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

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 substantially amended the Operations and Procedures Manual governing the operation of the TDC and the Tourist Development Department. Those amendments require travel procedures in conformity with Section 112.0601, Florida Statutes, including procedures for preapproval of travel. (See C.400 – C.410). Further, guidelines have been established for Reimbursable Promotional Travel and Expenses including those related to activities of those in the tourism and promotional industry. (See C.500). Additionally, as part of the implementation process for these procedures, in June, 2012, members of the Tourist Development Department staff attended training programs to enhance the use and understanding of the requirements relating to travel and entertainment related expenditures. The County will continue to review the policies and procedures related to travel expenditures and the use of signed travel vouchers to support all travel and entertainment-related expenditures to assure that adequate controls are provided and is consistent with the mandates of County policy and Florida Statutes. 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. Recommendation: The BCC should continue to strengthen its special events grant policies and procedures by addressing the methodology for calculating the amounts of the grants and requiring grant recipients to sign a written agreement acknowledging the terms and conditions of the grants. 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. As part of that amendment, the BCC set forth various criteria for the evaluation of Special Event Funding, including the application process, the provision of guidelines and criteria for the consideration of funding, and post event evaluation. (See G.000 – G.500). The County will continue to review and evaluate the future amendment of the Operations and Procedures Manual to determine whether further provisions should be addressed which would enhance the oversight of this area. This includes but is not limited to the strengthening of the special event grant policies and procedures including requiring the recipients to sign a written agreement acknowledging the terms and conditions of the grant. 44 JANUARY 2013 REPORT NO. 2013-085 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. Recommendation: The BCC should continue to strengthen its sponsorship policies and procedures by addressing the methodology for calculating the amount of sponsorships, requiring sponsorship recipients to sign a written agreement acknowledging the terms and conditions of the sponsorships, and requiring sponsorship recipients to provide documentation evidencing how the sponsorship moneys were used and that the sponsorships were effective in achieving their intended purpose. 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. As part of that amendment, the BCC set forth various guidelines for the evaluation of Sponsorship Funding. (See G.600). The County will continue to review and evaluate the future amendment of the Operations and Procedures Manual to determine whether further provisions should be addressed which would enhance the oversight and strengthen the controls of this area. This includes but is not limited to the strengthening of the sponsorship grant policies and procedures including requiring the recipients to sign a written agreement acknowledging the terms and conditions of the funding, the provision of documentation as to how the money was used and how they were effective in achieving their intended purpose. 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. Recommendation: The County should seek an opinion from the Attorney General as to the allowability of the $2,476,095.68 of questioned expenditures and, if appropriate based on the Attorney General’s opinion, should restore this amount to the tourist development taxes accounts. COUNTY RESPONSE: The County acknowledges the finding and recommendation of the Auditor General as it relates to the funding of lifeguard services with Tourist Development Taxes. The funding of lifeguard services through the use of Tourist Development Taxes was initially considered by the BCC in 2003, following numerous highly publicized drowning by visitors to the Gulf Coast area. The BCC became concerned for the safety of users of our beaches and also the impact on tourism as a result of the drownings. In the view of the BCC, the provision of a safe beach is an essential component of promoting the area as a family tourist destination. As a result, they began to explore the possibility of providing lifeguard services and identifying possible funding sources. At that time, the County sought legal opinions from two law firms, both of whom independently concluded that such use of tourist development tax revenues was permissible under Section 125.0104(5) (a) 2., Florida 45 JANUARY 2013 REPORT NO. 2013-085 Statutes, provided the County make the necessary legislative finding that the primary purpose of providing lifeguard services is related to promoting tourism within the County. In making its finding, the Auditor General relied solely on the Opinion of the Attorney General No. 90-55 which had opined that Tourist Development Taxes may not be used to fund lifeguard services as those services did not constitute “beach improvement, maintenance, renourishment, restoration, and erosion control” within the contemplation of Section 125.0104 (5) (a) 4, Florida Statutes. Both law firms that reviewed this matter were aware of this opinion and distinguished it in their respective opinions. The primary basis for their conclusion that the Attorney General Opinion was not controlling was that Okaloosa County was not relying Section 125.0104(5) (a)4, Florida Statutes that was the basis of the Opinion, but rather the County was relying on Section 125.0104(5) (a)2. At the time 1990 Attorney General Opinion was issued, that provision authorized the expenditure of tourist development tax revenue “[T]o Promote and advertise tourism in the State of Florida and nationally and internationally.” However, the Legislature, partly in recognition that the provision of services and activities may attract tourists and beneficially promote tourism to an area, amended this subsection in 1996 to add the following: 2. To Promote and advertise tourism in the State of Florida and nationally and internationally; however, if tax revenues are expended for an activity, service, venue, or event, the activity, service, venue, or event shall have as one of its main purposes the attraction of tourists as evidenced by the promotion of the activity, service, venue, or event to tourists. Section 44 of Chapter 96-397, Laws of Florida. The BCC believes that the provision of a safe environment for the attraction of visitors to the area is an essential component of the promotion of tourism to the area. Nor are lifeguard services in the nature of a general governmental function which is owed to the public at large. Therefore, though the County was aware of the Opinion of the Attorney General, it believes that the analysis must be made in the context of the original question asked and the changes in the law that have occurred in the 23 years since the issuance of that opinion. The BCC agrees with the Auditor General that this is an issue that requires clarification and it shall review various options which would allow the County to obtain certainty as to it authority to utilize Tourist Development Tax proceeds for these purposes. The second issue raised by Finding 17 relates to the funding of beach shuttle services with Tourist Development Tax proceeds. The Finding suggests that beach shuttle service is in the nature of a general transportation related activity and therefore provided to the public at large. Initially, the County does not believe that beach shuttle services are a general governmental function owed to the public at large, but, rather, it is a highly specialized type of activity that is directly related to the activities within high tourist areas. Second, these services are no longer being funded with Tourist Development Tax proceeds. 46 JANUARY 2013 REPORT NO. 2013-085 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. Recommendation: The County should consult with Florida’s Coastal Northwest Communications Council, Inc., as to the allowability of the $117,994 in questioned costs. COUNTY RESPONSE: The County acknowledges the audit finding and recommendation. The County has made a preliminary review of the expenditures from the Third Grant from BP and will continue to review documentation to determine whether the terms of the grant from the Florida’s Coastal Northwest Communications Council, Inc., have been complied with in the expenditure of those funds. The County has previously notified the Communications Council and BP of the existence of an expenditure which was not within the terms of the grant. To the extent that other expenditures are found to not comply with the grant or are otherwise questionable, then the County will consult with Florida’s Coastal Northwest Communications Council, Inc., as to those questioned costs. 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. Recommendation: The County should consult with the FCNCC as to the allowability of the $207,730.45 in questioned costs. COUNTY RESPONSE: The County acknowledges the audit finding and recommendation. The County has made a preliminary review of the BP Grant proceeds and its use for the Debit Card Program. The County acknowledges that some Debit Cards acquired under this