Audit Division
Audit Summary
Commission on Tourism
Division of Tourism
Report LA96-23
Results in Brief
Weaknesses in the Division of Tourism's financial management practices
have led to inappropriate use of contracts, improper payments, and unnecessary
costs. The State Budget Act, State Accounting Procedures Law, and the State
Administrative Manual dictate how agencies should account for transactions
involving state funds and how contracts should be awarded. However, the
Division of Tourism circumvented these requirements, resulting in payments
for prohibited items, increased risk of abuse, lack of state control over
expenditures, and faulty contract award processes.
During fiscal years 1994 and 1995, the Division spent over $4 million for
contractual services. This was 37% of its total expenditures; therefore,
it is critical that the Division have adequate control over its contract
management practices.
Principal Findings
1. The Division circumvented the state system of budgetary and accounting
controls to make $44,000 in payments to employees, vendors, and contractors.
Many payments lacked adequate supporting documentation and some were for
items such as gifts and gratuities, which are prohibited by state administrative
policy. (page 9)
2. Contractors were allowed to begin work prior to approval of their contracts
by the State Board of Examiners. Almost $90,000 in services were provided
before the contracts were approved. (page 14)
3. Payments totaling over $20,000 were made to contractors for services
not based on terms of the approved contracts. (page 14)
4. By misclassifying $55,000 in transactions, the Division violated state
law. Funds were not spent according to the budget requests submitted and
authorized by the Legislature. These misclassifications also resulted in
payments to contractors exceeding the maximums approved by the State Board
of Examiners. (page 15)
5. Contractor bid requests and evaluations were not always documented and
lacked information of how successful bidders were selected. (page 17)
6. The Division did not adequately evaluate whether persons working under
contract should have been classified as independent contractors or employees.
(page 19)
Commission on Tourism
Division of Tourism
Auditor's Comments on Agency Response
The Division of Tourism, in its response, does not agree with certain of
our findings and conclusions. The following identifies those sections of
the report where the Division has taken exception to our position. We have
provided our comments on the Division's response to assure the reader we
believe our findings and conclusions, as stated in the report, are appropriate.
1. On page 24, the Division states that it disagrees that any laws may
have been broken.
Legislative Auditor's Comments
The audit specifically identifies several violations of state law, including:
NRS 353.090 requires every claim for payment from the State be presented
to the State Board of Examiners (see page 10). Because $44,000 in payments
to employees, contractors, and vendors were processed through the Division's
advertising contract, the State Board of Examiners was not given the opportunity
to review these claims.
NRS 284.173(6) requires each contract with an independent contractor to
be submitted to the State Board of Examiners. Further, it states that contracts
do not become effective without the prior approval of the Board. On page
14, the audit states that the Division paid almost $90,000 for services
provided before obtaining the required Board approval. Contractors were
allowed to work under 10 different contracts which had not been approved
by the Board.
The State Budget Act (NRS 353.215(4)) requires agency expenditures be broken
down into such classifications as the Chief of the Budget Division of the
Department of Administration requires. The State Accounting Procedures
Law (NRS 353.293(a)) requires agencies to establish a system of accounting
that presents fairly and with full disclosure the financial position and
results of operations in conformity with generally accepted accounting
principles. On page 15, the audit states that the Division misclassified
a total of $55,000 of transactions during fiscal years 1994 and 1995. These
misclassifications resulted in circumventing budgetary restrictions and
reporting unreliable and inaccurate information about the Division's financial
operations.
2. Also on page 24, the Division states it will work with the Legislature
to clarify and strengthen the language in the law so that the successful
mission of the Commission can continue unabated, yet mitigate the accounting
procedural conflicts raised through this audit.
Legislative Auditor's Comments
Based on the Division's comments, it appears it does not plan to implement
recommendation number 1 (see page 20). Instead, the Division wishes to
change its status through legislation. This may allow the Division to continue
operating in much the same way it was during the audit.
We believe current state laws already provide appropriate controls and
allow enough flexibility for the Division to fulfill its mission. The Division
should work with the Budget Division of the Department of Administration
and the Legislature under current laws to ensure its budget accurately
reflects the types of expenditures it feels are necessary for its mission.
This information would assist the Division, the Budget Division, and the
Legislature in making decisions regarding the costs of unusual expenditures.
(See page 13.)