklahoma City Renaissance $3,384, Chicago Hilton $1,545, Tucson Loews $2,652, Nashville Maggianno's Italian $954, Nashville Maggianno's Italian $1,023.

This was all left out of the released audit.

The staffer report says, "The travel-related expenses increased significantly in 2014 from 2011 as revenues also went up substantially. There was quite a bit less of out-of-town lodging expenses during 2011 as well as restaurant costs."

The staffer audit also disclosed that during 2013 the CVB obtained a $350,000 loan from SunTrust Bank. Mr. Doak said the funds were used for a new Visitors Center.

The report also said that "several CVB past and present board members have done business with the CVB." 

CVB officials say the travel is necessary to help line up more conventions and events in Chattanooga and say business is conducted over lunches.

County Commission Finance Chairman Tim Boyd, who has been looking into spending at the CVB, said, "I confronted Ms. Randall about the time and efforts I had been spending on reviewing the CVB and told her that I should not be having to spend my time to expose the mismanagement of the hotel/motel tax. I expect her department should be letting the commissioners know of all the questionable activities.  She explained to me that her department was not tasked with reporting on how the CVB used the hotel/motel tax money, but only with '...resolution (207-27) compliance.'

"Her answer and attitude make me feel uncomfortable with any audit report coming out of her office.  This is exactly why Senator Todd Gardenhire had legislation passed this past session to have the state look into the CVB's activities.

"I am disappointed that Ms. Randall did not report what her staff had uncovered about the CVB.  In fact, I was told that she was asked if the 2015 CVB bank statements could be reviewed, and she instructed a staff member to stop investigating the CVB.

"If her department is not going to expose the questionable use of tax dollars, who in county government is?"

Click here to read the Internal Audit.

Click here to read the County Auditor's report.


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