Report No. 2011-59
September 2011
Complete Report
Findings in the audit of the Department of Economic Development, Division of Tourism

Conflicts of Interest
The Tourism Commission has not established a conflict of interest policy for its members, and three commission members took part in funding decisions benefiting entities with which they were associated. While a member of the Commission, the Lieutenant Governor took part in approving funding for Tour of Missouri, Inc. Although it was not disclosed on his 2008 or 2009 Personal Financial Disclosure Statements filed with the Missouri Ethics Commission, the Lieutenant Governor was Chairman of this non-profit entity at the time. Also, the current Chairman and a former member of the Commission participated in discussions and program funding decisions which benefited local tourism agencies they represented.

Fund Management
The Commission and the division budgeted to spend more than available in fiscal years 2010 and 2011. The division paid $4 million of fiscal year 2010 expenditures out of its fiscal year 2011 appropriation and expects to pay $4 million of its fiscal year 2011 expenditures from its fiscal year 2012 appropriation. Planning to spend more than you expect to have available in a year does not make financial sense, especially when additional budget cuts could occur.

Transparency of Expenditures
Rather than paying some vendors directly, the division paid its advertising agency a total of $2.2 million in fiscal years 2009 and 2010 which was passed through to other vendors, reducing the transparency of who actually received the funds. Of this $2.2 million, $1.54 million was passed through to Tour of Missouri, Inc.; $480,645 was passed through to subcontractors for website services; and $141,340 was passed through to vendors for conferences, research and other services. The advertising agency had no involvement in most of these services, so it is unclear why it was used to pass monies through to these other vendors. The division also paid the advertising agency an additional $586,056 for website development services, which were not within the scope of the original bid, without soliciting bids or showing the rates were competitively established.

Oversight
The Commission needs to improve its oversight of division budgeting and expenditure activities. Division budgets were not approved or adjusted promptly, and the division unnecessarily paid $66,000 in administrative fees to its advertising agency because the fees were based on the original fiscal year 2010 marketing budget. The budget lacks detail for payroll expenditures, making it difficult for the Commission to exercise appropriate oversight.

In fiscal year 2009, the division paid $709,794 to Tour of Missouri, Inc., $114,209 to its advertising agency for marketing at the Major League Baseball All-Star Game, and $50,000 to a second-tier subcontractor for marketing various athletic events without specific Commission approval. In addition, the division exceeded the fiscal year 2009 budgeted amount for office furniture by $22,167 and exceeded the budgeted amount for travel by $5,400 in fiscal year 2009 and $12,700 in fiscal year 2010.

Division contracts do not allow for adequate oversight of funds, and the division has not enforced contract terms. In a 2-year period, the division paid over $3.21 million to Tour of Missouri, Inc. without defining what costs were allowable, requiring a list or documentation of actual expenses, or providing for penalties if Tour of Missouri, Inc. did not follow the contract terms. Also, the division has not required its advertising agency to provide annual reports or weekly status reports as is mandated by its contract.

Performance Measurement
The Commission and division have not established formal performance goals and do not fully utilize performance data to measure whether or not chosen strategies are effective. The Commission and division made funding decisions related to its advertising agency, the Cooperative Marketing Program, Tour of Missouri, and Welcome Centers without conducting analyses or studies or measuring how these endeavors helped meet division goals. Having defined goals and measuring progress toward meeting them could help the Commission determine how best to use the division's resources.

Payment of Flight Costs of the Governor's Office
The division paid a total of over $3,000 in fiscal years 2009 and 2010 for travel relating to the Governor's Office. In one instance, there was not adequate documentation of the purpose of the flight or who was aboard. We determined the division paid $842 for a flight to St. Louis to promote the 2009 Major League Baseball All-Star game which included no division officials; $1,130 for a flight related to the 50th Anniversary of Silver Dollar City which included no division officials; and $1,100 for a flight to Branson to honor soldiers which appeared to include the Division Director. It appears these flights were primarily related to functions of the Governor's Office rather than tourism, and, therefore, should be paid out of the Governor's Office appropriations so as not to distort the operating costs of the division and the Governor's Office or interfere with the General Assembly's appropriation process.

In the areas audited, the overall performance of this entity was Fair.*

American Recovery and Reinvestment Act 2009 (Federal Stimulus)
During the fiscal year ended June 30, 2010, the division used $3.1 million from the Federal Budget Stabilization-Medicaid Reimbursement Fund to fund general operations.

Complete Audit Report
Missouri State Auditor's Office
moaudit@auditor.mo.gov