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

routinely part of the continual monitoring and interaction of the County Administrator and CCC. County personnel also provided examples of recent risks identified and controls put in place to mitigate these risks. However, the County had not performed and documented periodic fraud risk assessments of the operations of each County department, including the Tourist Development Department. Such fraud risk assessments would provide greater assurance of identifying potential fraud risks that may be unique to each department. Once potential fraud risks are identified, written action plans that implement and monitor controls designed to mitigate these risks would provide greater assurance of preventing or detecting fraud. Recommendation: The BCC should 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. 9  ****PRELIMINARY AND TENTATIVE FINDINGS**** Finding No. 6: Control Risk Assessments As discussed in the Background section of this report, the County is responsible for collecting, accounting for, and making disbursements from restricted resources, including tourist development taxes and funds received from BP. Therefore, it is important that the County identify the control risks associated with these activities and develop internal controls to mitigate significant control risks identified. Performing periodic control risk assessments can help to identify and analyze these risks. Control risk assessments should involve a systematic identification of circumstances or events that could prevent the County?s goals and objectives from being met, an assessment of the probability and significance of these circumstances or events, and a determination on the part of County management as to whether it is cost-beneficial to implement controls to prevent or detect these circumstances or events. As a practical matter, a formal control risk assessment could be performed and documented on an annual basis; however, as a good business practice, the control risk assessment process should be ongoing as new internal and external threats constantly develop. Upon inquiry, County personnel indicated that they had not performed and documented a recent control risk assessment relating to the activities of collecting, accounting for, and making disbursements from restricted resources, including tourist development taxes and funds received from BP. Periodic control risk assessments would provide greater assurance of identifying potential control weaknesses, such as those noted throughout this report, and would help ensure that adequate internal controls are in place to minimize the risks that control weaknesses could adversely affect the County?s operations. Recommendation: The County should 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 BP. Procurement and Payments to Vendors Finding No. 7: Competitive Procurement by the County County purchasing policies and procedures in effect during the period May 2010 through May 2012 required a minimum of three written quotes for nonexempt purchases (i.e., purchases that were not sole source, per State contract, etc.) in excess of $2,500 up to $50,000, and formal bids were required for nonexempt purchases in excess of $50,000. County purchasing policies and procedures that governed the selection of firms providing professional services required the following: The requesting department must seek BCC approval to distribute a request for proposal (RFP) and establish a selection committee to review the responses to the RFP, prioritize the contending firms, and negotiate an agreement with the selected firm; The selection committee?s rankings of prospective firms should be based on the firm?s capabilities, including ability, adequacy of personnel, past record, recent experience, current workload, and location; and The selection committee?s recommended priority list must be presented to the BCC for approval prior to the commencement of negotiations with the selected firm. Our test of six purchases made by the County during the period May 2010 through May 2012, totaling $134,260.41 and funded from tourist development taxes or BP grant funds, disclosed three purchases, totaling $68,650, for which three written quotes were not obtained. These purchases included $49,500 for production services at beach concerts, 10  ****PRELIMINARY AND TENTATIVE FINDINGS**** $12,800 for towing and deployment of a tug boat, and $6,350 for an artist to provide custom artwork for the convention center. County personnel indicated the custom artwork was a sole source purchase, but they could not provide a sole source purchase data sheet that, per County purchasing policies and procedures, must be completed and attached to the purchase requisition. In January 2011, the County issued an RFP for “marketing/advertising/public relations/Web site/research for the TDC, Emerald Coast Convention and Visitors Bureau, Inc., Okaloosa Film Commission, and Emerald Coast Convention Center.” Prior to that time and through September 19, 2011, the County operated under an existing contract with an advertising and marketing firm that was negotiated prior to May 2010. Our review of the selection process of the firms that were awarded contracts based on their responses to the RFP disclosed that the County did not follow the purchasing policies and procedures noted above, as follows: The TDC did not obtain BCC approval to distribute the RFP or establish a selection committee to review the responses to the RFP, contrary to County purchasing policies and procedures. An initial evaluation committee composed of four TDC members, the former TDC Executive Director, and the General Manager of the convention center ranked the responses to the RFP and selected four firms to make subsequent presentations to the TDC. However, TDC records did not document the discussions or decisions of the initial evaluation committee. A final selection committee composed of seven TDC members and the former TDC Executive Director ranked the four firms based on their presentations. However, the ranking sheets provided for our review were not signed by the seven TDC members. In addition, only three of the seven ranking sheets listed the individual criteria evaluated by the selection committee, and these criteria were not the same as the criteria required by County purchasing policies and procedures. In April 2011, the TDC approved the former TDC Executive Director?s recommendation to award contracts to two advertising and marketing firms ranked first and second on the ranking sheets. One of the two firms was the same firm already under contract with the County as previously discussed above. The selection committee?s recommendation was not presented to the BCC for approval prior to the commencement of negotiations with the firms, contrary to County purchasing policies and procedures. Instead, negotiations with the firms were conducted by the former TDC Executive Director. Although the BCC approved the contracts, which were effective June 7, 2011, and September 20, 2011, respectively, the County?s selection procedures were not followed. Failure to adequately document the selection process for professional services, including the criteria used in each selection committee member?s ranking and signed ranking sheets for each selection committee member, could expose the County to legal action should a firm wish to challenge the County?s selection. In addition, failure to follow County purchasing policies and procedures regarding the selection of professional services puts the County at an increased risk that firms may be selected without the requisite qualifications and experience to address the County?s needs. Recommendation: The County should ensure that purchases are procured in accordance with County policies and procedures. In addition, the County should strengthen its procurement procedures to ensure that the selection process for the acquisition of professional services is documented and services are acquired pursuant to County purchasing policies and procedures. These procedures should require maintenance of documentation evidencing the basis for decisions made by selection committees and the signing of ranking sheets by each selection committee member. Finding No. 8: Contract Design As a matter of good business practice, contracts should be designed to effectively protect the interests of the contracting parties. Contracts should include specific information about the requirements of all contracting parties 11  ****PRELIMINARY AND TENTATIVE FINDINGS**** and avoid the use of ambiguous or undefined terminology. As discussed in finding No. 7, the County contracted with two advertising and marketing firms in 2011. The County?s contractual relationship was such that the firms provided total turn-key services for the County. Generally, the firms provided advertising management and artistic services and contracted with other vendors to deliver the actual services and products. The firms paid the other vendors and claimed reimbursement on invoices submitted to the County for payment. Each of the contracts with the firms detailed the scope of services to be provided, the compensation for these services, and various general provisions and requirements. Our review of the 2011 advertising and marketing contracts with these firms disclosed that the contracts did not contain necessary provisions to protect the County?s interests. We noted that the contract with one of the firms did not require the firm to submit cost estimates, obtain BCC approval prior to starting work on an advertising project or marketing campaign, or state the advertising project or marketing campaign with which invoices were associated. Neither contract required the firms to competitively procure goods and services in accordance with County purchasing policies and procedures. In addition, the firms were not required to submit invoices, including invoices from third-party vendors, in sufficient detail to allow for an effective preaudit to ensure the goods or services purchased were actually received and that the correct amounts were charged. The deficiencies in the design of both contracts may have contributed to the unauthorized and inadequately supported expenditures noted in finding No. 9. The County also entered into an agreement with a contractor that assisted County personnel in responding to the oil spill. The County generally issued task orders to the contractor for specific services at specific amounts of compensation. However, we noted one task order that provided for various services to be compensated at “time plus expenses,” and the task order did not specify the types or amounts of contractor expenses that would be reimbursed by the County. The deficiencies in the design of this contract may have contributed to the inadequately supported expenditures noted in finding No. 20. Recommendation: The County should strengthen its procurement procedures to ensure that all contracts include provisions that specify the types and amounts of contractor expenses for which the contractor is to be reimbursed and require the contractor to submit sufficiently detailed invoices to allow for an effective County preaudit. Additionally