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Audit Urges Major Reforms of Visitors Bureau Spending

'Extravagant' salaries, perks are cited in draft report that also says city contract with nonprofit agency lacks measurable performance standards.

October 15, 2002|Patrick McGreevy | Times Staff Writer

The Los Angeles Convention and Visitors Bureau's spending on executive salaries, bonuses, luxury travel and meals appears "extravagant," and the city should impose tighter controls to make sure its portion of the budget is spent appropriately, according to a draft audit conducted for the city controller's office.

The audit also says the city contract with the visitors bureau lacks measurable performance standards. As a result, the nonprofit agency has continued to receive city funding despite a steep drop in convention bookings.

"As an autonomous entity with control of millions of taxpayer dollars, the LACVB is not subject to traditional municipal expenditure controls, oversight and disclosure requirements," the 36-page document concluded as it called for major reforms.

The audit was conducted by Sjoberg Evashenk Consulting, and a copy of the draft was obtained by The Times.

City Controller Laura Chick said the final audit will be released late this week or early next week. She declined to comment on the report, and an aide said the draft is subject to change before it is finalized.

"We have not seen the final draft yet, and it would be inappropriate to comment on the audit before the controller completes it and releases it publicly," said Michael Collins, the bureau's executive vice president

The draft audit recommended more than a dozen reforms, including negotiation of a new contract with measurable performance standards. It also said the city should consider appointment of a city official as an ex-officio member of the visitors bureau board to increase oversight.

Bureau board member Lesa Slaughter said she has not seen the draft audit, but said any findings about excessive salaries and spending should be seriously considered.

"There are a number of systemic issues that we have to look at, salaries being just one of them," Slaughter said.

The city gave the bureau $16 million in hotel bed taxes in 2001--about 65% of the bureau's budget--to bring conventions and tourists to Los Angeles, the auditors said.

The bureau also receives funds from the private sector. Auditors said the city has an interest in how the private funds are spent because they should help maximize the city's effectiveness in bringing conventions and tourists to Los Angeles.

The auditors concluded that city funds are used disproportionately to cover administrative overhead, and that there is not enough city control of the entertainment and travel expenses paid for by private funds.

Bureau expenditures of private funds that auditors said "appear extravagant" include:

* Bureau President George Kirkland's $350,000 salary and incentive package for the year examined is "significantly higher" than the $240,000 average paid to chief executives at major convention bureaus nationwide.

* A bureau staff retreat held in the fiscal year 2000-01 that cost nearly $200,000.

* Paid memberships for executives in multiple civic organizations.

* Administrative expense reimbursement for "luxury travel and meals."

The expenditures may be allowable under rules governing private nonprofits, the auditors concluded. But they said the spending "may not be viewed by the city's leaders as the highest and best use of limited funds to achieve the greatest results on behalf of Los Angeles and its residents."

Auditors also questioned the bureau's spending of $250,000 on a dinner at the Dorothy Chandler Pavilion for a convention of professional meeting planners. The expenses may be appropriate, the auditors said, but the city and the bureau should determine whether incentives exceed the amount of taxes generated by events.

City Council members said Monday that the report will be reviewed as the panel begins talks with the bureau to extend its contract, which will expire June 30.

"There is a need for accountability, but I believe for good reason the convention bureau has done a huge amount of good work for L.A.," said Councilman Mark Ridley-Thomas.

Kirkland, who once received a $199,000 bonus, did not return calls for comment.

The audit found bureau compensation for its executives and senior managers is "significantly higher" than the levels of other convention bureaus, and recommended a new salary and incentives study.

The audit noted that 48 conventions have canceled in the last three years, and said some business is lost despite offering huge discounts on convention hall rentals.

Auditors recommended that groups be required to repay the discount if they do not draw enough conventioneers to generate sufficient hotel bed taxes to cover the break on rent.

It also called for improvement of the bureau's Web site, saying it only gets 59,000 visits annually, compared with 400,000 at the Las Vegas convention bureau's Web site and 140,000 in Atlanta.

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