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

determine whether the County is entitled to recover any questioned billings, and take appropriate action to recover such billings. Finally, the BCC should adopt written policies and procedures that provide guidance on the reasonableness and necessity of TDC expenditures. Finding No. 10: Competitive Procurement by Contractors As discussed in finding No. 7, County purchasing policies and procedures required competitive procurement for nonexempt purchases in excess of $2,500. County records supporting many payments made to two advertising and marketing firms were inadequate to determine whether the goods or services purchased should have been competitively procured pursuant to County purchasing policies and procedures. However, based on available supporting documentation, we noted certain goods and services purchased through the firms that should have been competitively procured, but were not. For example, we noted the following: The County purchased a yacht for $710,000. County records did not evidence that formal bids were obtained for this purchase. The County purchased three motor vehicles (two automobiles and a sports utility vehicle) for $129,809, each costing less than $50,000. County records did not evidence that three written quotes were obtained for these purchases. The County purchased 508 beach towels for $8,832. County records did not evidence that three written quotes were obtained for this purchase. County personnel indicated the goods and services purchased through the firms were not competitively procured, and the County relied on the firms to obtain the goods or services at the lowest cost consistent with acceptable quality. As noted in finding No. 8, the 2011 contracts with the firms did not require the firms to competitively procure goods and services in accordance with County purchasing policies and procedures. Given that over $12 million was expended for goods and services acquired through the firms, failure to use a competitive procurement process in accordance with County purchasing policies and procedures resulted in limited assurance that the costs of the goods and services were competitive and reasonable. Recommendation: The County should ensure that goods and services purchased through contractors are competitively procured in accordance with County purchasing policies and procedures. Finding No. 11: Advance Payments Pursuant to Article VII, Section 10, of the State Constitution, the County may not become a joint owner with, or stockholder of, or give, lend, or use its taxing power or credit to aid any corporation, association, partnership, or person. As noted by the Attorney General in various opinions3, the purpose of this provision is “to protect public 3 For example, see Attorney General Opinion No. 2012-26. 15  ****PRELIMINARY AND TENTATIVE FINDINGS**** funds and resources from being exploited in assisting or promoting private ventures when the public would be at most incidentally benefited.” Section 28.235, Florida Statutes, provides that the CCC can make advance payments on behalf of the County for goods and services pursuant to rules or procedures adopted by the State Chief Financial Officer (CFO) for advance payment of invoices submitted to State agencies. The CFO established such rules and procedures in the Reference Guide for State Expenditures, which provides that advance payments may be made if the payments result in a savings that is equal to or greater than the amount that would be earned by investing the funds and paying later, or if the payments are essential to the operations of the agency and the goods or services are available only if advance payment is made. Our tests of 14 advance payments made during the period May 2010 through May 2012, totaling $399,885.52 and funded from tourist development taxes or BP grant funds, disclosed 6 advance payments for goods or services, totaling $118,166.66, that County records did not evidence met the CFO criteria. These included, for example, 4 payments totaling $80,000 made to local chambers of commerce for tourism-related services that were paid at the beginning of the fiscal years in which the services were provided. County records supporting many payments made to two advertising and marketing firms were inadequate to determine whether the payments were advance payments. However, based on available supporting documentation at the time of payment and additional documentation subsequently obtained by the County, we noted several advance payments to the firms that County records did not evidence met the CFO criteria. Further, the County overpaid for, or did not receive, certain services that were paid for in advance. For example, we noted the following: The County paid $24,001 from BP grant funds in advance to one firm for a driver to transport a recreational vehicle to promotional events and for certain expenses associated with the driver?s travel costs. The County paid for the driver to provide 123 days of services at $187 per day plus $1,000 in expenses. However, a travel schedule provided for our review that County personnel indicated was the only known support for the driver?s services showed a potential of only 43 days of services and $1,000 in expenses, resulting in an overpayment of $14,960. County personnel indicated the County is attempting to recover these funds. The County paid $38,400 from BP grant funds in advance to one firm for the services of a promotional spokesman. The County paid for the spokesman to provide 32 days of services at $1,200 per day. However, County records indicated that the spokesman only provided 23 days of services, resulting in an overpayment of $10,800. County personnel indicated the County is attempting to recover these funds. The County paid $25,000 from tourist development taxes in advance to one firm for a musical group to perform concerts. However, the County subsequently determined that no concerts were performed or were planned in the future, and County personnel indicated the County is attempting to recover these funds. CCC personnel indicated that they attempted to identify and deny requests for advance payment not authorized by Florida Statutes; however, they did not identify and deny the above requests for advance payment. In addition, the County did not have procedures in place to ensure that advance payments met the CFO criteria and that goods and services paid for in advance were subsequently received or that appropriate amounts were refunded. Notwithstanding legal requirements relating to advance payments, when goods and services are unnecessarily paid for in advance of their receipt, the County is at an increased risk that the goods or services may not be provided, and the County?s recourse may be limited should disagreements arise between the County and the vendor. In September 2012, the BCC adopted policies and procedures as part of the TDC?s operations and procedures manual that require all advance payments to be specifically approved by the BCC. 16  ****PRELIMINARY AND TENTATIVE FINDINGS**** Recommendation: The County should continue to strengthen their purchasing procedures to ensure that advance payments are approved and paid only if the payments result in a savings that is equal to or greater than the amount that would be earned by investing the funds and paying later, or if the payments are essential to the County?s operations and the goods or services being paid for are available only if advance payment is made. Additionally, the County should establish procedures to ensure that goods or services paid for in advance are either subsequently received by the County or a refund of the overpayment is pursued. Further, the County should continue its efforts to recover the questioned payments noted above. Finding No. 12: Approval of Purchases County purchasing policies and procedures required that noncontract purchases under $25,000 be approved by the issuing department head and the Purchasing Director; purchases between $25,000 and $50,000 be approved by the issuing department head, the Purchasing Director, and the County Administrator; and purchases in excess of $50,000 be approved by the BCC. Contract progress payments under $25,000 were required to be approved by the issuing department head, and contract progress payments over $25,000 were required to be approved by the County Administrator. Our test of 45 purchases, totaling $1.2 million and funded from tourist development taxes or BP grant funds, disclosed 3 purchases (6.7 percent), totaling $53,730, that were not approved by one or more required employees, contrary to County purchasing policies and procedures. These payments included a $49,500 payment for production services at beach concerts, a $2,430 payment for promotional golf caps, and an $1,800 payment for two tables of ten people at a dinner and silent auction for a charitable organization. According to County personnel, the reasons why the payments were not approved varied. For example, the rigging and production services were not procured through the Purchasing Department but were directly purchased by an employee, contrary to County purchasing policies and procedures. Therefore, the Purchasing Director?s approval was not obtained. We also scanned the payments made to two advertising and marketing firms and noted that the BCC Chairman was permitted to approve certain purchases rather than the County Administrator, contrary to County purchasing policies and procedures. Upon inquiry, the County Administrator indicated that he was unaware of any formal action taken by the BCC specifically authorizing a change in the responsibilities for expenditure approvals, but that there may have been an assumption that the BCC Chairman was authorized to approve the expenditures since the former TDC Executive Director reported directly to the BCC Chairman. When payments are not approved as required by County purchasing policies and procedures, the County is at an increased risk that it will pay for unallowed or inadequately supported expenditures. In February 2012, the County eliminated the practice of allowing the BCC Chairman to approve expenditures rather than the County Administrator. Recommendation: The County should ensure that required approvals are obtained for all purchases in accordance with County purchasing policies and procedures. Finding No. 13: Purchasing Card Controls The County provided purchasing cards (p-cards) to approved employees in an effort to efficiently and effectively process and expedite low dollar purchases of goods and services, and the County established policies and procedures to provide guidelines on the proper use of these cards. Our review disclosed that improvements were needed in the design and monitoring of County p-card policies and procedures, as follows: 17  ****PRELIMINARY AND TENTATIVE FINDINGS**** County p-card policies and procedures required that departments review p-card expenditures to ensure goods and services obtained were necessary and appropriate. However, these policies and procedures did not specify who was required to approve the expenditures. County records did not evidence that the former TDC Executive Director?s p-card expenditures were approved by another employee. County p-card policies and procedures required the p-card user and reviewer to sign a preprinted statement on monthly p-card expenditure reports certifying that they reviewed the expenditure report, that it correctly reflects the supporting receipts, and that