Legislature(1995 - 1996)
03/07/1996 03:10 PM House ITT
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE SPECIAL COMMITTEE ON
INTERNATIONAL TRADE AND TOURISM
March 7, 1996
3:10 p.m.
MEMBERS PRESENT
Representative Beverly Masek, Chairman
Representative Alan Austerman, Vice Chairman
Representative Jeannette James
Representative Brian Porter
MEMBERS ABSENT
Representative Pete Kott
Representative Irene Nicholia
Representative Caren Robinson
COMMITTEE CALENDAR
LEGISLATIVE AUDIT REPORT ON AK TOURISM MARKETING COUNCIL BY RANDY
WELKER
PREVIOUS ACTION
No previous action to record.
WITNESS REGISTER
RANDY WELKER, Legislative Auditor
Legislative Audit Division
Legislative Affairs Agency
P.O. Box 113300
Juneau, Alaska 99811-3300
Telephone: (907) 465-3830
POSITION STATEMENT: Reviewed Audit Report on Alaska Tourism
Marketing Council
DANE LARSEN, Legislative Auditor
Legislative Audit Division
Legislative Affairs Agency
3305 Arctic Boulevard, Suite 101
Anchorage, Alaska 99501
Telephone: (907) 561-1445
POSITION STATEMENT: Reviewed Audit Report on Alaska Tourism
Marketing Council
ACTION NARRATIVE
TAPE 96-01, SIDE A
Number 0005
The House Special Committee on International Trade & Tourism was
called to order by Chair Beverly Masek at 3:10 p.m. Members
present at the call to order were Representatives Masek and Porter.
Members absent were Representatives Austerman, James, Kott,
Nicholia, and Robinson. Chair Masek stated other members would
arrive later, as they were attending a Community and Regional
Affairs Committee meeting.
Number 0024
CHAIR BEVERLY MASEK announced the committee would hear a
presentation by Mr. Randy Welker, Legislative Audit Agency,
concerning the Alaska Tourism Marketing Council (ATMC). She
mentioned the amount of time the committee had spent examining the
state's approach to tourism marketing. Last year, the committee
heard testimony from the ATMC, the Alaska Visitor's Association
(AVA), and the Department of Commerce and Economic Development
(DCED). The committee also heard testimony from large and small
businesses throughout the state and from representatives of the
advertising industry on how to use an alternative media approach in
marketing Alaska. Chair Masek emphasized the most common complaint
heard by the committee was that smaller businesses feel they are
being left out of the marketing picture.
CHAIR MASEK stated the committee needs to find ways to reach out to
all business owners throughout the state who deal in tourism. She
said the committee needs to examine Mr. Welker's report with an eye
to see what can be done to shape up the tourism industry within the
state. Chair Masek called Mr. Welker to the table.
Number 0071
MR. RANDY WELKER, Legislative Auditor, Legislative Audit Division,
Legislative Affairs Agency, explained the Legislative Audit Report
on the Alaska Tourism Marketing Council, currently before the
committee, was a sunset report. The report is required by law to
be performed by the Legislative Audit Division on all boards and
commissions which are subject to the sunset laws of the state of
Alaska. These are boards and commissions whose existence
terminates automatically on a certain date, unless extended by the
legislature.
REPRESENTATIVE JEANNETTE JAMES arrived, 3:13 p.m.
Number 0143
MR. WELKER explained that this is the second sunset audit performed
on the ATMC, and that both reports have recommended continuing the
existence of the ATMC. The current report recommends extension of
the ATMC until June 30, 2001.
REPRESENTATIVE ALAN AUSTERMAN arrived at 3:14 p.m..
MR. WELKER explained the sunset statute mandates a variety of
criteria for reviewing the status of sunset agencies. The scope of
the review is broad, allowing for flexibility in the audit process.
He stated the Legislative Audit Division has concluded that the
ATMC is operating in the public's best interest. However, the
audit report makes a series of recommendations regarding statutory
and compliance matters which need to be addressed.
Number 0258
MR. WELKER stated the Report's first recommendation is that the
Department of Commerce and Economic Development (DCED) should
ensure that the joint relationship between the DCED and AVA is in
compliance with Alaska's statutes and constitution. He explained
that the Division of Legal Services' Counsel found several
provisions in the joint agreement between DCED and AVA which are in
violation of the Alaska Constitution and the Alaska Statutes. For
instance, the current agreement between the AVA and ATMC allows the
AVA to generate revenues through the sale of mailing labels and
promotional space in its mailer. Statute provides that the AVA may
deduct the expense of doing so, and that the balance is to be
remitted to the state. The audit report questions this procedure,
because those funds should be subject to the Executive Budget Act.
MR. WELKER provided several examples of similar situations, such as
the Department of Fish and Game license sales, where the
commissions, paid to agents selling licenses, are deducted before
the revenues are remitted to the state treasury. He explained
that, particularly in view of the current budget situation, it is
important that the legislature be aware of all such financial
questions. For example, the Department of Motor Vehicles is
currently discussing the possibility of allowing the public to pay
licensing fees with credit cards. While this may sound like a
convenience to the public, there is a potential financial loss to
the state because of the bank fees that must be paid. The audit
division believes these types of items should be contained in the
state budget, so that the legislature and the public will be aware
of the cost. From this perspective, the division questions the
practice of allowing the AVA to deduct expenses before funds are
transferred to the state treasury.
MR. WELKER said that Sub-recommendation B of the report states the
DCED commissioner should ensure that all funds collected by the AVA
under the joint agreement are deposited monthly with the state.
Sub-recommendation C states the joint agreement between DCED and
AVA should be subject to the provisions of the state procurement
code.
MR. WELKER explained the report's second major recommendation is
that the ATMC continue to identify and propose new means of funding
its operating budget.
Number 0263
REPRESENTATIVE BRIAN PORTER asked if the types of recommendations
made in this report were developing into a universal fix.
MR. WELKER replied that such recommendations would be targeted at
specific agencies and programs, as they were identified in the
course of financial audits.
Number 0281
REPRESENTATIVE JEANNETTE JAMES asked if an appropriation for the
cost of collecting fees, such as the Department of Fish and Game
licenses, could be made by the legislature.
MR. WELKER reiterated that, for accounting purposes, such fees
would be considered revenue, but the cost could be appropriated by
the legislature.
Number 0293
REPRESENTATIVE JAMES then questioned whether a similar process
could be followed with the AVA funds.
MR. WELKER responded that an appropriation for the expenses, which
are now being removed from the revenue, would address the concern.
However, the monies collected above and beyond the expenses would
still be a concern. He reiterated that the costs must be
identified somewhere within the budget.
Number 0311
MR. WELKER continued his report. He again stated that
Recommendation Number 2 deals with the funding source of ATMC.
Number 0334
MR. WELKER explained that the audit division replied on a legal
opinion prepared by Tamara Cook, Division of Legal Services, in
making its recommendations.
Number 0342
REPRESENTATIVE JAMES mentioned her concern over the dedicated fund
issue and stated that she was pleased it was brought to the
committee's attention.
MR. WELKER responded it was not always a cut and dried matter.
Legal considerations differ, depending upon the type of funds
involved.
REPRESENTATIVE JAMES noted the timeliness of the issue.
Number 0378
REPRESENTATIVE PORTER asked about the recommendation that the
industry increase its share of expenses.
MR. WELKER responded that the AVA was critical of that
recommendation. The budget for ATMC was reduced by $2.5 million,
so the industry's contribution is actually smaller. He pointed out
there is nothing to prohibit the industry from offering additional
funds. When the budget was reduced the industry did not respond to
help support the budget and he reiterated the Audit Division's
recommendation that the level of support for ATMC be increased.
There needs to be discussion on the fairest way to do this.
Number 0413
REPRESENTATIVE PORTER asked if figures were available from other
states, to show the balance between private sector and government
funding.
MR. WELKER responded that Dane Larson, Anchorage Audit Manager,
Legislative Budget and Audit Division, might have that information.
Number 0418
MR. DANE LARSON, Anchorage Audit Manager, Legislative Budget and
Audit Division, stated there was a study recapping that
information, but it was difficult to compare, since different
accounting systems are used. Some states used 100 percent
dedicated funds, but other revenue sources were included.
Number 0435
REPRESENTATIVE JAMES stated the Long Range Financial Planning
Commission suggested taxing the tourism industry. She wondered if
other states were doing this, whether through income or sales tax.
She asked if a tax on the tourism industry met the criteria for
increased contributions.
MR. WELKER responded that if such a tax were to be acceptable to
the industry, the tax dollars would need to go directly to tourism.
He felt that direct contributions would be preferable to forcing a
tax.
REPRESENTATIVE JAMES said the tourism industry has the ability to
put together such a voluntary system, but has not done so. She
stated if the industry wants to continue receiving general funds,
they should be willing to help in some way.
MR. WELKER stated that is why the report's recommendation is
directed to the ATMC, rather than to the legislature. It would be
best for the industry to develop a voluntary plan, rather than
being forced by the legislature.
REPRESENTATIVE JAMES concurred.
Number 0477
CHAIR MASEK asked if the AVA and the DCED had responded to the
audit.
MR. WELKER said the Department concurred with the report's
recommendations regarding increased industry support. Furthermore,
AVA's response was protective of the status quo.
CHAIR MASEK wanted to know if the legislature had shown interest in
this topic in the past.
MR. WELKER replied that the audits of 1993 and 1992 had raised the
same issues. Two years ago, the ATMC budget was discussed, and the
industry's contribution was increased to 15 percent.
Number 0513
CHAIR MASEK asked if the Attorney General had issued any opinion on
the report.
MR. WELKER responded that he was not aware of any opinion.
CHAIR MASEK asked if the relationship between the ATMC and the
state made it easier to achieve the oversight needed.
MR. WELKER responded that the current structure reduces legislative
oversight. However, the agreement between the ATMC and the AVA
provides for audit of AVA's affairs, and gives the DCED access to
AVA's financial records. The biggest piece missing is legislative
oversight.
Number 0541
CHAIR MASEK asked how AVA expenses are monitored.
MR. WELKER replied that the agreement between the AVA and the ATMC
provides for an annual financial audit, conducted by an independent
Certified Public Accountant (CPA) firm. The audit does not
consider programmatic aspects.
CHAIR MASEK asked if the audit division had looked into AVA
expenses.
MR. WELKER responded that the division only looks at summary
information provided to support calculations. The detailed records
are not examined. Unless a nonprofit organization receives money
from the state on a pass-through grant, the division normally does
not look at such detail.
Number 0561
REPRESENTATIVE JAMES asked if the audit detail was sufficient to
identify total income, less AVA expenses, so that an amount could
be appropriated in the budget.
MR. WELKER replied that the items would be identifiable.
CHAIR MASEK asked for an overall view of how the ATMC and the AVA
work together.
Tape 96-01, Side B
Number 0573
MR. WELKER responded that funds for the operation of ATMC are
appropriated by the legislature. The relationship between ATMC and
AVA is governed by an agreement that sets out their mutual
responsibilities. He stated that, in the Audit Division's opinion,
both the tourism planner and the mailing list are state assets
which are being administered by AVA, which is why revenues
generated from them are considered state revenues. The expenses of
producing the planner are deducted from the generated revenues.
The revenue then becomes the basis for AVA's contribution to the
ATMC. This process is statutorily mandated. The ATMC is broad
based in its representation of the visitor industry, and has the
responsibility to ensure the agreement between AVA and ATMC is
properly administered. Recent improvements have been made in the
agreement, to ensure the process works as intended.
Number 0980
CHAIR MASEK asked how contracts are handled. Who oversees the
contracts, the ATMC or the AVA?
MR. LARSEN replied that the bulk of the contracts are under the
ATMC.
MR. WELKER added that the contracts are subject to state
procurement codes.
Number 0968
REPRESENTATIVE JAMES asked how the recent changes in the Audit
Division of Tourism affected the ATMC.
MR. WELKER responded that there is a close working relationship
between the Division of Tourism and the ATMC. The Division
director is a member of the ATMC. There is no duplication of
responsibilities.
Number 0957
REPRESENTATIVE ALAN AUSTERMAN stated that the basic distinction is
ATMC handles the domestic market, while the Division of Tourism
works with Canada and other foreign countries. Also, ATMC handles
state funds, while AVA does not.
CHAIR MASEK read from the report, on page 10, as follows: "B. The
commissioner should ensure that all funds collected by AVA under
the joint agreement are deposited monthly with the state." She
asked if this money would go into the general fund, and if the
Commissioner referred to was the DCED commissioner.
MR. WELKER replied that it was the DCED commissioner. He
reiterated it is the Audit Division's position that state law
requires all revenue collected, less expenses, is state revenue,
and belongs in the general fund.
Number 0938
CHAIR MASEK asked if the same recommendation regarding revenue was
made in the 1992 audit, or the 1993 audit?
MR. WELKER responded that the issue was first raised in the 1992
audit report. Actually, the first audit issued in January, 1992,
was a special audit request from the legislature, which focused on
cost of the ATMC television commercials which aired nationally.
The following year, the first sunset audit was performed. Through
the sunset process, ATMC has been extended through December 30,
1996.
Number 0880
REPRESENTATIVE PORTER asked if AVA was in violation of any statute
in their handling of funds.
MR. WELKER stated that they are in compliance with the general
financial statutes of state government so long as their receipts
are deposited in the general fund on a monthly basis. He
reiterated it is the Audit Division's position that funds being
retained by the ATMC, in accordance with the terms of their
agreement with AVA, should also fall under that general financial
statute in Title 37.
MR. PORTER then asked what is the relationship between the ATMC and
the Division of Tourism.
MR. WELKER responded that the relationship is only indirect. They
have separate functions. He stated it is AVA's position that they
are not a state agency, and that, therefore, statutes concerning
revenue do not apply. The Audit Division believes that AVA is an
extension of the ATMC, and operates under authority of the council,
which means the monies that AVA collects are state revenue.
MR. PORTER stated perhaps the definition of "agency" needs to be
clarified through statute.
Number 0862
REPRESENTATIVE JAMES brought up the subject of television
advertising that was investigated in the original audit. She
stated Alaska should be advertised not just as a pristine
wilderness, because this image is detrimental to development of
industries such as mining, fishing, oil, and construction. She
reiterated for the record that she would like to see a more
balanced image of Alaska in television advertising.
CHAIR MASEK stated she had reviewed the response of AVA and DCED
regarding the state procurement code. She read from the
department's response, as follows: "The Department continues to
assert that the joint agreement between the Department and the AVA
is not subject to the state procurement code. This is not a public
procurement. It is a joint agreement authorized in statute between
the state and a private, nonprofit association."
MR. WELKER reiterated that the Audit Division disagrees with this
position. The Audit Division asserts the procurement code is
broader in scope, covering all types of state agreements,
regardless of what they may be called. He stated AVA is trying to
maintain the status quo, but the division's position is supported
by legal opinion.
CHAIR MASEK asked if the present system would help to keep the
costs down for smaller businesses that wish to participate in
tourism marketing policy.
MR. WELKER replied that was a broad policy matter, which the audit
division had not addressed.
Number 788
REPRESENTATIVE AUSTERMAN suggested this question was one that
should be asked of the ATMC itself.
REPRESENTATIVE JAMES added it is critical for the industry to
recognize the value of small businesses.
CHAIR MASEK stated that many of these questions were raised in
previous hearings. It is her understanding that small businesses
can not afford to buy advertising in the Vacation Planner, which
means the large corporations wind up subsidizing the tourism
marketing.
Number 0757
CHAIR MASEK asked if AVA had to comply with the procurement code,
would they be found in violation?
MR. WELKER responded that the agreement between ATMC and AVA should
be made subject to the procurement code. He stated the audit
division has not investigated the internal procedures of AVA, as
that is not subject to their review. He reiterated the agreement
should be subject to the procurement code.
CHAIR MASEK stated she would call another meeting to consider
options regarding the findings of the report. She said the
committee should consider adopting recommendations to put forth to
the House, Senate, and Governor's office.
Number 0730
REPRESENTATIVE JAMES asked if a statute change would be required,
or only a change in procedure.
MR. WELKER replied it would be a combination of statute and
procedure.
REPRESENTATIVE AUSTERMAN asked if ATMC would respond to the
committee.
CHAIR MASEK stated she was not sure. She said she would welcome
any response from the ATMC.
Number 0710
ADJOURNMENT
There being no further business to come before the House Special
Committee on International Trade and Tourism, Chair Masek adjourned
the meeting at 4:20 p.m.
| Document Name | Date/Time | Subjects |
|---|