Audit Raises Questions on Whether CVB Owes Refund to County, Poorly Drafted Contract by Collins Administration to Blame for Financial Discrepancy
Comptroller’s Office Also Notes Comparatively High CVB Salaries, Above Average Hotel Occupancy Rates, and Surprising Amount of Influence County Executive Has Over CVB Board
ERIE COUNTY, NY—Today, Erie County Comptroller Mark Poloncarz released the findings of an audit of the Buffalo Niagara Convention & Visitors Bureau, Inc. (“CVB”) for the period of January 1, 2008, through June 30, 2010.
The CVB is a New York not-for-profit corporation formed in 1987 to encourage tourism within Erie County and to promote the County as a convention, film and entertainment location. While the CVB is not a department or an administrative unit of Erie County, it receives a majority of its operating revenues from the County and is, therefore, subject to audit from the Erie County Comptroller’s Office.
The audit’s primary goal was to determine how much of CVB’s annual budget is derived from the County and whether CVB and the County were in compliance with the terms of their contract. Our office determined that the County provided CVB 83% and 86% of the revenues for its annual budget in 2008 and 2009, respectively. Of specific concern, was whether CVB ended each fiscal year with a surplus because CVB is required to refund any annual surplus back to the County. Our office determined CVB did, in fact, end 2008 and 2009 with a surplus; however, CVB disagrees with such finding because the contract’s terms are confusing and vague.
Poloncarz explained, “Because of the confusing way this contract was written, it is possible to argue that CVB ended 2008 and 2009 with a surplus, or as CVB argues, it ended each year with a deficit. CVB and its external auditor agreed with our conclusion that this contract is poorly written. They also agreed with our recommendation that language for future contracts should be changed to reflect the specific accounting method used by CVB to calculate its surplus or deficit.”
Additionally, auditors identified several other issues requiring remediation including: (1) CVB has failed to file certain required reports with the County; (2) CVB board meeting minutes are not always approved; (3) Certain CVB board members are not recorded as present at board meetings and could be removed for cause; (4) CVB did not hold a formal, annual meeting in years audited; and (5) bidding procedures for purchases are not defined.
Additionally, auditors made several noteworthy discoveries when making comparisons among CVB and other, like, convention and visitor bureaus in the Northeast:
- CVB spent more, as a percentage of total expenditures, on salaries (53%) than all but one of the other bureaus in our sample group;
- Less is spent by CVB per hotel and room to advertise the region compared to most of the other, like, organizations in our sample group;
- There is no standard hotel occupancy tax (“Bed Tax”) rate assessed on hotel rooms, nor is there a standard percentage of hotel bed tax provided by the underlying governments to other bureaus in our sample group;
- Erie County has consistently had a higher hotel occupancy rate than the national average; and,
- The CVB has one of the highest levels of government involvement compared to other bureaus from our sample group, with the county executive directly appointing six (6) board members with the potential to influence an additional three (3) members. This would mean the county executive can potentially influence nine (9) members, two (2) short of the eleven (11) votes needed for a majority.
“One of the largest complaints I have heard from local hotel owners is that there are ‘too many’ rooms and, by extension, too much competition for service in Erie County. This was voiced to me when hotel operators requested a reduction or suspension of the Bed Tax collection in late 2009, which request I rejected,” said Poloncarz. “Although, Erie County does have more hotel rooms than all but one of the comparable areas, the actual number of rooms, itself, is not an indication that there are ‘too many,’ as can be seen by the higher than the national average occupancy rate.”
Poloncarz also noted, “In comparison to other convention and visitor bureaus, which have little to no governmental influence, the County Executive has a tremendous amount of influence over the CVB’s activities. While Erie County provides a significant portion of the CVB’s revenues, it does not benefit the community to have a convention and visitors bureau that is subject to the political winds of the day.”
Since 2006, the comptroller’s office has conducted more than 50 major audits and reviews of Erie County’s departments, related entities and issues facing residents, which have identified more than $27 million in cost savings. Under Poloncarz’s leadership, the Audit Division has been shaped into an Inspector General-style organization that stops and prevents waste, fraud and abuse of county taxpayers’ dollars and was honored by the Association of Local Government Auditors with their prestigious Knighton Award for small audit departments in 2007.
The entire audit can be read at: http://www.erie.gov/comptroller/pdfs/CVB%20Audit%20Final%203-2-2011.pdf