A forensic audit of Visit Durango, a destination management and sustainable tourism nonprofit, revealed overpaid tips; alcohol purchases; and unsigned, uncollected, incomplete and late tax and vendor service documents; among other procedural issues.
The audit, conducted by the city of Durango’s independent auditor EideBailly, was launched earlier this year and focused on Visit Durango expenditures spanning from January to August.
EideBailly examined relatively high-cost expenditures totaling about $285,000 with 11 vendors, reviewed the nonprofit’s policies and procedures in its employee handbook, interviewed Visit Durango and city staff, and scrutinized receipts and payments made by Visit Durango, including 150 checks totaling about $500,000.
City Manager José Madrigal said the forensic audit was spurred by the city having issues getting invoices from Visit Durango, which receives the majority of lodgers tax funds earmarked for sustainable tourism marketing totaling 55% of lodgers tax revenues.
The Visit Durango board of directors and the city agreed to the audit, he said.
The decision to conduct a forensic audit followed the revelation to the city and La Plata County that former Visit Durango board chairwoman Jenny Roberts had previously been convicted of multiple felony counts of forgery, identity theft and illegal use of a credit charge in 1999, 2007 and 2013, The Durango Herald reported in June.
Just before the city and county learned of Roberts’ criminal history, former Visit Durango Executive Director Rachel Brown announced her resignation on May 27.
Roberts told the Herald in June her position on the board had nothing to do with Visit Durango’s finances.
Visit Durango Board Treasurer Cristina Della Grave confirmed Roberts did not have any access to Visit Durango’s money.
Despite that, her criminal history did not give Visit Durango a good look, city officials said.
Visit Durango hired Barbara Bowman as interim executive director, who was on-boarded Oct. 3. She brings with her 28 years of experience in tourism with Visit Grand Junction, another tourism agency, Bowman said
She served two terms on the Colorado Tourism Office Board by governor appointment, was elected to serve on the National Tour Association Board and currently serves as a transportation commissioner for the Colorado Department of Transportation, according to Visit Durango.
Bowman said the forensic audit was a good move by the city and Visit Durango. It’s generally a good business practice to conduct an audit after a director leaves the organization, she said, and Visit Durango is moving forward with EideBailly’s recommendations.
Results of the audit were presented to Durango City Council on Tuesday just after the city announced in a news release Visit Durango proposed a merger with the city.
“We found that there were minor processes not followed or done,” Mayor Jessika Buell said in a text message to Herald.
She said the procedural oversights and flaws are likely a result of neither the city nor the county requiring Visit Durango to follow more stringent policies. The city has been working with the nonprofit to clean up invoicing since Madrigal was hired in December 2021 and voters approved a lodgers tax increase from 2% to 5.25% in April 2021.
“I am glad we did the audit. It shows that more oversight is required to adhere to city standards,” Buell said. “Which aligns with the (Visit Durango board’s) recommendation to come under the city.”
Councilor Gilda Yazzie said the forensic audit provided a better picture of the status of Visit Durango through the management issues it revealed. She said the city is stepping up to facilitate the nonprofit’s transition into the city.
Councilor Olivier Bosmans said the city should follow up on the forensic audit’s results because it raised many questions about ethical and potential legal problems. And he suggested the city undergo a similar audit so it doesn’t appear as if the audit was conducted to prompt a merger of the city and Visit Durango.
Chase Davis of EideBailly, who presented the forensic audit’s findings, said Visit Durango lacks a specific policy for fraud or theft and it needs a credit card policy to define what purchases are allowable and what are not. It additionally needs to buff its travel and expense reimbursement policies to include what kinds of purchases are allowed.
According to EideBailly’s written forensic audit report, Visit Durango does not perform background checks “for individuals in key positions within the organization.” The auditing firm recommends background checks for those individuals and for people who can access its finances.
The report identified one instance of an overpaid travel reimbursement for $19 that was paid based on travel time instead of travel distance. The trip was from the Durango Welcome Center, operated by Visit Durango, to Durango Hot Springs for a meeting with Visit Durango board chairman Ken Stone and was listed as 29 miles at $0.655 per mile.
The actual trip mileage was 18 miles, the report said.
“What that indicates is having a closer eye on the expense approvals,” Davis said. “And so when people are approving those expenses, just making sure that things are accurately being reflected and calculated.”
He said there were numerous instances where tips at restaurants exceeded 20% and recommended implementing a policy that sets a tip limit and outlines what actions to take when that limit is exceeded.
Along similar lines, he said attendees to lunches and like activities should be named in expense reports.
“If there’s a $600 meal, it’s going to be important to know who all attended that, so that way they can also do some verifications on that afterward,” he said. “… Some of the transactions would show one attendee for a $600 meal. But when you look at the receipt, there’s quite a lot of food and it’s apparent that it was probably more than one person at the restaurant.”
Some receipts did not match recorded expenditures, possibly because tips were not included in the records, the report said.
And, Davis said some expenditures were approved by the same individual who made the purchase. That’s a typical activity in many organizations, he said, but Visit Durango should not have the same individuals approving their own transactions, and transactions should be approved before they are made, not afterward. Such a policy is a strong control against theft and fraud.
The report also recommended Visit Durango revises its conflicts of interest and ethics policy to include board members, and identified potential conflicts of interest regarding 10 Durango area entities:
- Durango Hot Springs Resort & Spa, whose marketing director is Ken Stone, who also serves as Visit Durango’s board chairman.
- The Strater Hotel, whose general manager is Tori Ossola. She also serves as Visit Durango’s vice chairwoman.
- Twilight Toys, whose owner, Cristina Della Grave, is also the treasurer for Visit Durango.
- Purgatory Resort, whose general manager is Dave Rathbun, who is also a sector representative for Visit Durango.
- Bar D Chuckwagon Suppers, which is owned by Andrew Scarborough, who is also a sector representative for Visit Durango.
- Fort Lewis College, which employs Cristian Sepulveda as an assistant professor in the college’s School of Business Administration; Sepulveda is also a Visit Durango sector representative.
- Bears Ranch, whose owner and operator is Emmy GreyEyes, who also serves as a sector representative for Visit Durango.
- Durango & Silverton Narrow Gauge Railroad, whose sales and business development leader, Carrie Whitley, also serves as a sector representative for Visit Durango.
- The Sky Ute Casino.
- Gable House Bed and Breakfast, whose owner, Charles Goodman, is a Visit Durango sector representative.
“Any group that’s receiving public funds must answer how that money is spent, especially board members,” said Tom Sluis, city spokesman. “… They have to be clear about potential conflicts of interest and why there are not conflicts of interest.”
At the same time, he said major economic stimulators, like Strater Hotel and Purgatory Resort, can’t be ignored and should have a voice in how tourism dollars are used.
“But there needs to be an arms-length approach,” he added.
Madrigal said bringing Visit Durango under the city’s oversight would subject it to the city’s processes and procedures, which would resolve many of the flaws identified by the forensic audit.
Many details of the proposed merger still need to be worked out and city staff will present their recommendations to City Council early next year.
“All these purchases, expenditures would have to go through our policies and procedures as well as being open to open records and transparency and expenses so that the public would be able to (see) what has been expended and where it has gone through,” Madrigal said.
Stone, Visit Durango board chairman, said the nonprofit has been in talks with the city about a merger over the past six months. He is pleased with the forensic audit.
“We had a clean audit. They had to dig pretty deep to find things like, you know, were we tipping the right amount in our expense reports?” he said. “But really, there was not anything egregious, or any discovery of misspending of tax dollars in any way. Everything aligns with the strategic plan and the budgets that the town council approves each year.”
cburney@durangoherald.com
