Okaloosa County BOCC — June 3, 2014 — Board Presentation on TDC Follow-up Review — reading text

Okaloosa County Clerk of Courts Internal Audit Department In January 2013 the Florida Auditor General issued an audit report on the Board’s oversight of the TDC and its use of funds. The audit was initiated as a result of the criminal investigation of the former Executive Director relating to the misuse of those funds. The audit report contained 25 separate findings and requires that the Auditor General conduct a follow-up review slated for June or July. Because of this, the Clerk directed the Internal Audit Department to conduct an internal follow-up review in preparation for the Auditor General’s return. Disclaimer: While we were thorough in our review and stand behind our conclusions, there is no guarantee that the Auditor General will agree with the conclusions reached in our report. 2 The County’s response to the misfortunes that occurred in 2012 was swift and decisive. By the time the Auditor General issued its report the Board had already instituted numerous policy and procedural changes designed to correct internal control weaknesses including: • Increased monitoring of tourist development expenditures • Ending contracts with the two existing advertising and marketing firms • Entered into a revised contract with a new firm • Revised the TDC Ordinance several times • Revised TDC Policy and Procedures Manual several times • Revised Board Purchasing Policies including sections on the use of p-cards and travel expenditures All of these measures were designed to strengthen internal controls over expenditures of tourist development and BP funds. 3 The Clerk of Courts too has revised several policies and created new ones to reinforce its role as the last line of defense in preventing fraud in Okaloosa County. Because of the relationship between the Board and Clerk of Courts, corrective actions to findings contained in the report required joint cooperation of both entities. Fraud prevention is a shared responsibility 4 The Auditor General divided his audit findings into 9 categories Finding #’s 1 through 4 dealt with Organizational Oversight These findings ranged from budgetary control to duties of the TDC and related subcommittees and conflicts of interests In response the Board: • Amended the TDC Ordinance simplifying the budgetary restrictions on TDC funds • Eliminated both TDC subcommittees • Amended the TDC Policies and Procedures Manual to clarify the TDC’s role as advisory • Requires the TDC to review detailed monthly expenditure reports and • Added language addressing conflicts of interests and requirements for members to abstain from voting on any matters in which they might have a perceived conflict. These four findings have been resolved 5 Finding #’s 5 and 6 dealt with Fraud Controls and Control Risk Assessment In response to the fraud finding the Board has developed a Comprehensive Anti- Fraud Program including: • Establishing a Whistle Blower Policy • Developing a formal Code of Conduct • Creating a policy on Unlawful Acts • Approving an Anti-fraud Policy that establishes a Fraud Response Plan • Finally, a formal fraud risk assessment was conducted last year as part of the audit conducted by one of our local CPA firms. What’s left to do: • Develop policies requiring a periodic fraud risk assessment. 6 Finding #’s 5 and 6, cont. In response to the finding relating to a Control Risk Assessment the Board engaged a local CPA firm to conduct an audit that included a formal risk assessment. The report identified 17 potential risks. To date the County has addressed several risks identified in the report and will continue its efforts to address these risks. What’s left to do: Develop policies requiring a periodic control risk assessment. Solutions to these two findings are ongoing 7 Finding #’s 7 through 13 dealt with policies relating to the Procurement of Goods and Services and addressed purchases made through the two advertising firms; how these firms were selected as vendors; expenses covered under the contracts; invoice detail; advance payments; purchasing approvals and the use of P-cards. In response to these findings the Board and County staff: • Ended contracts with the two existing firms • Selected a new firm following Board policy • Entered into a restructured contract with a new firm • Amended the County’s Purchasing Policies and TDC Policy and Procedures Manual. Those amendments now require: • That pre-approved task orders outlining the scope of work to be done accompany detailed invoices submitted for payment • The advertising and marketing firm must seek bids for goods and service where the costs are passed through to the County • Approvals for purchases from TDC funds now follow the same policies that other County purchases are subject to and • Review and approval of p-card expenditures by appropriate level department heads The Clerk’s Office too has intensified its pre-audit procedures for invoices and reviews to see that the above requirements have been met and that expenditures serve a public purpose. Requests for payments that do not meet the above requirements are returned. Findings 7 through 13 have been resolved. However, the Board is in litigation seeking repayment of these funds 8 Finding # 14 related to Travel Expenses In response to this finding the Board revised its travel policies and travel form. Current policies require: • A certification statement by the traveler as to the public purpose of the travel. • Travel must be preapproved • Actual receipts must accompany the request for reimbursement In addition the Board amended the TDC Policies and Procedures manual to address travel related to marketing and promotion activities. Finally, the Clerk addresses travel expense and travel reimbursement in the Finance Department’s Policy Manual. We reviewed all out of county travel claims for the TDD and noted no exceptions This finding has been resolved. 9 Both finding # 15 & 16 related to Special Events Grants and Sponsorships In response to the control weaknesses identified during the Auditor General’s visit, the Board revised the TDC Policy and Procedures Manual once in September 2012, before the audit was published and again in March 2013. Amendments included: • Adding a method for calculating the amount of the award or sponsorship • Defining the types of expenses to be reimbursed • Requirements for grant/sponsorship recipients to sign an agreement acknowledging the terms and conditions of the award • A requirement for recipients to submit a post-event report documenting the effectiveness of the event in increasing hotel room nights We looked at sponsorships and awards funded through the date of our field work and noted that all were in compliance with the above requirements. These findings have been resolved. 10 Finding #’s 17 through 20 related to uses of TDC and BP funds (Restricted Resources). Here the auditor took exception with the purpose for which some of these funds were used. Regarding the questions about lifeguards, beach patrol and beach shuttle services, counsel for the Board has previously issued a legal opinion and is currently considering various approaches to the issue of using TDC funds. For the other items mentioned in the Auditor General’s report, the County has sent letters to both the BP Gulf Coast Restoration Organization and Florida's Coastal Northwest Communications Council requesting direction. As of yet there has been no response. These matters are pending. 11 Finding #21 related to the use of County fuel cards. In response the Fleet Management Department modified controls for the use of fuel cards: • Revised limits on the amount of fuel each card can access for each fill up, with daily and weekly limits • Require that an employee ID and odometer reading be entered before the system will dispense fuel. The system checks the ID number and odometer reading and will reject the card for invalid ID’s or when an Odometer reading is out of sequence • A fueling exception report is automatically generated and reviewed by the Fleet Management Department Monthly exception reports are sent to each department. Fleet Management Department will contact department heads to discuss these exceptions as needed. In addition, monthly fuel usage reports are provided to County Departments. Fuel tickets for external fuel purchases are matched to the report, reviewed by the department head and filed for review. This finding is ongoing. 12 Finding #22 dealt with classification of expenditures. This is an issue for the Clerk and as mentioned in the original audit report, the Clerk recorded expenditures based on the documentation provided and consistent with the Uniform Accounting System Manual published by the Florida Department of Financial Services. Corrective actions taken with regard to contracts and supporting documentation will enable the Clerk to more clearly identify what is being purchased which will enable his staff to better determine the proper classification of the expenditure. This finding has been resolved. 13 Finding #23 involved controls over electronic funds transfers. In response to this finding the Clerk revised policies to require two people to complete a wire transfer (dual control). The banking agreement was amended to reflect this requirement and the maximum amount of wire transfers allowed was revised. This finding has been resolved. Finding #24 dealt with user rights and adequate separation of duties over accounting transactions. In response to this finding staff for the Clerk revised employee user rights and instituted mitigating controls over the processing of accounting entries to compensate for the lack of adequate staff (separation of duties). This finding has been resolved. 14 Public Records Finding #25 dealt with minutes of the TDC and its subcommittee meetings. We reviewed minutes of the TDC through January and noted that minutes are now kept for all meetings, approved by the TDC each month and signed by the Committee Chair. This finding has been resolved. 15  In Closing While actions taken by the Board and Clerk were in response to control weaknesses in the use of Tourist Development Funds