FY 2010 Audit Reports
To view a summary of any of the following audit reports, click on the report name.
Assistance and Guidance Report on TPD Take-home Vehicles (#1001)
This report provides additional information as follow up to Audit Report #0809 issued May 18, 2008, Audit of Take-home Vehicles. That audit addressed the cost of vehicles taken home by City staff to include TPD (Tallahassee Police Department) officers. The cost of vehicles taken home by TPD officers has continued to be discussed in meetings of the Financial Viability of the Government Target Issue Committee, and in workshops and regularly scheduled meetings of the City Commission. In addition, there has been continuing discussion on the cost of TPD vehicles taken home between TPD, the City's Department of Management and Administration, and the Office of the City Auditor. Audit conclusions are as follows:
- The average cost to police officers should they be required to commute in their own personal vehicle to and from TPD headquarters is approximately $70 biweekly or $150 per month. This average cost does not consider approximately 48 officers living outside Leon County.
- If the City Commission decides TPD officers should now share in the cost of such vehicle use, the amount of $70 biweekly should be reduced because other factors need to be considered to arrive at a fair and equitable cost sharing amount. These additional factors benefit the City and the community.
- Should the City Commission decide to discontinue the take-home vehicle program and instead selects a quick rotation program or assigned pool program (where vehicles are housed at TPD headquarters or other locations when not in use), a methodology should be used that considers vehicle needs for the long-term. The methodology should address miles to be used each year for patrol (business) purposes, and the desired fleet size based on scheduled shifts and operational needs. Some of the economic and social benefits identified in this report with the current assigned vehicle take-home program would not be present in a quick rotation or assigned pool program.
Inquiry Report - Blueprint 2000 & Beyond (#1002)
On September 15, 2008, the Board of Directors for the Blueprint 2000 & Beyond (BP 2000) met in a regular meeting. During the Public Hearings portion of that meeting a citizen made assertions that BP 2000 was not complying with regulations and as a result was jeopardizing $50 million in state and federal funding.
The Board asked the Office of the City Auditor to inquire into the assertions made by the citizen and provide information as to the validity of those assertions.
To gain a better understanding of the assertions made, we met with the citizen and discussed their concerns relating to BP 2000. In that meeting we learned that the concerns were in three specific areas:
- The monetary incentives offered to property owners were often not correct based on Florida Department of Transportation (FDOT) guidelines.
- BP 2000 primarily used "out of town" contractors (appraisers) resulting in local taxpayer money leaving the area and not being reinvested in the Tallahassee area.
- The appraisals (for right-of-way acquisitions) obtained by BP 2000 were incorrect and higher than could be justified which resulted in too much being paid for property acquisitions.
To address those assertions we reviewed relevant laws, regulations, policies, and procedures; selected a sample of right-of-way acquisitions for examination; and interviewed selected individuals.
Our inquiry into the assertions showed there were four out of twenty parcel acquisitions tested where we had concerns:
- For two purchases BP 2000 made errors in calculating the monetary incentive paid to property owners. The resulting underpayments occurred because BP 2000 erred in applying an incentive formula developed by FDOT for a pilot incentive program (subsequently incorporated into the FDOT Right-of-Way Manual).
- For two additional parcels the incentive was intentionally reduced because the property owner was the owner of the company that performed the road construction.
The amount offered for the 20 parcels tested totaled $13.4 million, of which $1.76 million was attributable to incentives. For the four parcels identified where exceptions were noted, the incentives were $127,000 less than the property owners would have received according to the FDOT incentive formula. This difference between the incentive amounts not paid and the total incentive paid for the 20 parcels equated to a seven percent underpayment ($127,000/ $1.76 million in incentives) or less than a one percent error of total payments for the 20 parcels tested ($127,000/ $13.4 million). For the four parcels only, the incentive underpayment ranged from 8.1 to 11.5 percent per parcel.
We also noted that in all instances the appraisals used as the basis for acquiring right-of-way were reviewed by a second independent appraiser, and in all instances the review appraiser concurred with the valuation of the property to be acquired.
Finally we noted that BP 2000 did, in most cases, use an appraiser from outside the local area, however that appraiser was selected through a competitive process.
Based on our review of the available information, the assertions do not merit further inquiry or investigation.
Final Audit Follow-Up on Repayment of Local Communications Services Tax (#1003)
This is the first and final follow-up on the action plan steps originating from the audit of the Repayment of Local Communications Services Tax (report #0911) issued on April 7, 2009. The Revenue management has completed all action plan steps identified in the audit as of September 30, 2009.
Our original audit was conducted to 1) verify the reasonableness and appropriateness of the information supporting the City of Tallahassee (City) Revenue Division's request to the City Commission to increase the local Communications Services Tax (CST) rate from 5.49% to 6.1%, effective February 1, 2009; 2) provide assurance that an FDOR audit finding requiring the City to repay $1.4 million is adequately supported; and 3) determine the accuracy of Leon County addresses and assigned jurisdictions in the Florida Department of Revenue (FDOR) CST address database.
We provided recommendations during the audit to the Revenue Division to address the identified issues. There were four action plan steps identified in the audit. The following two action plan steps were completed prior to the report being issued on April 7, 2009:
- Monitoring CST collections and adjusting the CST local tax rate to ensure that the expected tax collection levels are maintained. [The Revenue Division indicated that the collections from the revised rate are meeting the expected tax collection levels.]
- Working with City Information Systems Services and County Geographic Information Systems (GIS) staff to monitor the accuracy of the Leon County addresses in the FDOR address database. [Additional address updates have been submitted to FDOR.]
The two steps completed during this follow-up period were related to:
- Requesting documentation from FDOR to support current and future adjustments. Revenue Management reported that they received notice from the FDOR that the most recent FDOR adjustment was a $99,991 underpayment (i.e., the City will receive this amount).
- Requesting FDOR to a) waive the City's adjustment ($1.4 million to be repaid) and b) include the "qualifying discount" in the FDOR calculation of what jurisdictions owe back to the FDOR when adjustments are determined.
In March 2009, FDOR informed the City they do not have the statutory authority to "waive" the City's $1.4 million adjustment for the determined overpayment of the CST distributions. Therefore, the City will be repaying the $1.4 million overpayment over a three- year period ending March 2012. The Revenue Manager indicated that during the summer 2012, they will re-evaluate the sufficiency of the CST local tax rate to determine whether the rate should be adjusted to insure revenue neutrality compliance, as provided in Florida Statutes Section 202.20(2)(a).
Final Audit Follow-Up City's Ethics Program (#1004)
This is the first and final follow-up on the action plan steps originating from the audit of the City's Ethics Program (report #0912) issued on April 9, 2009. The City Attorney, City Treasurer-Clerk, and the Department of Management and Administration's Human Resources Division worked together to complete the outstanding action plan steps identified in the audit as of September 30, 2009.
Our original audit of the City's ethics program was conducted to 1) assess and evaluate the design, implementation, and effectiveness of the City's ethics program and activities; and 2) provide recommendations for improving the governance process of promoting appropriate ethics and values.
Our assessment of the design and implementation of the City's ethics program indicated that the program includes many of the components recommended for a strong ethics and compliance program, including a code of ethics, oversight of and compliance for ethical behavior, training, reporting of violations, employees' annual review of the code of ethics and critical policies, and transparency and accountability regarding the use of public funds.
We also conducted a survey of City employees to assess the effectiveness of the ethics program. The survey indicated that of the 643 responses (43% response rate):
- 94% of the respondents were familiar with the City's Code of Ethics.
- 86% of respondents knew how to report unethical behavior.
- 83% of respondents had participated as a City employee in a training course that included ethics awareness.
- 80% of respondents knew where to get help regarding ethical concerns at the City.
We provided the two recommendations during the audit to address identified issues and enhance the ethics program. One action plan step, related to enhancing communications with employees regarding ethical reporting and information, was completed before the original audit report was issued. The second action plan step, completed during this follow-up period, involved the Treasurer-Clerk's Office, City Attorney's Office, and Human Resources Division working together to formalize the City's financial disclosure process and develop procedures to provide assurance that all applicable individuals meeting the reporting criteria are made aware of Florida's financial disclosure laws and rules and individual reporting responsibilities.
Final Audit Follow-Up Fleet Fuel Operations (#1005)
This is the fourth and final follow-up on the action plan steps originating from the audit of the City's Fleet Fuel Operations (Report #0801) issued on October 18, 2007.
During our original audit, we noted that the accounting for and safeguarding of fuel had greatly improved since a prior audit conducted in 2003. Processes had been developed and implemented to better account for fuel purchased, issued, and in inventory and to better safeguard the City's fuel inventory. We also noted additional areas where improvements were needed and provided recommendations related to daily fuel operations, reconciliation processes, and fuel tax reporting. The audit report included management's action plan consisting of 15 action plan steps to address the recommendations in the audit report. Of those, management completed 13 action plan steps prior to this follow-up period.
Two action plan steps partially completed in prior periods were due to be completed during the follow-up period April 1, 2009, through September 30, 2009. One step was completed, and the responsibility for completing the final remaining step is being turned over to management.
The completed step was to implement additional oversight controls over the fuel operations and involves both Fleet and Accounting Services management.
The remaining step turned over to management for completion is for Accounting Services to reassess Fleet's controls over fuel inventories at the department-specific tanks and provide guidance regarding controls that need to be implemented.
Final Audit Follow-Up of the Purchasing Section of the Procurement Services Division (#1006)
Procurement Services completed 100% of the action plan steps developed as part of the audit of the Purchasing Section of Procurement Services. In that audit, we identified several issues for which improvements could be made; in response, management developed 22 action plan steps to address those issues. The issues identified in the audit broadly related to:
- Completion and issuance of procedures for the purchasing of goods and services,
- Development and implementation of departmental procedures to be followed throughout the procurement process,
- Improvement of procurement related training opportunities for City employees,
- Improvement of the perception of customer service provided by Procurement Services,
- Improvement of the document retention practices of Procurement Services,
- Improvement of the City's oversight of large sole source acquisitions, and
- Development of mechanisms for the customers of Procurement Services to provide feedback.
This is our third and final follow-up on the actions taken by Procurement Services to complete the audit action plan. The first follow-up was for action taken prior to March 31, 2008, and in that period Procurement Services completed five action plan steps. The second follow-up period ended September 30, 2008, and in that follow-up period Procurement Services completed an additional eight action plan steps. In this final follow-up period, Procurement Services completed the remaining nine action plan steps. In total, all 22 action plan steps developed by management were completed.
Final Audit Follow-Up 800 MHz Radio System (#1007)
Twenty-three of the twenty-eight action plan steps developed to address issues identified in audit report #0614 have been completed as of September 30, 2009. Actions have been initiated, but not yet completed, for three of the five remaining steps and responsibility for ensuring the completion of those steps is turned over to management. Additionally, management reviewed the risks associated with the final two action plan steps not completed and determined risks were not sufficient to justify the costs associated with mitigating the risks and therefore decided to accept those risks.
In report #0614, we noted areas where improvements could be made to increase preparedness for emergencies/disasters, improve oversight of the 800 MHz radio system, and increase the physical security of the various 800 MHz radio system infrastructure and radio tower locations.
For this follow-up period there were ten action plan steps due for completion. Six steps were completed; three were turned over to management for final resolution; and managements accepted the risk associated with the final step.
To address the action plan steps completed this follow-up period, the Information Systems Services Radio Communications Division (RCD) has:
- Tested certain aspects of the plan for recovery from emergencies and disasters,
- Worked with Motorola to conduct limited emergency testing of the radio system and received guidance from the oversight board as to the extent of testing that will be conducted, and
- Conducted an inventory of the major components of the radio system and found that all items were properly accounted for and identified.
While RCD has had success in completing six of the action plan steps due, completion of the three remaining steps will require direction from the Public Safety Communications Board (PSCB) that replaced the Management Oversight Committee (MOC) in July 2006.
In addition to the steps that were turned over to management, one step was deleted because management has decided to accept the risk the step was designed to mitigate. That step related to moisture sensors in the shelters that house components of the 800 MHz radio system infrastructure.
Overall, for the audit, RCD completed 23 of the 28 action plan steps, management reviewed and accepted the risks associated with two of the action plan steps, and three of the steps were not yet completed but were altered to address the initial issue and have been turned over to management to ensure final resolution.
Audit Follow-Up StarMetro Staffing of Drivers and Mechanics (#1008)
This is the second follow-up on the action plan steps originating from the audit of the City's StarMetro Staffing of Drivers and Mechanics (Report #0817) issued on August 14, 2008.
During the audit of StarMetro staffing of drivers and mechanics, we assisted management in developing methodologies to determine staffing needs in the General Transit, Special Transportation, and Garage Divisions and in determining the costs of services for General Transit bus service. We also provided analyses of overtime and temporary wage expenses and provided recommendations toward reducing these expenses in each of the three divisions. Of the 20 management action plan steps in the original audit report, eight were completed during the first follow-up period. During this second follow-up period ending September 30, 2009, five steps were completed and six steps are behind schedule and have not been completed. The targeted completion date for one additional step had been amended to be due in January 2010.
During FY 2009, StarMetro decreased overtime expenditures in the department from FY 2008 by 18% (from $811,718 to $663,068) and increased temporary wages by over 50% (from $411,521 to $641,129). While combined overtime and temporary wages increased by 7% (from $1,223,239 to $1,304,197), from FY 2008 to FY 2009, we estimated that StarMetro's increased use of temporary drivers rather than full-time drivers paid overtime has provided a more cost effective use of StarMetro's budget. For example, we estimated that in FY 2009, StarMetro saved over $9 for every hour worked by temporary drivers paid an average regular rate of $10.56 instead of paying full-time drivers at the average overtime rate of $19.92.
Notwithstanding the above positive actions, we note that from FY 2005-2009, StarMetro's combined salaries, temporary wages, and overtime expenditures have consistently exceeded the amount budgeted from a low of 4% in FY 2006 to 17% in FY 2009. In FY 2009, the budget was $5,837,846 and actual expenditures were $6,813,624, or $975,778 over-budget. StarMetro management reported they have been consistently challenged by the high turnover of temporary drivers over the years, and in FY 2009, increased use of additional temporary wages and overtime costs were caused by a three-month hiring freeze and voluntary separation incentive program, of which five full-time General Transit employees (four drivers and one clerk) participated in and terminated their employment with the City.
The five steps completed during this period were related to:
- Developing a methodology to predict vacancies and improve budgeting of temporary and overtime costs.
- Documenting the methodology for collecting, calculating, and reporting transit data.
- Developing, implementing, and documenting quality assurance processes to validate the information collected and reported.
- Establishing and implementing quality assurance processes to ensure that the revenues reported collected in the fare box system is accurate and all cash is properly accounted for and recorded.
- Implementing procedures to regularly monitor budget to actual expenditures and take appropriate management actions as needed. As a result, a more realistic budget for overtime and temporary wages was presented and approved for FY 2010.
The six steps behind schedule are related to:
- Identifying the most appropriate timekeeping codes to use to better track overtime.
- Incorporating the use of the identified overtime codes to better track reasons for overtime.
- Developing and implementing a method to track the amount of time employees are out of work due to workers' compensation and leave without pay.
- Developing strategies to minimize workers' compensation, catastrophic leave, leave without pay and safety related accidents in 1) General Transit and 2) Special Transit. (These are two separate steps.)
- Ensuring that all staff responsible for collecting and submitting NTD information receives appropriate training.
The additional remaining step due for completion in January 2010 is related to evaluating the performance measures and data to ensure the information is correctly calculated.
Final Audit Follow-Up Police Overtime (#1009)
This is the third and final follow-up audit conducted after the issuance of the original audit report #0726, Police Overtime Audit. Police management has made significant progress toward addressing complex issues related to the tracking and management of overtime activities.
As shown in report Figure 1 and Table 2, management has reduced overtime costs in the department from fiscal years (FY) 2007 to 2009 by 22%.
Police Overtime Costs for FYs 2007 - 2009
Supervisors and managers we interviewed noted that monthly monitoring of overtime budget to actual cost reports was instrumental in helping them control overtime costs.
There were three remaining action steps to be completed during this follow-up period. Police completed one step, partially completed one step, and one step remains not completed. Responsibility for completing the final step is being turned over to management for their resolution.
Police payroll transactions can be very complex due to union contracts and city policies. During the Police Overtime audit, we identified three areas related to the recording of overtime in the payroll system that should be improved. Management developed 11 action plan steps to address the issues in these three areas. Eight steps have been completed. Of the three remaining action plan steps due, the following step was completed:
A process was implemented to periodically review payroll transactions involving overtime to identify noncompliance with policies and agreements or incorrectly calculated overtime pay. The Accreditation and Inspection Unit has included an internal pay process and compliance review as part of their three-year cycle of accreditation inspections of Police programs and activities. The internal review focused on the pay process and analyzed pay records and timesheets that included the July 4 holiday.
- The step partially completed related to implementing a process to ensure adjustments are made retroactively in the correct pay period affected and not netted to time worked in the current period. Guidelines addressing when and how to make prior period adjustments are included in the newly developed Police General Order 25 that management anticipates will be approved, distributed, and fully implemented by January 31, 2010.
The remaining step not completed is related to developing procedures to monitor retroactive adjustments (also called prior period adjustments). At this point, a process has not been developed to monitor prior period adjustments to assure that all adjustments were properly authorized and approved.
Responsibility for completing the final two steps is being turned over to management for their resolution. We provided recommendations to assist management in further enhancing their controls over timesheets and record retention.
Audit Report on Risk Management Self-Insurance Programs (#1010)
The purpose of this audit was to address the processes established by the City Treasurer-Clerk and Risk Management to administer and oversee the City's self-insurance programs including general, vehicle accident, and Workers' Compensation liability. Transactions related to 5,031 self-insurance claims were processed by Risk Management between October 1, 2005, and March 31, 2009, resulting in Risk Management disbursements in excess of $7.6 million and subrogation collections of more than $1.1 million.
In our audit of the processes in place to ensure accurate and reliable accounting for the City's risk management function we determined that:
- Transactions were generally input timely and accurately, and
- Data maintained through the self-insurance management system, RiskMaster, was reliable and reconcilable to two of the City's major financial reporting systems, the Financials system and the CORE cashiering system.
We did note several areas where controls could be strengthened and processes adopted to provide additional assurance of the reliability of the RiskMaster system data and effectiveness and efficiency of the risk management function. Those issues were discussed with the City Treasurer-Clerk and Risk Management staff and management's planned corrective actions are provided in Appendix A.
While controls have been established over claims disbursements and collections related to the self-insurance programs to protect and safeguard City assets, we made recommendations in the following areas where controls could be strengthened and operations improved:
- Performance of periodic reconciliations of the data recorded in the involved systems in order to identify and correct any discrepancies in a timely manner.
- Establishment of controls over the receipt of all checks to provide for timely processing and deposit of all collections.
- Re-evaluation of risks associated with the lack of segregation of duties due to the sharing of the system administrator user identification numbers and passwords in the RiskMaster system and the established compensating controls.
- Analysis and correction of any overpayments/ underpayments made to City departments during the past two years resulting from inappropriate recording of Electric department third party vehicle accident losses.
- Consideration by the City Treasurer-Clerk and DMA of corrective actions necessary to adopt a transparent and equitable methodology to account for, and distribute to applicable departments, subrogation collections for losses to City property and vehicles sustained as a result of third party vehicle accidents.
- Evaluation of the benefits of the contributions of an active Insurance Advisory Board (IAB) and consideration of changes to City Commission Policy 216 to more accurately reflect the process in place to procure commercial insurance.
- Development and implementation of quantifiable performance measures to assist in evaluating and reporting the efficiency and effectiveness of the risk management function. Such measures should include consideration of resource requirements (inputs), and efficiency and effectiveness measures.
Audit Follow-Up City Lease Administration (#1011)
The Property Management Division and the Electric Utility (as assisted by Utility Business and Customer Services) have completed or resolved nine of the 14 steps (64%) due for completion as of September 30, 2009. Significant actions have been initiated to resolve three of the five remaining steps. Actions to resolve the last two steps were temporarily deferred until a more appropriate time.
In audit report #0917, issued July 22, 2009, we determined that City leases were generally properly executed, approved, and administered. However, several issues were identified in regard to leases of City property to external entities. Accordingly, recommendations were made to enhance the execution, administration, and management of those leases. Recommendations were also made in regard to billing and collecting lease revenues, maintenance of lease records, and internal operating procedures. Twenty-four action plan steps were developed to address our recommendations, for which 14 were due for completion as of September 30, 2009.
During this follow up engagement, we found nine of those 14 action steps had been completed and significant actions initiated for three of the five remaining steps. Completion of the last two steps, involving application of contract escalation provisions and the billing process for leases of City utility assets, was deferred until the start of the next appropriate billing cycle.
Significant actions completed or initiated included:
- The Property Management Division developed various procedures, forms, and checklists to assist City staff in negotiation, execution, and administration of City leases. Those procedures and forms were adopted and placed into operation. The new procedures and forms were provided to City departments.
- City departments were reminded to notify the Property Management Division of all prospective leases as required by City Real Estate Policy 136.
- Steps were taken to ensure more than one City employee and department is involved in leases initiated, executed, and/or renegotiated.
- The Property Management Division has been appropriately involved in leases executed by other City departments.
- Sales taxes have been properly assessed and collected from lessees that were not always assessed those taxes in the past.
- The Property Management Division developed a spreadsheet system to track City leases. Various data, including lease expiration dates, is tracked on those spreadsheets.
- For one significant lease (General Dynamics) the billing process was revised to provide for collection of the monthly payments ($33,317) by the due dates established in the lease agreement.
- The Property Management Division established a centralized filing and storage location for the majority of applicable City leases.
- Utility Business and Customer Services (UBCS) staff are monitoring payment activity and working with the one lessee noted in the initial audit as significantly delinquent in payments owed the City.
Actions that were due but remain to be completed included:
- Coordinating with Accounting Services to ensure the billing process for several lessees (other than the General Dynamics lease) is appropriate to provide for timely receipt of the lease payments (Property Management Division).
- Obtaining and storing copies of a few remaining leases in the recently established centralized storage location (Property Management Division).
- Continuing to work with one lessee (noted in the initial audit as significantly delinquent in payments owed the City) to recover amounts owed the City in a reasonable time (Utility Business and Customer Services).
Project Progress Audit Report-Revision of the Police Secondary Employment Program (#1012)
This is the first in a series of audit reports on the City of Tallahassee Police Department's (TPD) project to evaluate and revise their secondary employment program. TPD's project to evaluate and revise the secondary employment program has been delayed by at least one year, due to uncertainty of funding. TPD management estimates that revisions to the secondary employment program will be implemented in January 2011.
This project progress audit reported was to communicate the project status and accomplishments to TPD and City management; provide advisory services during the evaluation and revision of TPD's secondary employment program; evaluate the internal controls related to advertising and monitoring officers' secondary employment activities and payments made to both officers and TPD, and if applicable, scheduling, assigning, and managing officers' time related to secondary employment; and assist TPD in identifying the revenues, costs, benefits, and risks of the secondary employment program.
Based on our review to date, we recommend TPD address the following areas as they move forward with their secondary employment program:
- TPD should determine how the secondary employment program processes are to be revised and implemented prior to acquiring an automated solution.
- The project team should fully assess the liabilities and risks associated with the secondary employment program to include actions planned to reduce or mitigate those risks.
- The project team should solicit input from officers and investigators working secondary employment, communications operators, and businesses regarding how TPD should revise its secondary employment program.
- TPD management needs to address whether they will provide and manage equipment needed by officers and investigators working secondary employment. An example of such equipment would be a laptop computer to facilitate electronic reporting.
- The revised secondary employment policies should provide guidelines and standards for determining how many officers are required to work at a specific off-duty location.
- The revised secondary employment policies should include pre-defined pay ranges that officers charge businesses based on the level of services, and such pre-defined pay ranges will need to be negotiated with the applicable unions prior to implementation.
- Steps should be taken to ensure that officers and communications operators consistently input correct secondary employment related data into the Computer Aided Dispatch (CAD) system.
- Steps should be taken to ensure that coordinating officers submit appropriate service agreements and other required plans and permits for secondary employment events in a timely manner.
- Management should implement processes to accurately identify, track, and account for all costs associated with the secondary employment program.
We found city disbursements to generally be proper, authorized, supported, correctly recorded, and in accordance with governing laws, rules, policies, and procedures. We also identified several issues that are indicative of the need for enhanced procedures and controls. We also determined that certain former employees and retirees/annuitants were allowed to continue or commence participation in the City's health insurance program, although that participation was not clearly authorized by City policies.
Our audit covered the period July 1, 2008, through June 30, 2009. Total disbursements for that period were $732,492,146, which were segregated, for purposes of our audit, into three broad categories: general disbursements, salary payments, and retirement benefit payments. We also reviewed a fourth category, severance payments made to terminating employees during the quarter ending September 30, 2009, under the City's "voluntary separation incentive (VSI) program" and the City's layoff policy and approved layoff compensation package.
Generally, disbursements were proper, authorized, supported, correctly recorded, and in compliance with laws, rules, policies, and procedures. However, we did note instances where controls were not in place or operating effectively to ensure proper, timely, and efficient disbursement of City funds in accordance with City policies and procedures. Those instances, which are identified for management's review, resolution, and disposition, are as follows:
- An overpayment of $486 was made when Electric Utility staff did not detect that the vendor mistakenly charged for labor maintenance services using the terms and conditions of a subsequent contract, which was not applicable at the time the services were acquired.
- Retirement section staff have not timely updated the list of active City retirees on a contracted vendor's database, thereby restricting the assurance that vendor will timely detect and report deaths of those retirees to the City.
- The Retirement section did not always obtain direct evidence of non-City time worked at applicable state, federal, and other entities that is "purchased" by City employees for pension eligibility and benefit purposes.
- Records documenting employees' Prudential account balances, necessary to demonstrate the appropriateness of City matched annuity program (MAP) payments to those accounts, were not always retained by the Retirement section.
- Although not clearly authorized, over the last several years certain former employees and retirees/surviving annuitants have been allowed to continue or commence participation in the City's health insurance program.
Actions to address the noted instances have been identified and developed in conjunction with applicable City management.
The Office of the City Auditor is providing assurance services to assist management throughout the transition of the Municipal Supply Center (MSC) warehouse from Department of Management and Administration (DMA) Procurement, to the Electric Utility. After the transfer, the warehouse will support Electric Utility and Underground Utility. At October 1, 2009, the MSC inventory was valued at approximately $10.3 million, 91% of the total value of inventory items warehoused by the City.
Activities related to the transition occurring to assist in the process of Electric assuming the responsibility for the MSC warehouse inventory included:
- A physical inventory was conducted at the MSC starting on October 2, 2009.
- On October 17, 2009, an initial reconciliation was performed by Electric Utility. This initial reconciliation indicated that the value of the inventory recorded in PeopleSoft financials was approximately $400,000 greater than the value of inventory in the PeopleSoft inventory module at MSC (i.e., after the physical inventory count). This reconciliation is being performed to arrive at a final listing of inventory and value that is to be accepted by Electric as transferred from DMA.
- Inventory was transferred from Fund 725, Purchasing Fund, to Fund 426, Electric Warehouse Fund, by Accounting Services.
- Liaisons were established in Electric Utility and Underground Utility to assist in processing warehouse transactions.
We can provide assurances that the following has been accomplished:
- Written procedures to ensure compliance with City policies and procedures were developed prior to the physical inventory count and were discussed with individuals taking the inventory count;
- The physical inventory count was conducted in an orderly, professional manner with supervisory staff in attendance during the count;
- A diligent attempt was made to account for all items located in the warehouse and if obsolete items were identified, those items were marked for disposal through appropriate surplus procedures; and
- A reconciliation between the physical count and the inventory recorded in PeopleSoft is in progress to ensure a proper accounting for inventory and an appropriate inventory valuation.
Methods to properly account for and safeguard warehouse inventory continue to be put into place at the Electric-Utility Supply Center (USC) as staff follows through with improvements and changes to:
- Improve how inventory is maintained in the warehouse;
- Better account for warehouse overhead;
- More efficiently and effectively utilize PeopleSoft to account for inventory;
- Obtain needed warehouse and office equipment; and
- Improve the physical security of City assets stored at the warehouse.
Accounting Services continues to work to complete the reconciliation between the physical inventory count and the inventory value recorded in the accounting records and establish an agreed-upon beginning inventory value for USC. Accounting Services anticipates the transition reconciliation will be completed by the end of May 2010.
Audit Follow-Up of Take-home Vehicles (#1015)
This is the first follow-up on the action plan steps originating from the Audit of Take-home Vehicles (Report #0809) issued on May 28, 2008.
In response to that audit, management developed three action plan steps to address issues identified. Those action plan steps were:
- Review the City policy governing employees taking City vehicles home.
- Consideration will be given to policy guidance/directives provided by the City Commission and recommendations included in this audit.
- The policy governing employees taking vehicles home will be revised as applicable.
Our review of the actions taken to complete the action plan steps showed that all three of the action plan steps have been completed. We noted that the policy developed for take-home vehicles did not include TPD vehicles taken home by officers, as use of those vehicles may be part of the collective bargaining agreement with the police officers union.
Our review of forms completed pursuant to the newly revised policy showed inconsistency in implementation of the revised take-home vehicle policy approved by the City Commission. Specifically, some forms completed to support the continuation of vehicles being taken home by employees contained assumptions that were not supported or otherwise explained, were not completed in accordance with the policy, and included items that do not appear to be correct. We noted one or more of the conditions in 63 of the 86 forms reviewed. We believe the 16 forms submitted for the fire and police departments and seven from the Electric Utility comply with the newly revised policy.
We recommend management complete take-home vehicle approval forms that demonstrate compliance with the revised policy approved in April 2009.
Final Audit Follow-Up Gas Infrastructure (#1016)
Each of the 27 action plan steps established to address issues identified in audit report #0727 had been completed as of March 31, 2010.
In audit report #0727 we noted that, overall, the City has adequate and proper processes and procedures to ensure a safe and reliable infrastructure. We also noted significant improvements and enhancements had been and were being made in regard to accounting for and tracking infrastructure. We reported installations of new infrastructure met federal and state requirements and expansions and replacements were planned and funded. We reported an effective public protection program was established. However, we also identified areas where improvements and enhancements were needed. Accordingly, recommendations were made to install an additional isolation valve, accurately designate critical valves in the Gas Utility geographic information system (GIS), develop a project management plan for refinement of the Gas Utility's GIS, protect stored pipe from environmental elements, ensure timely repair of non-critical leaks, and enhance monitoring of system pressures at a satellite utility facility. Recommendations were also made to improve documentation in several areas, including infrastructure testing and inspection, leak identification and repair, emergency notifications and responses, and other areas.
Twenty-seven action steps were developed to address the identified issues. In our three prior follow-up reports, we reported 25 of those 27 action plan steps had been completed (i.e., as of March 31, 2009). During this follow-up engagement, we found the two remaining steps were completed. Completion of those two steps involved the following:
- A plan was prepared and placed into operation resulting in the completion and/or implementation of various refinements to the Gas Utility's geographic information system (GIS).
- The Supervisory Control and Data Acquisition (SCADA) monitoring system was expanded to cover the City's gas infrastructure segment located in the City of Midway.
Final Audit Follow-Up Allocated Costs (#1017)
DMA has successfully completed most of the actions necessary to address the issues identified in our audit of allocated costs. Responsibility for ensuring completion of the few remaining actions is turned over to management.
In audit report #0903 we noted that, overall, the Department of Management and Administration (DMA) Budget and Policy Section had established a reasonable, appropriate, and logical process for equitably allocating internal service fund costs to benefiting City departments and offices. Several issues were also identified that resulted in less than equitable allocations (charges) of those costs. Those issues primarily pertained to misapplications or misinterpretations of data during the cost allocation process. Because many of those issues offset each other, the final impact on the fiscal year (FY) 2008 budget was not significant to the overall accuracy of the costs allocated for all funds taken as a whole. Nonetheless, there were impacts, ranging from undercharges of $560,377 to the Water Operating Fund to overcharges of $328,459 to the Electric Operating Fund.
In addition to those issues resulting in allocation errors, we identified certain areas during the audit for which we recommended improvements to enhance the existing allocation process.
Nine action steps were developed to address the identified issues and areas. In our follow up reviews we found that DMA Budget and Policy (as well as DMA Accounting Services) has, for the most part, completed those nine action plan steps. Significant actions completed during the current follow up period included:
- Applicable allocation statistics were properly established based on the actual fund from which costs are paid.
- DMA staff obtained proper understandings and interpretations of applicable allocation statistics submitted by City departments and offices.
- DMA conducted appropriate independent reviews of cost allocation worksheets and work papers to ensure most identified errors were corrected.
- Several enhancements to the cost allocation process were implemented.
- Budget determinations were accurately entered into the City's budget database.
Other significant actions completed during the prior follow up period included:
- Appropriate adjustments were made to FY 2008 allocated accounts charges in the City's financial records for the identified under and overcharges.
- Transfers from the Special Insurance Reserve Fund were properly considered in establishing budgeted cost allocations for the Risk Management Fund.
- Vehicle parts and fuel costs, and activity of the Utility Business and Customer Services function, were properly considered in development of budgeted cost allocations for the Fleet Garage Operating Fund.
While DMA has successfully resolved most of the issues and other areas, we noted the following items still need to be addressed:
- Correct development/application of statistics provided by the Risk Management such that:
- Statistics developed for allocation of property insurance premiums are correctly applied only in the development of allocation statistics for the property management function.
- Insurance premium costs for the workers' compensation function are correctly treated as applicable to that function.
- Correct allocation of environmental costs applicable to general government activities to the City's General Fund and not to enterprise-funded activities.
- Budgeting cost allocations for the Fleet Garage administrative function on the most appropriate allocation basis (i.e., budgeted allocations are based on the departments' proportional share of total fuel billings while actual allocations are based on each department's proportional share of total City vehicles).
- Commence completion of annual analysis to determine if additional year-end adjustments are needed based on changes in annual service levels in relation to changes in annual internal service fund costs.
DMA management and staff indicated their intent to address and implement those remaining items during the FY 2011 budget process. Accordingly, those remaining items are turned over to management for their resolution and completion.
Audit Follow-Up on Water Infrastructure (#1018)
Thirteen of the 16 action plan steps due for completion as of March 31, 2010, have been completed or resolved. Actions have been initiated to complete another one of the 16 steps. Upon completion of that step, the remaining two steps should be completed.
In audit report #0919 we noted that, overall, Underground Utilities adequately accounts for and maintains the City's water infrastructure. We reported adequate processes, for the most part, were in place to ensure new infrastructure is properly designed and installed, and to ensure replacements and expansions are adequately planned and funded. As noted, several of those processes were the result of recent improvements and enhancements initiated by Underground Utilities. We also identified issues indicative of the need for further improvements and enhancements. Accordingly, recommendations were made that related to:
- Physically accounting for and tracking infrastructure components;
- Maintaining infrastructure;
- Designing, constructing, and installing new infrastructure; and
- Planning infrastructure replacements.
Forty-two action plan steps were developed to address the identified issues. Of those 42 steps, 16 were due for completion as of March 31, 2010. During this follow-up period, Underground Utilities completed 13 of those 16 steps and initiated actions to complete another one of those 16 steps. Completion of the remaining two steps is contingent on completion of that initiated step.
Actions completed in the six-month period addressed by this follow-up engagement included:
- Implementing a process to ensure complete and accurate attributes are recorded in the City's Geographic Information System (GIS) for fire hydrants.
- Adding and reflecting all automatic flush stands in GIS.
- Removing invalid work orders from the Mobile Work Management System.
- Using the Mobile Work Management System to schedule, document, and monitor sandblasting and painting of fire hydrants.
- Executing a contract to provide timely repairs of water well backup engines and generators and to provide rental of generators when needed.
- Requiring vendors performing 5-year inspections of elevated storage tanks to be currently licensed in accordance with FDEP regulations.
- Establishing written procedures for various inspection and maintenance activities relating to water wells and storage tanks.
- Determining that aviation warning lights are not needed on applicable elevated water storage tanks.
- Revising processes to ensure proper engineering design and review of in-house infrastructure additions.
- Developing and implementing a standard checklist for inspectors to formally document their inspections and approvals of new water infrastructure additions.
- Improving documentation showing resolution of problems identified by inspectors.
- Developing a process to ensure applicable projects are self-permitted as required by FDEP regulations.
- Amending the contract for the City's Water Master Plan update to provide for assistance in development of a "downtown water infrastructure replacement plan."
The three action plan steps not yet completed pertain to the determination and entry of complete attribute specifications (for various water infrastructure components) into the PeopleSoft Financials System and ensuring subsequent term contracts contain appropriate provisions to help ensure acquisition of proper components.
Audit Follow-Up of City Lease Administration (#1019)
Sixteen of the 24 action plan steps due for completion as of March 31, 2010, have been completed or resolved. Of the eight remaining actions plan steps: (1) efforts have been initiated and are in progress to resolve four steps; (2) actions for three steps have been temporarily deferred until finalization and approval of proposed revisions to City Real Estate Policy 136; and (3) actions have not been initiated for one step.
In audit report #0917, issued July 22, 2009, we determined that City leases were generally properly executed, approved, and administered. We also noted several issues in regard to leases of City property to external entities. Accordingly, recommendations were made to enhance the execution, administration, and management of those leases. Recommendations were also made in regard to billing and collecting lease revenues, maintenance of lease records, and internal operating procedures. Twenty-four action plan steps were developed to address the identified issues. All 24 steps were due for completion as of March 31, 2010.
As of the end of this follow-up engagement, 16 of those 24 action plan steps had been completed and resolved. Efforts are in progress to complete or resolve four of the eight remaining steps. Completion of three more of those steps has been temporarily deferred until finalization and approval of proposed revisions to City Real Estate Policy 136. And lastly, no actions had been taken to date to resolve the final remaining step.
In our prior follow-up report, we reported nine of 24 action plan steps developed to address our recommendations were completed or resolved (i.e., as of September 30, 2009). During this follow-up engagement, we found seven of 15 remaining steps were completed or resolved.
Steps completed or resolved during this follow-up period include:
- Property Management staff is now making use of developed checklists in negotiation, execution, and administration of City leases. (Property Management Division)
- The Property Management Division (PMD) has established a standard and centralized system for the storage/retention of lease agreements and related records pertaining to those leases negotiated, managed, and administered by PMD. (Property Management Division)
- Several City departments/offices now have procedures in place for notifying and obtaining proper assistance from PMD in the negotiation and execution of leases and/or lease amendments. (Parks and Recreation Division and Underground Utilities) (This represents two steps.)
- One department revised its billing process to allow for receipt of required lease payments by the due dates established in the applicable lease agreement. (Parks, Recreation, and Neighborhood Affairs Department)
- Appropriate efforts are being made to collect overdue amounts owed by a lessee that was found during the initial audit to be significantly delinquent in payment of amounts due. (Utility Business and Customer Services)
- Appropriate efforts were made and procedures were put in place to ensure annual escalation provisions for applicable leases were exercised when applicable. (Utility Business and Customer Services)
Actions that were initiated to address identified issues but which are not yet finalized include:
- Revising the City Real Estate Policy 136 to (1) identify the lease types subject to the policy and (2) provide for delegation of approval authorities under specific circumstances. (Property Management Division)
- Training City departments and offices on policies, procedures, and processes developed as a result of the initial audit (e.g., Real Estate Policy 136 when revised). (Property Management Division)
- Revising billing processes to allow for receipt of required lease payments by the due dates established in the applicable lease agreement. (Property Management Division)
- Establishing a complete centralized inventory of all City lease records and documents. (Property Management Division)
Action steps due for completion but deferred until finalization and approval of proposed revisions to City Real Estate Policy 136 include:
- Notifying the Property Management Division of each potential new or renewed lease in accordance with the revised provisions of City Real Estate Policy 136. (Aviation; Parks, Recreation, and Neighborhood Affairs; and Utility Business and Customer Services) (This represents three steps.)
Actions not initiated at the end of this follow-up engagement included:
- Revising billing processes to allow for receipt of required lease payments by the due dates established in the applicable lease agreement. (Utility Business and Customer Services)
Audit Of City Non-Pension Investments (#1020)
Overall, the Treasurer-Clerk's Office has successfully, properly, and prudently invested available non-pension assets in accordance with policy and legal requirements and industry practices. One significant issue was identified and several areas were identified where enhancements should be considered.
As of June 30, 2009, City non-pension investments were valued at $679 million. Those investments were managed both internally by Treasurer-Clerk staff and externally by third party managers hired by the City. The City established a non-pension investment policy to govern the investment of non-pension funds. The non-pension investments are categorized and managed into a Core Portfolio and several Specialized Portfolios.
This audit was conducted to determine (1) whether the City has a sound non-pension investment policy; (2) compliance with the non-pension investment policy, legal requirements, and sound business practices; (3) whether contracts and agreements with third parties contain appropriate language and terms; (4) whether investment transactions are properly authorized, executed, documented, and appropriate; (5) whether there is adequate monitoring and oversight of the non-pension investment function; (6) whether adequate internal controls have been established; and (7) whether earnings performance has been successful in relation to benchmarks.
We recommended the investment earnings allocation process be revised and fully automated to address significant allocation errors identified by the audit.
We also recommended the Treasurer-Clerk's Office consider making several enhancements to improve non-pension investment processes and documentation. Those recommendations pertain to:
- The non-pension investment policy.
- Compliance with that policy.
- Federal arbitrage regulations.
- Reporting investment performance and status.
- Third party fees.
- Documenting key investment decisions and processes.
- Internal Controls.
Returns on investments have been appropriate, especially under existing market conditions, with no losses of capital. The City has established an adequate investment policy and adequate controls. Third parties are hired and used as appropriate. Treasurer-Clerk management monitors and reviews those third parties as well as investment performance and status. The Treasurer-Clerk's Office is to be commended for maintaining a vigil over non-pension investments and making critical investment decisions that protected the City's invested assets during recent times of financial market uncertainty and instability.
We identified one significant issue regarding the accurate and equitable allocation of non-pension investment earnings. The issue involved significant worksheet errors and use of outdated (static) balances in determining allocations when current (dynamic) balances were more appropriate. Treasurer-Clerk staff has taken measures to address that issue.
We also identified other areas where enhancements to the non-pension investment administrative and oversight functions were recommended. Those recommended enhancements include:
- Updating, clarifying, and enhancing terms and provisions in the current non-pension investment policy.
- Clarifying classifications of certain investments as to portfolio type (i.e., Core or Specialized).
- Obtaining updated and timely arbitrage determinations on investments of bond proceeds.
- Making modifications to the periodic performance status reports to make reported information clearer to users of those reports.
- Increasing the review of periodic performance status reports to ensure accuracy of reported information.
- Enhancing the review of custodian invoices to ensure accuracy of fees paid for those services.
- Maintaining better documentation relative to certain investment transactions.
- Ensuring appropriate account reconciliations are performed in a manner consistent with good internal control practices.
- Improving other internal controls and processes.
Several additional recommendations were made.
Audit Follow-Up StarMetro Staffing of Drivers and Mechanics (#1021)
This is the third follow-up on the action plan steps originating from the audit of the City's StarMetro Staffing of Drivers and Mechanics (Report #0817) issued on August 14, 2008.
During the audit of StarMetro staffing of drivers and mechanics, we assisted management in developing methodologies to determine staffing needs in the General Transit, Special Transportation, and Garage Divisions and in determining the costs of services for General Transit bus service. We also provided analyses of overtime and temporary wage expenses and provided recommendations toward reducing these expenses in each of the three divisions. Of the 20 total management action plan steps in the original audit report, 13 were completed during prior follow-up periods, two steps were completed during this follow-up period (ending March 31, 2010), four steps are in process, and one step is behind schedule.
In this follow-up report, we updated and analyzed the total personnel costs, salaries, overtime and temporary costs, combined and individually, for the department (Table 1 and Figures 1 and 2) and overtime and temporary expenditures for each of the three divisions (Figures 3-8) for FYs 2005-2010 [Note: FY 2010 expenditures are projected based on actual expenditures during the first six months.]
Based on the first six months of FY 2010, should spending continue at the same pace during the remaining six months, StarMetro is projected to:
- Decrease total personnel costs 7% from FY 2009 ($8,890,000 to $8,441,000).
- Decrease overtime spending for the third consecutive year (from $1 million in FY 2007 to $615,000).
- Increase temporary wages spending for the third consecutive year (from $316,400 in FY 2007 to $778,034).
- Spend less than budgeted for total personnel costs, salaries, overtime and combined temporary and overtime.
StarMetro management reported to further reduce overtime costs, they changed operational policies by eliminating some non-driving work time, such as time for employees to obtain physicals (employees are required to obtain physicals on their own time), driver meetings, and reducing travel time to assignments.
We estimated that StarMetro's increased use of temporary drivers rather than full-time drivers paid overtime has provided a more cost effective use of StarMetro's budget. For example, we estimated that in FYs 2009 and 2010, StarMetro saved over $9 for every hour worked by temporary drivers. In FY 2010, temporary drivers earned an average regular rate of $10.55 vs. full-time driver average overtime rate of $19.78.
StarMetro management reported being continually challenged by high turnover of temporary drivers and high driver absenteeism. StarMetro management reported that turnover and absenteeism resulted in increased use of temporary wages and overtime costs.
We commend StarMetro for budgeting more realistically in FY 2010 and for their efforts toward reducing their overtime costs. Management has demonstrated that they are scheduling more cost effectively regarding their use of overtime and temporary wages. However, we encourage management to further examine and address the causes for the continued need for overtime and temporary drivers and overtime for mechanics as the cost for these additional work hours continues to increase.
During this follow-up period, StarMetro completed two of the seven remaining action plan steps due. These steps were to provide training for staff responsible for collecting and submitting National Transit Database (NTD) information and to evaluate the performance measures and data to ensure the information provided to the Budget Division is correctly calculated.
Progress was made on four steps toward completion. These partially completed steps included:
- Incorporating the use of the identified overtime codes to better track reasons for overtime.
- Developing and implementing a method to track the amount of time employees are out of work due to workers' compensation and leave without pay.
- Developing strategies to minimize workers' compensation, catastrophic leave, leave without pay and safety related accidents in 1) General Transit and 2) Special Transit. (These are two separate steps.)
The one step behind schedule is to identify the most appropriate timekeeping codes to use to better track overtime. This step involves StarMetro to work with Accounting Services staff to develop and implement additional codes in the timekeeping system.
Final Audit Follow-Up of Neighborhood and Community Services Owner-Occupied Home Rehabilitation Program (#1022)
This is the first and final follow-up on the action plan steps reported in audit report #0902, Audit of Neighborhood and Community Services (NCS) Owner-Occupied Home Rehabilitation Program, issued November 13, 2008. In audit report #0902 we identified the need for improvement in contract management and monitoring and provided recommendations to improve the City's Home Rehabilitation Program. In response to the audit, the Housing Division staff of the Economic and Community Development (ECD) department (formerly NCS) has addressed many of these issues and completed 17 of 18 action plan steps during this follow-up period. For the Housing Division processes and rehabilitation projects reviewed during this follow-up:
- Cost estimates directly correlated with work write-ups (i.e., building specifications) and were reviewed by Housing Division staff for accuracy and reasonableness;
- Change orders were reviewed and projects inspected prior to approval of change orders, or the start of any construction activities;
- Change orders were appropriately filed with Growth Management;
- Documentation of the use of competitive procurement bidding processes was maintained in rehabilitation files;
- Notices to proceed were issued on rehabilitation projects only after competitive bid documents were received from non-profit agencies;
- The City provided final inspection training to non-profit agencies. Our testing showed that inspections of rehabilitation projects and follow-ups with rehabilitation clients were conducted in an effort to reduce inadequate, substandard and/or incomplete rehabilitation construction work;
- Certificates of completion were obtained prior to the approval and payment of non-profit agencies' final pay requests for home rehabilitation projects;
- Four of five rehabilitation projects reviewed during this follow-up were timely completed, with one project being delayed due to client actions;
- Non-profit agencies made follow-up visits and delivered customer satisfaction surveys; however, the visits and survey delivery are not always timely;
- One non-profit agency contract was revised to require that a current waiting list be provided to ECD with each application for rehabilitation services. We noted during our testing that the non-profit agency provided ECD a current waiting list along with each application for rehabilitation services;
- Of four follow-up visits due at the time of our testing, the non-profit agency providing the rehabilitation services had made the required visits and delivered customer satisfaction surveys to three of their clients. A fourth client would not allow a follow-up visit. Two of the three clients visited voluntarily returned the customer satisfaction surveys to ECD with no issues of concern noted. One client was satisfied and the other was very satisfied with the non-profit's provision of services;
- Our testing showed required liens were appropriately filed on the five rehabilitated properties reviewed in this follow-up;
- Housing Division staff, in the period following the issuance of audit report #0902, has provided needed training, both written and verbal, to non-profit agencies regarding the importance of appropriate supporting documentation for rehabilitation projects and improved communication with rehabilitation clients; and
- ECD's monitoring activities with non-profit agencies have been ongoing throughout the year on a one-to-one basis, as new contract requirements have been put into place. Additionally, a final report on a prior monitoring visit has been completed and provided to the non-profit agency.
The one remaining outstanding action plan step is related to ECD's follow-up of all valid issues of concern noted on audit site visits to 20 rehabilitated homes. This final action plan step has been turned over to management for resolution.
Separate from this audit, we have also issued audit report #1023, dated September 16, 2010. That report specifically follows-up on the joint work of the Office of the City Auditor and the Department of Community Affairs Office of Inspector General review of a sample of homes rehabilitated by ECD and TUL for City and state compliance. That report addresses issues relating to the City.
Audit Follow-Up for Review of Selected Homes in the City Owner-Occupied Home Rehabilitation Program (#1023)
In November 2008, we issued Audit Report #0902, Audit of Neighborhood and Community Services Owner-Occupied Home Rehabilitation Program. The audit provided recommendations for improvement in how the Department of Neighborhood and Community Services (NCS), now renamed the Department of Economic and Community Development (ECD), contracts with and monitors non-profit agencies participating in the City Owner-Occupied Home Rehabilitation Program.
During the course of the above audit, we became aware that one non-profit agency, the Tallahassee Urban League, was also receiving monies from the Florida Department of Community Affairs (DCA). DCA monies were for upgrades for selected items such as windows, doors, walls, and roofs. We also noted these upgrades were approved through change orders to homes and items also funded through the City rehabilitation program. We requested TUL to provide documentation to support the upgraded cost and to identify the City's participation in such cost, if any; however, documentation was not provided.
Therefore, to seek accountability for city, state, and federal funds, we coordinated and jointly conducted additional fieldwork with the DCA Office of Inspector General. Our joint audit included eleven additional homes more recently funded for rehabilitation.
Separate from this audit, we have also issued Audit Report #1022, dated September 16, 2010, that follows up on issues identified in Audit Report #0902. For issues addressed in that report, we noted that ECD has addressed and corrected all issues identified.
As it relates to the City, this audit identified an additional area for improved accountability between ECD and TUL, and improved communication and coordination between ECD and the City's Growth Management Department, Division of Building Inspection.
Areas for improvement within ECD:
- While ECD knew what it paid on each rehabilitated home, ECD did not know specifically which items it was paying for. Also, ECD did not know which items the state was paying for or paid on the same home. For future contracts, ECD should require rehabilitation providers to identify all funds received and expended (city, state, and federal) for homes jointly rehabilitated by the City and others. The City should consider requiring each reimbursement request be accompanied by a certification that no other funding agency has (will) also reimbursed the agency for items funded by the City.
- Building permits issued by the City as requested by TUL contractors were for amounts less than planned (9 of 11 homes) and actual rehabilitation construction cost (11 of 11 homes). ECD should communicate with its' non-profit agencies and coordinate with the City Growth Management Department, Division of Building Inspection to emphasize the need for building permit requests to include all planned construction cost for a particular project. When events occur such that the scope of work described in the building permit is substantially changed, then contractors should obtain revised or additional permits.
We also identified three weaknesses in internal control at TUL which ECD should be aware of should they contract with that agency for home rehabilitation services in the future.
Areas for improvement within TUL:
- TUL files did not provide an accounting of specific items the City paid for and specific items the State paid for on each home rehabilitated. To the extent that TUL performs owner-occupied home rehabilitations in the future, TUL files and records should clearly and specifically identify all funding received and expended. TUL records should specifically show how those funds are used consistent with line items in the awarded bid and related change orders.
- For several homes funded for rehabilitation by the City and DCA, change orders were made to increase the cost of line items in the awarded bid for upgrades to windows, doors, walls, and roofs. Based on information provided to us by TUL, most of the upgraded cost was charged to DCA. However, some upgrade costs were also charged to the City. Although requested of TUL or its contractors through TUL, we have not been provided documentation to support the upgraded cost (over the original bid amount) charged to the City. TUL has not shown that such upgrades were purchased and installed. In some instances, TUL and its contractors have stated upgrades were not installed. Accordingly, the basis for additional charges to the City (and DCA) for upgrades are not apparent. Importantly, TUL has not shown that client homes received upgrades. Our findings are based on a sample of homes. To determine whether there would be similar findings for other homes rehabilitated by TUL through ECD would require an extensive audit that is beyond the staffing of the City Auditor. Also, the determination of whether city, state, and federal funds expended comply with applicable contracts, laws, and regulations is the primary responsibility of TUL's external auditor. We recommend ECD use our findings to further assess internal control issues at TUL should ECD contract with TUL in the future.
TUL submitted construction and administrative cost reimbursement requests to DCA certifying rehabilitation for five homes as being completed when construction had not started. The TUL reimbursement requests were accompanied by certifications that the submission was correct, administrative costs had been earned and paid, schedules of check numbers and dates paid were listed, copies of written checks were attached, and invoices from TUL contractors showing materials and labor cost were included. A separate TUL report submitted to DCA showed pre and post inspection dates and improperly indicated the homes were completed prior to the date of the reimbursement request. When questioned about this, TUL stated funds were requested expecting the homes to be completed. Subsequently, TUL returned the state warrant (approximately $96,000). TUL's request for an extension of time to complete the five homes was denied. Should ECD continue to contract with TUL, the need for TUL to submit accurate reports should be stressed. We view this issue as a serious weakness in TUL's internal controls and especially controls relating to the control environment.
Audit of the Fund Balance of the General Fund (#1024)
The General Fund of the City of Tallahassee is the predominant fund for recording and reporting the general government activities of the City. The City's administrative and management activities, the police department, cultural and recreation activities, and human services activities are examples of the operations of the City that are accounted for in the General Fund.
This audit examined the fund balance of the General Fund and its constituent parts, specifically the Deficiencies Fund. We identified several major factors that significantly decreased the balance in the Deficiencies Fund from $26.8 million to $5.3 million during the six-year period FY2004 through FY2009. We also looked into what best practices have been established for managing the fund balance and what funding level is recommended for the Deficiencies Fund. A third area we reviewed was the policy that governs the Deficiencies Fund. Finally, we reviewed a new standard that has been established by the Governmental Accounting Standards Board. The new standard, GASB 54 Fund Balance Reporting and Governmental Fund Type Definitions, addresses how the fund balance of the City's General Fund will be reported in the future and will be effective for the City's September 30, 2011 annual financial statements.
Our examination of the fund balance of the General Fund showed that the fund balance is currently comprised of four basic elements; (1) encumbrances, (2) inventory, (3) advances to other funds, and (4) the Deficiencies Fund. Encumbrances represent commitments related to contracts not yet performed and orders not yet filled. Inventory is the value of goods held for future use. Advances to Other Funds are the value of loans to other funds to make up for budgetary shortfalls in those other funds. The Deficiency Fund is the remaining portion of the fund balance and represents funds held for use in times of need.
A review of the total fund balance over the six-year period (2004-2009) shows a significant decrease in the total fund balance. This decrease was caused almost entirely by reductions to the Deficiencies Fund.
In 2004 the total fund balance was $27.8 million of which $26.8 million was in the Deficiencies Fund. At the end of fiscal year 2009 the total fund balance had fallen to $8.9 million and only $5.3 million was in the Deficiencies Fund. This is a $21.5 million reduction in the Deficiencies Fund over the six-year period.
We identified several best practices relating to the management of General Fund's fund balance and the Deficiencies Fund. Those best practices were put forth by the Government Finance Officers Association (GFOA) and the agencies that analyze the credit worthiness of the City and rate the risk to investors that loan money to the City.
The GFOA recommends that local governments maintain an unreserved fund balance or "rainy day fund" (the equivalent of the Deficiencies Fund for the City) of two months of operating revenues or expenditures. For the City, based on FY 2009 budgeted expenditures and transfers of $132 million, the Deficiencies Fund should be maintained at approximately $22 million. As previously noted, the balance was above that level in FY 2004 at $26.8 million and as of the end of FY 2009 the balance was $5.3 million.
The rating agencies (Fitch Inc. and Moody's Investor Services) recommend local governments have a written policy that outlines the requirement for a "rainy day fund" and that the policy stipulates when and how it can be used. Our review showed that the City has a policy (Commission Policy 224, Financing the Government) in place that addresses both fund balance and reserves, as recommended.
We reviewed Commission Policy 224, Financing the Government, which is the City policy that governs the Deficiency Fund. The policy sets the level of the Deficiencies Fund to be at a maximum of two months operating expenditures, which is roughly in line with the recommendation by the GFOA. Based on our review of the policy we made three recommendations, which if implemented will strengthen the management of the Deficiencies Fund and increase the transparency of the uses of the Deficiencies Fund.
In March of 2009, the Governmental Accounting Standards Board (GASB) issued a new standard that will change how the City reports its fund balance for governmental funds. That standard, GASB Statement No. 54 Fund Balance Reporting and Governmental Fund Type Definitions, (effective for periods beginning after June 15, 2010) will require the City to reclassify the current amounts reported in the fund balance of the General Fund into at most five separate classifications. The determination on how the currently reported amount will be reclassified will be based on the level of restrictions placed on the City's ability to expend those funds. Those five classifications are: non-spendable, restricted fund balance, committed fund balance, assigned fund balance, and unassigned fund balance.
As it relates to this audit, the new standard will have the effect of changing the Deficiencies Fund from being reported as unreserved designated. We recommend that the portion of the fund balance the City Commission intends to set aside for "rainy day" use be reported as committed fund balance.
After consulting with management it was clear that Accounting Services was already aware of this new standard and was making plans for its implementation when required.
As previously stated, the Deficiencies Fund has significantly decreased from where it was in 2004. While the fund has been used for its intended purpose, allowing the City to continue to provide necessary services, the City Commission recognized the need for the fund to return to a safe level and has directed management to deliberatively replenish the fund over a three to five to seven year period.
We will conduct follow-up reports to address the City's progress toward building the Deficiencies Fund back up to the identified goal of $23 million. We will conduct such follow-up work until the City Commission is satisfied that the target level for the Deficiency Fund has been reached.
Audit of Public Works Capital Project Contracts and ARRA Projects (#1025)
The purpose of the audit was to evaluate the Public Works Department's process for managing selected Capital Project Contracts and projects funded by the American Recovery and Reinvestment Act (ARRA). The audit addressed capital project contract activities during the period covering fiscal years 2004 through 2009; and ARRA projects started in fiscal year 2010.
The Public Works Department properly managed the three selected Capital Project contracts executed with one contractor (Sandco, Inc.) for road construction. We found (1) the sampled contracts were properly approved and competitively awarded in accordance with City procurement policy and other governing laws, rules, policies, and procedures; (2) contract activity was properly monitored by appropriate City staff to ensure required work was performed in accordance with contract stipulations; and (3) payments to the contractor were generally proper, correct, supported, authorized, and in accordance with contract terms and conditions. One issue was identified. Specifically, there was no documented policy or procedure addressing or explaining criteria for determining reductions in contractually prescribed retainage amounts withheld from periodic payments to contractors. The lack of such documented guidelines increases the risk of unreasonable and inequitable reductions in amounts (retainage) withheld from contractor payments for the City's protection.
In addition, considering the new and unfamiliar requirements, as well as the sense of urgency inherent in its source, the ARRA projects were, for the most part, properly managed and administered. However, we identified several issues in regard to the ARRA projects that indicate improvements are needed to ensure complete and accurate reporting of certain job-related information. Those issues included:
- Incomplete job creation data was reported to FDOT for a different three-month period for two ARRA projects (includes data for both City employees and contractor employees).
- Payroll costs reported to FDOT were overstated as they incorrectly included overhead costs.
- Inconsistent "local agency numbers" were used in reporting job creation activity to FDOT.
Actions to address the above issues have been identified and developed in conjunction with department management. We would like to acknowledge the full and complete cooperation and support of Public Works Department staff during this audit.