Knoxville Tourism and Sports CEO Pay Raises Oversight Questions for Board and Government

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February 5, 2012; Source: Knoxville News Sentinel | Knoxville, Tenn. politicians and journalists are up in arms about serious questions concerning the Knoxville Tourism and Sports Corporation (KTSC), a largely publicly funded nonprofit. Protestations of shock have reverberated through the community about the $411,000 salary of KTSC Executive Director, Gloria Ray, who has apparently agreed to resign pending negotiation of the terms of her severance and departure.

Apparently, the kicker was that Ray’s salary hit $411,000 as a result of “easily attained bonuses,” according to a Knoxville News Sentinel editorial, and could have hit $600,000 under the terms of her contract for FY2012. The KTSC board attorney said that $96,000 in bonuses for Ray were “unauthorized,” including one payment of $50,000 for a bonus that was made two months before the board approved that provision of Ray’s contract. Somehow, Knoxville City Mayor Madeline Rogero and Knox County Mayor Tim Burchett, the sources of KTSC’s funding, were outraged to learn about the compensation package. The KTSC executive committee resigned on Friday after board questions revealed that the committee members didn’t seem to know all that much about Ray’s contract and pay. Ray also received an additional $90,000 annually for serving as a board member of BlueCross BlueShield of Tennessee, which happens to be KTSC’s insurance provider; Ray’s conflict of interest form did not include her paid board service at BlueCross. 

Ray may or may not have walked too close to the edge of impropriety when it comes to determining her own compensation. There’s no question that Ray has pulled off some accomplishments for Knoxville, including luring the Women’s Basketball Hall of Fame, the AAU Junior Olympics, and the Ben Hogan Knoxville Open to the city, as well as drawing women’s basketball coach Pat Summitt to the University of Tennessee. Given all the indications of her persona as an energetic promoter of the city and as a tough negotiator behind Knoxville’s sports and tourism accomplishments, it is easy to imagine an overly compliant board rewarding the organization’s longtime director generously, perhaps without the thought and oversight the board members should have considered.

But the city and county protestations aren’t particularly persuasive. KTSC is funded from county hotel/motel tax revenues and municipal taxes. The two public entities had the obligation and wherewithal to conduct oversight of KTSC operations and raise questions about Ray’s large salary and other financial practices at the nonprofit. Last year, the Knox County Commission unanimously approved—almost without discussion—a  five-year extension of the county’s contract with KTSC. No one seemed to question how the Commission spent public funds, much less what and how Ray was paid. Promising more thorough reviews in the future, the county acknowledged that if there were oversight problems at the KTSC executive committee, there were also oversight shortcomings in terms of the county’s responsibility to monitor the dollars it gave to the organization.  

As the News Sentinel editorialists wrote, “Better oversight could have prevented KTSC’s abuse of taxpayers.” This should remind public authorities, who sometimes ride a high horse about nonprofit abuses, that it is sometimes their own less-than-adequate oversight performance that is part of the problem. Nothing obviates the need and requirement for good governance and strong oversight. –Rick Cohen

  • Mark Bertler

    Where was the board?
    One of the key features of a healthy fiscal sponsor is an active and engaged board since,in the fiscal sponsorship model, the fiscal sponsors board of directors is the board of record for all the sponsored projects. Certainly agree that comprehensive audits conduted by reputable outside firms are crucial as are regular reviews of internal controls. While not required to, we try to mirror Sarbanes-Oxley in our operations. In addition, those of us who manged ARRA,(stimulus)funded projects were able to use the more complete reporting requirements to test our internal compliance mechanisms.

  • Andrew Cutting

    Where was/ is the board?

  • Melanie Beene

    In addition to the duties of the fiscal sponsor, the fiscally sponsored project should expect a monthly financial statement from its sponsor and the project should review this statement for accuracy monthly. It is sort of like reviewing your monthly bank statement.

  • Robert Cope

    As new to a NGO and now its treasurer, I observe the good-intending people in such organizations are generally without nearly enough financial savey to understand finances. Needed is a simple guide (if they will read it) to this is how to know how money effects operations, current and future.

  • Jeff Paterson

    IHC was Courage to Resist’s fiscal sponsor/agent from our project’s beginnings in 2005 through October 2010. By late 2009, IHC’s service began declining–but I can see how a less active project would not have noticed the changes. Because we did have a strong working relationship with IHC up until that time, it was not an easy choice to “move on”. In retrospect, we were very lucky to coax the final $30k in disbursements from IHC when we switched fiscal sponsors in October 2010. So while we are listed in Part One of this series, we did “get out in time”, and our work was not impacted. Thank you Non-Profit Quarterly for these articles that for the first time show what was really happening. – Jeff Paterson, project director