CPA: Visitor Center funds funneled to Chamber

BLYTHEWOOD – After reviewing The Greater Blythewood Chamber of Commerce’s financial documents that were requested by council for fiscal year 2017-18, a certified public accountant concluded that the documents were “confusing, lacking in detail and sometimes impossible to follow and understand.”

He also concluded that much of the $18,500 accommodation tax (A-tax) money council awarded to the chamber in June, 2017, to pay for a dedicated visitor center employee, was not spent on that employee. Instead, it was funneled directly to the chamber to pay one quarter of the chamber’s annual operating expenses, an unauthorized use of A-tax money, according to the CPA, and an arrangement the council never agreed to when it allowed the chamber to take over the management of the visitor center in June 2017 and awarded the chamber the funds for a visitor center employee.

Those documents were acquired by The Voice from members of Town Council after the chamber’s executive director, Mike Switzer, turned them over to council on June 13, more than a month after council requested them. The documents included several untitled, undated budget reports along with others with partial dates. Many of the entries on budget ‘actuals’ do not match annual profit and loss statements for the same time period.

Former Town Councilman Bob Massa, a CPA and former treasurer for the Blythewood Chamber, said the financials that were presented to council and passed on to The Voice do not meet professional accounting standards even though the chamber’s May 31, 2018 actuals reflect $2,730 for ‘professional account fees.’

When council allowed the chamber to take over management of the visitor center in June 2017, it gave A-tax funding for a dedicated employee for the chamber, but did not approve that A-tax money for the chamber’s operating expenses as part of the arrangement.

However, a report in the chamber’s financial documents, titled ‘Visitor’s Center Report: January 2018”, showed that during the first six months, after being awarded the $18,500 for a visitor center employee, the chamber charged one quarter of its operating expenses to the visitor center’s $18,500, producing an artificial deficit of $4,885 for the first half of the fiscal year and projecting an artificial deficit of $2,758 for the upcoming second half of the fiscal year.

Switzer presented that report to council and, with no discussion as to why a quarter of the chamber’s operating expenses had been charged to the visitor center, which is, according to Massa, an unauthorized use of A-tax funds, voted to give the chamber another $7,643, the full amount of both artificial ‘deficits.’

Massa also pointed out that at least some of the chamber’s operating expenses charged to the visitor center appeared to be inflated, thus artificially increasing the amount of the deficit. One example is a $626 charge for one-fourth of the chamber’s annual insurance cost which, multiplied by four, comes to $2,504 total for the year. But the chamber’s profit and loss statement and the actuals of a budget for that same time period listed the chamber’s annual insurance costs at $1,491.72, not $2,504. Council did not question the difference before voting to give the $7,643 to the chamber.

“It’s difficult to tell what is going on with the chamber‘s and visitor center’s revenue and expenses from these documents. It’s a mess,” Massa said.

While members of the audience at the June 25 council meeting questioned and criticized the chamber’s financials, council, without asking any questions about the requested financial documents, voted 4-0 to award another $9,250 to the chamber for the visitor center for the next six months, even though it also voted to discontinue all funding for the visitor center as of Dec. 31, 2018. Council did not outline any expectations for the visitor center operations or how the $9,250 is to be spent.

“The A-tax money is intended to be used to promote tourism to the town, to bring visitors,” Massa said. He said it can also be used to pay an employee for a visitor center or to fund events, such as The Big Grab, that have the potential to bring visitors to Blythewood.

“Council has a fiduciary responsibility to the residents. A-tax money is for specific things. It is not for funding the chamber’s operating expenses, but it would appear that it is being laundered through the visitor center to do just that.”

$17,500 Grant

A state official also had concerns about an economic development grant council awards each year to the Greater Blythewood Chamber, a practice that Massa said should be frowned upon by the residents since it does not appear to meet the criteria for a grant. This year, council’s grant to the chamber is $17,500, a $2,500 increase over last year’s award.

“Who else is eligible to receive this grant? It’s not a grant if only one entity is eligible to apply and receive it,” the official, who asked not to be identified, said. “Grants must have criteria to which an entity has to adhere to and meet in order to apply and receive funds. Public funds must be spent for a public purpose. A service must be provided in exchange for these funds. The grant has to be open to anyone who meets the criteria. Businesses in the town could apply for this grant. There should be an expectation on the town’s part that there is a return on that investment. A contract is involved when a grant is awarded,” the official said.

But the only ‘contract’ for the grant between the town and the chamber is a letter stating that the chamber must provide the town a $2,500 premier sponsorship and that Ed Parler, the town’s appointee to the Chamber board, must have a vote on the board.

The state official said that is not a return on the town’s investment of $17,500.

Other inconsistences in the chamber’s financial bookkeeping and reporting has to do with the A-tax funds awarded to the chamber by council for events organized by the chamber. For the last three years, council has funded the chamber with A-tax funds to organize The Big Grab in September, a glorified yard sale that includes Blythewood, Ridgeway and Winnsboro.  Last year, the Chamber also received A-tax funds to organize the community’s Solar Eclipse event.

But Switzer’s reports on the chamber’s revenue and expenses for the two events came up short on transparency. Of the $8,750 A-tax award for The Big Grab, the chamber staff paid themselves $4,618 on top of their chamber salaries. Of the  $12,750 A-tax award for the Solar Eclipse event, the chamber staff paid themselves $7,475.25. This was compensation in addition to what the staff is regularly paid by the chamber for chamber activities.

After each event, the chamber is required to submit a report to the A-tax committee on its revenue and expenses for the event.  Those reports, with few details, led to questions of how the money was actually spent.

Solar Eclipse reports

Switzer reported to the A-tax Committee that its total revenue for the Eclipse event (A-tax and other sources) came to $19,455.94. However, the annual profit and loss statement he presented to council for 2017-18 and the budget/actual for the year listed total revenue for the Eclipse at $24,625.98, a difference of $5,170.04.

Switzer reported to the A-tax committee that the chamber’s total Eclipse expenses were $20,838.03.

The chamber’s profit and loss statement for 2017-18 and the budget actual for 2017-18 showed expenses of $22,565.79, for a difference of $1,727.76.

Big Grab reports

While both the A-tax report and the profit and loss and budget/actual for 2017-18 Solar Eclipse revenue matched at $13.547.00, expenses for the event were off on the same reports. Switzer’s final report to the A-tax committee reported expenses of $12,114.23. His profit and loss for 2017-18 and the budget/actual for the year listed Big Grab expenses as $7,402.12; a difference of $4,712.11.

In other reports for the events, there is little information about revenue and expenses for what Switzer said were lucrative t-shirt sales, vendor sales, sponsorships and other areas of revenue.

“The chamber needs to explain these discrepancies,” Massa said. “They are playing fast and loose with numbers and the council is apparently going right along with them. When you’re making decisions to dole out town money, you’re accountable to know what the numbers really are.”

Other financial reporting

The reporting of the chamber’s total operating revenue and expenses also vary from one document to another for the same time period in documents presented to council. The last documents were presented on June 22, 2018 prior to the June 25 council meeting where council voted to extend funding to the chamber for the visitor center in the amount of $9,250 through Dec. 31, 2018.

The total revenue listed under ‘actuals’ dated May 31, 2018 is $92,806.05. Total revenue listed on the chamber’s profit and lost statement for May 31, 2018 is $133,442.10, a difference of $40,636.05.

The total operating expenses listed under ‘actuals’ dated May 31, 2018 is $114,639.52, Total operating expenses listed on the chamber’s profit and lost statement for May 31, 2018 is $86,907.35, a difference of $27,732.17.

While the total revenue for the visitor center is reported on the May 31, 2018 actuals and on the May 31, 2018 profit and loss statement to be $40,616.05. It jumps to $67,342.76 on the June 22, 2018 profit and loss statement even though there appears to be no income activity for the visitor center in those 22 days.

Total visitor center expenses are listed at $8,157.31 on the ‘actuals’  and the profit and loss statement for May 31, 2018, but they jump to $30,842.07 on the June 22, 2018 profit and loss statement, again, with no significant expenses documented for those 22 days.

For his part, Switzer has maintained that the chamber is above board financially and that council has long approved of how the chamber has conducted its business and spent its money.

“I just want to say thank you to the council for the vote of confidence with the increases that you’ve proposed for the upcoming budget,” Switzer said at a May 2018 budget workshop. “We appreciate your vote of confidence in the work that we’re doing and we’re looking forward to continuing to grow that work.”

“Despite the very misleading and sometimes often outright false statements that were put out there, we are completely  of the upmost integrity at the chamber, and I think a good testament to that is that the town has had a representative on our board for many years,” Switzer said. He said the mayor, himself, had served as that representative for a year before Ed Parler, the town’s economic development consultant, took the role.

“He (Parler) attended every single board meeting where our treasurer’s report is given out and all our financials are laid out,” Switzer said. “The $4,500 increase [$2,500 to the chamber and $2,000 to the visitor center] that you have in the budget for us will cover three-quarters of our rent increase of $6,000,” Switzer said.

The chamber rents space for $24,000 a year in a building in McNulty Plaza that Mayor J. Michael Ross and a partner own. According to chamber documents acquired by The Voice, annual rent for the chamber was $600 in 2015/16, increased to $12,000 in 2016/17 and $18,000 in 2017/18. The increase of $6,000 will bring the annual rental fee for the chamber to $24,000. Ross said that increase went into effect July 1.

On Wednesday, shortly after The Voice went to press, Switzer was to appear before the A-tax committee to request $10,000 in funding to organize and manage the next Big Grab event to be held in September.