Okaloosa County BOCC — November 4, 2012 — Stewart TDD Recommendations 6-19 — reading text

TALLAHASSEE Suite 200 1500 Mahan Drive Tallahassee, Florida 32308 (850) 224-407 (850) 224-4073 Fax FORT LAUDERDALE 208 S.E. Sixth 0 Tel Fort Lauderdale, Florida 33304 {954) 525-80 00 Tel (954) 525-8331 Fax ve Reply to Tallahassee Via Electronic Mail Don Amunds, Chairman Okaloosa County Board of County Commissioners 1804 Lewis Turner Boulevard Fort Walton Beach, Florida 32547’ Re: Report of Internal Review Dear Chairman Amunds: contact Nab Giblin& oF Nickerson June 13, 2012 FORT MYERS Bullding 83, Sulte 2 12731 World Plaza Lane Fort Myers, Florida 33907 (239) 288-4027 Tel (239) 288-4057 Fax TAMPA Suite 1060 2502 Rocky Polnt Drive Tampa, Florida 33607 (813) 281-2222 Tel (813) 281-0129 Fax Attached please find the Report of Internal Review by Nabors, Giblin & Nickerson, P.A., concerning the Tourist Development Council. I will be available at the County Commission meeting on June 19, 2012, to discuss the report. If there are any questions, please feel free to me, GTS:pad Attachment cc: James D. Curry John R. Dowd Greg Donovan Commissioner Wayne Harris Commissioner Dave Parisot Commissioner Bill Roberts Commissioner James Campbell REPORT OF INTERNAL REVIEW BY NABORS, GIBLIN & NICKERSON The firm of Nabors, Giblin & Nickerson, has been requested to conduct an internal review of the procedures and policies of the Tourist Development Council in light of the allegations surrounding the former Executive Director, Mark Bellinger. In particular, our task was to focus on the policies and procedures which were in effect and to provide recommendations as to how they may be strengthened to provide greater control in the future. As part of our review, we have interviewed numerous witnesses, including past and present employees, reviewed audio recordings and minutes of meetings of the Board of County Commissioners (the “Board”), the Tourist Development Council (“TDC”), and the various subcommittees of the TDC. We have also examined voluminous financial records and other documentation related to TDC operations. Further, as part of our review, we have also interviewed various TDC Executive Directors and TDC Attorneys throughout the State and surveyed the procedures and policies of other counties in regard to the administration of their respective TDCs in an attempt to ascertain “best practices” within the State of Florida. INTRODUCTION _ On May 13, 2010, Mark Bellinger (“Bellinger”) began employment with Okaloosa County. He replaced the long serving Executive Director who had retired. In evaluating the process and procedures in effect, it is important to be aware of the circumstances that existed at the time of Bellinger’s employment. " Throughout our internal review, we were sensitive to the ongoing criminal investigations being conducted by various law enforcement entities. To assist law enforcement, we have immediately notified them of any activity that may be within the purview of their investigation. We also deferred several interviews to avoid any interference with the criminal investigation. Finally, though we have engaged an independent accounting firm to conduct a complete forensic review of the finances of the TDC, we have requested that they stand down until such time as the Auditor General has completed its review. Following the conclusion of the review by the Auditor General, we will provide the Board with a recommendation of additional areas which might be appropriate for further review. On April 20, 2010, less than a month prior to Bellinger beginning his employment, the disaster at the Deepwater Horizon Oil Rig occurred, the adverse impacts of which were broadcasted on news programs both nationally and internationally. This created an immediate need to counteract the publicity which would adversely affect tourism in the area. Businesses and their livelihoods were in danger as a result of the event and its impact on tourism. Coupled with that crisis situation, there were new available revenues through BP which had never been available in the past. Following the disaster at Deepwater Horizon, BP made certain monies available to local communities to mitigate impacts to its tourism industry and assist in marketing efforts, In May 2010, the State of Florida received a payment of $25,000,000 from BP for immediate marketing assistance. Of that amount, $750,000 was received by Okaloosa County and was predominantly utilized for two “Rock the Beach” concert promotions. On July 31, 2010, an additional $7,000,000 was received through the Florida Coastal Northwest Communications Council, an entity consisting of seven counties in the Northwest Florida area that were impacted by the Deepwater Horizon disaster. Of the $7,000,000 grant received, $1,371,939 was received by Okaloosa County and utilized for a debit card promotion and other marketing activities. Finally, in April 2011, BP provided a grant through the State of Florida for tourism marketing efforts in the amount of $30,000,000. This amount was received through the Florida Coastal Northwest Communications Council and $6,506,015 was received by Okaloosa County. Into those circumstances stepped Bellinger who brought a more hands-on approach to marketing activities, including more emphasis on special events, sweepstakes and social media promotions. These additional revenues, coupled with a new approach, provided the means by which aggressive promotions could occur. This is not to suggest that either the availability of these funds or the circumstance in the community justified the events that ultimately occurred. However, it appears that as a result of the crisis that adversely impacted a broad cross section of the community, that there was a stronger emphasis on results rather than the process. OVERVIEW Based upon our review, it is clear that there has been a massive failure of controls. The documentation suggests that some of the expenditures were made through the misappropriation of funds by Bellinger. However, the documentation also revealed that there were expenditures for arguably legitimate promotional and advertising purposes that were inadequately reviewed and not formally approved. Both types of transactions could have been prevented had adequate controls been in place, Ultimately, it appears that Bellinger exercised almost unfettered ability to expend public funds and was able to avoid detection through a combination of false information and an absence of effective supervision. Structure of the TDC In 1986, the Board adopted Ordinance 86-06, which created the TDC, approved the recommended tourist development plan and authorized the levy of a two percent Tourist Development Tax as provided in section 125.0104, Florida Statutes, subject to the approval by the voters. The levy of the two percent Tourist Development Tax was approved by the voters and imposed”, The required membership of the TDC and their general functions are set forth in section 125.0104 (4) (€), Florida Statutes. The pertinent part of that section provides: (e) The governing board of each county which levies and imposes a tourist development tax under this section shall appoint an advisory council to be known as the " (mame of county) Tourist Development Council." The council shall be established by ordinance and composed of nine members who shall be appointed by the governing board. The chair of the governing board of the county or any other member of the governing board as designated by the chair shall serve on the council. Two members of the council shall be elected municipal officials, at least one of whom shall be from the most populous municipality in the county or subcounty special taxing district in which the tax is levied. Six members of ? Additional pennies of authorized Tourist Development Taxes were subsequently authorized by the Board. 3 the council shali be persons who are involved in the tourist industry and who have demonstrated an interest in tourist development, of which members, not less than three nor more than four shall be owners or operators of motels, hotels, recreational vehicle parks, or other tourist accommodations in the county and subject to the tax. All members of the council shall be electors of the county. tot The council shall meet_at least once each quarter and from time to time, shall make recommendations to the county governing board for the effective operation of the special projects or for uses of the tourist development tax revenue _and perform such other duties as may be - prescribed by county ordinance or resolution. The council shall continuously review expenditures of revenues from the tourist development trust fund and shall receive, at least quarterly, expenditure reports from the county governing board or its designee. Expenditures which the council believes to be unauthorized shall be. reported _to the county governing board and the Department of Revenue. The governing board and the department shall review the findings of the council and take appropriate administrative or judicial action to ensure compliance with this section. Section 125.0104 (4) (e), Florida Statutes (emphasis added). These same requirements and functions of the TDC are also incorporated into the County’s Ordinance in nearly identical language. (See Section 20-73, Code of Okaloosa County). Throughout the history of the TDC, the management and administration of the tourism and promotional activities have been the responsibility of the Executive Director. The Executive Director is an employee of the County who is responsible for the management of the County’s Tourist Development Department. The County’s Tourist Development Department is separate from the TDC itself. 4 The Executive. Director position previously reported directly to the County Administrator. However, in September 2005, at the request of the then Executive Director and the then TDC, the Board altered that structure and required that the Executive Director report directly to the Chairman of the Board of County Commissioners. The Ordinance governing the TDC was also amended by Ordinance 05-102 on October 18, 2005, to provide similar reporting authority. The responsibilities of the Executive Director, as defined in that Ordinance, states: 4) Administration. The county determines that the best means for administration of the tourism tax revenues allocated under this plan is local administration by an executive director operating as the executive for the tourist development council, under the direction of the chairman of the board of county commissioners and secondarily the chairman of the tourist development council. The administration of the revenue collection process shall be carried out under a subcontract with the Okaloosa County Clerk of Court’s Office as provided for by separate ordinance 92-08. Role of Advertising Agencies To assist with the promotion and advertising on behalf of the TDC, the County entered into contracts with advertising and public relations agencies over the years. The current Tourist Development Plan, as adopted by Ordinance, not only authorizes this but mandates it. The Plan, as adopted in 2007, states: Accordingly, the county will maintain contractual relationships with professional advertising/marketing and public relation advisors and contractors for the development and implementation of a unified marketing campaign each year this ordinance is in effect at such expense as is deemed desirable and necessary to achieve maximum positive promotional exposure to potential visitors to the subdistrict. These annual promotional efforts shall remain one of two primary focuses of the county’s tourist development plan. The primary 5 objective for these efforts shall be the maintenance of consistent positive “branding” which are image and name recognition and the future development of “shoulder season,” to encompass group and leisure business. Section 20-72(c)(1), Code of Okaloosa County. The primary