Okaloosa County BOCC — August 2, 2016 — Response to Report of Clerk’s Inspector General on the Production and Printing of the Okaloosa County Visitor’s Guide — reading text

which was ultimately awarded the design and printing contract by Okaloosa County was the high bidder by almost 400% when prices were quoted in the bid issued by Peter Mayer. See following;: 'Vendor Price (Based on 150,000 copies) Compass $ 60,000 Life’s A Beach $116,686 IAvanti $ 32,895 RESPONSE: It is important to note that Peter Mayer’s bid issuance was flawed and may well have violated the County’s Purchasing Manual. The PMA Bid Specification requested bids for only developing the visitor’s guide. Printing costs were not specified so bidders had no idea whether to include printing costs or not. Also absent from the bid specifications was a requirement to sell ads only to Okaloosa based businesses unless otherwise approved. Additionally, there were concerns about the process employed by PMA in soliciting certain vendors. These were corrected by staff in the issuance of the County’s RFQ. P-card Charge Paid to Private Individual FINDING: We examined documentation to support the P-card charge and noted the invoice provided by the p-card holder was from Life’s A Beach Publications, L.L.C. for $2,200 for a “custom cover.” However, the charge on the p-card was to the account of a private individual, Richard Seevers. Upon inquiry through the Florida Division of Corporations we learned that Richard Seevers is listed on the annual Corporate filing report as a Manager for Life’s A Beach Publications, L.L.C. In effect, the additional $2,200 paid for the visitor’s guide was paid to Richard Seevers, an individual, not Life’s A Beach Publications, L.L.C. RECOMMENDATION: We recommend in order to effectively track all expenditures under a given contract, all payments should be made to the individual or entity listed in the contract. RESPONSE: The County generally agrees with this recommendation_—as to the tracking of all Lxmndltums under a given contract and believe that is generally done. Lkwvevei—aA%—tHhfi Advertising Revenue FINDING: For comparison, we contacted E. W. Bullock, Escambia County’s advertising and marketing firm for Visit Pensacola, the non-profit corporation responsible for marketing Escambia County’s tourist industry. There are two common contracting methods for producing and paying for the guide. One way is for the successful vendor to produce and print the visitors guide to the customer’s specifications at little or no cost and sell advertising in the publication to recoup their costs. There, the risk falls to the vendor who must sell sufficient advertising in the guide to recoup costs (and make a profit). While vendors bidding for this type of contract take the risk, the rewards can be great given the tremendous channel for generating advertising revenue. The other method of contracting shifts the risk to the customer, in this case, the County, which pays the vendor to produce and print the visitors guide but all revenues from the sale of advertising goes to the County. Here, the TDD director developed bid specifications and negotiated the terms, conditions and fee for producing the visitors guide. The negotiated contract requires the county to pay the contractor, LABP, $74,341 and permits the contractor to sell, collect and retain all advertising revenue. We contacted the Manager for LABP to obtain information on production of the visitors guide here in Okaloosa County. While he was forthcoming in providing the cost LABP paid to print the visitors guide, he has refused to provide us with the amount of advertising revenue generated from ad sales in the visitor’s guide. This is despite several attempts both by phone and in writing. Instead, he has stated that such information constitutes a trade secret and is exempt from public record. We researched the Florida Statute regulating public records (FS119). Classifying information as a trade secret applies to proprietary software. RESPONSE: E.W. Bullock Agency is Escambia County’s marketing and advertising firm. This relationship significantly changes the dynamics of pricing the production of the visitor guide. Due to its annual advertising revenue with Visit Pensacola, EW Bullock only charges approximately 60% of the actual staff hours applied to production of the visitors guide; the remaining is absorbed by the agency. Bullock does not sell the ads that finance the visitors guide, normally a commissioned sales rate of between 15% and 20% of ad costs. Ad sales are handled internally by Visit Pensacola. This arrangement would be analogous to the Peter Mayer agency producing the visitors guide and TDD staff handling ad sales. Furthermore, the Manager for LABP has subsequently provided the amount of advertising revenue generated from the ad sales in the visitor’s guide. Misconception by staff at the TDD FINDING: During the course of our review we spoke with members of the TDD to gain a better understanding of the reasons why the TDD chose to remove the project for the visitor’s guide from the TDD’s marketing and advertising firm. One explanation provided by a staff member (who has been employed by the TDD for many years) was that the vendors submitting bids to Peter A. Mayer were not registered and certified by the County’s Purchasing Department. This is a misconception on the part of that staff member. Prospective bidders for County work are not required to be registered or certified by the County’s Purchasing Department. This misconception only goes to demonstrate the fact that County departments, which are not trained in County purchasing procedures, should not be handling procurement matters. RECOMMENDATION: To strengthen the centralized procurement function of the County and provide consistency in implementing County policies, we recommend the Purchasing Department oversee all aspects of the procurement process. RESPONSE: The County agrees with this recommendation. However, the staff member mentioned above was not, and is not, involved in the handling of procurement matters and it may be inappropriate to conclude from one discussion that this asserted lack of understanding extends throughout the TDD. Conflict of Interest FINDING: In reviewing advertisements in the visitors guide we noted one was for a vacation, rental, property management and real estate company presumably owned by a member of the Tourist Development Council. We noted this individual also served on the Board appointed committee to evaluate proposals and make recommendations to the Board for the ranking of the firms. Given the appearance of a potential conflict of interest between the committee member’s interests as an advertiser purchasing an ad in the visitor’s guide and his responsibilities to the Board as a member of the evaluation committee selected to choose the vendor to produce the visitors guide, we suggest that perhaps another member of the Tourist Development Council should have been appointed. We contacted the TDC member referenced above who provided us with documentation indicating that he paid the appropriate rate for advertising in the publication. As such nothing came to our attention to suggest that business transactions between the TDC member and LABP were anything other than appropriate. However, we are concerned with the perception it creates. RECOMMENDATION: We recommend the Board consider modifying these policies to address conflicts of interests for members of Board appointed committees including requirements for full disclosure of potential conflicts prior to and or during participation. RESPONSES: The County agrees with this recommendation. The County will review the Purchasing Manual and consider revisions thereto. Advertising for Venues Located Outside of the County FINDING: The contract between the Board and LABP provided that LABP could sell advertising in the visitor’s guide and keep all proceeds therefrom and required that all advertisement sales were restricted to Okaloosa County unless pre-approved by the TDD in writing. We reviewed the ads appearing in the 2015 guide and noted five were for venues located outside of Okaloosa County. When questioned about these ads, the TDD director informed us he did approve all ad sales in the visitor’s guide but that it was done verbally. There is no written record of this approval as required in the contract. RESPONSE: The County agrees with this finding. The TDD will ensure strict compliance with contract requirements moving forward. Lucrative Contract FINDING: LABP has published Okaloosa County’s visitors guide for several years. The 2012- 2013 contract provided that the TDD would supplement/underwrite the costs to vendors who advertised in the guide by making additional payments to LABP. It appears the TDD contributed an additional 25% of the cost of advertising for the 2013 guide paid by vendors placing ads in the guide. We estimate total advertising dollars earned by LABP from ad sales in the 2013 guide was $224,656. Adding that amount to the contracted amount already paid to LABP ($16,000) we arrive at the total amount earned by LABP to produce the County’s 2013 visitors guide-$296,820. We noted that the County, not LABP, paid for the printing of the visitor’s guide in 2013. In addition, all content material for the visitor’s guide was provided by the TDD. In effect, LABP earned approximately $296,820 for designing and organizing the visitors guide. RESPONSE: The relevance of this finding to a review of the 2015 visitor’s guide is tenuous. The backeround related to the 2013 visitor’s guide production is significantly different from the 2015 review. Additionally, the figures stated above seem over inflated. By applying the 2015 advertising rates to the advertisements actually placed in the 2015 visitor’s guide, it appears the maximum amount LABP could have earned is $108,194.