Okaloosa County BOCC — November 5, 2013 — Response to October 17 2013 AG Report - 10 29 13 (3) — reading text

OKALOOSA COUNTY’S RESPONSE TO THE PRELIMINARY AND TENTATIVE AUDIT FINDINGS AND RECOMMENDATIONS OF THE OKALOOSA COUNTY BOARD OF COUNTY COMMISSIONERS AND OKALOOSA COUNTY CLERK OF THE CIRCUIT COURT The Board of County Commissioners is in receipt of the Preliminary and Tentative Audit Findings and Recommendations, dated October 17, 2013, which may be included in the operational audit of the Auditor General of the Okaloosa County Board of County Commissioners (BCC) and Okaloosa County Clerk of Court (CCC). Please find the Response of the Board of County Commissioners to the Preliminary and Tentative Findings and Recommendation. As reflected in the Preliminary and Tentative Audit Findings, the review parameters consisted of the period from October 2011 through February 2013. This review period overlaps with the period addressed in Report No. 2013-085 relating to the Tourist Development Department which was May 2010 through May 2012. Though the Tourist Development Department was excluded from this review, the Preliminary and Tentative Audit Findings identify several areas that were also the subject of Report No. 2013-085. However the Preliminary and Tentative Audit Findings fails to adequately note that as part of the Corrective Action Plan Report No. 2013-085, the County has previously addressed several of these through the amendment of its Purchasing Manual on April 2, 2013 and that the implementation of the corrective action plan resulting from Report No. 2013-085 is ongoing. FRAUD AND ETHICS CONTROLS/RISK ASSESSMENTS Finding No. 1: The BCC had not performed and documented periodic fraud or control risk assessments of the operations of BCC departments, developed written action plans that implement and monitor needed controls, or included a fraud response plan in its policies and procedures. Recommendation: The BCC should continue its efforts to ensure that periodic fraud and control risk assessments are performed and action plans are prepared to implement and monitor needed controls. In addition, the BCC should enhance its anti-fraud program policies and procedures to include a written fraud response plan. COUNTY RESPONSE: The County agrees with the audit finding and recommendation. As noted in the Finding, these matters were previously addressed in Report No. 2013-085 (See Findings 5 and 6). As with our response at that time, the County indicated it will review and consider the amendment of its current code of conduct and whistleblower policies to include a written fraud response plan that addresses investigation protocols and guidance on reporting known or suspected fraud to the appropriate authorities. 1  In response to those previous Findings, the County, in April 2013, retained an independent CPA firm to conduct fraud and control risk assessments related to the County’s operations, including accounting activities for the County performed by the CCC. The CPA firm has issued a report dated August 26, 2013 that has identified several fraud risks and control weaknesses and provided recommendations to the BCC. The County is continuing to study this report and its recommendations. It is also considering other areas that may be addressed in the future. The County is also reviewing and considering the implementation of an annual fraud risk assessment and fraud controls monitoring. In furtherance of this monitoring, the County has researched and determined the Association of Certified Fraud Examiners has a Fraud Risk Assessment tool that can be used by Okaloosa County to strengthen its anti-fraud program. The County will consider the implementation of this or similar fraud assessment tools which can be utilized to enhance its fraud controls. Finding No. 2: Several BCC employees did not file a statement of financial interests with the Okaloosa County Supervisor of Elections, contrary to law. Recommendation: The BCC should ensure that all BCC local officers, as defined in Section 112.3145(1), Florida Statutes, are advised of the requirement to file a statement of financial interests and that the names and positions of applicable local officers are communicated to the Commission. COUNTY RESPONSE: Based upon the comments in the audit finding and recommendation, the Auditor General appears to be imposing a requirement on the County which is not supported by Florida law. Specifically, there are aspects of the comments which accompany the Finding that are at odds with the opinion of an attorney with the Florida Commission on Ethics (see attached correspondence). Initially, section 112.3145(7) (a), F.S., sets forth certain responsibilities of the appointing authority as to the filing of a statement of financial interests. The County agrees that all BCC local officers should be advised of the requirement to file a statement of financial interests and in accordance with section 112.3145(7)(a), F.S., and the County complies with Florida law by notifying each newly appointed local officer of their duty to comply with the disclosure requirements of section 112.3145, F.S. However, Florida law assigns the responsibility for the notifying those persons who are required to file statements of financial interests with the Commission on Ethics. Per section 112.3145(6), F.S. The County has fully complied with the obligations assigned to it under the Statute and the comment appears to impose a standard not required by law. 2  Finally, the comment also identifies four (4) employees that did not file a disclosure of Financial Interests and the Auditor General states that they should have in that they have the authority to purchase goods and services in excess of $20,000. Initially, none of these employees have authority to purchase goods and services in any single transaction in an amount in excess of $20,000, however, it is the position of the Auditor General that a statement of financial interest is required if the cumulative amount of all purchases could exceed $20,000. The attached correspondence from the Florida Commission on Ethics provides an attorney’s opinion that the expenditure limit is not a cumulative amount, but rather must be based upon authority to make individual purchase in excess of $20,000. Finding No. 3: BCC policies and procedures were not adequate to identify and prevent potential conflicts of interest. Recommendation: The BCC should enhance its policies and procedures, as needed, to identify and prevent potential conflicts of interest. Such policies could include, for example, requiring employees to disclose potential conflicts of interest. COUNTY RESPONSE: The County agrees with the audit finding and recommendation. As noted in the Finding, as part of the corrective action plan implemented by the County in response to Auditor General Report No.2013-85, issued in January 2013, the County adopted significant revisions to its Purchasing Manual on April 2, 2013. The purpose of these changes was to apply many of the controls that were implemented for the Tourist Development Department to all other departments of the County. In particular, the County amended Section C of the Purchasing Manual which strictly prohibits employees from engaging in any conduct or business that present a conflict of interest. Though the amendment requires a Conflict of Interest Disclosure by any supplier of goods and services in excess of $2500, the amendment prohibits any direct or indirect participation in the procurement process by an officer or employee where there is any financial interest by that officer or employee or any member of their family, regardless of the amount. Further, that section of the Purchasing Manual expressly incorporates the provisions of section 112.313, F.S., as well as the National Institute of Governmental Purchasing Code of Ethics. These amendments strengthen the controls related to the issues raised by this Finding. The County will continue to review, as needed, its policies and procedures to place controls so as to avoid conflicts of interests. 3  ADMINISTRATIVE MANAGEMENT Finding No. 4: Listings of disbursements that included the check number, amount, payee, and authorized public purpose of each expenditure were not recorded in the BCC minutes, contrary to law. Recommendation: The BCC should ensure that the check number, amount, payee, and authorized public purpose of each expenditure are recorded in the BCC minutes as required by law. COUNTY RESPONSE: Initially, under the Constitution of the State of Florida, the CCC and the BCC are independent constitutional offices. Though the Clerk, under Article V, section 16 of the Florida Constitution is empowered to serve as the “ex officio clerk of the board of county commissioners, auditor, recorder and custodian of all county funds,” the operation of his office is not subject to the direction of the BCC. In those roles, the Clerk is both the keeper of the minutes and responsible for the disbursement of County funds. The Clerk’s constitutional grant of authority vests him with the independent authority within these areas of responsibility. This includes the applicability and compliance with section 136.06, Florida Statutes. Therefore, the County will continue to work with the CCC to assure that the proper recording of expenditures satisfies the requirements of Florida law. Finding No. 5: The BCC had not adopted policies addressing an acceptable level of unrestricted fund balance in its General Fund or developed a plan to replenish the unrestricted fund balance should it fall below target levels. Recommendation: The BCC should adopt formal policies addressing an acceptable level of unrestricted fund balance in its General Fund and develop a formal plan to replenish the unrestricted fund balance should it fall below target levels. COUNTY RESPONSE: The County acknowledges that Government Finance Officers Association (GFOA) recommends that local governments establish a policy on the level of unrestricted fund balance that should be maintained for the General Fund. The County views this recommendation as a best practices tool and not a requirement of law. Additionally, the extent of unrestricted fund balances that may be held during the course of a given year may vary. The County closely monitors these fund balances throughout the course of the year both as to anticipated and potentially unanticipated expenditures. The County will continue to work toward assuring that there are sufficient fund balances available to meet these needs. RESTRICTED RESOURCES Finding No. 6: The BCC had not established separate accountability for each type of fuel tax to demonstrate fuel taxes were spent for authorized purposes. 4 Recommendation: The BCC should establish separate accountability for each type of fuel tax to demonstrate fuel taxes were spent for authorized purposes. COUNTY RESPONSE: The County agrees with the audit finding and recommendation. While the respective BCC departments exercise prudence in overseeing the appropriateness of expenditures related to the fuel taxes and examples of inappropriate use was not noted in this report, the BCC acknowledges that it should and will take further steps to ensure separation of respective gas tax dollars in order for the County to track expenditures to the respective allowable tax. Additionally, under the Constitution of the State of Florida, the CCC and the BCC are independent constitutional offices. Though the Clerk, under Article V, section 16 of the Florida Constitution is empowered to serve as the “ex