State Audit Finds That Bailey Lauerman and Nebraska Tourism ‘Took Advantage of Taxpayers’

By Patrick Coffee Comment

At the very end of the day last Friday, Nebraska’s auditor of public accounts released an extensive and somewhat damning account of the state’s Tourism Commission and its relationship with its agency of record, Omaha’s Bailey Lauerman.

As reported on, the team tasked with reviewing the contract between state and agency found that two went over budget by $4.4 million during the past three years. It also found that the Tourism Commission itself effectively misused taxpayer money by both failing to properly track expenses related to the Bailey Lauerman campaigns and expensing items unrelated to their production…like booze and cigarettes.

From the report, which is quite extensive:

“The documentation obtained by the APA revealed that over $350 of the amount requested by Bailey Lauerman was for alcohol and cigarette purchases. Included were charges for several bottles of wine, three bottles of Tanqueray Gin, a bottle of Crown Royal Canadian whisky, multiple packs of Coors beer cans, a box of Marlboro Gold Pack 100’s (Cigarettes), and a significant amount of other alcohol purchased during meals while on the shoot.”

Among other problematic expenses, the report lists $18K spent to help one Commission employee move from Sidney to Kearney (a three-hour drive), $44K for a 90-minute speech by “happiness researcherShawn Achor, and the hiring of state tourism director Kathy McKillip’s own daughter to star in a photo shoot tied to the campaign.

The problem, it seems, stems from a 2012 decision to basically let the Tourism Commission act with little or no oversight. From state auditor Charlie Janssen:

“We had heard some rumblings that Tourism was operating as a rogue agency without any oversight. It appears that was the case. They kind of took advantage of the Nebraska taxpayers.”

That all changed this spring, when a new state budget required the commission to agree to greater oversight regarding its spending.

It doesn’t seem like these slip-ups involved any explicitly illegal behavior, though the audit expressed concern that the hiring of McKillip’s daughter by Bailey Lauerman might run up against anti-nepotism laws or those prohibiting businesses with state contracts from “offering of something of value to influence a public official.” The lead auditor himself called the hire “very questionable.”

Here’s the kicker in case SAG-AFTRA is listening: state and agency say they hired frat/sorority members, interns and volunteers to appear in the resulting campaign in order to avoid paying professional models. Seems both parties had trouble finding people who met all the requirements and had time to take off for the shoot.

Bailey Lauerman, which was AdAge’s 2013 National Small Agency of the Year, won it’s home state’s tourism account later that same year. This was approximately one year after state government voted to make the Commission an independent entity; it had previously been part of the Nebraska Department of Economic Development, and it currently has a yearly budget of $6 million. Here’s a spot the agency produced for its client more than a year ago.

According to the audit report, Bailey Lauerman spent “more than $2,500 on more than 35 occasions” to buy dinners for McKillip, her husband and other state officials and their family members; these expenditures would appear to go against regulations forbidding public employees from accepting gifts from vendors.

The report contains several other allegations like this one:

“The Commission’s internal control environment was not conducive to fair and complete financial reporting, including a lack of involvement by the Commissioners in the day-to-day operations, inadequate documented reviews, and no segregation of duties.”

In its official response, the Commission admitted that it had not properly filed certain expenses and that the contract went over budget. But McKillip denied that her husband had ever received any meals from Bailey Lauerman, calling the agency’s own records incorrect.

Bailey Lauerman said it was unaware of the vendor rule mentioned above and that “those errors will be corrected.” The agency also addressed the fact that McKillip’s daugher was compensated twice for gas used by her convertible during the 2,000 mile-plus road trip photo shoot project. The agency said it did not know that this had occurred, noting that the car itself appeared in the final photo shoot.

Maybe this is what people mean when they say “small government.” We’re pretty sure it’s not, though.