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Audit: Manhattan, Overland Park and Wichita largely spent guest-tax revenues appropriately but audits flag a few questionable transfers and collection risks
Summary
A Legislative Post Audit review found most guest-tax spending by Manhattan, Overland Park and Wichita appeared appropriate (2021–2023) but flagged Manhattan's $100,000 transfer to its general fund without clear documentation, Wichita's prior use of $16,000 for administrative fees (an ordinance change is in protest), and KDOR collection practices that may have resulted in misalignment with city charters.
Legislative Post Audit staff reported to the Tax Committee that Manhattan, Overland Park and Wichita generally spent transient guest tax revenue appropriately for tourism promotion, bond repayment and tourism facility operations during 2021–2023, but auditors identified a few instances requiring attention.
"Most of Manhattan, Overland Park, and Wichita's spending of transient guest tax revenue appeared to be appropriate," said Macy Smith of Legislative Post Audit, while noting exceptions in Manhattan and Wichita.
Macy said the audit found Manhattan transferred $100,000 of transient guest tax revenue to its general fund in 2023; the city commission approved the transfer under a broad charter ordinance, but auditors concluded the documentation was insufficient to determine whether the expenditure related to tourism and conventions and therefore whether it complied with the charter ordinance.
In Wichita, auditors found $16,000 of guest tax revenue was used from 2021–2023 to cover city administrative and audit fees, which Wichita's transient guest tax ordinance did not allow. Wichita reported it passed a new charter ordinance this winter that would permit such uses; that ordinance was in its protest period at the time of the presentation and was expected to take effect in February.
Auditors also raised a collection-process concern: KDOR collects and processes guest taxes for about 107 local governments using state statute rather than each city's charter ordinance when determining which businesses should remit the tax. As a result, KDOR may have collected and remitted taxes to Wichita for some hotels and lodgings not authorized by Wichita's charter ordinance since 1992; auditors could not quantify the amount and recommended that KDOR and affected cities review ordinances against state law.
The audit listed dollar totals for the period 2021–2023: Manhattan spent $5.6 million, Overland Park $25.8 million and Wichita $19.8 million in guest-tax revenue during the review period. Auditors noted that all three cities used guest-tax funds for tourism promotion and bond repayments related to tourism and convention facilities, expenditures the audit judged appropriate. Wichita also applied about $11.2 million to maintain and operate tourism facilities such as the Century II Convention Center and the Wichita Art Museum.
Auditors issued management letters to Manhattan and Wichita for specific issues and recommended ordinance and process reviews to reduce collection risk. The report noted Manhattan's late comprehensive financial reports in 2022 and 2023 had affected bond ratings but said the city's 2024 reports appear to have been completed on time.
Macy concluded her presentation and stood for questions; the committee heard no immediate votes on the findings.
