Chamber audit results: "needs improvement"

City administration officials declined to accept the recommendation of the City Auditor's office to use a process to select an economic development contractor, rather than continuing to renew the Tulsa Metro Chamber (officially the Metropolitan Tulsa Chamber of Commerce -- MTCC) automatically each year. The auditor's recommendation was one of six findings in this audit of the Chamber's compliance with their economic development contract with the city for Fiscal Year 2007.

It's unclear who wrote the administration's response to the audit, but the response sets up a vicious circle. First, here is audit finding 1:

SUMMARY:

It has been a long tradition, dating back to the early 1900's that the City has contracted with MTCC for economic development purposes. City management generally uses a contract awarding methodology prescribed by executive order for selected consultants. However, this type of methodology is not applied when awarding the economic development contract. Without exploring available options for the economic development contract or using the established contract methodology, there is less assurance the value of the services provided is equivalent to the amount of funding expended.

RECOMMENDATIONS:

Stakeholders should use an established contract methodology or contract selection criteria for selecting future economic development contractor(s). Continued funding of MTCC may be the best option available, but without exploring other options, stakeholders cannot be sure.

The administration's response:

Decline. While the processes outlined in the recommendation are sound, until potential alternate providers are identified the use of those processes will be ineffective.

The auditor points out the obvious in a response to the response:

AUDITOR COMMENT:

Decline of the recommendation accepts risk that alternative providers may not be identified and funding expended may not maximize service provided.

In other words, until the city sets criteria, issues a request for proposals, and indicates a willingness to look at other providers, it's unlikely that other providers would emerge to compete with the Chamber.

The auditor, in finding 2, also recommended adding quantifiable performance standards for the economic development contract -- to have a way to measure the outcomes achieved by the contractor.

In finding 3, we learn that the Chamber isn't reporting expenditures on a quarterly basis as required by its contract:

The MTCC contract requires performance reports be submitted 30 days after each calendar quarter and 60 days after the end of the fiscal year. MTCC submits performance reports and marketing plans timely and includes all of the required information, with the exception of budgetary versus actual expenditures data. MTCC senior management stated they did not include the actual expenditures versus budget because it was never required in prior contracts.

Finding 4 reveals that when the Chamber can't find private sponsors for a marketing activity, they just hit up the city for the difference:

MTCC prepares a marketing plan of City funding for proposed activities during the contract period. Some of the proposed activities also involve private funding obtained by MTCC. The marketing plan is provided to the City contract administrator who uses the marketing plan for review of reimbursement requests from MTCC. If MTCC is not successful in securing enough private funding for an activity, they may use funds from other projects to fund the activity. When these changes occur, the City's contract administrator only learns of the change when reimbursement requests for an event are received. For example, in the FY07 marketing plan, $10,000 was earmarked as the City's portion for the LPGA Tournament and $15,000 from private partners. MTCC was unsuccessful in securing sufficient funding from private partners, so the City paid $25,000.

Internal Auditing reviewed the marketing plan and discovered several mathematical errors and some activities listed twice. The contract administrator does not review or verify the plan for accuracy. The contract administrator uses the marketing plan for review of reimbursement requests from MTCC.

Finding 5: The Chamber didn't meet its goal of 300 new sales, contacts, and leads. They only made it to 260. (How hard is it to generate leads?)

Finding 6: The City needs someone with a background in economic development and convention and visitors services to oversee this contract. The auditor notes: "Although MTCC submits performance reports they are not reviewed to ensure performance measures are being met."

If we insist on making economic development a tax-funded activity, the City ought to follow the auditor's recommendations: objective performance measures, ongoing monitoring of performance throughout the year, and a process to allow competition for the economic development contract.