Okaloosa County BOCC — January 18, 2013 — Attorney General P&T Audit — reading text

AUDITOR GENERAL STATE OF FLORIDA G74 Claude Pepper Building 111 West Madison Street Tallahassee, Florida 32399-1450 DAVID W. MARTIN, CPA PHONE: 850-488-5534 AUDITOR GENERAL December 18, 2012 FAX: 850-488-6975 Honorable Don Amunds, Chair Board of County Commissioners Okaloosa County 320 Wilson Street, Suite 302 Crestview, Florida 32536 Dear Commissioner Amunds: Enclosed is a list of preliminary and tentative audit findings and recommendations which may be included in a report to be prepared on our operational audit of the: Okaloosa County Board of County Commissioners? Oversight of the Tourist Development Council and Use of Tourist Development Taxes and Funds Received From British Petroleum Pursuant to Section 11.45(4)(d), Florida Statutes, you are required to submit to me within thirty (30) days after receipt of this list a written statement of explanation concerning all of the findings, including therein your actual or proposed corrective actions. Your written statement of explanation should be submitted electronically to flaudgen_audrpt_lg@aud.state.fl.us (flaudgen_audrpt_lg@aud.state.fl.us) in source format (e.g., Word or WordPerfect) and include your digitized signature. For quality reproduction purposes, if you are not submitting your response in source format, please convert your response to PDF and not scan to PDF. If technical issues make an electronic response not possible, then a hard copy (paper) response will be acceptable. If you are submitting a hard copy, address to Auditor General, Local Government Audits/Section 342, 111 West Madison Street, Tallahassee, FL 32399-1450. Please e-mail this Office at flaudgen_audrpt_lg@aud.state.fl.us to indicate receipt of the preliminary and tentative findings. Absent such receipt, delivery of the enclosed list of findings is presumed, by law, to be made when it is delivered to your office. If within the 30-day period you have questions or desire further discussion on any of the proposed findings and recommendations, please contact Marilyn Rosetti at (850)487-9031 or at marilynrosetti@aud.state.fl.us. Sincerely, David W. Martin DWM/jk Enclosures c: Board of County Commissioners Don Howard, Clerk of Courts James D. Curry, County Administrator Gary Stanford, Finance Director  ****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 SUMMARY Our operational audit of the Okaloosa County Board of County Commissioners? oversight of the Tourist Development Council and use of tourist development taxes and funds received from British Petroleum disclosed the following: ORGANIZATIONAL OVERSIGHT Finding No. 1: The Board of County Commissioners (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. Finding No. 2: The Tourist Development Council (TDC) and TDC subcommittees performed duties that were not of an advisory nature, contrary to law. Finding No. 3: The TDC did not continuously review all expenditures of tourist development taxes, contrary to law. Finding No. 4: The County purchased goods and services from companies or organizations that were affiliated with members of the BCC, TDC, or a TDC subcommittee, contrary to law. FRAUD CONTROLS AND CONTROL RISK ASSESSMENTS Finding No. 5: The BCC had not adopted a fraud response plan, and the County did not perform periodic fraud risk assessments or establish action plans to implement and monitor fraud controls. Finding No. 6: The County 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. PROCUREMENT AND PAYMENTS TO VENDORS Finding No. 7: The County 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. Finding No. 8: The County negotiated and entered into contracts that did not contain adequate provisions to effectively protect the County?s interests. Finding No. 9: The County did not perform an adequate review or preaudit of invoices submitted by two advertising and marketing firms, including a comparison of payment requests to the provisions of contracts. As a result, the County paid two advertising and marketing firms $12.1 million without obtaining adequate documentation supporting the goods or services received, including payments of several invoices that incorrectly or inadequately described the actual goods or services purchased. Finding No. 10: The County did not ensure that goods or services acquired through two advertising and marketing firms were competitively procured. Finding No. 11: The County paid for certain goods and services in advance of their receipt, including certain goods and services acquired through two advertising and marketing firms, contrary to law and the State Constitution. Some services for which the County paid in advance were not subsequently provided. Finding No. 12: The County did not consistently follow prescribed policies and procedures relating to the approval of purchases, including purchases made through two advertising and marketing firms. 1  ****PRELIMINARY AND TENTATIVE FINDINGS**** Finding No. 13: The County did not consistently follow prescribed policies and procedures relating to the use of purchasing cards (p-cards), document the receipt of goods and services purchased with p-cards that were not immediately provided to the purchaser, or document the public purpose served by the p-card expenditures. TRAVEL Finding No. 14: The County needed to enhance its policies and procedures to ensure that travel expenditures are preapproved and adequately documented. SPECIAL EVENTS GRANTS AND SPONSORSHIPS Finding No. 15: The BCC had not adopted written policies and procedures relating to special events grants, and the County did not document that the special events grants were used for allowable purposes or were effective in increasing tourism and the use of lodging facilities. Finding No. 16: The BCC had not adopted written policies and procedures relating to sponsorships of organizations or events. In addition, the County did not consistently document the purpose for which the sponsorships were provided, that the sponsorships were used for allowable purposes, or that the sponsorships were effective in achieving the purposes for which they were provided. ALLOWABLE USES OF RESTRICTED RESOURCES Finding No. 17: The County paid $2.5 million from tourist development taxes for lifeguarding, beach patrol, and beach shuttle services that were not expressly authorized by law. Finding No. 18: The County paid $117,994 for various goods and services from British Petroleum (BP) grant funds that were, in the past, paid from tourist development taxes, contrary to grant provisions. Finding No. 19: As part of the Emerald Coast Money Debit Card Program, the County used $207,730 of BP grant funds for purposes that County records did not evidence were allowed by grant provisions. Finding No. 20: The County overcharged BP $27,063 in connection with medical support services provided, and County records did not adequately support the allowability of $385,185 in reimbursements received from BP. MOTOR VEHICLES Finding No. 21: The County had not established adequate controls over the use of fuel cards. ACCOUNTING CONTROLS Finding No. 22: The County incorrectly classified and recorded certain expenditures in the accounting records, contrary to guidance provided by the Florida Department of Financial Services. ELECTRONIC FUNDS TRANSFERS Finding No. 23: The BCC had not adopted written policies and procedures, and the County had not established adequate controls, over the authorization and processing of electronic funds transfers. INFORMATION TECHNOLOGY CONTROLS Finding No. 24: The County had not established adequate controls over employee access privileges to data and information technology resources. PUBLIC RECORDS Finding No. 25: The County did not record minutes of a TDC and TDC subcommittee meeting, contrary to law. In addition, the minutes of the remaining meetings were not signed or otherwise designated to indicate the minutes were the official minutes approved by the TDC or TDC subcommittees. 2  ****PRELIMINARY AND TENTATIVE FINDINGS**** BACKGROUND Section 11.45(3)(a), Florida Statutes, provides that the Auditor General may, pursuant to his or her own authority, or at the discretion of the Legislative Auditing Committee, conduct audits or other engagements of the accounts and records of any governmental entity created or established by law. In May 2012, the Auditor General received a request to perform an audit of the Okaloosa County Tourist Development Council (TDC) and Board of County Commissioners (BCC) with respect to the use of tourist development taxes and funds received from British Petroleum1 (BP). Specific concerns expressed included a criminal investigation of the TDC and its former Executive Director relating to the likely misuse of public funds, including tourist development taxes and amounts paid by BP following the 2010 Deepwater Horizon Oil Spill2. Pursuant to Section 11.45(3)(a), Florida Statutes, we performed this operational audit. . The BCC created the TDC in 1986 by adopting County Ordinance No. 86-06. Pursuant to Section 125.0104(4)(e), Florida Statutes, the TDC? s primary purpose is to act in an advisory capacity to the BCC in matters relating to tourism and to review expenditures of tourist development taxes to ensure that they are made for authorized purposes. The TDC is composed of nine members appointed by the BCC and has an Executive Director employed by the County that manages the County?s Tourist Development Department. Two TDC subcommittees, the Promotion Review Subcommittee and the Marketing Subcommittee, met during the period May 2010 through May 2012. These subcommittees were composed of the former TDC Executive Director and various appointed local business representatives. The County accounted for its tourist development activities in the Tourist Development Special Revenue Fund and Convention Center Enterprise Fund. Table 1 summarizes the revenues received during the period May 2010 through May 2012 that were accounted for in these funds. 1 Funds received from British Petroleum were pursuant to agreements with British Petroleum Exploration and Production, Inc., or British Petroleum PLC. 2 On April 20, 2010, an explosion occurred on the mobile drilling platform Deepwater Horizon, located in the Gulf of Mexico approximately 130 miles southeast of New Orleans, Louisiana. Due to the threat that oil leaking from the drilling platform and well posed to the State of Florida, the Governor declared a state of emergency for certain counties, including Okaloosa County. In an effort to assist the State in paying the costs incurred in