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

promotions, the advertising agency would obtain an estimate from a vendor for the media placement or an acquisition. Based upon that estimate, Bellinger would then approve the expenditure. The vendor would then provide the service or acquire the property and send an invoice documenting the basis for the expenditure to the advertising agency. The advertising agency would then generate a separate invoice to the County for payment. The invoices prepared by and submitted by the advertising agency would contain a narrative of the service provided. In some instances, the language used on these invoices was actually written by Bellinger and submitted to the advertising agency for its use in preparing the specific invoices. The language prepared by Bellinger was frequently very general and, in some cases, fraudulent. The invoice would then be submitted for payment with a County processing form (i.e., Contract/Lease Payment Approval Form). When approved, the funds would be sent or wired to the advertising agency and they would pay the vendor. However, the Clerk and other reviewing entities did not normally have any of the actual backup documentation that had been sent by the actual vendor to support the expenditure except the summary invoice prepared by the advertising agency. Our review has also revealed there were several occasions when the advertising agencies would receive an advancement of funds for some future promotion, rather than operate strictly on a reimbursement basis. This created a review process which resulted in limited documentation being available for review. In the past, the backup documentation from the actual vendor was submitted to the Executive Director and Clerk’s office, but apparently at some point prior to Bellinger’s employment, that practice was discontinued. We have not been able to determine exactly why that process was stopped. In conjunction with the contracts with the advertising agencies, Bellinger requested that certain acquisitions be made through the advertising agencies. 11 These were termed “pass-throughs.” The payment for acquisitions would be invoiced through the agency and the agency, upon receipt, would then pay that money to the vendor from which the equipment/service was purchased. In reviewing the procedures under the prior Executive Director, pass-throughs were used but they were limited and substantially smaller in nature. For example, shirts with logos and promotional towels had been purchased through the advertising agencies. However, upon the hiring of Bellinger, there was a greater focus on sweepstake (“contest”) or event type funding. These events were sweepstakes where vacations and vehicles were awarded as part of a contest. With the greater emphasis on these types of sweepstakes, the use of pass- throughs reached a new level. Bellinger used pass-throughs to acquire vehicles, a boat and other items through the respective agencies’ contracts. Further, as indicated previously, even grants for funding of local events were treated as pass- throughs and often funded through the advertising agency. Additionally, the salaries of two “contract” employees who work in the TDC offices are funded through the Zimmerman Agency utilizing this pass-through approach. They are paid by the Zimmerman Agency and the County reimburses the cost of such services to Zimmerman, in addition to its fixed monthly charges by an invoice generated by Zimmerman. In November, 2011, both employees became employees of Zimmerman though their costs continue to be paid by the County as a pass-through. The following . are some examples of the expenditures made through this pass through process:° e In July, 2011, Bellinger sent an email to Lewis Communications setting forth specific language which was to be incorporated on an invoice. That invoice was to read as follows: Boast the Coast National Television Campaign and Promotion (Atlanta, Asheville, Chattanooga, Memphis, Nashville, Knoxville, Cincinnati, Columbus, Cleveland, 3 In reviewing the documentation, we did not attempt to make any judgment as to the merits of any particular promotional event but only reviewed them as to the process and controls that were in place. 12 Kansas City, St. Louis, Louisville, Indianapolis, Minneapolis, Toronto, Niagara Falls, Chicago, Little Rock, Dallas and Houston). On July 12, 2011, an invoice was prepared by Lewis in the amount of $747,000, utilizing the descriptive language which Bellinger had provided. Clerk’s finance paid the amount to Lewis, who then forwarded it pursuant to the directions of Bellinger to Regions Bank in Birmingham, Alabama, and ultimately to Title Works in Destin, Florida. This money was not used for advertising purposes, but rather was used to purchase a house that was titled in Bellinger and his wife’s name. The only backup provided to the County and the Clerk for review was the prepared invoice with the above language. The actual backup possessed by Lewis would have reflected the payment to Title Works which should have raised a concern by the reviewing entities. e At the Marketing Committee and before the TDC, discussions had occurred relating to the use of a boat to promote and complement the “Best Place in America to Boat and Live” by Boating Magazine. The promotion contemplated a contest for a vacation in the Destin area aboard a yacht. The early discussions had been in the context of either leasing or actually acquiring a boat for these purposes. No formal approval to proceed with this promotion had been granted by the Marketing Committee or the TDC and, in our interviews, no one was aware that the discussions had gone beyond the concept phase. However, on December 16, 2011, Bellinger entered into a brokerage, purchase and sales agreement for the acquisition of a 2011 Marquis 42-foot yacht. The purchase price was $710,000. The payment of the money was processed through the Zimmerman Agency as part of the promotion, and the invoice which was prepared by Zimmerman based upon the language provided by Bellinger stated as follows: 2011 Marquis 420SC #MQYU3073T011 Yacht Promotional Campaign, Overnight Summer Giveaway, Wedding Promotions, Snowbird Campaigns and National Contest Giveaway. One year advertising and marketing support of the campaign developed and managed by Zimmerman. TDC partnership with legendary marine. * Information on this acquisition was based upon public and published materials and materials contained in Federal court filings. 13 The invoice was approved by the Chairman of the Board and processed through Clerk’s finance. The boat itself was delivered in December, 2011. The invoice was somewhat misleading in the description of the promotion was extremely vague. Based upon the narrative language provided, it would be difficult to understand the nature of the promotion. However, the summary of the activity did include the description of a yacht. Though this acquisition has received some notoriety, the purchase itself was for a promotion and advertising event and would be a legitimate expenditure, had it been properly authorized and approved. It was not. e As a result of the success of “Hog Rally” in Destin, the concept was circulated concerning giving away motorcycles during the next Hog Rally the following year. This was discussed before the Marketing Committee, the TDC and the Board, but no formal approval given. Again, Bellinger, without formal approval, arranged for the acquisition of the motorcycles, which were custom designed by the Bourget family. The motorcycles themselves were customized and depicted scenes from the Destin-Okaloosa County area. The motorcycles were purchased as a pass-through by the Zimmerman Agency. The invoice submitted by the Zimmerman Agency stated “2012 Boast the Coast Promotional Campaign Sweepstakes” and the job name was “Final Billing for Bourget Bikes.” The total price of the motorcycles was $118,100. The motorcycles were completed and are being held by the Bourget family for transmittal. This acquisition was a legitimate promotional and advertising expenditure, had it been properly authorized and approved. It was not. e A Dodge Durango was purchased for “Boast the Coast Promotion” in the amount of $45,329.50. This promotion was an undefined promotion for the fall of 2012 which would give away the Dodge Durango. Again, the promotion itself appears to have not been reviewed by either the Marketing Committee or the TDC, but was a concept generated solely by Bellinger. Though there was some vague discussion concerning a fall promotion, Bellinger authorized the purchase without approval by the TDC or the Board. The vehicle was purchased as a pass-through by the Zimmerman Agency. This invoice clearly reflected the purchase of a vehicle which should have raised a question as to the expenditure. Again, this acquisition was a legitimate promotional and advertising expenditure, had it been properly authorized and approved. It was not. Based upon cooperation from the 14 dealer, this purchase has been rescinded and the promotion cancelled by the action of the Board at its June 5, 2012 meeting. Though the majority of these approvals were signed by the Chairman of the Board of County Commissioners, there are some which were approved by the County Administrator. On some occasions, the Administrator reviewed authorizations when the Chairman was not available. However, the standard procedure was for the Chairman to review and approve these acquisitions. Following approval by the Chairman, the invoice would be processed through the Clerk’s office. In February, 2012, a policy change was implemented which required additional approval by the Administrator. In discussions with the Clerk’s office, they interpreted these expenditures as contract payments under the authority granted by the Board through the approval of the contract with the advertising agency. As a contract payment, the Clerk’s office predominantly analyzed the invoices as to whether it fell under the umbrella of promotional-type activities, which the advertising agencies were contracted to provide, and whether it was being paid out of the appropriate fund. Representatives of the Clerk’s office did raise various questions in the past as to some of these requested payments and at that time would contact Bellinger for additional details and support. However, the explanation given by Bellinger appeared to satisfy the Clerk’s office that these expenditures were appropriate, as - no objections were raised. In analyzing the expenditures, the Clerk relied on the Tourist Development Plan and contracts with the advertising agencies in determining whether the particular expenditure falls within the scope of the contact for promotional activities and whether the revenues to be used to pay the expenditure was appropriate. As the review was based upon the interpretation that these were approvals authorized under the advertising agency contract there was no detailed review by the Clerk as to the authorization process of these promotions by the TDC. Nor was there any review by the Purchasing Department for the acquisition of any tangible property. With the availability of revenues from BP, it appears that more special events-type advertising and sweepstake promotions were instituted. Again, the processing of these promotions was funneled through the advertising agencies, as were the vehicle sweepstake promotions. The purchasing of these vehicles through the advertising agency deprived a layer of review that would otherwise normally 15 occur in the acquisition of property by the County, that is, the Purchasing Department was omitted from the review process. In reviewing these special event and sweepstake processes, none of them were formally approved by vote by the TDC, nor were they submitted to the Board for vote. Further, in reviewing the minutes, we have been unable to find any significant discussion concerning the financial costs involved