Missing receipts from credit card spending, a lack of reports to the Hamilton County Commission and inadequate documentation for the use of gift cards from local businesses were some of the faults a state audit released Wednesday found with the Chattanooga Convention and Visitors Bureau (CVB).
Detailed receipts were not kept for 36 percent of the $378,298 in credit card charges made by the CVB from July 2015 through June 2016, the audit said.
During that period, the CVB spent $48,537 on meals and entertainment for out-of-town clients, along with $14,163 for business lunches and other dining that only involved Chattanooga-area residents.
"I was kind of shocked by the amount of undocumented receipts," said Tennessee state Sen. Todd Gardenhire, R-Chattanooga, who authored the legislation that triggered the state audit.
"In private business, you have to produce those receipts. The IRS demands it," Gardenhire said. "I also was shocked that they hadn't been following the county procedures."
While some CVB expenses may appear lavish or questionable compared to county government departments, the audit said, the expenses might be considered reasonable or necessary within the tourism promotion and recruitment industry.
The CVB, which gets more than 80 percent of its funding from the county's hotel room tax, needs to be transparent about how it handles tax dollars, said Comptroller Justin P. Wilson, whose office issued the report.
"The Chattanooga CVB receives nearly all of its funding from hotel and motel taxes," Wilson said. "It's vital that taxpayers have confidence that this money is used to promote the CVB's mission. That assurance can be achieved if employees are following detailed policies on how money should be spent."
Even the staunchest supporters of the CVB weren't happy about itemized receipts not being kept.
"Yes, it bothers me," Hamilton County Mayor Jim Coppinger said. "And yes, I've had discussions with [CVB's] executive board."
Tennessee Aquarium CEO and President Keith Sanford, who's the treasurer of the CVB board, said the audit's concerns are being addressed.
"We just met yesterday, the full [CVB] board, and talked about this," Sanford said.
Since July, CVB employees have been required to turn in itemized receipts, he said. However, Sanford doesn't expect the CVB will make those receipts public record.
The CVB gets gift cards from local businesses in exchange for advertising on the CVB website, the audit says, and the gift cards are given to employees to use for entertaining clients and to cover other expenses incurred.
But the audit said there's no log of gift card activity and no reconciliation of the expenses incurred on the cards.
"The gift card thing, I didn't know about. But that is now being reconciled. A log is being kept," Sanford said.
No reports to county
Overall, the state audit found the CVB's operational policies and procedures are very general.
The Comptroller's Office believes more detailed policies should be adopted. For example, when local meals are allowable, what's a reasonable amount for employee retirement gifts, and the appropriateness of other miscellaneous expenses.
The audit cites a county resolution that says the CVB had to make "regular and periodic written reports to the Hamilton County Mayor and Board of Commissioners of its efforts" but says that auditors weren't able to find any written reports.
"We're going to do an annual report to the county commission each year," Sanford promised.
Overall, Sanford felt the state audit — which concluded that "no obvious, material instances of waste or abuse were noted" — was positive.
"I don't see a whole lot here [in the audit] which is really bad stuff, except the receipt piece, which I'm really not comfortable with," he said, explaining that an itemized receipt would show such things as how much room service was ordered by a CVB employee staying at a hotel.
Longtime CVB President and CEO Bob Doak, who last month announced he'll retire at the year's end, said government rules for receipts and spending are different than for those who are engaged in selling and promoting the city to tourists and trying to recruit conventions.
"Government certainly has their own rules, but we operate under the standards of the industry we work with," Doak said.
CVB has a 25-employee staff, about half of whom travel, Doak said. Going to trade shows and other promotions events, he said, is critical for building tourism business. The audit showed last year CVB spent $66,884 on employee travel and another $48,537 on client meals and entertainment.
"A lunch meeting is a great way to get business done," Doak said.
State audit 'a good thing'
Gardenhire thinks that in addition to a new CEO, the CVB could use new board members. At close to 40 board members, some people don't even know they've been named to the board, he said.
"New leaders — not the old ones who got us into this position," the state senator said. "I think they need to get new leadership. I think they need to restructure the board."
County Commissioner Tim Boyd, who's been critical of the CVB's spending, thanked the state comptroller's office and said its audit validated many of the concerns he and others have raised.
"What is important now is the path of the cooperation that the commission, the county mayor and the CVB board chooses to follow going forward," Boyd said.
Coppinger said the CVB's board includes people who are not only leaders in the community, but in their industry.
The board includes hotelier Mitch Patel, the founder, president and CEO of Chattanooga-based Vision Hospitality Group, and Ken DeFoor, who with his brother Byron DeFoor recently opened The Westin hotel downtown.
"I have a tremendous amount of confidence in the board," said Coppinger, who credits the CVB for helping make tourism a $1 billion industry in the Chattanooga area that he credited with creating 8,500 jobs.
Coppinger thought the state audit should have a good effect on the CVB.
"At the end of the day, [the audit's] a good thing," Coppinger said. "There's no doubt they've been lax on their internal controls."
TFP Business Editor Dave Flessner contributed to this report.
Contact staff writer Tim Omarzu at firstname.lastname@example.org or www.facebook.com/MeetsForBusiness or on Twitter @meetforbusiness or 423-757-6651.