DENVER – Public dollars from revenue owed to Denver International Airport by the Westin Hotel still aren’t regularly and completely reviewed and the hotel could still block some access to supporting documentation, according to a follow-up report out this month from Denver Auditor Timothy M. O’Brien, CPA.
“We finally received some of the records we requested — after more than two years of waiting — but it is vital that the hotel management agreement is updated to end the possibility that Marriott International could further block access to records for both auditors and airport management,” Auditor O’Brien said. “We shouldn’t have had to wait this long to get documents we should have had access to from the beginning.”
Denver spent more than $700 million in bonds and airport capital funds to build the Westin Hotel and transit center which opened in 2015. The city entered into a hotel management agreement with Marriott and pays Marriott a management fee to run the Westin Hotel.
At the time of follow-up, the audit team found the airport has not yet updated its hotel management agreement to address concerns that Marriott could withhold information because it was deemed proprietary. Airport officials say they initiated discussions with Marriott in 2019 and are working this year to update the agreement while it is up for renewal.
“I’m disappointed this vital recommendation has yet to be implemented, and I urge the airport to successfully address it in its contract negotiations this year,” O’Brien said. “We should always be taking a trust-but-verify approach when it comes to records and taxpayer dollars. Marriott’s efforts to deny the city access to information remains troubling and hampers the city’s duty to ensure accountability over a significant public investment.”
In the meantime, airport management did update roles, policies, and procedures for contract monitoring and worked toward better performance and financial oversight of the hotel management agreement. Yet none of those updates included reviewing supporting documentation for revenue and expense transactions. Reviews of financial transactions should include assessments of allowability, accuracy, and completeness as outlined in the hotel management agreement.
“This is like the Westin giving itself an A+ on a test, but nobody else can actually see the answers to the questions to confirm that grade,” Auditor O’Brien said. “The significant decrease in revenue due to the COVID-19 pandemic in 2020 makes it even more important to check that all revenue owed to the city was actually paid to the airport from the hotel.”
In 2018, Westin’s representatives refused to provide all requested documentation related to hotel operations and revenue, claiming some of it was proprietary, even though Denver Charter grants the Auditor the specific right to conduct audits of city contracts and franchises with access at all times to books, accounts, reports, and other records.
“My office handles confidential information every day,” Auditor O’Brien said. “If I can’t access these records, then the airport management surely isn’t looking at them, either. And that’s a problem.”
Revised contract terms and stronger policies, procedures, contract monitoring, and clearly defined roles will allow the airport to ensure the Westin is operated in a way that protects the city’s asset and optimizes its financial performance.
The airport did successfully develop clearly defined roles for some financial monitoring, including tracking trends for management fees, original income projections, reviewing external opinions, and the flow of funds.
The airport also fully implemented a recommendation for ensuring all reimbursements to third-party contractors are allowable, and a recommendation to document and resolve on-site inspections. Airport management also formalized steps to document task orders, including documenting the terms and conditions, timeline and costs for requests. Management also developed a process for formal review and approval of those task orders.
“The airport’s managers are taking steps to improve financial monitoring of the hotel,” Auditor O’Brien said, “but without supporting documentation and a corrected operating agreement from the Westin, we will never have the resources we need to assure the public there is no mischief going on.”
Airport managers failed to implement one recommendation, partially implemented seven recommendations, and fully implemented four recommendations.