Improve controls for tourism agency

The Hawaii Tourism Authority is tasked with creating a vision and pursuing a plan for promoting and developing tourism here. And because the visitor industry is critical to our economy, state lawmakers give HTA a great deal of freedom in how it operates.

But a stinging state audit persuasively argues that the agency’s freedom has “facilitated lax oversight, deficient internal controls, and, ultimately, less accountability.” In short, it needs to better handle public money, and should be reined in.

When the Legislature formed HTA in the late 1990s, it tethered the agency to a permanent source of funding: it gets more than $108 million annually from the transient accommodations tax (hotel room tax). Exempt from administrative supervision required of other boards and commissions, HTA operates as sort of a self-ruling state agency.

This structure makes it possible for HTA to operate as a private business, essentially. But an enterprise that handles a steady flow of public money yet is subject to few transparency-related checks can set the stage for trouble.

Due in part to HTA’s structure, Sen. Laura Thielen (D-Kailua, Waimanalo, Portlock) correctly observed: “I’m not surprised to find out that there are abuses because when there are exemptions and people aren’t being watched, they will cut corners.”

It’s also not surprising that the audit rightly recommends that lawmakers clarify with the agency various state-imposed boundaries on matters, such as spending caps. In addition, HTA’s procurement exemption needs review, and with an eye to repealing or limiting it.

In defense of its procurement practices, which allow skipping a competitive process for securing a contract, HTA has noted that this exemption from state oversight enables it to speedily seal deals, when necessary, to compete with other markets vying for tourist dollars.

But what’s unacceptable is the audit’s finding that HTA’s “haphazard approach to procurement” ignores its own policies and procedures, and uses sole-source procurement for services that more than one vendor offers. Competition among vendors, of course, fosters open-field fairness and typically results in a better value for public money.

Also in defense of its overall conduct, HTA has pointed to an ongoing streak of record visitor arrivals. In 2017, Hawaii’s tourism industry marked its sixth consecutive year of record arrivals, with some 9.3 million visitors spending $16.7 billion here — generating nearly $2 billion in tax revenues.

There’s no disputing that HTA deserves some credit for such success. After all, it does battle for visitors with other alluring island-destinations around the globe. But the ends do not justify the means.

As a check against HTA’s semi-autonomy, the state Office of the Auditor conducts an audit at least every five years, including on contracts valued over $15 million. Its report released last week revealed HTA deficiencies ranging from large-scale failure to ensure that public money funneled to major contractors is used effectively and efficiently, to smaller missteps.

In one slipshod instance, despite an agreement limiting a contractor’s airfare reimbursement to “actual cost or coach air fare, whichever is less,” HTA reimbursed about $50,000 in first-class airfare. It also shelled out reimbursement of nearly $370 for one-day chauffeur service when the contract limited cost to a mid-sized car rental. The audit said: “By deciding to reimburse costs that were clearly prohibited, HTA needlessly expended excess public funds.”

Due to the agency’s allotted freedom, since its beginning — in the Department of Business, Economic Development and Tourism — transparency has been a tug-of-war issue between HTA and lawmakers seeking to track spending and other decision-making.

For the sake of ensuring appropriate stewardship of public dollars, it’s time to step up oversight as a means to fend off over-spending under the public radar.