Okaloosa County BOCC — January 8, 2013 — Final AG Report and Board Response - January 2013 — reading text

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. COUNTY RESPONSE: The County agrees with the audit finding and recommendation. Okaloosa County 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. The County will review and consider 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. 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. 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. COUNTY RESPONSE: Okaloosa County agrees with the audit finding and recommendation. The County will review and consider the implementation of a formalized control risk assessment for the County as a whole, with particular emphasis on collecting, accounting and disbursing all restricted resources of the County, including tourist development taxes. 37 JANUARY 2013 REPORT NO. 2013-085 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. 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. COUNTY RESPONSE: The County agrees with the audit finding and recommendation. As part of the corrective action already taken by the County, on September 18, 2012, the BCC has substantially amended the Operations and Procedures Manual governing the operation of the TDC and the Tourist Development Department. Those amendments require that all expenditures be in conformity with established policies and utilize the procedures of the County’s Purchasing Policy (See D.400). Additionally, all functions determined by the Director and Council to be handled by contract with third parties are required to be entered into in accordance with the County’s standard procedures, including the issuance of Requests for Qualifications (RFQ’s) and/or Requests for Proposals (RFP’s) required under County procedures (See E.100). On July 23, 2012, the County issued RFQ # TDC 47-12, which sought proposals to provide marketing, advertising, public relations services for the Tourist Development Department. Pursuant to County policies, a selection committee reviewed and ranked 17 proposals which were submitted in response to the RFQ. The selection committee’s rankings were presented to the BCC at its December 4, 2012 meeting and it approved entering into an Agreement with a new entity to provide these services. The policies and procedures of the County were followed during this process and the documentation evidencing the decision was maintained consistent with the County’s policy and the Recommendation of the Auditor General. Additionally, the Agreement entered into with the new entity requires compliance with the County’s Purchasing Manual, Contract/Leases Policies and Procedure Manual, and Operations and Procedures Manual of the TDC and Tourist Development Department. The County will continue to periodically review the Tourist Development Plan and Operations and Procedures Manual to provide assurance that adequate controls are provided and that the operation of the TDC is consistent with the mandates of County policy and Florida Statutes. Finding No. 8: The County negotiated and entered into contracts that did not contain adequate provisions to effectively protect the County’s interests. 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 the contracts for advertising and marketing services firms should include provisions to competitively procure goods and services in accordance with County 38 JANUARY 2013 REPORT NO. 2013-085 purchasing policies and procedures, and require the firms to submit cost estimates, obtain BCC approval prior to starting work on an advertising project or marketing campaign, and state the advertising project or marketing campaign with which invoices are associated. COUNTY RESPONSE: The County agrees with the audit finding and recommendation. As part of the corrective action already taken by the County, on September 18, 2012, the BCC has substantially amended the Operations and Procedures Manual governing the operation of the TDC and the Tourist Development Department. Those amendments require that all expenditures be in conformity with established policies and utilize the procedures of the County’s Purchasing Policy (See D.400). Additionally, all functions determined by the Director and Council to be handled by contract with third parties are required to be entered into in accordance with the County’s standard procedures, including the issuance of Requests for Qualifications (RFQ’s) and/or Requests for Proposals (RFP’s) required under County procedures (See E.100). Additionally, the County has recently entered into an Agreement with a new entity to provide marketing and advertising services to the Tourist Development Department. That Agreement incorporates significant new controls over the provision of these services which contains many safeguards to protect the County’s interest, including but not limited to the following:  3.3 The CONTRACTOR shall submit copies of effective contracts, insertion orders, a recapitulation of credits and debits affecting previously submitted statements or invoices and substantiating bills, and tear sheets, with support materials or other proof of publications for invoices presented for payment.  3.4 It is mutually agreed and understood that payments to the CONTRACTOR for approved expenditures shall be made only upon submission to the COUNTY of itemized copies or original invoices. All statements or invoices for fees for services rendered submitted by the CONTRACTOR to the COUNTY shall be submitted in detail sufficient for proper pre-audit and post-audit thereof to insure that the work performed, expense incurred, or service rendered actually took place, was properly authorized and that the correct amount has been charged. Invoices submitted by the CONTRACTOR for services performed under this Agreement shall be itemized such that the description of services performed is consistent with the description included in the scope of services attached hereto as Attachment A.  3.5 No invoice will be processed without the executed task order, purchase order or contract/lease payment approval form approved by the respective County official(s). No invoice will be approved unless a copy of the actual invoice from the vendor accompanies the invoice reflecting the acquisition of goods/services.  5.3 BID PROCESS. The CONTRACTOR shall receive and maintain copies of the three (3) bids, required by the COUNTY, for each item with a cost in excess of $2,500 which is purchased on behalf of the COUNTY. In those instances where competitive pricing cannot be obtained, a sole source purchase data sheet must be completed and attached to the requisition. Such requests must meet both of the following criteria: 39 JANUARY 2013 REPORT NO. 2013-085 o It is the only item that will produce the desired results (or fulfill the specific need). o The item is available from only one source of supply. The County will continue to periodically review the Tourist Development Plan and Operations and Procedures Manual to provide assurance that adequate controls are provided and that the operation of the TDC is consistent with the mandates of County policy and Florida Statutes. Further, future agreements entered into by the County will provide necessary protections of its 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. Recommendation: The County should continue to strengthen its monitoring and preaudit procedures to ensure that contract provisions are properly monitored and payments are supported by adequate documentation to allow for an effective preaudit. The County should also continue its efforts to obtain supporting documentation for payments made to the two advertising and marketing firms. In addition, the BCC, in consultation with its legal counsel, should 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. COUNTY RESPONSE: The County agrees with the audit finding and recommendation. Initially, under the Constitution of the State of Florida, the Clerk of the Court 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. The preaudit review of expenditures is within the constitutional grant of authority of the Clerk. Therefore, specific issues raised in regards to the