HomeMy WebLinkAboutSubmittal-N Patrick Range II-Audit of Virginia Key Beach Park Trust(Ettv of Altrami
THEODORE P. GUBA, CPA, CIA, CFE ;$
INDEPENDENT AUDITOR GENERAL
i
eoxi:
October 11, 2022
Honorable Members of the City Commission
City of Miami
3500 Pan American Drive
Coconut Grove, FL 33133-5504
Re: Audit of Virginia Key Beach Park Trust
Report No. 23-02
Executive Summary
Submitted into the public
record for item(s) SR.5
on 10/13/2022, City Clerk
Telephone (305) 416-2044
E-Mail: tguba@rim amigov.com
We have completed an audit of Virginia Key Beach Park Trust (Trust) for the period of October 1,
2016 through July 31, 2022. The audit was directed by an adopted resolution of the Miami City
Commission. The audit was performed in order to provide the City Commission and management
unbiased and relevant information for use in promoting accountability, stewardship, and improving
the Trust's operations. For the fiscal years 2017 through 2021, the Trust received average annual
revenues of $1,166,840 and incurred annual average expenses of $1,083,015.
As a result of our audit, we recommend the following to enhance internal controls, promote
accountability, and to improve the Trust's operations:
1) Establish formal policies and procedures to ensure proper administration and billings of
special events.
2) Establish internal controls to adhere to the City's Procurement Code and best practices.
3) Establish separate account codes to track all sources of operating revenues.
4) Improve the budget preparation process.
5) Adhere to monthly financial reporting requirements to the City Commission.
6) Comply with Florida Statutes, City Code, and Trust Policies and Procedures with respect
to Sunshine Laws.
7) Monitor independent contractor performance and adhere to employee classification
requirements.
8) Improve internal controls over the bank reconciliation process.
OFFICE OF THE INDEPENDENT AUDITOR GENERAL, 444 S.W. 2"�D AVENUE, 7ih FLOOR, MIAMI, FLORIDA 33130-1910
pp�wc IC(�n�-'�I- �cl,� P aLk21-�u S+�
Submitted into the public
record for item(s) SR.5
on 10/13/2022, City Clerk
These and other findings are included on pages 3 through 17 of the report.
We wish to express our appreciation for the cooperation and courtesies extended to us by Trust
personnel while conducting the audit.
Sincerely,
Theodore P. Guba, CPA, CIA, CFE
Independent Auditor General
Office of the Independent Auditor General
Cc: The Honorable Mayor Francis Suarez
Arthur Noriega, City Manager
Victoria Mendez, City Attorney
Todd Hannon, City Clerk
Larry Spring, Chief Financial Officer/Assistant City Manager
Nzeribe Ihekwaba, Assistant City Manager/Chief of Operations
Natasha Colebrook -Williams, Assistant City Manager
Erica Paschal, Director, Finance Department
Marie Gouin, Director, Office of Management and Budget
Angela V. Roberts, Director, Human Resource Department
Ann -Marie Sharpe, Director, Risk Management Department
Annie Perez, Director, Purchasing Department
Guy Forchion, Executive Director of Virginia Key Beach Park Trust
Virginia Key Beach Park Trust Board Members
Members of the Audit Advisory Committee
Audit Documentation File
Audit conducted by: Raymond Ishmael, CPA, CFE, Audit Supervisor
Work papers reviewed by: Mala Khilnani, CPA, CISA, Audit Supervisor
Submitted into the Public
record for item(s) SR.5
on 10 13 2022, City Clerk
AUDIT OF VIRGINIA KEY BEACH PARK TRUST
OCTOBER 1, 2016 THROUGH JULY 31, 2022
REPORT NO.23-02
TABLE OF CONTENTS
SCOPE, OBJECTIVES, AND METHODOLOGY...................................................................................................1
BACKGROUND...........................................................................................................................................................2
AUDIT FINDINGS AND RECOMMENDATIONS...................................................................................................3
FINDING 1: ESTABLISH FORMAL POLICIES AND PROCEDURES TO ENSURE PROPER
ADMINISTRATION AND BILLINGS OF SPECIAL EVENTS...................................................3
FINDING 2: ESTABLISH INTERNAL CONTROLS TO ADHERE TO THE CITY'S PROCUREMENT
CODE AND BEST PRACTICES..................................................................................................5
FINDING 3: ESTABLISH SEPARATE ACCOUNT CODES TO TRACK ALL SOURCES OF
OPERATINGREVENUE...............................................................................................................7
FINDING 4: IMPROVE THE BUDGET PREPARATION PROCESS...........................................................9
FINDING 5: ADHERE TO MONTHLY FINANCIAL REPORTING REQUIREMENTS TO THE CITY
COMMISSION..............................................................................................................................10
FINDING 6: COMPLY WITH FLORIDA STATUTES, CITY CODE, AND TRUST POLICIES AND
PROCEDURES WITH RESPECT TO SUNSHINE LAWS.....................................................11
FINDING 7: MONITOR INDEPENDENT CONTRATOR PERFORMANCE AND ADHERE TO
EMPLOYEE CLASSIFICATION REQUIREMENTS................................................................13
FINDING 8: IMPROVE INTERNAL CONTROLS OVER BANK RECONCILATION PROCESS ............ 16
Submitted into the public
record for item(s) SR.S
on 10 13 2022, City Clerk
In accordance with the provisions of Section 48 of the City of Miami's Charter, and at the request
of the City Commission, the Office of Independent Auditor General (OIAG) conducted an audit of
the operations of Virginia Key Beach Park Trust (Trust), in order to provide the City Commission
and management with unbiased, timely, and relevant information for use in promoting
accountability, stewardship, and improving the Trust's operations.
The initial scope period included fiscal years 2017 through 2019 and selected transactions prior
and subsequent to this period. Audit field work was substantially completed in March 2020. The
completion of the audit was subsequently postponed due to the temporary closure of the Trust,
other issues related to the Pandemic, as well as staffing and scheduling priorities. When we
resumed the audit, additional procedures were performed to expand the scope period through
July 2022. As a result, the audit period for this audit has been revised to be October 1, 2016
through July 31, 2022.
The scope and objectives of the audit were to:
Evaluate management's performance in establishing and maintaining internal controls,
including controls designed to prevent and detect fraud, waste, and abuse, and in
administering assigned responsibilities in accordance with applicable laws, rules,
regulations, contracts, and other guidelines.
• Examine internal controls designed and placed in operation to promote and encourage
the achievement of management's control objectives in the categories of compliance,
economic and efficient operations, reliability of records and reports, and safeguarding of
assets, and identifying weaknesses in those controls.
• Ensure management is maximizing revenue potential.
We conducted this performance audit in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings and conclusions based on our
audit objectives. We believe that the evidence obtained provides a reasonable basis for our
findings and conclusions based on our audit objectives.
The audit methodology included the following:
• Interviews and inquiries of appropriate personnel
• Reviews of written policies and procedures in order to gain an understanding of the
internal controls
• Observations of current practices and processing techniques
• Tests of applicable transactions and records
• Other audit procedures as deemed necessary
i Submitted into the public
record for item(s) Sg.5
on 10 13 2022, City Clerkv
BACKGROUND
Virginia Key Beach Park Trust (Trust) is a component unit of the City of Miami and is included in
the City's comprehensive annual financial report as a blended component unit. The Trust was
established in December 2000 to manage and operate an 82.5-acre historical landmark called
"Old County Park". The governing board of the Trust consists of nine members of which the City
Commission appoints the majority of the Trust's Board of Trustees and approves its annual
operating budget.
The purpose of the Trust is to preserve the 82.5-acre property in a manner consistent with the
environmental health, public use, historical importance of the park and the aspirations of the
African American community and shall propose policy, planning, and design to ensure maximum
community utilization, enjoyment, and maintenance of the park as an open greenspace
compatible with its historical and recreational characteristics and accessible to the public. The
Trust shall endeavor to promote activities and functions at the park consistent with this purpose
and with the nature of the park.
For the fiscal years 2017 through 2021, the Trust's operating revenue ranged from $417,495 to
$1,887,922 from special event facility rentals, ticket surcharges, pavilion rentals, park entrance
fees, fundraising events, film & photo shoots, summer camp facility rentals, and smaller revenue
sources such as cabana rentals and vending. The City also contributed funds to the Trust for
operations, for the fiscal years 2017 through 2022, ranging from $150,000 to $300,000.
For the fiscal years 2017 through 2021, the Trust's operating expenses ranged from $850,725 to
$1,342,761 for salary & benefits, contractual services, and general. park operations. Salary and
benefits accounted for the majority of expenses ranging from $419,512 to $666,971 for the period.
As of August 2022, the Trust employed 17 employees (eight full-time, eight part-time, and one
temporary part-time). Another significant expense included three individuals hired as consultants -
independent contractors. (See Financial Highlights below)
Financial Highlights
Fiscal Years 2017 through 2021
2017
2018
2019
2020
2021
Revenue:
Charges forservices
$ 643,091 $
632,468
$1,887,922*
$ 417,495
$ 702,157
Intergovernmental
15o,000
306,000
330,430
427,842
300,000
Interest, Investment, and other income
3,477
5,646
26,940
415
318
Total Revenue
$ 796,568 $
944,114
$ 2,245,292
$ 845,752
$ 1,002,475
Expenditures:
Salaries and Benefits
$ 419,512 $
445,170
$ 586,789
$ 666,971
$ 653,228
Operating Expenditures
313,327
340,377
419,225
446,383
403,411
Independent Contractors
117,886
114,129
152,828
147,692
106,135
Capital Outlay
81,715
Total Expenditures
$ 850,725 $
899,675
$ 1,158,842
$ 1,342,761
$ 1,162,774
Excess of revenues over expenditures / net
change in fund balance
$ (54,157) $
44,439
$ 1,086,450
$ (497,009)
$ (160,299)
*During the 2019 fiscal year the Trut received $1 miillon from hosting the Ultra Music Festival, which is included in Charges for services.
►a
Submitted into the public
record for item(s) SR.5
on 10 13 2022, City Clerk
AUDIT FINDINGS AND RECOMMENDATIONS
As a result of our audit, we recommend the following to enhance internal controls, promote
accountability, and to improve the Trust's operations.
Details of our findings and recommendations follow:
FINDING 1: ESTABLISH FORMAL POLICIES AND PROCEDURES TO ENSURE
PROPER ADMINISTRATION AND BILLINGS OF SPECIAL EVENTS
The Trust organizes special events in the park which account for approximately 40% of the Trust's
revenue.
For each special event, the event promoter is required to submit a Special Event Application, Use
Agreement, Damage Deposit, Venue Fees, Vendor Surcharges, Insurance Certificate, Ticket
Surcharges, Ticket Manifest, and any additional fees incurred as a result of the event.
The amount charged for use of the Trust Facilities is based on a Fee Schedule developed by park
personnel. However, the fee schedule does not include expenses incurred by the Trust such as
park employees which are paid $20 per hour to service events.
The Use Agreement (Agreement) requires that payment be made to the Trust at least seven days
prior to the event for venue fees, setup/breakdown days, vendor fees, damage deposits, and
ticket surcharge with the final amount to be determined after the event. The Agreement also
requires a damage deposit of $1,000 to $2,000 per day, which is intended to secure all user's
obligations including damages, fees, or costs. If the Damage Deposit is insufficient to pay the
balance, then the promoter shall pay the balance within 10 business days. The Agreement also
requires that the promoter obtain adequate insurance coverage for the Use Period including
naming the City of Miami and Virginia Key Beach Trust as Additional Insured.
Our examination of 16 special events disclosed the following:
Type of Exception
Frequency
Use Agreements were not completed priorto the Use Period
5 of 16
Damage Deposits were either insufficient to cover additional expenses
or returned to the promoter prior to the Trust receiving payment in full.
11 of 16
Payments for the event were received afterthe Due Date
14of 16
Venue Fees charged to promoters were less than the Fee Schedule
8 of 16
Promoters were not charged for expenses incurred by the Trust
14 of 16
Inadequate Insurance Coverage for Use Period
4 of 16
Ticket Surcharges not administered in accrodance with City Code.
13 of 15
As a result of the above -mentioned deficiencies, the Trust did not achieve maximum revenues for
special events and ticket surcharges and was not always sufficiently insured. It should be noted
that prior to the conclusion of our audit the Trust obtained fully executed Use Agreements prior to
the use period.
Submitted into the public
record for item(s) SR.5
on 10 13 2022, City Clerk
RECOMMENDATION 1:
We recommend that the Trust:
1) Complete Use Agreements on a timely basis prior to the use period.
2) Establish a systematic process to assess the amount of damage deposit for events based
on event characteristics such as attendees, area of use, and days used.
3) Collect all estimated fees prior to allowing promoters to use the Trust's facilities.
4) Establish a review process of invoices rendered to promoters to ensure the accuracy of
charges.
5) Enforce the contract provision by applying the damage deposit to outstanding fees owed
to the Trust.
6) Revise Fee Schedule, to include services provided by the Trust (i.e., Staffing).
7) Invoice event promoters for expenses incurred due to the event.
8) Establish controls to review insurance requirements.
9) Assess Ticket Surcharges in accordance with the City Code.
10) Include a "Right -to -Audit" provisions in all future use agreements with event promoters in
order to ensure that the Trust's and City's interest are protected and that revenues are
optimized.
Auditee Response: The Trust agrees with the recommendations and will implement the
following corrective actions:
o The Trust will ensure that a Use Agreement is executed for all Special Events held at
Historic Virginia Key Beach Park on a timely manner including the set-up and break-
down days.
o The Trust has implemented a new damage deposit policy increasing the $1000 per
event day. The Trust will assess damage deposits based on a percentage of the venue
fees per day of the Use Period.
o The Trust implemented a change in procedure to ensure that all fees are invoiced
before the Use Period.
o A final invoice for any outstanding fees will be sent to the Event Organizer immediately
following the event.
o The Trust will revise the fee schedule to include services (where applicable) provided
by the Trust.
o The Trust adjusted/increased Ticket surcharge fees in fiscal year 2019 in accordance
with City Code. Those changes are reflected on all Special Event forms and fees will
be collected accordingly for all events.
o The Trust will collect ticket surcharge fees seven days prior to the Use Period.
o The Trust will include a Right to Audit provision on all future use agreements.
• Implementation Date: Some of these policies and procedures have been implemented,
however, all the recommendations will be in place and adhered to by November 1, 2022.
4
Submitted into the public
record for item(s) SR.5
on 10 13 2022, City Clerk
FINDING 2: ESTABLISH INTERNAL CONTROLS TO ADHERE TO THE CITY'S
PROCUREMENT CODE AND BEST PRACTICES
The Authority for the Trust to expend monies is set forth in City Code Chapter 18, Article III
(Procurement Code), the Trust By -Laws, and in the Trust's Policies and Procedures Manual.
While the Trust must adhere to the City's Procurement Code, procurement policies and
procedures have also been established by the Trust in their Policies and Procedures Manual.
While the Manual mirrors the City Code, it has also established additional purchasing policies and
procedures, including the use of "Travel and Miscellaneous Expense Report" and the
"Entertainment and Business Gift Expense Report" in order to document details of expense
transactions such as date, location, public purpose, nature of transaction, and authorization for
the expense.
We reviewed the Trust's procurement process for Contractual Services, Travel Expense
Reimbursements, Miscellaneous Expense Reimbursements, and General Trust Expenses which
disclosed the following:
Contractual Services
We examined eight vendors with payments totaling $188,595 and found the following exceptions
for all eight vendors:
Not selected in accordance with City Code regarding bids, proposals, or solicitations.
Purchase Orders were not supported with a proposal, quote, estimate, or contract.
Alternatively, invoices for services rendered were used as support for the Purchase
Orders.
Employee Travel Expense and Miscellaneous Expense Reimbursement
We examined 58 travel expenses reimbursements totaling $16,154 and 75 Miscellaneous
expense reimbursements totaling $38,565. We noted that employees were reimbursed in their bi-
weekly payroll checks, which is disbursed by an independent payroll company. Submitting
reimbursements through the City's Finance Department would provide an additional level of
review. Additionally, for all Travel and Miscellaneous expense reimbursements reviewed, the
required Travel and Miscellaneous Expense Report forms were not used to document the
employee, place, public / business purpose, details of the expense, nor were there supporting
documents reflecting that the expenses were reviewed or authorized. As result, a significant
control deficiency existed to ensure expenses were for a public purpose in accordance with the
purpose of the Trust. Although the Trust provided some notated invoices or receipts, there was a
lack of complete documentation to support expenses, since key information required by the Travel
and Miscellaneous Expense Report forms was not prepared. Examples of questionable expenses
that lacked sufficient documentation are noted below:
Travel Expense Reimbursements Lacking Documentation
Frequency
Amount
Travel expense reimbursements unsupported with receipts or invoices
3
$2,057
Reimbursement for a conference registration fee of $575 with no receipt on 8/4/18. The same
employee was reimbursed $425 on 8/18/18 for the same conference with a receipt,
1
$575
Milage Reimbursement for Personal Use
1
$12
Misclassified Expenses (Non -Travel)
6
$4,680
Submitted into the public
record for item(s) 5R.5
on 10 13 2o22, City Clerk
Miscellaneous Expense Reimbursements Lacking Documentation
Amount
Three unsupported journal entries.
$4979
500 Beach Balls, 1,000 Whistles, 500 cooling towels, 2 magnetic signs, 2 Tables runners €
i
$3,541
Three payments made to individuals by personal check, that may have required the
$3,332
issuance of Internal Revenue Service Miscellaneous Income Form 1099,
2,500 brochures, business cards with tote bag, letter head with envelopes, direct mailings,
$2,623
and custom holiday cards.
Holiday Gift Cards for employees and consultants:9 Issued in 2017 and 16 issued in I$2,500
Storage Rental: Unit#3056 °
$2,335
Employee lunch at Ruth Chris Steakhouse ($1,306.74 Food +$200 Tip) '
$1,506
----------------
Photographer, printing, and framing ofa photo.
$1,430
Advance Deposit on Board Planning Retreat (No Public Notice and no public access) at The
$1,255
Betsy Hotel South Beach
Marketing and Advertising Services: email marketing service, targeted email, postal, and
$1,231
phone service, and advertisement
GoPro Camera $500 with $401 accessories and servicecontract
$901
Three Verizon Hotspots charged to a personal cellular account (annual $1,299)
$325
Employee Lunch —Boston Market
$230
2-year domain renewal for a websitethatwas last updated in 2014.
$81
General Trust Expenses
We examined 26 purchases totaling $120,110 of general Trust expenses and noted that the Trust
did not adhere to the City's Procurement Code related to the following four criteria:
Number of
Criteria
Exception
Purchases
A
Transactions were artificially divided into two or more transactions (Split Transactions).
3
1) Purchases totaling $13,669 from the same vendor on the same date divided into 4
transactions.
2) Purchases totaling $3,830 from the same vendor on the same date divided into 2
transactions
3) Purchases totaling $3,939 from the same vendor on the same date divided into 2
transactions.
B
The Trust did not adhere to the Procurement Code in administering the procurement process for
13
bids solicitations totaling 84 890.
C
Required quotes, estimates, or contracts were not submitted with the purchase orders totaling
8
$35,478. Alternatively, invoices for services rendered or goods received was submitted with the
D
No document evidencing the public purpose for the expenses as follows:
5
1) $22,356 — paid to one vendor for 3 dates for 20,000 paper hand fans, 10,000 Printed
Plastic Cups, 710 T-shirts, and 500 Tote bags
2) $400 —Tour Bus
3) $1,436 — Purchase of 1,008 toy sea turtles
The Trust's internal controls over procurement is significantly deficient. Although the City and the
Trust has established policies and procedures based on state law, the Trust did not adhere to
established controls resulting in significant documentation and authorization concerns. Finally, it
should be noted that management stated that they discontinued the practice of providing
employees/independent contractors gift cards or holiday meals at restaurants.
Submitted into the public
record for item(s) 5R.5
on 10/13/2022, City Clerk
RECOMMENDATION 2:
We recommend that the Trust:
1) The Trust's employees attend Procurement Training with the City's Procurement
Department.
2) Adhere to all City and Trust established policies and procedures for procurement,
including but not limited to, obtaining bids/proposals/solicitations, required supporting
documents for expenses, documentation of public purpose, and obtaining estimates,
quotes, or contracts prior to procuring services or goods.
3) Submit purchase orders for approval with required estimates, quotes, or contracts for
goods and services.
4) Complete Travel and Miscellaneous Expense Report forms to properly document key
information for these expenses.
5) Process employee reimbursements through the City Finance Department.
6) Limit the use of personal credit cards and checks by obtaining a P-Card with controls to
ensure only allowable purchases are made including per transaction and daily limits.
7) Negotiate contracts with vendors for indeterminate number of repairs, parts, supplies, and
services with specific monetary limits for use as blanket purchase orders. i.e. cleaning
services, parking staffing, security guards, printing, etc.
8) Restrict purchases that artificially divide transactions (Split Transactions).
• Auditee Response: The Trust agrees with the recommendations and will implement the
following:
o Trust employees will attend Procurement training with the City of Miami Procurement
Department and adhere to all City and Trust established policies and procedures for
procurement.
o The Trust will require estimates or quotes (instead of invoices) prior to obtaining
services or goods.
o The Trust will complete the travel and miscellaneous expense report forms to properly
document key information for these expenses.
o The Trust will contact the City of Miami Finance Department for training on processing
employee reimbursements.
o The Trust will contact the City of Miami Procurement Department to discuss obtaining
a P-Card. If P-card is approved, it will limit the usage of personal credit cards and
personal checks.
o The Trust will restrict purchases that are split transactions and get all quotes from the
same vendor on one estimate.
• Implementation Date: Some of these policies and procedures have been implemented,
however, all the recommendations will be in place and adhered to by November 1, 2022.
FINDING 3: ESTABLISH SEPARATE ACCOUNT CODES TO TRACK ALL SOURCES
OF OPERATING REVENUE
For the fiscal years 2017 through 2021, the Trust reported revenue ranging from $796,600 to
$2,245,292 (includes $1 million from hosting the Ultra Music Festival). The Trust's Standard
Operating Procedures for posting to the general ledger requires that cash receipts be posted to
Submitted into the public
record for item(s) SR.5
on 10 13 2022, City Clerk
their corresponding general ledger account; and that a schedule of all revenues received and due
at year-end be prepared. The current year's amounts should be compared to the prior year to
evaluate and comment on any significant differences; a memorandum should be prepared for any
new revenue accounts; and a schedule of revenues by type should be prepared for inclusion in
the annual report.
The Trust earns operating revenue from special event facility rentals, ticket surcharges, pavilion
rentals, park entrance fees, fundraising events, film and photo shoots, summer camp facility
rentals, cabana rentals, and vending. The Trust's revenue projections in the adopted budget
classifies revenue by these sources.
However, our review of revenue transactions disclosed that all revenue generating activities are
comingled in either account 449000-CFS (Charges for Services), or account 469000 (Other
Miscellaneous Revenues). According to the Finance Coordinator, for the period October 2016
through November 2017, account 449000-CFS (Charges for Services) was used for all revenue,
then in December 2017, account 469000 (Other Miscellaneous Revenues) was used to account
for parking revenue.
Also, the audited financials and the monthly income statements reported revenue as Charges for
Services and did not provide the source of the revenue generating activity.
The Finance Coordinator stated that since the revenue is not identified by source when recorded,
the Trust did not perform a revenue analysis, and they did not track the amount of revenue
generated from each revenue source. However, it should be noted that prior to the conclusion of
our audit, management has taken steps to manually track revenues.
RECOMMENDATION 3:
We recommend that the Trust implement an accounting software system to:
1) Record operating revenue in the general ledger based on its source or activity by
establishing separate account codes.
2) Revise the monthly income statement to include revenue by its source.
3) Prepare a schedule of revenues by type for inclusion in the annual report.
• Auditee Response: The Trust agrees with the recommendations and will implement the
following:
o The Trust will implement an accounting software to record operating revenue in the
general ledger based on its source or activity by establishing separate revenue
accounts.
o The Trust will revise the monthly income statement to include revenue by its source
and not just under one account.
o The Trust has implemented a manual tracking system creating monthly Excel reports
to track revenues. These reports will be more easily facilitated when the accounting
software is implemented.
• Implementation Date: Some of these policies and procedures have been implemented,
however, all the recommendations will be in place and adhered to by November 1, 2022.
Submitted into the public
record for item(s) SR.5
on 10 13 2022, City Clerk
FINDING 4: IMPROVE THE BUDGET PREPARATION PROCESS
The Trust's Accounting Policy (Policy), provides that, "An operating budget is twofold: first, it is a
plan of action for future activity and, second it is a device for monitoring ongoing activity." The
Policy provides that the previous year's actual results (recommends 3 years actual results) should
be analyzed, then used to apportion the current year's budget according to the same profile, while
taking into consideration external factors such as inflation, cost of living, etc. The Policy further
provides that the budget be compared to monthly operating statements, which should be promptly
prepared in detail so that variances can be readily identified, and immediate action can be taken
to correct any deviations from the budget.
Our review of the budgets disclosed that they were not based on the previous years' actual results
of the Trust as reported in the audited financial statements. Additionally, the FY 2019 and 2020
budgets, projected results were based on the prior year's adopted budgeted values rather than
the year's actual performance.
Monthly income statements are prepared and provide a comparison with the prior year's revenue
for the month. However, the income statement provides revenue as a one -line item from various
park activities as noted in Finding No. 3, Page 7. As a result, revenue and expenses cannot be
analyzed by source to identify and take action if a significant deviation from the budget were to
occur.
The City Commission, the Board of Trustees, and the Budget Department, rely on timely,
accurate, and concise information to make decisions in the best interest of the Trust. When
presented with unsupported financial information, decisions based on the information may have
undesirable consequences.
RECOMMENDATION 4:
We recommend that the Trust improve the budget preparation process by:
1) Utilizing the three prior year income statements to prepare the annual operating budget
taking into consideration external factors such as inflation, cost of living, etc.
2) Monitoring and analyzing revenue and expenses monthly and explain any significant
variances between actual, prior year, and budgeted amounts.
• Auditee Response: The Trust agrees with the recommendations and has implemented
the following:
o A procedure of using the three years income statements to prepare the annual
operating budget.
o A procedure to monitor and analyze revenue and expenses monthly.
Implementation Date: Implemented.
Submitted into the public
record for item(s) SR.5
on 10/13/2022, City Clerk
FINDING 5: ADHERE TO MONTHLY FINANCIAL REPORTING REQUIREMENTS TO
THE CITY COMMISSION
To comply with requirements of City Code and the Trust's Bylaw's, the Trust's Standard Operating
Procedures for Management Reporting require that the Executive Director or designee
periodically prepare and present to the Board, an Executive Director's Report relating to the
Trust's financial condition, general administrative operations, and other information relating to the
maintenance of the park. Furthermore, the Procedure requires that, monthly written status reports
that include financial statements (balance sheet, income statement and cash flow statement) be
prepared and submitted to the Miami City Commission after review by the Trust's Treasurer and/or
Board of Trustees.
For 29 monthly reporting periods reviewed, we noted that none of the required monthly status
reports relating to the Trust's financial condition were submitted to the City Commission. We also
noted that while a monthly income statement is prepared, it does not provide the sources of
income generated from Trust operations (see Finding 3, Page 7). Further, monthly balance sheets
and cash flow statements were not prepared for any of the months reviewed. Of the income
statements prepared, we found that 20 of the 29 (69%) were presented late to the Board (33 to
37 days after month -end), and 9 of 29 (31 %) were not presented to the Board of Trustees for
review.
Based on inquiry, the Executive Director and the Finance Coordinator stated that only the income
statements are produced monthly, and no other monthly reports are produced nor sent to the City
Commission. They further stated that the income statements are dependent upon the completion
of the City's monthly closing process since they rely on Oracle for financial statement preparation
rather than having an in-house accounting software system. However, based on the Trust's
policies and procedures, the Trust should be able to generate these reports independent of the
City's monthly closing process.
The City Commission and the Board of Trustees rely on timely and relevant information in order
to make decisions in the best interests of the Trust. When presented with no or untimely
information, the City Commission and the Board are unable to make informed decisions.
RECOMMENDATION 5:
We recommend that the Trust adhere to the monthly reporting requirements of the City Code,
Trust Bylaws, and the Trust's Policies and Procedures. Also, implement an accounting software
system to:
1) Close all transactions for the prior month within a few days after month -end.
2) Prepare an Executive Director's Report and Financial Statements (an income statement,
balance sheet, and statement of cash flows).
3) Submit the Executive Director's Report and Financial Statements to the Board of Trustees
prior to monthly Board meetings.
4) Submit the Executive Directors Report and Financial Statements to the City Commission
after Board of Trustee's approval.
10
Submitted into the public
record for item(s) SR.5
on 10 13 2022, City Clerk
• Auditee Response: The Trust agrees with the recommendations and will implement the
following:
o The Trust will adhere to the City Code and Trust Bylaws.
o The Trust will implement an accounting software to assist in the closing of the month.
o The Trust will create an Executive Director Report with Financial statements.
o The Trust compiles complete financial reports reconciled with the City of Miami
monthly. Going forward the financials will be reconciled in-house using accounting
software monthly, approved by the Trust Board of Trustees and reported to the City of
Miami Clerk, City Commission, Mayor and Manager following the Board approval each
month.
o A monthly Executive Director's report will be prepared highlighting significant progress
reports, Museum Project, Capital Improvements, Public Programs, Special Events,
Volunteerism, Development, and Environmental Status updates. The Executive
Director's Report will be provided to the Trust Board of Trustees for review prior to the
next scheduled Board Meeting and subsequently approved by the Trust Board of
Trustees. The Executive Director's monthly report will be shared with the City of Miami
Clerk, City Commission, Mayor, and Manager each month.
• Implementation Date: Some of these policies and procedures have been implemented,
however, all the recommendations will be in place and adhered to by November 1, 2022.
FINDING 6: COMPLY WITH FLORIDA STATUTES, CITY CODE, AND TRUST
POLICIES AND PROCEDURES WITH RESPECT TO SUNSHINE LAWS
Florida's Government Sunshine Law (Sunshine Law) provides a right of access to governmental
proceedings of public boards or commission at the local levels. The law is applicable to appointed
boards and applies to any gathering of two or more members of the same board to discuss a
matter which will foreseeably come before that board for action. There are three basic
requirements of the Sunshine Law:
1) meetings of public boards or commissions must be open to the public.
2) reasonable notice of such meetings must be given; and
3) minutes of meetings must be taken and promptly recorded.
City Code specifically provides that the Sunshine Law is applicable to any City board or executive
committee and minutes of each meeting shall be made available by the City Clerk to the public.
Additionally, the City Code provides that, "All meetings of the Trust shall be public. Written minutes
of the proceedings of all actions taken at the meeting of the Trust shall be maintained by the Trust
and shall be promptly and properly recorded and submitted to the city clerk."
According to the Executive Director, all Board Members attend all meetings including the monthly
Board Meetings, committee meetings, special meetings, and retreats. We reviewed 101 Board
meetings which included the monthly Board Meetings, the Museum Planning and
Audit/Budget/Development Committee, the Museum Planning and Historical Preservation and
Nature/Environment Committee, the Museum Planning Committee, and special meetings.
11
Submitted into the public
record for item(s) SR.S
on 10 13 2022, City Clerk
We determined that the Trust is not in compliance with the Florida Sunshine Law or the City Code,
concerning public access to meeting, public notice requirements, record keeping including
meeting minutes, and submission of meeting minutes to the City Clerk Office for recording
purposes. Our audit procedures disclosed the following:
7 instances (7%) where public notice of board meetings was not given.
® 79 instances (78%) where board meeting minutes were not taken or inaccurately
taken.
• 101 instances (100%) where board meeting minutes were not submitted to the City
Clerk for recording purposes.
101 instances (100%) where board meeting minutes were not approved by the Board
or timely approved by the Board (6 were approved between 210 - 364 days after the
meeting; 16 were not approved; 79 were not taken).
Based on inquiry, the Executive Director stated that minutes are only taken for the monthly Board
Meetings and not committee meetings, special meetings, or board retreats. It should be noted
that the Trust provided that they recently have reduced the number of meetings held as compared
with earlier years.
Without adhering to the requirements of Florida Statute and City Code the City Commission has
limited information to make decisions. Furthermore, the citizens do not always have the
opportunity to attend meetings or to review meeting records.
We recommend that the Trust comply with the Sunshine Law and City Code by:
1) Providing public notice for all meetings and conduct meetings within the City of Miami.
2) Obtaining a transcription service to provide minutes of all meetings.
3) Providing Board of Trustees members meeting minutes for approval prior to the next
meeting.
4) Promptly submitting the meeting minutes to the City Clerk for recording purposes.
® Auditee Response: The Trust agrees with the recommendations and will implement the
following:
o The Trust submits public notice for all Board of Trustee meetings at the start of each
new year. Public notice requests are submitted to the City of Miami Clerk's Office and
noticed on the City of Miami public calendar; any emergency meetings are requested
individually through the Clerk's Office and publicly noticed. Going forward the Trust will
create an internal two-step public notice and confirmation process coordinated with
the Clerk's Office to ensure public notice of all meetings follows City Code.
o All Trust Board of Trustee meetings will be held within the City of Miami.
o Currently, the recording and transcription of all Board of Trustee meeting minutes are
completed by the Trust Administrative Assistant and reviewed by the Executive
Director. The Trust is investigating viable transcription services to complete this task
to ensure accuracy and the timely delivery of all Board meeting minutes and meeting
attendance records to satisfy City Code.
12
Submitted into the public
record for item(s) ws
on 10 13 2022 City Clerk
o Accurate and timely completion of the Board meeting minutes, and attendance records
will ensure the delivery of these documents to each Board of Trustees member prior
to the next scheduled meeting.
® Implementation Date: Some of these policies and procedures have been implemented,
however, all the recommendations will be in place and adhered to by November 1, 2022.
FINDING 7: MONITOR INDEPENDENT CONTRATOR PERFORMANCE AND
ADHERE TO EMPLOYEE CLASSIFICATION REQUIREMENTS
The City Code provides that "Persons retained as expert consultants means individuals acting as
independent contractors retained by the city manager on a contract basis with a specific term for
the purpose of performing specialized defined tasks that require knowledge, skills and training
not otherwise available to the city by temporary or permanent members of the classified or
unclassified service and which tasks, by their nature, require independent and autonomous
judgment. Remuneration for the services of such persons shall not exceed one hundred twenty-
five thousand dollars ($125,000.00) in any one year and shall be payable on a per diem basis."
The Trust has employed four individuals as independent contractors for personal services with
payments totaling $775,271 for the period of October 1, 2016 through July 31, 2022. The
independent contractors were used as a Special Events Coordinator, Marketing and Community
Relations Coordinators (two contractors), and Special Projects & Outreach coordinator. Although,
they are contracted employees, their job functions are of a permanent basis, since all four have
worked for the Trust for over four years (three current and one is no longer with the Trust). The
independent contractors function as employees of the Trust and are provided use of Trust
resources such as office space, equipment, software, subscriptions, purchasing of supplies &
materials. They also supervise Trust employees and are required to work a specified amount of
weekly hours. Additionally, the independent contractors present themselves as representatives
of the Trust, including but not limited to, the use of city email addresses, by title, at events, and
when working with vendors and the general public.
In addition, our audit procedures disclosed a lack of monitoring procedures to ensure that
independent contractors comply with applicable contract terms and conditions and satisfactory
receipt of services to support the payments made.
Based on our review of the Consulting Agreements and documents supporting payments made
to or on behalf of the consultants, we noted the following:
The Special Events Coordinator, who is responsible for special events (approximately 40%
annually), the Trust's largest revenue source. The consultant is responsible to assist in
working and securing existing events to the park as well as work on securing new business
for the park. Their current agreement provides for annual compensation of $30,784 ($37 per
hour) for 16 hours per week plus 15% of net profit from new events or 7.5% of net profits for
returning events. During the period of October 1, 2016 through July 31, 2022 the consultant
was paid a total of $356,048. Based on the agreement and special event commission
payments reported to us, we estimate the consultant will be compensated $58,086 for the
2022 fiscal year.
13
Submitted into the public
record for item(s) S=
on 10 13 2022, City Clerk
We noted that all Special Events Revenue Reports submitted for Commission payout
were based on gross revenue rather than net revenue (after expenses) for events,
resulting in overpayments. However, we could not accurately quantify the
overpayments.
The Special Projects & Outreach Coordinator responsibilities include assisting in the planning,
implementation, and completion of the Trust's Special Projects List, grants and funding source
identification, grant writing, local chamber of commerce and community organization outreach
and relationship building for the Trust. The current agreement provides for annual
compensation of $30,576 ($49 per hour) for 12 hours per week. During the period of October
1, 2016 through July 31, 2022, the consultant was paid a total of $203,455. Our audit
procedures disclosed the following:
Assigned responsibilities overlap with the Marketing coordinator, the Development
Coordinator, and the Special Events Coordinator.
Required semi-monthly written event reports summarizing special event activities,
upcoming calendar of events, major event prospects, event solicitation and special
events office and City Services interactions, were unavailable for our review.
III. The Marketing Coordinator responsibilities include updating the website, assisting in the
planning, implementation and completion of the Trust's marketing special projects,
coordinating with Trust grant writing, and local chamber of commerce and community
organization outreach and relationship building for the promotion of the Trust. Their current
agreement provides for annual compensation of $42,432 ($34 per hour) for 24 hours per
week. During the period of October 1, 2016 through July 31, 2022, the consultant was paid a
total of $187,518. Our audit procedures disclosed the following regarding the performance of
the consultant:
• Assigned responsibilities overlap with the Special Projects & Outreach Coordinator
and the Development coordinator.
• Responsible for updating the website. However, at the time of our audit procedures in
October 2019, the website was not updated or reflected outdated information.
IV. The Social Media Marketing Services/Community Relations Consultant. The Trust approved
a proposal without a written contract for a Social Media Marketing Services/Community
Relations consultant for the period of 9 months during 2015 at a rate of $1,250 per month
(total $11,250) which was required to be paid in advance prior to services rendered. The
consultant's responsibilities included Social media marketing, Newsletter, and Public
Relations/Marketing. During fiscal years 2017 and 2018, the consultant was paid a total of
$28,250.
• Despite the proposal termination date of September 2015, the Trust continued to pay
the consultant through April 2018 with no contract or agreement in place (3 years after
the termination date of the proposal). For the period of January 2015 through April
2018, the consultant was paid a total of $57,950 or $46,700 more than the original
approved amount of $11,250.
14
Submitted into the public
record for item(s) SR-5
on 10/13/2022, City Clerk
Without having an established formal review of Independent Contractors' performance, the Trust
may not be receiving the services agreed upon in the consulting agreement. Additionally, the
Trust should ensure consulting agreements are in place for any consultant hired, which includes
a contract begin/end date, specialized defined tasks, and procedures to document benchmark or
milestones expected of the consultant.
Classification of consultants
As noted above, based our review of the consulting agreements, payments made to the
consultants, and the relationship created by the Trust with these consultants, our office requested
a legal opinion from the City Attorney's Office on whether the consultants employed by the Trust
should be classified as employees, rather than independent contractors. Their analysis was
limited to the Special Events Coordinator, the Marketing Coordinator, and the Special Projects &
Outreach Coordinator.
The City Attorney's Office provided a Brief Answer and Discussion that states, "Based on the
information provided by your office, the consulting agreements at issue have created an
employee -employer relationship with the Trust, for tax purposes only. It is important to note that
the Internal Revenue Service takes a far broader view of employment than would be the case for
other legal purposes. The Trust is free to contract with these individuals as independent
contractors without triggering other employment related issues."
As a result, the City Attorney's Office concluded, "Based on the above analysis, the pertinent
factors weigh heavily in favor of classification of the identified consultants as employees of the
Trust for tax purposes. Particularly the degree of control factor, which is weighed very heavily in
the analysis, would suggest employee status for each of the consultants at issue. The Office of
the City Attorney would recommend that the Trust consult with the City's finance and/or payroll
departments with respect to the most advisable course of action to process the taxes related to
these consultants' compensation."
RECOMMENDATION 7:
1) The Trust should ensure consulting agreements are in place for any consultant hired which
include a contract begin/end date, specialized defined tasks, and procedures to document
milestones expected of the consultant.
2) The Trust should independently review and document any invoice submitted by
consultants to verify that the agreed upon services in the agreement are performed.
3) The Trust should consult with the City's finance and/or payroll departments with respect
to the most advisable course of action to process the taxes related to consultants'
compensation.
• Auditee Response: The Trust agrees with the recommendations and will implement the
following:
o The Trust currently executes consultant agreements that include clear begin and end
dates and identifies specialized tasks expected of the consultant. Going forward the
Trust consultants' agreements will clearly identify the need for monthly progress
reports and project milestones reviewed by the Executive Director that will ensure that
the Trust receives the services identified in the contractual agreement and the desired
performance expected by the Trust.
15
Submitted into the public
record for item(s) SR.5
on 10/13/2022, City Clerk
o All Trust consultants' invoices will be reviewed internally by the Trust Finance
Coordinator and subject to a second review and approval by the Executive Director
before payment is issued. This internal two -stage review and approval process by the
Trust will ensure that the agreed upon services and desired performance of the
consultant is met to the satisfaction of the Trust.
o The Trust will seek the advice of the City of Miami's Finance and Human
Resources/Payroll departments regarding the potential tax status related to Trust
consultants' compensation through a Legal Services Request (LSR); this will ensure
the best policy and procedure going forward to adhere to City Code.
• Implementation Date: Some of these policies and procedures have been implemented,
however, all the recommendations will be in place and adhered to by November 1, 2022.
FINDING 8: IMPROVE INTERNAL CONTROLS OVER BANK RECONCILATION
PROCESS
Trust Policies and Procedures requires that monthly bank reconciliations be performed to ensure
that errors do not accumulate and can be readily and easily identified and attributed to a period.
The Trust Policies and Procedures requires that a bank reconciliation process should be
performed for bank accounts held by the Trust. For bank accounts held by the City, the
reconciliation should be requested and reviewed for accuracy.
The Trust's operating funds are held by the City in the pooled cash account and the monthly
reconciliation is performed by the City Finance Department. However, the Trust does not review
the reconciliation in accordance with the Trust Policies and Procedures. The Trust has provided
that while they attempt to reconcile expenses, they are unable to do so based on the reports
received from the City Finance Department.
In addition, the Trust had three bank accounts with the Miami Foundation used to receive
donations made to the Trust. One account remains with the Miami Foundation and a new account
has been opened with The Key Biscayne Foundation. The financial statements report these
account balances as Cash with fiscal agent and as of the end of fiscal year 2021, the balance
totaled $35,212. The Trust reviews these accounts annually but does not document the review.
Without reviewing the City's monthly bank reconciliation or documenting the review of the cash
held with fiscal agents, there is an increased risk of revenue or expenses being misclassified,
returned for insufficient funds, or missing deposits.
RECOMMENDATION 8:
We recommend that the Trust:
1) Perform bank reconciliations of all accounts held by the Trust.
2) Obtain monthly reconciliation reports from the Finance Department and review for
accuracy, and document monthly reviews of City Reconciliation Reports.
• Auditee Response: The Trust agrees with the recommendations and will implement the
following:
Ural
Submitted into the public
record for item(s) SR.S
on 10/13/2022, City Clerk
o The Trust has implemented a biweekly and end of the month reconciliation.
o The Trust is working as closely as possible with the City of Miami Finance
Department.
o The Trust has implemented an in-house expenditure report and performs a
monthly reconciliation with the City of Miami Oracle reports.
• Implementation Date: Some of these policies and procedures have been implemented,
however, all the recommendations will be in place and adhered to by November 1, 2022.
17