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May 9, 2012 Door County Tourism Zone Executive Committee Minutes
DOOR COUNTY TOURISM ZONE
EXECUTIVE COMMITTEE MEETING
Minutes of May 9, 2012 10:00 a.m.
Village of Egg Harbor Offices, 7860 Highway 42
Committee Members Present by Roll Call: Bob Kufrin, Bill Weddig, Bryan Nelson, Jeff Larsen, Dick Skare and Josh Van Lieshout
DCVB Board Members Present by Roll Call: Jack Moneypenny, Bob Dickson, Jerry Zaug and Jennifer Laughlin.
Also in Attendance: Kim Roberts, Administrative Assistant
Call to Order
Chair Bob Kufrin called the meeting to order at 10:01 a.m.
Kufrin began the meeting with a review of the history of the original entity agreement that was agreed to in June or July 2007. The DCTZC had been operating for a while and had made the move to contract with the DCVB as a marketing entity. The original agreement structured the flow of money on a reimbursement basis to the DCVB. Through the Intergovernmental Agreements at the time, the DCTZC would report back to the municipalities stressing the need of reporting from the DCVB. Under the original agreement, the DCVB and the DCTZC operated for two (2) years.
The first changes to the original agreement allowed for the change of distributions on a disbursement basis. The DCVB was providing financial reports facilitated by DCVB operations. With this change, the cash flow was better for the DCVB. Essentially the money was paid out as the money came in. During this time, the DCTZC had minimal reserves; the DCTZC was not collecting enough room tax to pay bills. Every year the DCTZC holds funds from the DCVB for cash flow. In the first year of this practice, $75,000 was held to build reserves.
The original premise was to try room tax for five (5) years and allow it to demonstrate its worth. Municipalities that participated had the option of pulling out at the end of the five (5) year period. In this time period, the room tax had to demonstrate the value of money to the DCVB for marketing. The existing Intergovernmental agreement ran for five years and then just continues unless any participant gives six (6) months’ notice to pull out. 2011 was the five-year deadline and everyone continued their participation. Now the agreement continues on a year-by-year basis. The agreement shows the value of the partnership, countywide marketing and the success in providing information to the municipalities.
Bob Dickson said he would like to see the Chair at the municipalities’ board meetings to help with the flow of information to the local board level.
Kufrin responded that the five-year program is a success and the numbers suggest that the marketing is working. He also noted that the six (6) year relationship with the DCVB has had its ups and downs. The DCVB over the years has had complaints and or challenges with the DCTZC due to the DCTZC’s micromanaging and difficulty in creating expectations for the DCVB. Early on in the relationship, the complaints of micromanaging came from not knowing who was responsible for what internally with the DCVB. This problem has gotten better over time.
Weddig offered that everyone felt an obligation to be a part of where the money was going. He referenced the December 2007 meeting in Jacksonport. Moneypenny clarified that during the December 2007 meeting in Jacksonport everyone was given the chance to offer a marketing idea.
Kufrin returned to the subject of micromanaging, he noted that it did get better over time. The issues with individual commissioners raising questions about performance of individual DCVB employees were difficult to control before they were communicated during meetings. However, Kufrin said that he always made sure the meeting minutes from these meetings never reflected these outbursts of personal feelings and always directed the commissioners to contact the DCVB directly with specific questions and/or grievances.
Laughlin asked if the Commission attended DCVB board meetings? She said performance was addressed during these meetings. Nelson interjected that there is no cross directorship which is intentional. Nelson said he would like to address this subject in a meeting. Laughlin replied that performance is handled by the DCVB and that these meetings are open and she recommended that those who had issues attend. Kufrin said that performance issues were not appropriate to discuss in open session, it’s not the role of the DCTZC. He reiterated that he recommended those with specific issues talk to Moneypenny or the DCVB board of directors.
Moneypenny said that no one has ever come to him regarding individual employee performance. He has had people come to him regarding specific business marketing and he always has to remind those who do so that his task is to look at the bigger picture for the membership and he can’t say yes to everyone. Kufrin said that the commissioners are directed to talk about statistics not job performance. If they have issues, they are directed to talk to Moneypenny. Dickson asked if the personal performance questions were in the DCTZC meeting minutes. Kufrin said that they are always edited out. Some comments could be misunderstood in the records. He said that they don’t embarrass someone or cause a problem.
Dickson said he appreciated that the minutes didn’t reflect the performance comments and questions. He also offered that anyone with issues could speak directly to him. He stressed that if one individual has a problem and it is more of a personality issue, it has no place on a board.
Weddig remarked that in the draft of the entity agreement they never envisioned the commission being a part of the decision making process for marketing or advertising at the time. He felt that we should get involved over time if the DCTZC didn’t receive statistics and reporting from the DCVB to correlate performance standards. Weddig wanted to know if the DCVB board would still request the statistics and reporting?
Dickson said yes, the reports to the board would still happen. Kufrin interjected that in the past the reports weren’t supplied to the DCTZC until they were asked for. Dickson reminded Kufrin that things have evolved. He stressed that the DCTZC doesn’t need to bless or approve the budget or marketing strategy.
Kufrin asked the DCVB board if they recognized that they work for the DCTZC? The DCTZC needs to assure that the job is done via the approval of the strategic conversation and the budget. The DCTZC has to approve the budget and the marketing plan; if not there is no oversight.
Dickson responded by saying the DCTZC collects the room tax and the DCVB handles the marketing. The DCVB tells the DCTZC how the DCVB is doing. Kufrin said that the Finance Committee has failed to engage to discover the 2011 entry problems. He felt that there was no oversight over internal controls.
Zaug provided that the $41,000 never showed up until the audit. Zaug agreed that there has been a lack of internal financial controls. Now to address that deficiency the DCVB has hired someone to handle the financial oversight. Kufrin said the lack of oversight has been going on for years. Zaug said that the errors aren’t getting corrected, but the financial end of things is.
Moneypenny clarified that the DCVB has hired a CPA for three (3) to four (4) hours a month to review the end of month financials so that an auditor doesn’t have to. The CPA will make critical decisions and review quarterly reports. The goal is to improve financial systems and over the last four (4) years, reporting has improved.
Zaug mentioned that gift certificates and understanding distribution for invoices for the DCVB based on an accrual system has been a challenge because QuickBooks is on a cash system. He said there has been some difficulty adjusting. Jack commented that there are gift certificates that have been out there for (5) five + years. The issue is that they have identical money values as serial numbers. Zaug said that the new DCVB gift certificates have different serial numbers for the different denominations of gift certificates.
Skare responded by saying with the new legislation that is at work in Madison it is critical to have a good relationship with the DCVB. There has to be controls and in the end we are just trying to avoid spending without controls; there should be no questions at the end of the year.
Van Lieshout said that the DCTZC is accountable to those from whom the DCTZC collects tax from. We have to have willingness to submit information from the DCVB.
Kufrin stated that the audit doesn’t reflect a budget that matches the financial statements. It doesn’t tell the DCTZC how the DCVB spent in relation to the membership budget. In the program services and management in general categories, expenditures seem to be lumped in so that one cannot tell how the money was spent. Kufrin felt he didn’t know how the audit numbers corresponded. He felt it would be reassuring to see the marketing budget and the membership budget to see how the money spent ties back to the audit. Moneypenny reminded Kufrin that the DCVB uses a bottom line budget. He also said that the 4th quarter financials would provide Kufrin the information that he was seeking. Kufrin said that was fine, but if there was an allocation for $100,000, you don’t see how expenses compared to the budget. When does the DCTZC know how close room tax expenses were to budget, the audit doesn’t reflect this information? Moneypenny said he has looked into the extra schedules for the audit that Kufrin is looking for and they cost an additional $500 per schedule. Therefore, in total it would be an extra $1,000 for the audit.
Kufrin said the team has agreed to the bottom line, but he wants to know that the audit shows expenses in relation to the budget. He feels that it’s impossible to compare the schedule to the expenses; you don’t know how the money is spent in financial numbers. Zaug mentioned that they get that information monthly, but that it’s just not part of the audit. Kufrin stated the financial statements don’t reflect the budget. Dickson asked if the issue is with the audit and how it should look?
Zaug said that the format for a nonprofit audit is not necessarily the same for as what the DCTZC is looking for. For non-profit cash and assets are the same. Nelson interjected that the DCTZC is happy with the audit, but that we are looking for more information. He suggested that perhaps the DCTZC should finance the extra reporting.
Moneypenny said they would take the annual budget and reflect what is happening so that it flows up through the financial statements for each fund.
Dickson asked if everyone to agreed that you get an audit so that there is proper oversight. Moneypenny added that the audit also verifies what is spent. Kufrin added that the audit basically reflects one big account that the DCVB allocates a percentage of money to different line item expenses. In effect, the entire budget is run out of one pot of money. Auditors don’t look at the fraction of the total of expenditures – never 100% of the transactions.
Dickson said the difference is the audit is independent. The auditor will verify that the statements are accurate. Kufrin said journal entries and transactions adjust. He wants to know that when he looks at the budget they are accurate. The marketing budget and then expenditures tie out to the expenditures shown in program services and general.
Moneypenny noted that the auditor gets a copy of QuickBooks. He went on to say that the control, concern and final determination of the budget and marketing plans should be in the hands of the DCVB. He felt that the DCTZC shouldn’t get to say if the marketing plans are good or bad.
Kufrin replied that the DCTZC can’t give the DCVB money to spend how they see fit. Van Lieshout added that the relationship between the two entities is a professional contractual relationship. The DCVB was hired to do X, Y, and Z. The DCTZC is relying on the DCVB to develop a scope of service.
Kufrin added that last December during the presentation of the strategic conversation there was a review of the prior year and what was planned for the coming year. Moneypenny replied that in the last year the updates on plans during the course of the year are a fluid conversation, not a hard on the shelf plan. Van Lieshout offered that the DCVB is hired on the scope of the plan. Moneypenny stated that the DCTZC should have input not approval on the marketing plan.
Kufrin said that there were few issues ever raised on the marketing plan, however it is the DCVB’s promise of how the money is spent and the DCTZC can’t just give money to the DCVB betting that they will get it right. Dickson replied that the marketing expertise lies with the DCVB.
Weddig noted that he would like to hear the presentation of the marketing plan. Laughlin added that the Entity Agreement is an ongoing contract; the DCTZC has final approval and an option of giving a six-month notice of the termination of the Agreement.
Moneypenny said he’s not saying that they don’t want to report statistics. Nor are they saying they don’t want to distribute the marketing plans, but he felt that it was important that when the DCVB board asks questions and the marketing plans meets the monetary goals the DCTZC still gets the information and has input.
Kufrin replied with saying that when the the monthly reports reflected a consistent decrease in website visits. He added that when he asked why there has never been a good answer supplied, none of which were board presented. His apprehension was what kind of concerns was brought to the DCVB board? Moneypenny said marketing is an art not a science. What they look for is trends.
Kufrin replied that after many months of down numbers, the answers supplied were not reassuring and there were no plans to address the issues. Dickson stated that there were discussions. Nelson added that the DCTZC just wants to know that the DCVB board is asking the right questions. Laughlin asked if a presentation of the marketing plan and the budget, some sort of joint meeting so that there is no hesitation. She felt that the issue might be a communication problem.
Kufrin said that the challenge is how to spend the money with oversight so that it doesn’t affect future years. What he would like to see is board appropriate oversight that the room tax is spent as promised. Moreover, Kufrin voiced his concern that during the situation involving the misplacement of funds, Moneypenny issued a statement not the Finance Committee. Kufrin felt that the statement should have come from the Finance Committee and therefore he felt it may raise oversight issues with the Finance Committee. He went on to say the DCTZC would take the heat if the money is not spent correctly. How could the auditor know and show that the room tax money wasn’t lost and just membership money.
Laughlin said that everyone has obligations and responsibilities to everyone that they represent. The DCVB just wants what is best for the County. Kufrin replied by asking why wouldn’t you want to know the information?
Laughlin said that they had more trust in the documents. She added that it was the DCTZC’s job to enforce law, collect money and distribute money. Their job was to oversee the marketing and hold Moneypenny responsible.
Nelson felt that the DCTZC should bless the plan on behalf of those who we represent. Dickson said the issue is what does “bless” mean. Where do you draw the line? Kufrin replied that the DCVB contract with EBRAINS and the study with the University of Texas no one could ever explain the analysis to tie out any of the numbers. There was no way to explain the performance to the contractual amount that they agreed to a performance promise.
Kufrin went on to say that the numbers that the professor generated couldn’t indicate that EBRAISN people lived up to their promise. Moneypenny said the ROI on the $450,000 wasn’t based on that. eBrains does many different things. One portion of the contract has a guarantee. The professor followed a formula that was intellectual property. Everyone thought it achieved the performance measures expected.
Kufrin said that he never got an answer.
Dickson asked if the overall plan worked? Kufrin replied yes.
Moneypenny stated that there has to be trust. He had to sit through a Sheriff’s investigation. The DCVB has every invoice and every invoice has at least two signatures signing off on the expenditure. The result of the investigation was that the systems in place were very comprehensive and an understanding of how the money was spent and where it is supposed to be. The goal is to continue to better the systems in place for better control. The board is asking questions. Kufrin said that he understands that there has been a lot of change. He went on to say that, he understands that Moneypenny’s area of expertise isn’t financial controls.
Kufrin then offered the DCTZC proposal of changes to the Entity agreement, which prompted immediate discussion. He proposed that on page 1 line 28 it was impossible to define the word adequate and the word should be struck from the agreement. On page 1 lines 35-37 he noted that the date doesn’t matter as long as the budget and plan are approved by the end of the year. Both sides agreed that December 1st was an acceptable deadline. Page 1 lines 35-37 the word submit versus provide. There was preference of wording on both sides and perhaps a sticking point. Page 1 point 4 Kufrin felt that the entire section could be deleted. Kufrin felt that it didn’t need to be in the agreement and Moneypenny agreed. On page 2 lines 4-10 (Point A) Kufrin felt they should be omitted, as they were holdovers from the beginning with specific information about how funds were dispersed from a reserve fund. On page 2 lines 12-19 (Point B) Kufrin felt that forty (40) days was an achievable board cycle for the DCVB for point 1. For point 2, Kufrin said the audit should show an itemization of how the expenses compare to the total budget by adding the language “itemizing the room tax revenues and expenses.”
Weddig pointed out that he wanted to make sure that the room tax money wasn’t covering something that membership should. He added that we need that information to be able to present if need be. He felt that it was about accountability.
Dickson felt that it shouldn’t be a problem to create an audit that the DCTZC needs. He added that we all want confidence in what is being done. Moneypenny added that it will be key people, like himself, that will go away if performance isn’t what it should be. DCTZC will never fire the DCVB from a realist point of view. Weddig said he hoped that the DCVB board would do it before the DCTZC would have to.
Kufrin moved on to point 3, page 2, lines 19-20, adding that the DCTZC needs to retain cash to cover expenses; the cash flow component. Point C, lines 22-34, he added that lines 30-40 should be omitted. These lines went back to when the DCTZC paid the DCVB on a reimbursement basis, which is no longer the case. Point D, lines 36-40, should be omitted. Point 7, lines 42-48, the word initial should be struck and on lines 45-46 the sentence “Municipalities that join the Tourism Zone Commission Intergovernmental Agreement in the future shall be subject to the terms of this agreement,” should be omitted. Point 11, page three, lines 16-18, the effective date is the second amendment to the original.
Laughlin suggested more of a proposal process rather than a meeting in which the budget and plan are approved. She suggested that the boards and the community come together so there can be discussion and approval together. She felt that communication and trust was crucial. She also thanked Moneypenny for the great job he has done to this point.
Kufrin replied that he could not support a contract that doesn’t give the DCTZC approval of a budget or plan. He felt that the DCTZC could lose its purpose. He felt that there has to be certain expectations and the ability to hold the DCVB to its promises. He added that when you expect something to happen, you have a contract. Checks can’t be just written without a control over the money that is collected by the DCTZC.
Dickson felt that it wasn’t that black and white. In regards to the budget, his concern was that the DCTZC would nitpick line items. Laughlin added that it was the responsibility of the DCTZC to collect the tax and disburse the 66% used for marketing.
Kufrin noted that there were a variety of expenses that have occurred that allocations need to be agreed to on the budget. Are they appropriate? How do we know and trust that the numbers provide a backup that the splits are occurring and appropriately. Who is going to compare budget numbers to the prior year? Kufrin felt that it needed to be refreshed in everyone’s mind how splits happen or change.
Dickson proposed that perhaps there needs to be a discussion between the boards of what expenses are membership and what expenses are marketing. Kufrin added how the splits occur is the business of the DCTZC. Moneypenny said the money shifted to marketing, but never out of splits. He added that he would supply the marketing budget.
Skare mentioned that if the municipalities collected the money it would be much more for the DCVB to deal with. In the bigger picture, Skare felt that the relationship with the DCVB is a good one.
Nelson reminded everyone of the summer of 2009 when the frustration over reports led to ad hoc committees to decide on reporting. Nelson proposed the possibility of a committee to iron out the details.
Kufrin added that the performance indicators are the results of marketing efforts. He said that there has been no change in what has been asked for in regards to reports. He added that the Executive Summary is very useful, but that the timing was difficult. He felt that we should try to streamline the requirements and reporting. We already get quarterly financial reports, but Kufrin said he would like to see an audit that reflects how the money was spent in relation to the overall budget, which he mentioned was a challenge and a concern. Kufrin wanted to see how the actual totals end up after the audit and wanted to see a continuation of approvals in regard to the budget and marketing plan based on the fact that the DCTZC is contracting with the DCVB and it would be difficult to do without seeing plans.
Van Lieshout added that when a contractor is hired to do a project they develop a scope of plan after a long discussion on the scope of the project. Kufrin pointed out that he didn’t want to be a part of the creation of the marketing plans. Nelson said it’s the municipalities that the Commission reports to that need to know that there is accountability.
Kufrin added that there are opportunities that exist and we have worked hard to avoid micromanaging. The goal is not to debate strategies. We are responsible for the performance of the contractor and if they lived up to the expectations. If we aren’t a part of the approval process, we have nothing at the end of the year to put the results against what was proposed. Kufrin felt that the audit is the accountability at the end of the year.
Nelson agreed and added that the DCTZC is asking to look at the marketing plan. Kufrin asked Dickson if in the draft plan for 2012 were there items that were changed from the board perspective before approval. Dickson replied that everything was good with the plan and that it would accomplish goals as expected.
Kufrin countered that the same reliance on the plan we look at will accomplish goals of how the room tax dollars are spent. The plan needs to reflect goals and objectives and is the only indicator of the performance of room tax collection.
Dickson asked Kufrin to look at the big picture. He added that there are certain things that can’t be controlled like the economy. Moneypenny voiced his concern about how five (5) years down the road; those who will be sitting at the same table might interpret the intent of the words differently than intended. Dickson agreed and said that it comes down to what does “approval” mean? Kufrin said Moneypenny presents a very detailed plan, but said what he is trying to say is that in some sense he wants to approve a promise that something is going to happen.
Moneypenny noted that the DCVB board has to approve the budget and the marketing plan before it goes to the DCTZC. He felt that was the promise. Nelson interjected that the town boards were going to want something stronger. Kufrin asked if we could hold the DCVB accountable to the promise if it wasn’t achieved. Kufrin added that the promise doesn’t need to be an eighty (80) page strategic conversation.
Moneypenny liked the idea of having the DCVB plan and budget go to their board for approval and then have it go to the DCTZC. He reiterated his concern about the future people sitting at the same table in five (5) years plus and how they would interpret the agreement.
Kufrin responded by saying that 70% of the permit holders aren’t DCVB members, therefore the DCTZC represents a broader group. Dickson pointed out the intention was to meet for two (2) hours and suggested that the group reconvene as scheduled on Thursday May 10th, 2012 at 10 AM.
The discussion adjourned at 12:20 PM.
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