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12 Jun, 2008

Ex-PATA Chairman Calls For Independent Financial Probe

A former chairman of the Pacific Asia Travel Association has called for a comprehensive probe into PATA’s financial management as well as a thorough membership survey to determine its future directions.

In this dispatch:






(TTR Weekly Editor Don Ross contributed to this report)

A former chairman of the Pacific Asia Travel Association has called 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 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.”

Complimenting TTR Weekly and Travel Impact Newswire for bringing the issues to public attention, Mr Kohli said, “All these issues which you are 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.”

Mr Kohli added, “PATA was considered one of the world’s most prestigious travel organisations. Today, it appears that it is no long run by or for Asians, it is more dominated by few individuals, benefiting personally at the cost of the general membership Some of them are there for years and years, circumventing all rules and regulations by their appointment as members of the various committees or Board of Directors, which is highly questionable.

“The small and medium enterprise, which was the backbone of PATA and whose representatives looked forward to the annual conference, is slowly disappearing because PATA events are now too expensive and elitist, to suit a few. Some NTOs are rethinking why they should spend thousands and thousands of dollars without any tangible benefit.

“The time has come to ask the membership of PATA at large to evaluate the benefit of being a member of PATA versus other more service-oriented associations.”

Mr Kohli said ensuring transparency and public accountability, as required by the laws of the US Internal Revenue Service and the State of California (where PATA is still registered as a non-profit organisation), is critical.

“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-today 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.”

He 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.

“Membership is our lifeblood: we are losing members faster than gaining new ones. Our chapters system is breaking down. While it is easy to say that quality of the remainder is more important than quantity, NTOs are as impressed by the size of the network as by its strength in determining the value of a paid membership.

“It would also be useful for an independent group to undertake a survey of PATA membership to establish whether they find it useful to continue being members. It will reveal the true feelings of small and medium companies,” Mr Kohli said.

As part of the joint TTR Weekly-Travel Impact Newswire editorial effort, 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.



[The following editorial appeared in TTR Weekly this week.]

Not many people in the travel business, worldwide, would admit they know little or nothing about the Pacific Asia Travel Association. This 55-year old non-profit organisation has been at the core of tourism promotions ever since its formation in 1953 in the State of Hawaii. Its influence stretches from the shores of west coast US to embrace destinations in the Indian Ocean.

Yet there is another side to PATA that escapes the attention of even its 1,000-odd members.

Just how many PATA members, for example, ponder over the significance of its non-profit organisation status achieved and maintained in the US?

Registered under US laws, in the state of California, Pata 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.

Transparency laws in the US serve a general good, and there is much to learn from them in Asia where so far disclosure rules are limited in their scope.

But despite the inherent promise that PATA makes on governance, due to its NPO status under US law, it means very little if members are too disinterested to ask the organisation for relevant financial statements.

Ultimately it’s a right of membership, but in reality the majority of 1,000-paid up member organisations could not care less.

For example, PATA is obliged to post annual information returns with the IRS that provide detailed financial and operational reports. PATA is obliged by law to make the three most recent annual returns available for inspection at all of its offices in Bangkok and other offices in the US and Australia.

Unfortunately, evidence indicates that PATA is far too frugal in what it discloses even to its members.

This suggests that PATA is financed by the many for the benefit of the few.

Here are the facts:

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.

The association in turn is ruled by an inner circle of 76 PATA members, who sit on the board of directors. Some have resided on the board for two to three decades without interruption.

Very few members, outside of the board, are privy to financial statements.

If Pata members, who are not on the board, attended the AGM they would participate in a largely ceremonial task of ratifying an annual financial statement, almost two years after the document was approved and filed with the IRS.

Pata’s directors should be encouraged to read the IRS rules and laws of California pertaining to NPOs and recognise that they were appointed as trustees to ensure the full disclosure of financial documents to members and the public.

However, PATA’s 1,000 plus members have no one to blame, but themselves, for allowing 76 of their colleagues to virtually hijack the association and take the lion share of benefits with them.

PATA members may whinge “just what do I get out of my membership?” Do they ever seek the answer?



[A Travel Impact Newswire Commentary]

In 1997, the Asia Pacific region was hit by an economic crisis that sank many a regional economy. The financial crisis which started in Thailand and become a regional contagion was later attributed to the lack of transparency and accountability in the local financial and banking circles and a supporting culture of cronyism and nepotism that nourished it.

Today, Asian governments have learnt their lesson. An improved culture of check-and-balance, although far from perfect, has meant more openness and democracy. Although that can prove to be cantankerous at times, eventually it proves to be good for the system.

The Pacific Asia Travel Association, unfortunately, does not appear to recall that sordid chapter in Asia’s history. In recent years, an internal culture has emerged that has tremendous parallels to the wider economic and political conditions that prevailed Asia-wide in the pre-1997 days.

Bit by bit, simmering membership frustrations are coming to the fore. Questions are emerging about internal management processes, accountability and transparency. As former PATA Chairman Ram Kohli points out in his interview, the issues go right to the “heart of association management – the upholding of public trust.”

The immediate reaction has been to lash out at the media, the convenient scapegoat whom everyone loves to hate but to whom everyone turns when they want to offload their frustrations with “the system.” In fact, trying to shoot the messenger is a sure-fire sign that things are genuinely wrong.

Mr Kohli was not a popular chairman during his tenure, precisely because he sought to question the well-entrenched establishment. His call for an independent inquiry into PATA finances is not without foundation, but if the establishment again has its way, it will be pooh-poohed and trashed as being superfluous and irrelevant.

But the call will no go unnoticed amongst PATA members, premier partners and sponsors who can then evaluate for themselves what is happening to their money and what they are getting in return for it.

Like the Asia-Pacific region in 1997, PATA is at a critical stage in its history. There is plenty of travel & tourism growth potential but the opportunities to tap that growth clearly cannot be availed under the current way of doing things.

Mr Kohli’s call for an independent financial inquiry can be the first step in, or one part of, what PATA really needs — a comprehensive SWOT analysis and restructuring of its existing systems, procedures and business model. This has to be done by an independent body, free of internal influence and self-serving political games.

The transition taking place in both the generations that founded the PATA of today as well as its management leadership provides a perfect window of opportunity to do so. It will require a good deal of lip-biting and pride-swallowing, but that’s exactly what was required in 1997.

It was too late for the Asia-Pacific region then. It’s not yet too late for PATA now.

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