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By WILL VAN SANT, Times Staff WriterAn internal report shows the Pinellas agency paid a Clearwater marketing firm almost a half million too much.
CLEARWATER - The St. Petersburg/Clearwater Area Convention & Visitors Bureau overpaid a marketing agency by nearly a half million dollars and needs to better oversee how it spends money, according to an audit released Friday.
In response to the findings, the bureau, Pinellas County's tourism development agency, has agreed to open marketing contracts to competitive bidding and has clarified language that deals with the half million in question.
Carole Ketterhagen, who has directed the tourism bureau for 14 years, apologized for what she termed an "unfortunate situation" and promised to cooperate with the Clerk of the Circuit Court's Internal Audit Division.
However, Ketterhagen said, some of the audit findings were unjustified and that the Clerk of the Circuit Court's Finance Division was responsible for approving the payments.
"We rely on the Finance Division," Ketterhagen said. "They in effect are our bookkeeping department."
The bureau gets its revenue through a tax that is applied to stays of six months or less at hotels, condominiums and campgrounds. The bureau, which has a budget of nearly $23-million, uses the money to promote Pinellas County as a vacation destination.
The audit found that the bureau overpaid FKQ Advertising & Marketing of Clearwater by approximately $485,000 between 2002 and 2004. Ketterhagen said FKQ has held a contract with the county for about three years.
FKQ got the bulk of that money, about $330,000, as a service fee it charged the bureau when it hired subcontractors. Auditors said FKQ's service fee was supposed to be 15 percent of what its subcontractors were paid.
But the company was adding its 15 percent service charge to the base amount used to calculate its total fee, auditors said. For instance, instead of taking a $15 fee on $100, it was taking $17.25 on $115.
Ketterhagen said the final service fee payments were calculated by the clerk's Finance Division, not the tourism bureau. Also, she said, vague language in the FKQ contract was reworked earlier this month to deal with the issue.
Robert Melton, the county's internal auditor, said Finance Division workers had said "unequivocally" that the bureau determined the final service fee payments for FKQ.
"Regardless of any explanation," Melton said, "the bottom line is that it's inappropriate for the agency to earn a service fee on the service fee."
The audit also found that FKQ had been paid $150,000 for work performed by tourism bureau employees. Further, the company was getting discounts when it prepaid for ads but not including the credit in bills it submitted to the bureau.
Ketterhagen said it was true that bureau employees had been "very hands on" developing Web sites and working on other projects that FKQ was paid for, but it was not as if the company had been uninvolved.
As for not crediting the bureau for ad discounts, Ketterhagen said, FKQ did no wrong. By prepaying, the company got a price reduction, but it also took a risk, she said, because the bureau could choose to cancel the ad, in which case FKQ would not be reimbursed.
"That's one response that concerns me," Melton said. "It is inappropriate for a contractor to make money off of the county from exercising a cash discount."
FKQ vice president of operations Karen Gorenflo said she was extremely surprised and distressed by the audit findings, which she chalked up to a misinterpretation of the contract. At no time was FKQ paid money it had not earned, she said.
"We are certain that a further review by the county and their representatives will clarify this misunderstanding and set the record straight in short order," Gorenflo said.
The audit suggested that the tourism bureau retrieve the alleged overpayments from FKQ. County attorneys said they planned to review contract and bidding documents Monday to determine whether to seek the money.
In nearly half of the invoices for work done by FKQ, documents supporting the expenditures were inadequate, the audit stated. Auditors said a similar lack of controls compromised the bureau's $140,250 annual contract with Research Data Services of Tampa.
Ketterhagen said it is the Finance Division, not the bureau, that determines what documentation is needed when contractors are paid for services. And her agency, she said, has always complied with requirements.
Melton said Ketterhagen is mistaken. The Finance Division, he said, only ensures that a payment meets strict legal criteria - making sure that bureau employees' signatures are on the right documents, for instance.
"The only role they had really was to process the check," Melton said of the Finance Division. "(The tourism bureau) is the agency contracting for the services, and they are the agency that is responsible for making sure the payments are correct."
For several years, the bureau has hired marketing firms in Canada, England and Germany to promote Pinellas abroad. The annual contracts average $157,000 each. The audit said these contracts should be open to competitive bidding, as they were not previously.
Ketterhagen agreed. Next year, she said, the Canada contract will become the first to be competitively bid on.
"I think having internal audits are very positive for an organization," Ketterhagen said. "They can be a help in changing things that need to be revised."
Will Van Sant can be reached at 727 445-4166 or vansant@sptimes.com