Okaloosa County BOCC — January 20, 2015 — Okaloosa Follow-Up Letter and PT — reading text

AUDITOR GENERAL STATE OF FLORIDA G74 Claude Pepper Building 111 West Madison Street Tallahassee, Florida 32399-1450 David W. Martin, CPA 850/412-2722 AUDITOR GENERAL Fax: 850/488-6975 December 19, 2014 Honorable Kelly Windes, Chair Board of County Commissioners Okaloosa County 320 Wilson Street, Suite 302 Crestview, FL 32536 Dear Commissioner Windes: Section 11.45(2)(j), Florida Statutes, requires us to, no later than 18 months after the release of a report on the audit of a local governmental entity, perform such appropriate follow-up procedures as deemed necessary to determine the audited entity's progress in addressing the findings and recommendations contained within our previous report. This correspondence is to notify you of the preliminary results of our audit to determine the extent to which the Okaloosa County Board of County Commissioners, Clerk of the Circuit Court, and the Tourist Development Council had taken, or were in the process of taking, corrective actions to address the findings included in our Report No. 2013-085. Please review the attached document and provide us your written comments concerning the results, including any additional information that you believe would affect our determination, by January 20, 2015. Your written comments should be submitted electronically in its original format (e.g., Word or WordPerfect) and include your signature. For quality reproduction purposes, if you are not submitting your response in its original format, please convert your response to PDF and not scan to PDF. If you have questions or desire further discussion on the status of the findings, please contact Marilyn Rosetti at (850)412-2902 or at marilynrosetti@aud.state.fl.us. Sincerely, David W. Martin DWM/jk Attachments c: Board of County Commissioners J. D. Peacock, II, Clerk of Courts John Hofstad, County Administrator Sam Scallan, Internal Auditor  ****PRELIMINARY AND TENTATIVE FINDINGS**** OKALOOSA COUNTY BOARD OF COUNTY COMMISSIONERS’ OVERSIGHT OF THE TOURIST DEVELOPMENT COUNCIL AND USE OF TOURIST DEVELOPMENT TAXES AND FUNDS RECEIVED FROM BRITISH PETROLEUM OPERATIONAL AUDIT EXECUTIVE SUMMARY This report provides the results of our audit to determine the extent to which the Okaloosa County Board of County Commissioners (BCC), Clerk of the Circuit Court (CCC), and Tourist Development Council (TDC) had taken, or were in the process of taking, corrective actions to address the findings included in our report No. 2013-085. There was no occasion to correct 1 finding. Our follow-up procedures to determine the BCC’s and CCC’s progress in addressing the remaining 24 findings and recommendations contained in our report No. 2013-085 disclosed that, as of the completion of our follow-up procedures in December 2014, the BCC’s, CCC’s, and TDC’s actions corrected 13 findings, partially corrected 10 findings, and the BCC took no corrective action on 1 finding. STATUS OF REPORT NO. 2013-085 FINDINGS Organizational Oversight Finding No. 1: Budget Preparation and Monitoring Previously Reported The BCC did not establish annual budgets for expenditures from restricted resources at the level the resources were restricted, or project budgets for each advertising project and marketing campaign, to ensure that available resources were not overspent. We recommended that the BCC adopt budgets to control expenditures from restricted resources at the level of their restriction and by each specific project funded by these restricted resources; corresponding budgets be incorporated into the accounting records to provide for the effective control of expenditures; the BCC and TDC perform periodic budget-to-actual comparisons; and the CCC reject invoices presented for payment when sufficient authorized funds are not available. Results of Follow-Up Procedures The BCC’s and CCC’s actions corrected this finding. Our review of adopted budgets and accounting records disclosed that budgets for restricted resources were established that correspond to the level of their restriction and to projects funded by BP moneys and tourist development taxes, and that monitoring controls, including budget to actual comparisons, were established to provide for the effective control of expenditures of BP moneys and tourist development taxes. Finding No. 2: TDC Duties and Responsibilities Previously Reported The TDC and TDC subcommittees performed certain duties that were not of an advisory nature, contrary to law. 1  ****PRELIMINARY AND TENTATIVE FINDINGS**** We recommended that the BCC implement policies and procedures to ensure that the TDC performs only those duties authorized by Section 125.0104(4)(e), Florida Statutes, and County ordinances. Results of Follow-Up Procedures The BCC’s actions corrected this finding. The BCC approved several changes to the Tourist Development Department’s1 (TDD’s) Operations and Procedures Manual designed to ensure that the TDC performed duties only of an advisory nature. Our review of TDC actions taken at TDC meetings, and subsequent actions taken by the BCC, disclosed that the TDC performed only those duties authorized by Section 125.0104(4)(e), Florida Statutes, and County ordinances. Finding No. 3: TDC Monitoring of Expenditures Previously Reported The TDC did not continuously review all expenditures of tourist development taxes, contrary to law. We recommended that the TDC continue to strengthen its monitoring controls by ensuring that it timely receives and reviews detailed reports of expenditures of tourist development taxes as required by Section 125.0104(4)(e), Florida Statutes. Results of Follow-Up Procedures The CCC’s and TDC’s actions corrected this finding. Beginning in March 2014, the TDC began reviewing CCC-provided monthly reports of expenditures of tourist development taxes. Finding No. 4: Conflicts of Interest Previously Reported The BCC purchased goods and services from companies or organizations that were affiliated with members of the BCC, TDC, or a TDC subcommittee, contrary to law. We recommended that the BCC implement policies and procedures to ensure that future purchases of goods and services are not made from vendors in which a potential conflict of interest exists or that waivers of the requirements of Sections 112.313(3) and 112.313(7), Florida Statutes, as they relate to TDC and TDC subcommittee members, are granted and documented in accordance with Section 112.313(12), Florida Statutes. Results of Follow-Up Procedures The BCC’s actions corrected this finding. TDC Bylaws now require TDC members to abstain from voting, and submit a voting conflict form, when potential conflicts of interest exist. The BCC’s Human Resource Policy Manual now requires BCC employees to disclose, at least annually, potential conflicts of interest. In addition, the BCC’s Purchasing Manual now requires all bidders or proposers to disclose potential conflicts of interest to the BCC. We noted no conflicts of interest during our review of transactions for the period January 2014 through July 2014. 1 The TDC’s primary purpose is to advise and make recommendations to the BCC in matters relating to tourism, sales, marketing, and advertising and to review expenditures of tourist development taxes to ensure that they are made for authorized purposes. The TDD is a County department that carries out the mission of the TDC and oversees the operations of the Emerald Coast Convention and Visitors Bureau, Emerald Coast Convention Center, and Emerald Coast Film Commission Center. 2  ****PRELIMINARY AND TENTATIVE FINDINGS**** Fraud Controls and Control Risk Assessments Finding No. 5: Fraud Controls Previously Reported The BCC had not adopted a fraud response plan, and the BCC did not perform periodic fraud risk assessments or establish action plans to implement and monitor fraud controls. We recommended that the BCC strengthen its anti-fraud program by adopting a fraud response plan, requiring periodic fraud risk assessments, and developing action plans to implement and monitor fraud controls. Results of Follow-Up Procedures The BCC’s actions partially corrected this finding. The BCC adopted a fraud response plan in April 2014. The BCC also contracted with a certified public accounting (CPA) firm to perform an overall risk assessment, and the CPA firm released its report on risk assessment in August 2013. In its report, the CPA firm made several recommendations to the BCC regarding developing and implementing an ongoing risk assessment process. As of November 2014, the BCC was in the process of developing this ongoing risk assessment process. Recommendation: The BCC should take the steps necessary to complete the development and implementation of the recommended ongoing risk assessment process, including developing action plans to implement and monitor fraud controls. Finding No. 6: Control Risk Assessments Previously Reported The BCC did not perform and document periodic control risk assessments over the activities of collecting, accounting for, and disbursing restricted resources to identify and respond to identified control risks. We recommended that the BCC perform and document periodic control risk assessments over the activities of collecting, accounting for, and disbursing restricted resources, including tourist development taxes and funds received from British Petroleum (BP). Results of Follow-Up Procedures The BCC’s actions partially corrected this finding. As noted in finding No. 5, the BCC contracted with a CPA firm to perform an overall risk assessment, and the CPA firm released its report on risk assessment in August 2013. In its report, the CPA firm made several recommendations to the BCC regarding developing and implementing an ongoing risk assessment process. As of November 2014, the BCC was in the process of developing this ongoing risk assessment process. Recommendation: The BCC should take the necessary steps to develop and implement the recommended ongoing risk assessment process to ensure that adequate internal controls are in place to minimize identified risks. 3  ****PRELIMINARY AND TENTATIVE FINDINGS**** Procurement of Goods and Services Finding No. 7: Competitive Procurement by the BCC Previously Reported The BCC did not consistently follow prescribed policies and procedures relating to the competitive procurement of goods and services, including the selection of two advertising and marketing firms. We recommended that the BCC ensure that purchases are procured in accordance with BCC policies and procedures, and strengthen its procurement procedures to ensure that the selection process for the acquisition of professional services is documented and services are acquired pursuant to BCC purchasing policies and procedures. We also recommended that these procedures require maintenance of documentation evidencing the basis for decisions made by selection committees and the signing of ranking sheets by