Grand County officials and the state auditor’s office have reached a tentative agreement to release withheld state-allocated funds related to findings from a June audit that accused the county of misusing tourism-related revenues, according to Grand County Commission Vice Chair Kevin Walker.
An official letter outlining the county’s corrective actions and arguments will be voted on by the commission on Friday in a special meeting. If the letter is approved and the state auditor’s office signs off on it, as they indicated they would during negotiations, it will significantly reduce the projected financial impact on the general fund compared to if the county had accepted all of the audit findings – over $4 million.
In its initial response to the audit, the county commission acknowledged certain errors and proposed a corrective plan but argued that many of the findings were due to “differing interpretations” of tax statutes governing tourism funding. Per the recent agreement, the auditor’s office has now accepted the majority of the county’s interpretations, according to Walker, who has led negotiations with the auditor’s office, along with County Attorney Stephen Stocks and Clerk-Auditor Gabriel Woytek.
“I’m glad that we were able to resolve this [and] I’m happy that the auditor was willing to have additional conversations and take into consideration additional information,” Walker said. “A big chunk of our past spending has gotten a stamp of approval from the auditor.”
hile the original audit recommendations suggested a transfer of about $4.5 million from the general fund, the current agreement calls for approximately $1.1 million, according to Woytek. This means that only about 25% of the originally recommended transfer will be required, with the remaining funds under scrutiny deemed either appropriate or manageable with minimal or no impact on the general fund.
Woytek explained that some transfers have already been made based on the audit’s original findings. With this latest development, further adjustments will be needed to align with the auditor’s revised conclusions.
Grand County’s general fund, which supports a range of county operations not covered by specific restricted funds, currently holds around $10 million, according to an Oct. 30 Budget Advisory Board report.
A lack of “reasonable corrective actions” and delayed submission of Grand County’s 2023 annual report led to a temporary hold on state-allocated funds starting Sept. 17, including Grand County property tax distributions. These state-allocated funds encompass revenue from sales and income taxes, education funding, tourism tax revenue and other subsidies.
Woytek explained that the funding hold forced the county to cover healthcare sales tax allocations to EMS and Canyonlands Healthcare for a couple of weeks, but overall has had little effect. “We lose a crumb of interest income for that money not in the bank,” Woytek said, emphasizing that the funding hold has “for all intents and purposes, had no impact” on county operations.
Breaking down the audit findings and adjustments
The audit presented five key findings that questioned the county’s use of tourism-related tax revenue from January 2022 to December 2023. Transient Room Tax, the primary subject of the audit, is a voluntary levy imposed on lodging accommodations to generate revenue used to promote tourism, fund convention facilities and support local economic development.
The audit initially found misuse of TRT funds on the economic diversification program that has now ended, trail ambassadors and flood relief grants, among many other items
However, the county’s response, supported by additional documentation and clarification, led the auditor’s office to revise its stance on several findings, said Walker.
Finding 1: Mitigation activities expenditures exceeded statutory limit
The most substantial adjustment concerned finding 1, where the audit initially estimated about a $1 million impact due to discrepancies in TRT allocations.
(The Times-Independent) Grand County’s efforts to address the impacts of heavy tourism landed them in hot water with the Utah State Auditor earlier this year, but the temperature has cooled considerably following negotiations.
The county has agreed they made an error involving their misallocation of funds between Mitigation and Promotion activities due to a number transposition error. Specifically, 67% of funds were mistakenly allocated to the TRT Mitigation Fund instead of 63%, while only 33% went to the Economic Development Fund instead of 37%.
The state auditor’s office had originally assumed that TRT allocation rules remained static each year, overlooking annual changes since 2020.
After a detailed review, the impact of this finding was lowered to $650,000.
Finding 2: Failure to apply generally accepted accounting principles
Finding 2 initially flagged $700,000 of tourism-related spending on an economic diversification program, stating that Grand County’s “prepayment of economic development activities to be performed after [the allowed spending period] expired appears improper.”
The auditor’s office argued that, under Generally Accepted Accounting Principles, such expenses should align with the period when the services are performed, not prepaid before July 2023 when the program ended.
However, upon re-evaluating the statute, the auditor’s office determined that, while the tax collection period had ended, spending could still be spread over multiple years. This adjustment resulted in no financial impact on the general fund
Finding 3: Inappropriate classification of expenditures as tourism promotion
Finding 3 included various expenses the auditor initially deemed unallowable, such as trail ambassador videos and flood relief grants for tourism facing businesses, among others.
Through negotiation, Walker said nearly all items in the long list were approved, with the exception of $70,000 related to the shuttle service.
Additionally, Walker added the auditor’s office incorrectly assumed that flood relief grants for non-tourism facing businesses, aside from a couple, were paid for by TRT promotion funds when they were instead allowably funded by TRT economic diversification funds.
Finding 4: Tourism promotion funds for economic development
The county accepted finding 4, which required reallocating certain staff salaries funded by tourism-related tax revenues.
Auditors said that the salaries of the economic development director and assistant economic development director are funded entirely from TRT funds, but claimed “their actual tourism-related duties take up less than 25% of their time.”
Walker said he’s heard from employees it is a much higher percentage than that. Currently, they’re conducting a time study to ensure these salaries align with allowable tourism-related expenses and will make final adjustments as needed.
Finding 5: Grand Center as a convention facility
Finding 5 centered on whether the Grand Center qualifies as a “convention facility” eligible for TRCC funds under Utah Code. The audit initially concluded that the Grand Center primarily operates as a senior center, citing limited rental availability and minimal recorded deposits in 2023, which did not align with TRCC’s statutory definition for convention funding.
In negotiations, Walker argued that the Grand Center hosts a wide variety of events, including public hearings, conventions and gatherings like quilting groups, arguing that it met the broader intent of “other gatherings” under the statute, which is broad.
Walker noted that although the auditor’s analysis primarily reflected senior center activities, it did not fully account for the calendar of public events that do not always require security deposits.
Ultimately, the county and auditor’s office agreed on a compromise, recognizing 55% of the Grand Center’s usage as convention-related, which permits partial TRCC funding.
This adjustment may result in a transfer of up to $200,000 from the general fund, though reallocations across other eligible areas may reduce or even eliminate the financial impact of this finding.
Next steps
The commission will vote on approving the new letter that outlines the necessary transfers and arguments at Friday’s 10 a.m. special meeting. If approved, the auditor’s office will likely respond within a couple of business days, potentially releasing state-allocated funds and Grand County property tax distributions by early next week.
This is a developing story
