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Financial Mismanagement Forces City of Merced, California to Terminate the
 Merced Conference and Visitors Bureau's $373,100 City Contract
By Leslie Albrecht, Merced Sun-Star, Calif.McClatchy-Tribune Regional News

Nov. 20, 2007 --After uncovering signs of financial mismanagement -- including the unauthorized refurbishment of an executive's office -- the City Council voted Monday night to terminate the Merced Conference and Visitors Bureau's $373,100 city contract.

The action followed revelations that the CVB has racked up at least $40,000 in unpaid bills and whittled its cash reserves to just a few hundred dollars.

The council voted 6-1 to end the contract and to find a new organization to provide the city's tourism promotion services. Councilman Carl Pollard voted against terminating the contract.

The CVB is an independent nonprofit organization that has provided the city's tourism promotion services since October 2005. When the CVB started its 2006 contract with the city, it had cash balances exceeding $21,430. As of the end of June 2007, that figure had dwindled to less than $650.

"Basically the corporation is insolvent and is not a going concern," read the city staff report that detailed the CVB's money troubles. "Putting it bluntly, there's not enough money in the bucket to pay the bills that are owed right now," said Economic Development Manager Frank Quintero at Monday's meeting.

The city began an investigation of the CVB's finances in September, after two board members alerted the city to concerns about the CVB's financial stability.

City officials say the factors that led to the CVB's financial downfall include:

A 15 percent pay raise to CVB Executive Director Melyssa Laughlin that wasn't authorized by the entire CVB Board of Directors

An $11,775 renovation to the city-owned California Welcome Center that was made without city permission, including refurbishing the executive director's office

An escalation in credit card debt from $1,778 to $10,390 over a one-year period. Some of the charges were made on a credit card that belonged to a former CVB executive director.

Quintero said that while the CVB fulfilled its contractual obligation to promote tourism in Merced, it failed to control its spending. That was due in large part to a board of directors that was disengaged and failed to adequately oversee the CVB's spending, he said.

Board President Dave Wood said Monday that part of the blame lays with the board, but he also noted that some of the CVB's accounting procedures made it difficult for the board to keep a close eye on exactly how money was spent.

"Not being able to understand the books really did us in," said Wood. "We should have pushed harder, we should have been able to understand the books."

Wood said that after the financial problems came to light, the board made several changes to the CVB's operations and by-laws in an effort to set the organization back on course. But city officials weren't confident the changes would work, he said.

The bulk of the CVB's funding comes from city money. It was also set to receive $15,000 in county funds. The CVB generates some revenue by selling merchandise at the California Welcome Center.

In August two of the CVB's ex-board members, County Supervisor Kathleen Crookham and Doug Fluetsch, alerted city officials to financial problems at the CVB.

In September, the city took over operations at the California Welcome Center, paying to staff the center and provide supplies. The city has spent $8,900 keeping the center going since then.

City staff will take over CVB operations until a new contract is awarded.

Reporter Leslie Albrecht can be reached at 209-385-2484 or lalbrecht@mercedsun-star.com.

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To see more of the Merced Sun-Star or to subscribe to the newspaper, go to http://www.mercedsunstar.com.

Copyright (c) 2007, Merced Sun-Star, Calif.

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