16 Jun, 2008
Former PATA Chairman Calls for Deep Financial Audit, Membership Survey
(TTR Weekly Editor Don Ross contributed to this report)
A former chairman of the Pacific Asia Travel Association has made an unprecedented public call for a comprehensive probe into PATA’s financial management as well as a thorough membership survey to determine its future directions.
Responding to the recent travel trade press reports about errors in PATA’s filings of financial statements with the US Internal Revenue Service and disclosure requirements, Mr Ram Kohli of India, who chaired PATA between 2004-2005, said:
“I believe it is time for PATA to face its problems squarely, and for those of us who have been deeply involved with PATA to courageously raise pointed questions addressing strategic issues once again about the future of PATA, including its vision, goals, governance, accountability to members — our fundamental raison d’etre.”
Mr Kohli said, “All these issues which (the media is) raising now had been brought out during my chairmanship. Ensuring strict compliance with the by-laws of the association and accounting had been among my major concerns because they go to the heart of association management – the upholding of public trust.”
He said he had chosen to break years of silence “because I consider myself a well-wisher of PATA. Transparency, accountability and disclosure are absolutely imperative in publicly-funded, taxpayer-supported, non-profit organisations.”
Although its operational HQ is in Bangkok, PATA is registered under US laws, in the state of California, and enjoys tax exemption afforded to organisations that have 501 status under Internal Revenue Service rules. Charities that receive donations from the public live under the 501 c 3 umbrella, while trade associations such as Pata are in the 501 c 6 category.
Both are exempt from income tax, but that financial benefit comes with conditions – transparency and compliance with strict disclosure rules.
PATA is financed by 1,000 plus members, who contribute over US$2.2 million of the US$3.9 million the association garners in revenue.
All the members in Thailand, including the Tourism Authority of Thailand, Thai Airways and the private sector, pay a total of roughly US$ 140,000, the third largest contribution after Singapore and Hong Kong.
In recent weeks, investigations by the trade media have uncovered alleged lapses in disclosure procedures and reporting errors, all of which have been downplayed by the association.
Now Mr Kohli has become the first former chairman to go public with on-the-record comments about the need to ensure transparency and public accountability, as required by the laws of the IRS and the State of California.
“Those laws have not been passed for nothing. They have a very specific purpose – to establish public trust. During my days as chairman, I had insisted on the appointment of a proper financial officer but a junior staff was given the responsibility, based not in Bangkok but in San Francisco even while day-to-day accounting is controlled in Bangkok.”
He noted that he had raised concerns about the 62.3% of the total budget being spent on salaries at that time.
“The most problematic expense relates to that of high CEO compensation plus perquisites, which do not seem tied to performance objectives. I had also pointed out that the outlook for generating new sources of revenue, especially through membership growth, appear bleak and small gains in revenue are offset by higher expenditures.”
According to the financial statements filed with the IRS, PATA President and CEO Mr Peter de Jong makes US$230,000 a year.
Mr Kohli said he was sorry to see these issues being aired in public but also said part of this was due to the “cursory and in my opinion, ineffective, oversight provided by elected officers.”
“In the executive committee meetings, whenever I raised deep questions to the management, they were evaded and when pursued, the response was one of defensiveness or a counter-charge of micro-management.
“At one stage, even in my capacity as chair of the association and despite my persistent inquiry, I was not successful in securing a meeting with auditors to review the association’s financial standing. Once, I recall, a meeting was fixed at the auditors office but inexplicably cancelled just half an hour before it was to take place.
“There was no whetting neither of expense accounts nor of travel and accountability of time away from office, or use of contributed air tickets. Many accepted rules of effective management, which requires having checks and balances, responsibility and accountability, were being circumvented.
“I very strongly recommend that we should hire an outside agency to go through the finances. It is possible that all the officers past and present can get into serious trouble with both American and Thai authorities, which should be avoided.”
Mr Kohli said his greatest concern was about the future of PATA, especially the critical question of what benefit it is providing to members.
“What is the value received by members for their investment? While I have been asking this question for some time, no satisfactory reply has been forthcoming and the sad conclusion on the part of many is that PATA may have outlived its usefulness, to be displaced by other more vital tourism organisations on local, national or international levels.”
Some of the selected quotes from the above interview were dispatched to PATA for comment. President and CEO Mr Peter de Jong was on leave, and Director of Operations Michael Yates was unable to provide a return comment by deadline.
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