Door County Tourism Zone Commission : Meeting Minutes

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November 2, 2011 Door County Tourism Zone Executive Committee Minutes

DOOR COUNTY TOURISM ZONE
EXECUTIVE COMMITTEE
Minutes of November 2, 2011 – 1:05 p.m.
Kerber Rose & Associates, 10568 Country Walk Lane, Sister Bay 54234

ACTION ITEMS:
Nelson moved and Skare seconded to send the DCVB Executive Committee a letter petitioning for further details about the deficit and assurance about what proper controls are in place. Motion passed unanimously.

Starr moved and Holtz seconded to approve the new insurance policy from The League of Municipalities. Motion passed unanimously.

Nelson moved and Holtz seconded to recommend to the Commission the projected budget as amended. Motion passed unanimously.

Kufrin moved and Holtz seconded to convene into Closed Session pursuant to Wisconsin State Statutes, Section 19.85(1)(a)(f) or (g) to consider enforcement action against certain businesses regarding the room tax permitting, late payments and reporting and Wisconsin State Statutes, Section 19.85(1)(e) regarding negotiating various agreements with the DCVB and member municipalities. All ayes by roll call.

Larson moved and Nelson to reconvene into Open Session All ayes by roll call.

Nelson moved and Larson seconded to increase Kirkland’s hourly rate by 2.0%. All ayes.

Kufrin moved and Nelson seconded to adjourn. All ayes. The meeting adjourned at 4 p.m.

Committee Members Present by Roll Call:
Robert Kufrin, Dave Holtz, Jeff Larson, Bryan Nelson, Dick Skare, Bob Starr, Bill Weddig

Also in Attendance:
Dianne Lensert/Kerber Rose; Kathy Kirkland/Administrative Assistant; Mike Konecny/Schenck

Call to Order
Chair Bob Kufrin called the meeting to order at 1:05 p.m.

Approval of the Agenda
Starr moved and Nelson seconded to accept the agenda. All ayes.

Discussion on DCVB Budget/Audit
Mike Konecny reviewed the DCVB Audit Report. He calculated that about 75% of their revenue is room tax; the rest is membership fees, so about $2 mil out of about $3 mil revenue. In the last two years, the DCVB has carried over $1.2 in room tax money (there was a lag in the first year). The restricted fund is $1.2 million and the Zone approves that. Is it too high? Kufrin said they collect cash on one schedule, but they spend it on a different schedule; most of income is after the season is over, and they spend in Jan-May. Skare asked for the lowest May/June balances. Kufrin said on June 30, 2010, the balance was $544,000. Konecny says about $100,000 is cash. That amount isn’t a concern. He also noticed in 2010, the DCVB spent 13% more than the prior year: salaries and benefits up about 3%, marketing up 10%. Other “direct” were up 80% due to more community marketing in 2010 than in 2009. They purchased $85,000 in property/equipment; not sure, what it was. Perhaps lobby expenditures, picnic area, server, etc. Konecny noted that the only outstanding debt is gift certificates for $300,000. Nelson said the State stepped in; anything over 60 months, the tax has to be paid to the State.

Konecny said the unusual item is the memo about the auditors making “unsupported journal entry” due to lost data from a QuickBooks malfunction that deleted entries, so $41,307 is recorded as uncategorized expense. They can’t account for it. Kufrin hadn’t asked Moneypenny, but is that a charge against The Zone entirely or proportionately based on 75/25 membership? Konecny said it’s not disclosed whether it was assigned to membership or room tax. Kufrin said it just shows up “other changes in net assets.” However, it has been co-mingled. If it were proportional, that’d be acceptable. Weddig asked if was a single transaction or do we know? Konecny read, “Data had been corrupted. Extent of the corruption not known.” It should have been easy to reconstruct if there were receipts or a paper trail to recoup figures. Larson noted the original figure might’ve been higher and most was accounted for. Starr asked Konecny if he’d seen anything like it before; he had not, at least for this high amount; usually it’s a day’s checks/receipts not posted correctly, etc.

Nelson said that Moneypenny had noted “an aberration” in June or July, but we didn’t see the audit until recently. Kufrin said Moneypenny said his staff concealed the problem for a couple of months; had it been disclosed when the initial problem was discovered, they might’ve done something different. Apparently, it happened in March 2010, but didn’t become known for us until a year and a half later. What kind of internal investigation was done? DCVB Board and Finance were involved; there was not necessarily wrongdoing, but no notification of the problem. Starr asked if safeguards had been put into place since then. Moneypenny said there had been. Konecny said it was proper to ask them in writing; it’s an internal control issue on their end. Any errors should be detected within a short period of time—a day, week, end of month. Weddig asked if it was determined to be an expenditure or income. Konecny said yes, they concluded that it was one-sided entry as a debit.

Kufrin felt that the letter should go to either Hellman or Finance to ask if they reviewed internal controls based on this incident; is the Board confident there aren’t lingering issues? Moneypenny told Kufrin about external backups: It was set up to overwrite Quicken each time, and they didn’t realize the backup was corrupt until they had already overwritten the good version. They were not operating with a safe external backup because each backup had the same name and overwrote the previous. It was in the Strategic Conversation that they would do backups. Konecny confirmed that it’s normal operating procedure. Kufrin said personnel hadn’t changed because of the incident. He also noted this is only their third audit. Konecny said the auditors noted that in April 2010, in reconciling the books for March, it was out of balance. Nelson suggested that an appropriate letter might point out the Commission’s awareness and that we need to know they’ve investigated properly and now have proper safeguards/internal controls in place. We owe our constituent municipalities that due diligence; we need an exchange of letters. Starr would like to hear about specific internal control improvement, not just assurances that they’ve taken care of it. Konecny said the auditor did “additional procedures.” Starr wanted to hear something more than that.

Kufrin said Steve Hellman asked to get together with his committee about the Entity Agreement; Kufrin suggested sending the above letter and stating, “As part of meeting on the Entity Agreement, we want to talk about these specifics.” Lensert expressed her concern that it took a year and a half before The Zone heard about it. Kufrin said The Zone doesn’t want to micromanage the DCVB, but he can’t tell if they’re concerned or not. Is the DCVB Board engaged? Starr felt that if it relates to financial concerns, we have legitimate reason. Weddig felt if they don’t have an answer to a question, it usually means that their Board hasn’t asked the question; we’re asking it first. Kufrin said with the performance measures, they agreed that we could talk about certain items without micromanaging.

Nelson asked if the next action should be to send a letter prior to the Executive Committee meeting. Kufrin said yes because some changes in the Entity Agreement may have direct bearing on financial operation. Nelson moved to send the DCVB Exec Committee a letter asking for further details about the deficit and assurance about what proper controls are in place. Skare seconded. Starr wanted to make sure their answer includes specifics. All ayes. Kufrin will send a draft around. Konecny left the meeting.

Discussion on 2012 Tourism Zone Commission Budget
Lensert said this is a first draft except for a couple things added. The room tax is projected at flat. Kufrin notes that total units continue to decline; are we going to earn less money because innkeepers are constrained on ADR? Filled rooms are flat or below but seeing fewer rooms available. Skare noted that nobody’s 100%; other lodging should pick up on occupancy when other lodgings close. Weddig noted that two or three municipalities have large changes such as the Village of Egg Harbor and Nasewaupee. Kirkland noted anecdotally that people closing earlier, opening later. Weddig said it’s a big expense to do less than weekly rentals for houses. Lensert said the availability could be run by type of property; Kirkland had already done so for the DCVB/Davidson-Peterson. She will send it to everyone. Starr said if economy starts to bounce back, flat is okay but if it doesn’t, we have to change to a downward trend. Holtz asked what is in our reserve account now; Lensert said the assets are just under $55,000 in reserve. Nelson said the DCVB is still assuming 2.5% increase for year-end 2011, but he feels we’re prudent if we predict flat for 2012. We’re still deferring full payment to the DCVB for 45 or 60 days; Lensert said we start to pay about June. Starr pointed out that our YTD 2011 figures conflicts with the DCVB’s 2.5% rise. Lensert said we’re short by $11,400 in 2011 projections, but there are still lates coming in.

Kufrin calculated that Moneypenny is overestimating by 1.6% for 2011; Weddig said between 2011 real figures and the DCVB budget for 2012, it’s about a 4% difference. Kufrin asked if Moneypenny gets the charts Kufrin has been calculating; yes, he does. Anecdotally, the Executive Committee members have had a good fall to date. Kufrin said the DCVB should go off the trends we have, whereas the DCVB budget shows about $110,000 than they’re likely to get. Larson thinks it will wind up being 0%-2%; Moneypenny should rework his 2012 numbers. Kufrin asked if everyone agreed that we should leave the income as stated on the draft budget; i.e., flat. All agree. Kufrin will call Moneypenny before their annual meeting tonight to tell him the results.

Administrative Allocation. Bank fees: Is there any reason to shop? About 3% of the total budget is bank fees. It hasn’t been discussed for two years. Consensus that we could ask around, and Starr recommended only local/county banks: North Shore, Citizens, Bank Mutual, Baylake, perhaps credit unions. Lensert said the banks would need the number of transactions per month, approximate balances, need for an onsite deposit manager hardware/software. Starr asked how laborious it would be to switch. Lensert said it wouldn’t be horrible; setting up the onsite manager and software and online would take the longest. Even if there are startup fees, it would be recouped after a year. Nelson said it’s a good idea to keep the current vendor aware and perhaps they would meet any deals. Nelson and Kufrin will send out an RFP; not a complicated letter.

Insurance policy. There’s a renewal. The only change is that The League asked if we’d be interested in expiring at the end of the year instead of mid-February. So it would be effective January 1. New rates are $113 higher. Starr moved and Holtz seconded to approve the new insurance policy. All ayes. Starr noted that The League has always been the most reasonably priced policy.

Legal fees. Kirkland noted that Bill Vande Castle said his $130/hour rate will stay the same for 2012. She didn’t foresee “general compliance” changing; those are non-permit related legal questions and don’t happen often. As far as enforcement, it’s hard to tell; one case in court now has half the year’s budget as legal fees, although we can recoup. Lensert said any recoupment of legal fees doesn’t show as a line item offsetting the expense. The late fees/penalties come back to The Zone and have a specific category. Nelson felt comfortable keeping compliance and enforcement where they are. Lensert said the compliance fees are shown when they occur; for example, legal fees could show up in 2011 but be recouped in 2012.

For office expenses, postage should stay about the same, although they’re changing the mailing rates in January. Office supplies include all consumables and shouldn’t change. Kufrin noted that Sister Bay will be sending a bill for software upgrades. The copier is leased for about $53/month. Kufrin asked if we should set aside money for a new copier. Kirkland felt the maintenance done so far has been covered by the maintenance agreement and the copier seems stable. She felt it could go another year or two. All other expenses should remain static (phone, rent, website, etc.).

Administrative assistant. Kirkland noted that The Zone (since July) has paid only half the retirement fund, so that figure will be approximately $940 for 2012. Kirkland’s salary will be a separate discussion.

For professional fees, Kufrin asked Lensert how many hours Kerber Rose works compared to what’s billed. Lensert’s time is volunteered; only staff hours are billed. Lensert pointed out that The Zone has about $400-$500 for unaccounted-for funds cumulative since 2007. Weddig put forth the idea of paying the commissioners $X per meeting, as they are in municipalities. Kufrin said the Intergovernmental Agreement says it’s volunteer. Kirkland asked if the need for monthly statistics will be a constant. Consensus that it will be; members use them for their municipalities. Kufrin hopes local business associations are acting on it.

Kufrin asked whether, other than the changes note, if there’s any reason not to recommend the budget to the Commission as a whole. Consensus that the Executive Committee would recommend it. Nelson moved and Holtz seconded to recommend to the Commission the projected budget as amended. All ayes.

Consider motion to convene into Closed Session pursuant to Wisconsin State Statutes, Section 19.85(1)(a)(f) or (g) to consider enforcement action against certain businesses regarding the room tax permitting, late payments and reporting and Wisconsin State Statutes, Section 19.85(1)(e) regarding negotiating various agreements with the DCVB and member municipalities
Kufrin moved to go into closed session; Holtz seconded. All ayes by roll call.

CLOSED SESSION

Consider a motion to reconvene into Open Session
Larson moved and Nelson seconded to reconvene into open session. All ayes by roll call.

Consider a motion to take action, if required
Nelson moved and Larson seconded to increase Kirkland’s hourly rate by 2.0%. All ayes.

Adjournment
Kufrin moved and Nelson seconded to adjourn. All ayes. The meeting adjourned at 4 p.m.

Respectfully submitted,

Kathy Kirkland
Administrative Assistant

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