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

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 OF GOODS AND SERVICES 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 JANUARY 2013 REPORT NO. 2013-085 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 were 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 JANUARY 2013 REPORT NO. 2013-085 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. Okaloosa County Tourist Development Council. 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 response to damages resulting from the explosion and oil spill, BP provided moneys to the State, certain local governments, and certain nonprofit organizations. 3 JANUARY 2013 REPORT NO. 2013-085 Table 1 Revenue 5‐1‐10 to 10‐1‐10 to 10‐1‐11 to Total 9‐30‐10 9‐30‐11 5‐31‐12 Tourist Development Special Revenue Fund Tourist Development Taxes $ 3,839,189.69 $ 6,288,548.04 $ 2,301,634.46 $ 12,429,372.19 Beach Restoration Municipal Services Benefit Unit 70,988.84 881,665.58 850,214.86 1,802,869.28 Florida Department of Transportation Mass Transit Grants 82,113.74 218,520.30 225,860.66 526,494.70 British Petroleum 2,121,939.00 8,073,065.00 10,195,004.00 Investments 11,612.56 43,539.52 205,360.23 260,512.31 Other 14,766.51 5,000.00 76,112.46 95,878.97 Total Tourist Development Special Revenue Fund 6,140,610.34 15,510,338.44 3,659,182.67 25,310,131.45 Convention Center Enterprise Fund Tourist Development Taxes 2,559,459.80 5,237,066.70 1,534,422.98 9,330,949.48 Charges for Services 384,373.68 720,598.20 457,489.93 1,562,461.81 Investments 15,378.72 104,165.90 73,531.93 193,076.55 Other 231.08 311.53 200.49 743.10 Total Convention Center Enterprise Fund 2,959,443.28 6,062,142.33 2,065,645.33 11,087,230.94 Total Revenues for Both Funds $ 9,100,053.62 $ 21,572,480.77 $ 5,724,828.00 $ 36,397,362.39 Source: General Ledger Tourist Development Taxes. A major source of revenue used by the County for tourism promotion was tourist development taxes. Of the total revenues shown in the table above, $21,760,321.67, or 59.8 percent, was tourist development taxes. Section 125.0104, Florida Statutes, governs how counties can assess and use tourist development taxes and allows counties to assess up to 6 percent of each dollar collected from rents of living quarters or accommodations in short-term (less than six months) facilities. This Section specifies how counties that assess tourist development taxes can use each percent of the tax and requires that counties assessing tourist development taxes establish county ordinances that specify how each percent of the tax will be used. The BCC assessed tourist development taxes of 5 percent and established ordinances governing the use of the tourist development taxes. Table 2 provides an analysis of tourist development taxes collected by the County during the period May 2010 through May 2012, showing