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

activities of collecting, accounting for, and disbursing restricted resources, including tourist development taxes and funds received from BP. Procurement of Goods and Services Finding No. 7: Competitive Procurement by the County County purchasing policies and procedures in effect during the period May 2010 through May 2012 required a minimum of three written quotes for nonexempt purchases (i.e., purchases that were not sole source, per State contract, etc.) in excess of $2,500 up to $50,000, and formal bids were required for nonexempt purchases in excess of $50,000. County purchasing policies and procedures that governed the selection of firms providing professional services required the following:  The requesting department must seek BCC approval to distribute a request for proposal (RFP) and establish a selection committee to review the responses to the RFP, prioritize the contending firms, and negotiate an agreement with the selected firm;  The selection committee’s rankings of prospective firms should be based on the firm’s capabilities, including ability, adequacy of personnel, past record, recent experience, current workload, and location; and  The selection committee’s recommended priority list must be presented to the BCC for approval prior to the commencement of negotiations with the selected firm. Our test of six purchases made by the County during the period May 2010 through May 2012, totaling $134,260.41 and funded from tourist development taxes or BP grant funds, disclosed three purchases, totaling $68,650, for which three written quotes were not obtained. These purchases included $49,500 for production services at beach concerts, $12,800 for towing and deployment of a tug boat, and $6,350 for an artist to provide custom artwork for the 10 JANUARY 2013 REPORT NO. 2013-085 convention center. County personnel indicated the custom artwork was a sole source purchase, but they could not provide a sole source purchase data sheet that, per County purchasing policies and procedures, must be completed and attached to the purchase requisition. In January 2011, the County issued an RFP for “marketing/advertising/public relations/Web site/research for the TDC, Emerald Coast Convention and Visitors Bureau, Inc., Okaloosa Film Commission, and Emerald Coast Convention Center.” Prior to that time and through September 19, 2011, the County operated under an existing contract with an advertising and marketing firm that was negotiated prior to May 2010. Our review of the selection process of the firms that were awarded contracts based on their responses to the RFP disclosed that the County did not follow the purchasing policies and procedures noted above, as follows:  The TDC did not obtain BCC approval to distribute the RFP or establish a selection committee to review the responses to the RFP, contrary to County purchasing policies and procedures. An initial evaluation committee composed of four TDC members, the former TDC Executive Director, and the General Manager of the convention center ranked the responses to the RFP and selected four firms to make subsequent presentations to the TDC. However, TDC records did not document the discussions or decisions of the initial evaluation committee.  A final selection committee composed of seven TDC members and the former TDC Executive Director ranked the four firms based on their presentations. However, the ranking sheets provided for our review were not signed by the seven TDC members. In addition, only three of the seven ranking sheets listed the individual criteria evaluated by the selection committee, and these criteria were not the same as the criteria required by County purchasing policies and procedures. In April 2011, the TDC approved the former TDC Executive Director’s recommendation to award contracts to two advertising and marketing firms ranked first and second on the ranking sheets. One of the two firms was the same firm already under contract with the County as previously discussed above. The selection committee’s recommendation was not presented to the BCC for approval prior to the commencement of negotiations with the firms, contrary to County purchasing policies and procedures. Instead, negotiations with the firms were conducted by the former TDC Executive Director. Although the BCC approved the contracts, which were effective June 7, 2011, and September 20, 2011, respectively, the County’s selection procedures were not followed. Failure to adequately document the selection process for professional services, including the criteria used in each selection committee member’s ranking and signed ranking sheets for each selection committee member, could expose the County to legal action should a firm wish to challenge the County’s selection. In addition, failure to follow County purchasing policies and procedures regarding the selection of professional services puts the County at an increased risk that firms may be selected without the requisite qualifications and experience to address the County’s needs. 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. Finding No. 8: Contract Design As a matter of good business practice, contracts should be designed to effectively protect the interests of the contracting parties. Contracts should include specific information about the requirements of all contracting parties and avoid the use of ambiguous or undefined terminology. As discussed in finding No. 7, the County contracted with two advertising and marketing firms in 2011. The County’s contractual relationship was such that the firms provided 11 JANUARY 2013 REPORT NO. 2013-085 total turn-key services for the County. Generally, the firms provided advertising management and artistic services and contracted with other vendors to deliver the actual services and products. The firms paid the other vendors and claimed reimbursement on invoices submitted to the County for payment. Each of the contracts with the firms detailed the scope of services to be provided, the compensation for these services, and various general provisions and requirements. Our review of the 2011 advertising and marketing contracts with these firms disclosed that the contracts did not contain necessary provisions to protect the County’s interests. We noted that the contract with one of the firms did not require the firm to submit cost estimates, obtain BCC approval prior to starting work on an advertising project or marketing campaign, or state the advertising project or marketing campaign with which invoices were associated. Neither contract required the firms to competitively procure goods and services in accordance with County purchasing policies and procedures. In addition, the firms were not required to submit invoices, including invoices from third-party vendors, in sufficient detail to allow for an effective preaudit to ensure the goods or services purchased were actually received and that the correct amounts were charged. The deficiencies in the design of both contracts may have contributed to the unauthorized and inadequately supported expenditures noted in finding No. 9. The County also entered into an agreement with a contractor that assisted County personnel in responding to the oil spill. The County generally issued task orders to the contractor for specific services at specific amounts of compensation. However, we noted one task order that provided for various services to be compensated at “time plus expenses,” and the task order did not specify the types or amounts of contractor expenses that would be reimbursed by the County. The deficiencies in the design of this contract may have contributed to the inadequately supported expenditures noted in finding No. 20. 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 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. Finding No. 9: Contract Monitoring and Contract Payments As discussed in finding Nos. 7 and 8, the County contracted with two advertising and marketing firms and made significant payments to the firms during the period May 2010 through May 2012 as indicated in the following table: Table 4 5‐1‐10 to 10‐1‐10 to 10‐1‐11 to Total 9‐30‐10 9‐30‐11 5‐31‐12 $ 1,603,223.05 $ 6,175,224.70 $ 4,929,601.44 $ 12,708,049.19 Source: General Ledger Our review of the contracts with the firms and the related contract payments disclosed significant deficiencies in County procedures relating to contract monitoring and preauditing of contract invoices. Contract Monitoring. The contracts with one of the firms provided that the firm would perform various services, including advertising, marketing, promotions, and public relations, for a specified monthly fee. Prior to September 20, 12 JANUARY 2013 REPORT NO. 2013-085 2011, this fee was $26,000 per month. Beginning on September 20, 2011, pursuant to a new contract, this fee was $38,400 per month, a 47.7 percent increase. Our review of the invoices submitted by the firm disclosed that County personnel did not effectively monitor contract payments to ensure that the invoices submitted were in accordance with provisions of the contracts. For example, in addition to the monthly fees noted above, the County paid the firm an additional $142,942.30 for the services of an integrated marketing associate and a sales/public relations associate. However, based on the description of services to be provided pursuant to the contracts, these services appear to be the types of services covered by the monthly fee, in which case the firm would not be entitled to the additional payments for services. In addition, during the period covered by the contract in effect prior to September 19, 2011, the firm was paid $3,351.23 for out-of-pocket expenses and $20,500 for social media management and support services although the contract did not provide for the firm to be paid for such expenses. Support for Invoices. Our review of payments made by the County to the two advertising