WALLA WALLA — A recently released State Auditor’s report found city officials didn’t properly monitor the use of hotel-motel tax funds in 2012 when they failed to receive regular quarterly reports from Tourism Walla Walla.
“The City of Walla Walla is not monitoring its contracts with Tourism Walla Walla and does not have internal controls to ensure restricted funds are used properly,” the 2012 audit stated.
Each year, the city turns over approximately $600,000 in hotel-motel taxes to Tourism Walla Walla, a private nonprofit.
Walla Walla is audited every year. The audit report generally takes a year to complete. The 2012 audit reviewed landfill, water, ambulance billing, patrol, self-insurance, restricted funds, payment securities, credit card transactions and various city contracts. The only finding against the city for 2012 was that it failed to obtain quarterly reports from Tourism Walla Walla.
In the last five audits, the city had only one other finding. In 2010, auditors found the city lacked proper safeguarding of property assets, which was resolved.
That money must be used specifically for tourism promotion, strategic planning or the support of tourism agencies, according to state law.
In their findings, auditors reviewed a sampling of 21 Tourism Walla Walla expenditures totaling $55,304. Their finding stated that city officials did not have the required reports, invoices and documentation for seven of the expenditures worth a total $11,090.
In a response, city officials conceded that they had not received quarterly reports from Tourism Walla Walla for 2012.
Deputy City Manager Tim McCarty noted, however, that Tourism Walla Walla was struggling that year to retain a permanent executive director.
“It was just a godawful year. There were four directors and they didn’t have any continuity,” McCarty said.
Even though the city lacked the quarterly reports, McCarty said Tourism Walla Walla’s use of hotel-motel tax funds was highly scrutinized by board members.
“That board is all over those monies. They are eagle eyes and they are all over how that money is spent,” McCarty said.
He added that the contract between the city and Tourism Walla Walla only required quarterly reports be turned over but not individual receipts for every expenditure. But that policy will now change to meet auditor’s expectations.
“We are going to be auditing every invoice associated with the lodging tax and probably every Tourism Promotion Area invoice too,” McCarty said.
While the one finding was specifically for failing to follow its own contract and obtain quarterly reports, auditors made several notes in their documents to the city where they questioned the appropriateness of expenditures.
In one comment, auditors reviewed a $1,000 catered board meeting and La Porte Brune and wrote, “Large bill for the size of the board, no indication it was a special meeting.”
McCarty noted that annual board meetings tend to be longer and larger in attendance, but added he would request details from Tourism Walla Walla on that expenditure.
Tourism Walla Walla board chairman Scott Peters said the nonprofit holds an annual meeting each year that averages around 50 to 75 attendees.
“They are not extravagant,” Peters said, noting the annual meetings are catered. “I had just joined the board, but I think the turnout was pretty good because it was at the Power House Theatre.”
Two other questioned invoices were for two credit cards payments: $2,259 in March and $2,511 in July.
In their notes, auditors wrote that the March credit card expense appeared to be for a trade show in Santa Clara, Calif. As for the July credit card expense, they wrote the documents “included just a few notes indicating lunch with a journalist, several of the charges were not accounted for.”
McCarty said city policy is to scrutinize every credit card expenditure, but Tourism Walla Walla was not under the same commitment because it operates as an independent nonprofit and was only obligated to turn over quarterly reports.
“There was an absolute level of trust but there was also a level of engagement,” McCarty said, noting that board members were aware of what the expenditures were going toward. But he added the city will require Tourism Walla Walla to include receipts for all credit card expenses, and he will ask for the two questioned credit card expenditures so he can examine them.
“We will look at the ones (credit card payments) that were pulled up. And going forward they are not going to get their check unless we see those invoices,” McCarty said.
Auditors also questioned a March travel expense to Portland for $769, commenting “no supporting documentation was attached with the reimbursement request form.”
McCarty said he would ask Tourism Walla Walla to supply documentation for the travel expense.
The last three questioned expenditures were for $750 spent on the Walla Walla Valley Farm Map, $2,300 paid to Smith Travel Research for lodging trade studies and $1,500 to cover the cost of 10 downtown hanging flower baskets.
In the case of the flower baskets, auditors commented: “How does this promote tourism?”
McCarty said there is no question to him or board members that the map, lodging study and flowers are all in support of tourism.
Tourism Walla Walla Executive Director Ron Peck, who joined the organization in the spring of 2013, said he couldn’t comment on the 2012 expenditures because they occurred before he was hired.
He also explained that board retreats — all-day strategic planning work sessions — include meals and facility rental costs.
“I have been here since March. The only thing I can say that we have had is in November we had a two-day retreat,” he said, referring to a catered board meeting. “And the total cost for that, including meeting space and two meals, was less than $610.”
Peck said he would work with city officials to produce any invoices or other documents requested.