HONOLULU -- The Hawaii Visitors and Convention Bureau's response to
a critical state audit involved apologies, as officials promised to
repay the state for funds spent on what the audit termed
inappropriate personal expenses and lobbying. The issue places the
HVCB in a precarious position as its contract comes up for renewal
at the end of the month.
An undisclosed amount in state funds was spent to research and
lobby against a bill dictating that responsibility for marketing
the Hawaii Convention Center -- and the $4 million contract that
went with it -- be taken away from the HVCB and be given to
Philadelphia-based SMG. The account was awarded to SMG Jan. 1.
The Hawaii Tourism Authority, charged with setting tourism
policy and contracting out to the HVCB, is sharing the hot
seat.
In addition to poorly constructed contracts, "the authority's
lax monitoring and enforcement of its contracts with HVCB left
little assurance that $151.7 million in state funds were
effectively spent to promote Hawaii as a visitor destination,"state
auditor Marion Higa reported in a seven-hour HTA meeting July
16.
An 11-page item-by-item rebuttal from HVCB supplemented verbal
testimony. The bureau apologized for misuse of funds and pledged to
move forward to correct shortcomings.
Board members vehemently defended the value and integrity of the
HVCB, and resignations of key figures were never addressed.
"The relationship [between HTA and HVCB] has been "a bit too
close and informal," said HVCB chairman Tony Guerrero, who admitted
this might have caused several problems regarding contracts and
record keeping.
"We want to get more clarity in there more than anybody,
really," said HVCB president and CEO Tony Vericella.
Vericella said many improvements have already been made in the
first half of this year.
"Right now we have identified some weaknesses and we are ready
to work with everybody to address them," said former HVCB board
chairman Chris Resich.
He added that the HTA needs to decide if HVCB will operate as a
private or a state entity because there are "huge differences
between the two, and a lot of points in the audit had to do with
those differences."
Accounting anomalies such as $1 million accrued in 2001 to an
advertising company for services that were performed the following
year occurred several times.
The audit also revealed $191,000 in state contract funds on
questionable expenditures that "violated HVCB's own travel and
entertainment policies," said Higa, citing a culture where "it
seemed to be okay to cheat here and there."
The report concluded that Vericella used state funds to pay for
traffic tickets and hotel in-room movies, that one employee
received a severance pay of $141,000, nearly equal to the
employee's annual salary, and that an airline representative who
earned $80,000 per year from HVCB and $8,000 a month from Japan
Airlines -- when he was supposed to be an advocate for all airlines
-- created the appearance of conflict of interest.
In addition, the bureau lacked a system for formal evaluations
of its subcontractors. Instead, it relied on personal relationships
and oral communication to determine their effectiveness.
HVCB paid $2 million for advertising services in 2002, with no
written agreement or scope of services. And of the 25 contracts
reviewed in the audit, HVCB documented its evaluation of only
two.
State tourism committee chairwoman Donna Mercado Kim said she
has asked the auditor to retain all records "in case the
legislature wants to pursue an investigation."
A legislative mandate requires the state to audit HTA's major
contracts every five years.