One member of the Nebraska Tourism Commission's nine-person board says its executive director remains fit to lead despite a state audit pummeling the commission over its questionable finances.
, which included reimbursing an outside firm for alcohol and cigarettes, paying the director’s daughter to appear in an advertising campaign, and giving a single conference speaker $44,000 for a 90-minute speech that was witnessed by no more than 150 people.
Commission Director Kathy McKillip and others also received dozens of free meals from the advertising firm Bailey Lauerman, which the commission paid some $3.6 million last year for its services.
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"Clearly this is not an acceptable practice," state Auditor Charlie Janssen said Saturday, addressing the entire scope of the commission's spending activity. "Hopefully it's a culture that can be corrected."
Commissioners are expected to address the issue at a 1 p.m. meeting Tuesday in Omaha.
Jeff Boeka, a commissioner and longtime hotel operator from North Platte, said Saturday he still has faith in McKillip's ability to lead.
"Kathy's done a tremendous job creating awareness for tourism throughout the state," he said. However, "We need to tighten up the compliance."
The 79-page audit report portrays the commission as an entity that frequently sidestepped government transparency, ethics and record-keeping standards. That included signing contracts and making purchases without a public bidding process, accepting meals and other gifts from its top contractors, overspending its budget and failing to keep diligent financial statements.
Other commissioners were silent on the issue Saturday.
Chairman John Chapo, director of the Lincoln Children’s Zoo, didn't return a message left on his home phone, and others either couldn't be reached or declined to comment until Tuesday's meeting.
Five of the commissioners, including Boeka, end their terms in July, meaning a majority of the board could change. All nine members are industry representatives appointed to four-year terms by the governor.
"This audit did exactly what state audits are suppose to do, find areas of weakness so that we can improve upon them," McKillip said in an email Sunday.
There's no manual for forming a new state agency, she said, and as a result of the audit the commission will develop an internal policy manual and partner with the state's Administrative Services Department for help with purchases and accounting.
"We consider this a great opportunity (and) something we have wanted since becoming a state agency," she wrote.
The commission said in its official response to the audit that it will work to improve its internal controls and establish formal rules and regulations, which it has not done since it was spun off from the state Department of Economic Development four years ago. McKillip has lead the agency since its creation.
Tourism leaders also defended some of the actions as industry standard, essential for promoting the state or aimed at keeping costs low.
For example, when auditors questioned why McKillip's college-age daughter was paid $550 plus expenses as one of the models for a nine-day, cross-state photo shoot in June, the commission responded that it was trying to avoid paying more for professional talent, and it was "challenging" to find other 18- to 26-year-olds who were able to participate.
"As a taxpayer, that doesn't pass my sniff test," Janssen said. "I guess I would have loved to have had that eight-day trip if I were in college."
Auditors didn't directly accuse McKillip or the commission of breaking any laws, but noted state statute prohibits government officials or their families from using their positions for outside gain. Another law bars people from offering items of value to influence a public official.
Both are misdemeanors, punishable by as much as three months in jail and a $500 fine.
Janssen said the audit report will be shared with the Nebraska Attorney General's Office.
"We're obviously really proud of the work that we get to do for the state, and we don't want this to overshadow that," said Bailey Lauerman executive Mary Palu.
McKillip's daughter was hired by the firm, not commission staff, Palu said, and since the audit, Bailey Lauerman has refunded the commission for about $3,000 worth of questioned expenses, mostly from the June photo shoot.
"Those shouldn't have ever been submitted," Palu said. "The commission shouldn't have reimbursed us for them. That's kind of a no-brainer."
Among the dozens of other accounting and expense issues listed in the audit report:
* Two Bailey Lauerman contracts went over budget by $4.4 million, the result of poor tracking for purchase orders under the commission's contracts. The commission responded by saying it was working to correct the issue with the state Department of Administrative Services, which handles most state contracts.
* McKillip was reimbursed $1,318 for more than 2,200 miles put on her daughter's convertible during the photo tour, while the commission's purchasing card was also used to buy gas on the trip. The possibility of double-dipping and a lack of documentation "could raise concerns regarding possible abuse, if not actual fraud," the auditors wrote.
The car was used in photo shoots, and the agency communicated with Administrative Services about fuel purchases, the commission wrote.
* The Tourism Commission paid its keynote speaker $44,000 for his speech at last year's state tourism conference in Columbus. Three other speakers were paid more than $9,000 each, and the state also footed the bill for complimentary massages.
The conference's overall costs exceeded revenue from registrations and sponsorships by $84,000 and had to be covered using other tourism funds. The commission said the keynote speaker, GoodThink co-founder Shawn Achor, is nationally recognized and the extra expenses were justified to promote the state's tourism industry.
* A deal with IMG College to promote tourism during Husker sporting events was arranged through Bailey Lauerman and didn't follow any public bidding process, despite totaling more than $1 million over three years. Advertising deals with Nebraska Educational Telecommunications and Most Valuable Productions tied to high school sports championships and the Wisconsin football and basketball programs also weren't publicly bid.
No other entities provide those services, so public bidding would merely slow things down, the commission wrote in its response.
* The commission spent $18,511 to move an employee from Sidney to Kearney to replace a more centrally located staffer who retired.
Moving that position cost less than hiring an additional person to fill the Kearney job, the commission responded.