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

collections by percent and ordinance restriction. 4 JANUARY 2013 REPORT NO. 2013-085 Table 2 Percent Distribution County Ordinance 5‐1‐10 to 10‐1‐10 to 10‐1‐11 to Total Use Restrictions 9‐30‐10 9‐30‐11 5‐31‐12 First Percent Beach Restoration and Monitoring $ 1,279,729.89 $ 2,618,533.35 $ 767,211.49 $ 4,665,474.73 Second and Fifth Percents Tourism Promotion 1,433,297.49 2,055,208.23 859,276.86 4,347,782.58 Second and Fifth Percents Tourism Administration 383,918.97 550,502.20 230,163.45 1,164,584.62 Second and Fifth Percents Beach Improvement, Facilities, Landscaping, and Maintenance 691,054.15 990,903.97 414,294.20 2,096,252.32 Second and Fifth Percents Contingency and Statutory Improvements 51,189.19 73,400.29 30,688.46 155,277.94 Total Second and Fifth Percents 2,559,459.80 3,670,014.69 1,534,422.97 7,763,897.46 Third Percent Tourism Promotion 383,918.97 785,560.00 230,163.45 1,399,642.42 Third Percent Beach Improvement, Facilities, Facilities Operations, Landscaping, and Maintenance 895,810.93 1,832,973.35 537,048.04 3,265,832.32 Total Third Percent 1,279,729.90 2,618,533.35 767,211.49 4,665,474.74 Fourth Percent Convention Center Debt Service 1,279,729.90 2,618,533.35 767,211.49 4,665,474.74 Total $ 6,398,649.49 $ 11,525,614.74 $ 3,836,057.44 $ 21,760,321.67 Source: General Ledger Of the tourist development taxes collected, the first, second, and fifth percents were accounted for as revenues in the Tourist Development Special Revenue Fund. The third and fourth percents were accounted for as revenues in the Convention Center Enterprise Fund. The County generally used the tourist development taxes as follows:  First Percent. To restore and monitor nine and one-half miles of County beaches, including the beaches within the Destin city limits.  Second and Fifth Percents. To promote tourism, operate the Tourist Development Department, maintain beaches, and set aside moneys for contingencies.  Third Percent. To promote and operate the Emerald Coast Convention Center (convention center).  Fourth Percent. To pay debt service on revenue bonds issued to construct the convention center. BP Funds. Table 3 provides a summary of funds received from BP during the period May 2010 through May 2012. Table 3 Type 5‐1‐10 to 10‐1‐10 to 10‐1‐11 to Total 9‐30‐10 9‐30‐11 5‐31‐12 Negotiated Settlements Tourist Development Taxes Lost Revenues (1) $ $ 1,567,052.00 $ $ 1,567,052.00 Water and Sewer Department Lost Revenues 110,345.57 110,345.57 Total Negotiated Settlements 1,677,397.57 1,677,397.57 Reimbursements BP Claims Reimbursements 1,116,113.85 146,801.86 1,262,915.71 Performance Based Emergency Medical Services Aid Stations 634,041.00 634,041.00 Grants Tourism Promotion (1) 750,000.00 750,000.00 Tourism Promotion (1) 1,371,939.00 1,371,939.00 Tourism Promotion (1) 6,506,013.00 6,506,013.00 Total Grants 2,121,939.00 6,506,013.00 8,627,952.00 Total $ 3,872,093.85 $ 8,330,212.43 $ $ 12,202,306.28 Note (1): Total Received for Tourism Promotion $ 2,121,939.00 $ 8,073,065.00 $ $ 10,195,004.00 Source: General Ledger 5 JANUARY 2013 REPORT NO. 2013-085 The County experienced a decline in tourism after the oil spill that impacted the receipt of tourist development taxes and water and sewer billings. As a result, the County filed claims with BP for lost revenues. BP subsequently negotiated a settlement of these claims and awarded the County $1,677,397.57. In addition, the County incurred expenditures related to beach monitoring and cleanup during the period immediately following the oil spill, and BP reimbursed the County $1,262,915.71 for these expenditures. BP also contracted with the County to provide Emergency Medical Services aid stations at locations specified by BP representatives to assist workers while performing monitoring and cleanup activities. The contract provided that the County would be paid at set rates per hour of service, and it received $634,041 for these services. After the cleanup, the County received three BP grants totaling $8,627,952 to help rebuild and promote area tourism. These grants could be spent on a wide variety of activities including advertising, promotions, special events, and other activities. FINDINGS AND RECOMMENDATIONS Organizational Oversight The BCC is entrusted by the public with the proper and efficient administration of public funds. The Okaloosa County Clerk of the Circuit Court (CCC), as ex-officio clerk of the BCC, auditor, recorder, and custodian of all County funds, is responsible for preauditing expenditures to determine whether the expenditures are lawful and properly supported prior to payment. Additionally, pursuant to Section 125.17, Florida Statutes, the CCC is required to keep the BCC’s minutes and accounts and perform such other duties as the BCC may direct. Further, the TDC is responsible for monitoring expenditures of tourist development taxes. The BCC, TDC, and CCC did not exercise sufficient control over tourist development taxes or funds received from BP to ensure that expenditures of public funds were made in accordance with BCC intentions, grants, or contractual agreements, or were lawful, properly supported, and served a public purpose. Primary issues of concern relate to the failure to budget for and control expenditures at appropriate levels and the failure to obtain adequate support for invoices submitted for payment, especially those invoices related to contracts with two advertising and marketing firms. These and numerous other issues of concern are discussed in this report. Finding No. 1: Budget Preparation and Monitoring As discussed in the Background section of this report, all of the resources accounted for in the Tourist Development Special Revenue Fund and substantially all of the resources accounted for in the Convention Center Enterprise Fund were restricted for various specific purposes (e.g., tourism promotion, tourism administration, beach maintenance). However, the BCC did not adopt budgets for these restricted resources at the level of their restriction. To track the available balances of each percent of tourist development taxes, BP grant funds, and other resources at the level of their restriction, the CCC maintained a computerized spreadsheet of the revenues and expenditures at these levels. Although CCC personnel indicated that the spreadsheet was provided to the former TDC Executive Director, County records did not evidence that the spreadsheet was provided to the BCC. As of May 31, 2012, the CCC’s spreadsheet indicated that, although tourist development taxes were not overspent in total or at the total statutory percent levels noted in Table 2, the County had overspent the portion of the second and fifth percents of tourist development taxes that was restricted by ordinance for tourism promotion by $3.5 million. Likewise, the CCC’s spreadsheet indicated that the County had overspent the portion of the third percent of tourist development taxes that was restricted by ordinance for tourism promotion by $689,000. As a result, funds restricted by ordinance for other purposes were used to promote tourism. CCC personnel stated that, although the spreadsheet 6 JANUARY 2013 REPORT NO. 2013-085 calculated available tourist development taxes at the ordinance restriction level, it was used primarily to ensure that tourist development taxes were not overspent in total or at the total statutory percent levels. The spreadsheet was not used by the CCC to reject invoices presented for payment when sufficient funds were not available at the ordinance restriction level. The Tourist Development Department also engaged in various advertising projects and marketing campaigns to accomplish its goals and objectives. However, project-level budgets were not established, and expenditures were not consistently identified by project. Project budgets are an important tool in effectively allocating and managing available resources. They not only serve to control expenditures, but project budgets help to ensure that available resources are spent in accordance with applicable restrictions and BCC intentions. As noted in finding No. 8, the County could also more effectively monitor advertising and marketing expenditures by requiring that all vendor invoices be referenced to specific BCC-approved advertising projects and marketing campaigns. In September 2012, the BCC adopted budget policies and procedures as part of the TDC’s operations and procedures manual. These policies and procedures require the TDC to submit an annual marketing plan to the BCC for approval and all expenditures to conform to the approved marketing plan. As of November 13, 2012, the 2012-13 fiscal year marketing plan had not been submitted to the BCC. Recommendation: The BCC should adopt budgets to control expenditures from restricted resources at the level of their restriction and by each specific project funded by these restricted resources. Corresponding budgets should be incorporated into the accounting records to