State audit finds Grand County misused and misreported tourism tax money

The county agrees with some findings but disagrees with others.

A recent Utah state audit report found misuse and misreporting of restricted tourism-related tax revenues in Grand County.

The Grand County Commission said they agree with some of the findings and recommendations but disagree with others in a letter published below the report.

The audit, which was made public on June 21, outlines five specific findings that highlight breaches in financial protocols and statutory requirements. It was initiated after the auditor’s office received complaints alleging the misuse of tourism-restricted funds from January 2022 through December 2023.

“When the Legislature allows a county to impose a tax for specific purposes, it is critical that the county strictly follow those statutory restrictions when spending those revenues,” State Auditor John Dougall said in a statement.

Transient Room Tax, the main focus of the report, is a levy imposed on lodging accommodations to generate revenue used to promote tourism, fund convention facilities and support local economic development.

Dougall added that their audit revealed “improper use of tourism promotion revenue for tourism mitigation and economic development activities” in addition to “lax controls over restricted funds as well as justifications that would have the effect of undercutting statutory restrictions.”

Due to these findings, the report recommends that Grand County “reimburse misspent money, improve its internal controls and strengthen its tone at the top.”

Grand County Clerk-Auditor Gabriel Woytek was initially sent a draft of the report last month so the commission could respond to the findings in a letter before the audit was made public. That response was passed in a 5-2 vote at the June 4 commission meeting.

Response to the findings

The commission’s core argument in their letter is that they agree that mistakes were made and they have or are working to correct them, but many of the other cases the report brought up “seem to be about differing interpretations of the TRT and TRCCA statutes,” the letter reads.

A slightly revised version of the letter passed in a 5-2 vote at the June 18 commission meeting after the auditor’s office provided feedback to Woytek about changes to make including the commission more clearly stating ways in which they’ll improve in the future.

In their letter, the commission argued that the mid-2023 transition for rules governing TRT spending for economic development was complex and lacked clear state guidance.

During those changes, the county reached out to the state auditor’s office for clarity and was told to consult their county attorney, said Vice Chair Kevin Walker at the June 18 commission meeting.

“Clearly, we are trying our best,” Walker said. “Then we consulted the county and we consulted our accountants and we came up with a way to try to get all the numbers happening before July because we thought that would be cleaner.”

Walker added that the commission has done everything it could do to be in legal compliance.

“To me, it does not feel very good to then get nitpicked, [and told] ‘You did it wrong’ and somehow this is an example of bad faith – it’s the opposite, it’s an example of us trying in good faith to get things right,” Walker said.

Commissioner Bill Winfield, who voted against passing both versions of the letter, said in the June 18 meeting that their response should’ve been further amended because it still argues that the state is wrong in some of their findings.

“There’s still many areas of disagreement between us and the state auditors and I don’t think who approved the spending decisions have taken enough responsibility for their decisions,” he said.

Commissioner Mary McGann said the commissioners who approved the budget are responsible, but many people saw the budget.

“We had a lot of us looking at it and none of us caught it – so I guess we can [as a group] say, ‘we all missed it,’” McGann said. “Our attorney missed it, we missed it … we made mistakes but I don’t think any of the mistakes were made intentionally.”

Mitigation activities expenditures over statutory limit

According to state auditors the county “overspent TRT revenues on tourism mitigation activities, exceeding the statutory limit.” State law allows up to 63% of TRT revenues for mitigation, yet the county allocated 67%, which is a just over $400,000 difference.

In the commission’s letter, they admit to this mistake as a “clerical error,” attributing it to a common percentage split mix-up — a 67/33 vs. 63/37 split which went “undetected because it’s difficult to distinguish, at a glance, 63% of 8.5 million dollars from 67% of 8.5 million dollars.”

The commission noted it’s been corrected as of January and this mistake didn’t affect any actual spending.

The letter also said that both funds 10 and 16 have “significant positive balances” so the county can transfer just under $644,000, which is 4% of total TRT receipts for March 2022 through December 2023, from fund 10 to 16.

Violation of GAAP

The audit also found that the county failed to adhere to Generally Accepted Accounting Principles in accounting for prepaid contracts, recognizing expenses upfront instead of over the contract duration.

This practice overstated expenditures by over $700,000 in 2023, including prepaid expenses of $300,000 to Utah State University and over $200,000 to the Grand County School District.

In response to this specific finding, the commission wrote that state code, as far as they know, doesn’t offer “clear guidance” on what steps of the process to receive TRT funds last year needed to happen “before the change in TRT spending rules, and which may occur after.”

After being told by the auditor’s office to consult the Grand County attorney, they did, as well as their external auditor.

The plan that came from those conversations was to only use TRT money — which was earmarked for diversification purposes — received by the county before July 1, and to get all contracts signed before that date.

“We will roll the associated funds into the revolving loan fund, which was set up to capture any economic development funds not used for other purposes,” the letter reads, also assuring that in the future they will ensure their record keeping follows GAAP.

Misclassification of Expenditures

The audit also claimed that $883,330 in expenditures were improperly classified as tourism promotion, including flood relief grants and funding for trail ambassadors, which were said to not meet the statutory definition of tourism promotion.

The commission strongly disagreed with these findings, claiming that they are “ones of legal interpretation, rather than accounting issues.”

When the county asked state offices questions of statute interpretation related to the budget items at issue, they were again told to consult their county attorney.

The commission said that their attorney “in many cases wrote lengthy and detailed memos on interpreting TRT code, and those memos were shared with Seth Oveson,” the local government manager of the state auditor’s office.

“We try hard to stay in conformance with state code, but it becomes difficult when we receive contradictory advice on the correct interpretation of statutes,” the letter reads.

In the report, it’s claimed that “trail ambassadors and instructional videos do not encourage, solicit, or market tourism that attracts transient guests to the county, so they do not qualify as tourism promotion.”

Walker said in an email response that state code is very clear that TRT money can be spent for “establishing, developing, as well as promoting.” The commission argued that things like trail ambassadors and instructional videos aimed at sustainable tourism fall within the scope of promoting and developing tourism.

“Specifically, messaging aimed at preserving and sustaining a resource that attracts tourists to Grand County is a way of establishing and developing tourism in the county,” the letter reads.

Walker said the county’s messaging about tourists recreating responsibly is similar to the Utah Office of Tourism’s “Forever Mighty” initiative, which aims to “educate visitors and residents about responsible travel to minimize impacts on our state’s cultural and natural resources.”

The commission agreed that the free shuttle service, which was funded through Recreation/Film/Conventions fund balance, should’ve been funded through the tourism fund balance.

“We will transfer funds from the General Fund balance to the Rec/Film/Convention fund balance to correct this error,” the letter reads.

Inappropriate use of tourism promotion funds

The audit also explained that in 2023, Grand County merged its Travel Council and Economic Development departments, using TRT revenues to pay for economic development salaries, despite it being ineligible post-July 2023.

Consequently, the audit found that nearly $70,000 was improperly spent on salaries unrelated to tourism promotion, violating statutory restrictions. They added that they estimate those positions spend less than 25% of their time on tourism-related duties.

“We agree that salaries within the Economic Development department should accurately reflect the split in each employee’s [tourism]and non-[tourism] activities,” the letter reads.

But they said 25% seems “far too low,” adding that they think it would be at least 75%.

The commission vowed to conduct a quantitative time study to determine the appropriate time split for these positions.

Misuse of TRCC Funding

Lastly, the audit found that the county improperly used Tourism, Recreation, Cultural, Convention, and Airport Facilities Tax (TRCC) revenue for the Grand Center, which they claimed is “primarily a senior center.”

Since the main function of the Grand Center is not to host conventions, the audit added, that makes it ineligible for TRCC funding. Despite this, substantial TRCC funds were allocated to the Grand Center, including over $700,000 in 2023.

The state auditor’s report recommended that Grand County reimburse the misused funds, reclassify prior year expenditures and improve its internal financial controls to prevent future violations.

The commission’s letter noted that the definition of “convention facility” in the statute is “very broad,” saying it can mean “any publicly owned or operated convention center, sports arena or other facility at which conventions, conferences, and other gatherings are held and whose primary business or function is to host such conventions, conferences, and other gatherings.”

The letter argued that nearly everything that happens in the Grand Center, including senior activities, is a gathering of some sort and therefore, should be considered a “convention facility.”

Unintentional mistakes

McGann said she thinks a lot of this situation comes down to the confusion related to the change in TRT spending rules.

“I’m comfortable with the letter – it’s part of the process, it’s just to say, ‘these are your findings and this is why we did it,’” McGann said. “… Apologies, to me, are for when something is done purposefully.”

Hedin said she’s more than happy to say she, among others, made mistakes, “but a lot of these aren’t mistakes – they’re how code is interpreted and we were given advice by county attorneys.”

She added that the commission is not being “nefarious,” and has been transparent during this process about the decisions they made.

“We interpreted code one way, the state wants to interpret it another way – my guess is that the state will come back and clarify their code a bit in the next legislative session,” Hedin said.

This story was originally reported by The Times-Independent.

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