2 Jun, 2008
Media Probe Yields “Clerical Lapses” in PATA’s IRS Report
The Pacific Asia Travel Association (PATA) was last week forced to “update” its filings with the US Internal Revenue Service after a media investigation showed up two instances of a “clerical lapse” that could have seen it face penalties and possible fines.
The same investigation by the Bangkok-based travel publication TTR Weekly also showed up two additional gray-areas related to PATA’s financial disclosure requirements under IRS regulations as well as information that has to be made available to PATA members under its own by-laws.
Although the association is headquartered in Bangkok, it has a registered office in California where it was previously based before moving to Thailand in 1998. It still retains its status there as a non-profit organisation (NPO) and thus has to file annual financial statements with the US IRS.
However, the investigation by TTR Weekly indicated that PATA, in its filings for both 2005 and 2006, had ticked “No” to two very specific questions asking if it maintained an office outside of the US, and whether it has an interest in or signature over a financial account in a foreign country. The statements for 2007 have still to be filed.
The 2005 forms were signed by PATA’s US-based Director of Finance Tes Yabut and a representative of its CPA while those for 2006 were additionally signed by the PATA President and CEO Mr Peter de Jong. The forms clearly make the signatories responsible for the accuracy of all the information provided or risk facing “penalties of perjury.”
PATA’s finances have come under close scrutiny this year because they hold the key to its survival. The association’s three primary sources of income – an annual conference now rebranded as a “CEO Challenge”, an annual travel mart and the dues paid by its roughly 1,000 members throughout the Asia-Pacific – are all under significant competitive pressure.
After being alerted to the “clerical lapse,” the association scrambled to fix it. TTR Weekly editor Don Ross reported being told by Mr de Jong that “the earlier filing… (was) inadvertently not updated in some of the particulars.”
Mr de Jong attached a PDF of the revised form covering the financial year 2006 which now states that PATA has overseas offices in Thailand and Australia and bank accounts in these countries as well as Germany.
Mr de Jong clarified: “It is a supplemental filing, it updates, but does not replace the earlier filing. Yes, we became aware that the (form) 990 prepared by the accountants was out of date on some points and we chose to amend it.”
IRS rules allow an association to “file amended returns at any time to change or add to the information reported on a previously filed return for the same period,” TTR Weekly reported.
The publication noted that its investigation had also led to the discovery of another potentially serious issue — that PATA is “in danger of defaulting on strict (public) disclosure rules set by the IRS to ensure US-registered NPOs practice good governance.”
US law requires the association to have at its principal offices, copies of the three latest annual information returns (Form 990 Return of Organisation Exempt from Income Tax) that are filed with the IRS.
“TTR Weekly’s investigation revealed that until last week the association’s HQ (in Bangkok) was not in possession of the annual information returns for 2004, 2005 and 2006, leaving it open to criticism that it would not have been able to provide the documents if requested by the public or a Pata member.
“In various (IRS) website instructions on good governance, the management of NPOs is told that complying with the IRS instruction on disclosure tops the ‘must-do list’. Failure to comply with the disclosure rules could result in an association facing a daily fine of US$20 and a maximum fine of US$10,000, until the error is rectified,” TTR Weekly reported.
However, Mr de Jong “appears to disagree with that assessment,” said the report. “The information in public domain is fairly limited and there is no obligation to go beyond that,” he was quoted as saying.
Although Mr de Jong stated that “financial records that are required for our US reporting obligations are kept at our US-based finance office rather than our Bangkok head office,” TTR Weekly noted that the US office address is neither publicised in association literature, nor posted on its website www.pata.org.
Said the report, “Mr de Jong’s explanation is largely irrelevant, as the IRS disclosure rules state: ‘The organisation must make its annual information returns available for public inspection without charge at all of its principal, regional and district offices during regular working hours’.”
Mr de Jong also assured the publication that the financial statements for 2007 would be available on request after being filed.
US-registered NPOs are also obliged to provide an annual report and financial statements to all members before they are approved at an AGM.
But TTR Weekly said that PATA’s honorary treasurer and executive committee member, Mr Hiran Cooray, had first said that the annual financial statement for 2007, with an invitation letter to attend the last AGM in Colombo, Sri Lanka, had been sent to all members.
“Shortly after making that statement, in an email to this publication, he reported that he could no longer confirm that point,” TTR Weekly said.
Questions about PATA’s internal governance and management procedures were dispatched late last week to PATA chairperson Janice Antonson, who is based in the Bahamas. A reply was awaited at the time of writing.
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