HomeMy WebLinkAboutItem #07 - Discussion ItemEi
' l.R. I-1.IN'-1770 1 � � r✓-�
®nth LLP
FOR ENQI MDtA TE RELEASE
Contact; Mn Ringel
(203) 761-35.22
DEI.®rrm & Toiac ; ISSUES STA,T]Ei►'IEN T CONCEPNIPiG
MY OF MIAINi AUDIT
Wlltan, Coca., October 4,1996 -- The foilowing is a state av= from Delaitte & Toucfho LLP
coa=ning recent events related to the City of Mianm -.
Rat press reports have suggested that Deloitte & Touche Lid' faded to report to tho
City of Muni that the City was experiencing fivancW &fficW ies, and needM to improve its cash
p.06Woct.
Thr,.sc mports are wrong. Specffically, the City's fumdal statc=u fbr fiscal 1995,
audited by Dedoitte & Touche, disclosed that the City had i=med deficiencies as follows:
(5) Deficlency ofRaveftae and Other Sources
In fiscal 1995, the City had a net deficiewr of remora and other sources of
approxmmaie}p S26 mullcon under appropriation.
Over 1$ months ago, Deloitte & Touche's 1994 ttsanagemtent letter advised the M iyor and
the City Commtissioners that the City needed to improve its cash positiom the letter
recommended 11 specific mcasares that the City should consider to strengthen its funcial
c, dition, stadn& "Ibe City ahauld en=e thst thasc me=m become inculcate in its CUIMM
and... avoid the possUbility that a `budget deficit,' as defined by Floaida Statute-, docs not occur
for two consecutive years."
(more)
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aiticized Deloittc & Tout for omitting from iu 1995
Press rcpotuhawe nl wr°y s� of tine
of that ltt'
} t million deficiency, the City was temgar y not is COMPl •a to Sectre�n
1 .. � s d,.sclosad .
166.241(3) of thtFIONA
Statutes. In fact, the rent is Tc a:2 '�
te
r was proper nat u
ud d in the final lam- ihe.ChY was t,Ot in violation of
management
tl�►t xtsnzte b�. its budgew approF� did not exccod fee MOM'
budgeted to be '
mmiycd from Marian and other segue 60"C", ,
1 fiuw4w stet ►ts
' '35 facial sratan�ts w� the most recent
The City's � 19
loittc 'f otxc xe. Iaetoitte Toucbe ins not performed Y
3tdit yroredur
repot
r�
Oho �tg for fisw 19% o� r any izAeperiods.
e �� audit,
ad r, conwwng
M10itte, A Touch - #rides to u anl�
thMu t o 16.000 p-wpte in mo
eo t11 1� U.S. cities.l�eioi '�oatal� � ispart
gem
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in PT0 tofw � with
OfD4101ttc Toss To t tiara& e I
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RECENT EVENTS RELATED TO DELOITTE & TOUCHES AUDITS
• Since 1989, Deloitte & Touche LLP ("D&T") has provided external auditing services to
the City of Miami.
• D&T's principal role has been to audit and report on the City's historical general purpose
financial statements, the most recent being FY 1995. These financial statements
disclosed a $26 million deficiency for FY 1995.
• D&T has not been involved in the preparation of the City's budget, which appears to be
the focus of the City's present inquiries.
• The $19 million budget shortfall predicted by Acting City Manager Stierheim, as
published in recent media reports, addresses the fiscal year ending September 30, 1996,
which year D&T has not yet examined.
June 1994 - January 1995
• During its FY 1994 audit, D&T develops concerns as to the City's cash position
and advises the City's Finance Director as to these concerns.
• D&T meets with the City Manager, Finance Director, Budget Director and
Assistant City Manager to reiterate D&Ts concerns as to the City's financial
picture.
Feb m= - March 1995
• The City Manager holds a series of meetings to address the City's cash flow and
budgetary problems. Numerous proposals are developed by the City for reducing
the operating budget. (See Miami Herald clippings, attached hereto as Exhibit I
• The City issues its Comprehensive Annual Financial Report (CAFR) for FY
1994, citing efforts of the City to "right -size" operations to reduce its budget and
the City's commitment to strengthening its financial condition. The Financial
Statements, audited by D&T, report cash deficits in several of the City's operating
fiords. (See pages 6 and 47 of the CAFR, attached hereto as Exhibit 2
May 3 1. 1995
•D&T issues to the City its Management Letter for FY 1994. The Management
Letter cites D&Ts concerns as to the City's financial statements and cash position
as observed and discussed with the City's administration, and includes
comprehensive and specific corrective measures recommended by D&T to be
taken by the City. (See p. 2 of the Management Letter, attached hereto as
Exhibit 3
Submitted Into the publia
in connection w1jil
Item
-cmmn
Clerk
77 U
x
i A
I
I July 1295
D&T appears before the City's Audit Advisory Committee and discusses those
.� matters previously identified and reported to the City in D&T's Management
I Letter regarding the City's cash position and remedial measures recommended by
i
D&T. (See Agenda of Audit Advisory Committee meeting, attached hereto as
Exhibit 4)
i The City approves a comprehensive bond program to address immediate cash
flow requirements.
The City continues its "right -sizing" efforts.
December 1995
• The City issues pension bonds to fund current and future pension contributions.
i
March - April 1996
• The City issues its Comprehensive Annual Financial Report (CAFR) for
i
FY 1995, citing efforts of the City to alleviate cash flow problems, its continued
"right -sizing" of operations, and its commitment to strengthening the City's
financial condition. The Financial Statements, audited by D&T, report
deficiencies of revenues of $26 million and a cash deficit of $45 million. (See '!
pages 6, 33 and 48 of the CAFR, attached hereto as Exhibit 5
• D&T meets with City officials, including the City Manager and Assistant City
Manager/Finance Director, to review the FY 1995 financial statements.
I
July 8. 1996
• D&T appears before the City's Audit Advisory Committee and specifically
discusses those deficiencies of revenues and cash deficit reported on pages 6, 33
and 48 of the City's Comprehensive Aauival Financial Report (see Exhibit 5 and
the City's efforts to manage its finances. (See Minutes of Audit Advisory
Committee meeting, attached hereto as Exhibit 6)
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lipjuayorenv 101fts
AlICH solid w amt, L1�31a004 'jvvith.
BpOUtNEAIBR The y' allutictf •
Heratd StalfWater '
j 4Vrdnri- staff through a .rerir• ul' buyti 70 o tCCrs
C Miami Mayor Steve C la� �unslv:d on uniitns, Thir-x are ainuu at reduetn6 cite
the "ribhl-suing' hand b. , artmeat- as many as
day, using the teem to descnUe the butt- c ujd ICU"
lltis rear thrbugh early ectirc-
;'-slashin htiytnit-inten;ivc future
that in start for lNiami city guscrnntent. nients, Bait! ,!i Ct�tera, coca! Ftatcrna{
t.• �'
Order of POI cc prciident.
This city is nu longer bu•incss o rompled la.'olTfcars.
.1R ..: ✓`r" F" :. 'Clark told a luncheon cP(i+vd at' tiuch talks have p
usual: Zits C untmissiuner J.L : Plummer said
il(Kl at his frit >tatc-tif-lhc-city aJdecs cur
tilt. n many calls from city
~ 3, :��' •, B' :tad l ilxir ,cur- he .has S they'll
r y rt man.i �nient wuntScting uhclher
1 full suit rntpk»rcy
w rent initiatives
L'tl1` ,6ni 3t n e ti ciee
continue to P rg have 1uh; t.fien the right -siring ends.
usnt 9s>ral
a'r ti cis , while achievinF lunb- ' Vowed (hliu: "�o layolrt,
soundness for the City. ° �l• . ccfi- C {arS. insisted the
l " v Ilan- chancre don t signal a Pnihlcni with city
ter his spe.
Translation: Wr tY rutting hart;. ,� lot.
It has already "un- s.itfi 10' t .
'r --it's not a crisi. situal��,n:'the mayor i
~ agerCc•:ir';li million city cut
u act.'C'lark linan:c;. ry ri running
ALWAzrti.relaSon from the S__.ovrrnmcnt:' �':.
particularly lauded nnr.0 . frtimithe City S. c A S said. '{t ; :i iituatiun ut p lx Y `
EFERS CUTS: Miami Mayor Stev®G{ttrrk. to stall' and cspcnu'3
k
i
for 7
OcRo,, an`-'....:
.$ 3Q iil.1 1'0` n
1 450 '�s set=ao.0
9t iAA M CAVANAUGH,
mid Start wrner
Miami Cityhlanagcr Cesar t3dio:vants'to fwr.;..
-pnize city government, and plans by luite Ito • ;2
slash. more than 450 *obs and more than• $30.mil-_. '
lion ,d m't want to&tlaw alnothereiating bud to c t'
" tom•
to downsize the city.- Qdio said.
tht first time 1 think "are
rcally taking cafe of business. '.
In . recent Mrs, iatrii's
:money: aocs have forced the city
to dcp-nd on Large grants to help ,
balance the budget--'inciudin t
r S4 million from n current fed _
crime bill and $4 millionin- state
hurricane relict money. - 3x{
It's a nail-biting proms. Men.
the grants nun out. the city has tox
scramble to find 'ntw ones. w •' ,;�;
instead of -depending on. stuck
standard revenue .as property ®dba
wei to pay fo; city opFrations. Odty anent, to
t:F) than�ee. •- ,
~We want to hsde a vei3* simple.operatioo.
Odio said: •
To dimidate 4S0' positions, O8i9 is .dfcnng ;
'earlyretirenwrit packages to -police; Gre. sanitation :.
and 6cocral city cmployee!••Ht t& plate to toy off.
as many as j0 emptoyecs in city departments.
iEzccuttvc and administrative posltions.itr job'
training and a�
�e�partments will be'eut
ti«J
spceik employees Me not txenito(ifed: ott'teiats's ;
said. Some are Nigibk for i+ctirement. .
Other savinss win mld come from combining M }
' tairt city departments. contracting out some city,
ices, and through proposed cuts io city pr*
Z s.-wch as child sam.
Odio and union Iradcrs have worked out agree-.' '
merits to provide pension incentives to. induce ..
crs to take early rctiremenl. If thaw measures
+ d n'l pwraic-the 450 positions corded, Odio told ,
thi`m he would consider more layoffs., '
• Knowing that city: polite. fire and generil'
employee unions voted to apprbve the agreements
last week. Sanitation workers already approved m
deal that would cut -that department's S million
budcsl'to $ I6 mIIIkw .
It's a vctydi4Ticult process. There is a ilm ofgive'
and take. a lot of streaming and,ycllin - sold Wit., ' I
i liam "%%mr" liry5oit.4)i6atlfnfofcity'sArtiisht•;
ers union. ;Uu1 it is better then the old.way"lgnord. l
. PL&4SESEE OW09T. SIP
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• l�iAl0. tAfyfNQAy, tdMCsl $y, 1@b a .. • .} �
Milo S- - 1 0V Ahli.- tee-
' 50, S, 30 id n, oi W b" "d,
•
gptpp�T, E1a04/
•' ' ..hM ��.�.�. .1�.�T�'T
grams iha/t, are sunning Tirflsiis— , -fM'g Is out bti�et,` mid Ira
illg the pfiJble111." ' •�
.111eitldtr� Vs.tman l:etrttr faf the ICalt,eacevtive ditrctor � the
hrfosming Arts and the Mani. p®rt'strust "lye tail chit fatal
Today,'the Miami City Com=
Artime Confrounity Center..: ' minion:d we wood. a to'
an
mis:ion will e,ontider the ne v
Prottrarm dirccton wbo •ere • narly shot do" the tattoiapvkki :
--bargaining agreements at its 2:30
Cr'ty 1-10.15W
—fiandi Oo'.1he eboppin bbck"And stir ttpOntor a Woromame.-.
Nm mrctmg sI
h Art►ericmn Dr. Commissioar•
worry that they would not be able" airy �1p0." .
to get ncrbed money from cow fltrv(dngQKrIMrC+tUF�e7ti�'
era do not heed to approve
sourcim , ewuribmttd to chit typos t. , , ,
Odio's other deyanmentai ova.
—
hauls.
Odio ptaro to save about $23
million throvo the tarty Twire-
ments •— cutting at many is 70
positions in police, 20 in the
etty's' fire department. 300
among gentral employers and 70
=i`n the sani1a6&n &panmevt`
Fire, police. and 1 city
CMployers an a far carty�
refiRment•April I to May IS.
Sanitation workm have between
March IS and May 1. So far.
'
about 13'sanitalion wortas have
applrod.
During 1ii09e dates city Work.
en can qu4iry for early retita
meot Or earn rcl rwct Ive raiscs
3�pemns,pnncxr31ernppolice lo 10 per.
I
In addition to tlxse changes,
j
.OEio hu•also told department
tads to find ways to cct their
budgetsby 10 pereatt. Pcline will
likely -hire more public teryke
aides, .who earn less than police
. •• 0(fieem. fof low report rYrAws.
.
The rraiaining 37 million is
savings would come fmm depart-
.,
tssenl restructuring. layroffs•sad"
proposed eutf in child cart and
ostler pro remit odic toy!
backs of bss of sonar ranks
will not affect city strv�tcts
-We have a cadre of goad
M
young people coring up, 404 we
'have to trim the budget Or heavy
falarim- 0aio Said. -We nett to
be more efficient with kss."
,
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SCvMI
Community�„Develolopme�aod.
city. Management sad Budges.
;
are Wns .absorbed by. Other
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depsinmeats, with some cuts in
positions or services. Finance'
would take 'ov",•tht badges
;
depanmaat.
CCommunity tleveloprnept,
which finds kr Comma.-
;
SAY profrsms ar►d housing, .1.
likely loft-aboart 32 positions~
. Itenlainiat workers will- •be
seined i1lt. city s.Neighbor. �
'7 i
i
hc haneeracm Tan.
F,
-we art trying to hard-vrire
services into the commewity."•
said Frank May. assistant to the
i.
alanapes•:
odin is also erg cut to
r
< I
err city p=t. lhrwgh
'r•. C> eorrimrstt0eoen would save
I'
to, approve• them for rust yy�eaaffa
bmdgct, which (tans Oct. I. Sorsle
'will be chanraqe&
0 The city a International
Trade Board would be ems• a say.
ings of more this $950.000
annually. The board is respansi•
bk for overseas trips to tacos
age rorcip.busiam hae,.bna bu
bm Mooted fa ovaspeadiall
0 Miages chAdm s day-care
proMm conid be gone. Oda
said the private saior aboWd
?
Piet up Ibaee setviars. Savisp
be $300.000.
would
® Other dicer aooid in N&
about iI rnitlion fyeu to Bay
wont Pact avid 3500"O to pro.
,
1i
furthering the development of the Downtown Miami area.
The Commission must approve the millage levied on the
special taxing district established to fund DDA. Therefore,
the City is financially accountable and is discretely
presenting DDA as a governmental fund type in the
accompanying financial statements.
Department of Off -Street Parking ("DOSP") - DOSP
was originally created in 1955 by a special act of the Florida
State Legislature and subsequently incorporated into the
City's Charter in 1968. The DOSP is an agency and
instrumentality of the City, which owns and operates
parking facilities within the City. The City Commission has
reserved the right to confirm new members of the Off -
Street Parking Board, to establish and fix rates and charges
for parking services, to approve the DOSP operating budget
and to authorize the issuance of revenue bonds. Therefore,
the City is financially accountable and is discretely
presenting DOSP as a proprietary fund type in the
accompanying financial statements.
ECONOMIC CONDITION AND OUTLOOK
The City situated at the mouth of the Miami River on
the we -stem shores of Biscayne Bay, is a main port of entry
in Florida and the county seat of Metropoktan Dade County
which encompasses Z000 square miles of Florida's
southeastern region. The City comprises 34.3 square miles
of land and 19.5 square miles of water.
The U. S. Bureau of Census population count for the
City was 358,458 as of April 1, 1990. This count is being
challenged by the City. According to City estimates its
population was 3f33,400 in 1994, and is expected to increase
to 400,000 by the year 2000.
The CWs drver;;ified economic base is comprised of
fight manufacturing, trade, commerce, wholesale and retail
trade, and tourism. While the City's tourist trade remains an
important economic force, the great gains the City has
made in the areas of international banking and business, real
estate and trans -shipment have d►versified the economic
base.
Located in the center of a hemispheric market of more
than 700 million people, and easily accessible to Europe and
Africa, Miami's strategic location and international
commerce infrastructure make it the ideal location for
international trade. As a result of expanding economies in
several Latin American countries, international trade has
been growing at double digit rates in the Miami area. Miami
Irdemational Airport became in 1993 the wow's number
one airport for handling international cargo, exceeding the 1
million ton mark In 1994 its cargo tonnage increased 16%
reaching 1.3 million tons. Cargo tonnage through the Port of
Miami increased by 7% in 1994. reaching 5.6 miton torts.
MAJOR INITIATIVES
For the year. A Neighborhood Enhancement Teams
Program ("NET') was implemented in 1992. NET offices,
located in neighborhoods throughout the City, provide
citizens with quick and effective access to municipal
government. Community -based learns, composed of police
officers, fire fighters, code inspectors, job counselors, and
6
other City staff, provide services based on the needs of the
residents of the individual neighborhoods. During the year
the number of NET offices was expanded from eleven (11)
to thirteen (13) offices to satisfy the citizens demand for
such services.
The participative management approach implemented
in pnor years with the formation of Labor/Management
Committees at departmental and citywide levels continued
to make measurable progress dunng the year. As a result of
a proposal made by the firefighters' union, provisions of a
1985 pension settlement affecting the City's Fire Fighters'
and Police Officers' Retirement Trust were amended and
adopted into a final judgement by the Circuit Court in and for
the Eleventh Judicial Circuit Dade County. These
amendments included funding for a new cost -of -living
program, and changes in actuarial methods and valuation, of
assets, which eliminated a frozen unfunded liability originally
determined in 1985. As a result of these changes the City's
contribution to the fund decreased by S2.7 million in fiscal
year 1994.
Capital projects in excess of $25 million were
completed during the year. The heaviest activity occurred in
the areas of housing, parks, sewers and renovations of
facilities affected by hurricane Andrew.
For the future. The City has maintained the same
operating millage since fiscal year 1987-1988. The most
significant fee assessed by the City, its solid waste fee, has
not been increased since 1985. More effective utilization of
the City's resources, obtained by consolidating operations
and other cost -savings measures, has allowed the City to
maintain the level of services with limited revenue
increases.
In February 1995, the City initiated a review process to
"right -size" its operations with the goal of reducing its fiscal
year 95-96 budget by $30 melon. As part of this initiative,
significant concessions obtained from the sanitation union
are expected to reduce the Sold Waste Department's fiscal
year 95-96 budget by $10 million. In addition, several
departments are being consolidated and certain operations
not drectly related to the City s basic services are expected
to be discontinued by September 30, 1995. Early retirement
incentive plans have been agreed in principle by the City's
adrrinisvatim and unions leadership with the purpose of
reducing the City's work force by approximately 400
employees by September 30, 1995. The knplen*ntation of
the proposals discussed above are expected to strengthen
the City's financial condition.
I7FI' r , ,y ! i
Management of the City is responsible for establishing
and maintaining an internal control structure designed to
ensure that the assets of the City are protected from loss,
theft or misuse and to ensure that adequate accounting data
is corrnpled to allow for the preparation of financial
statements in conformity with generally accepted
accounting principles. The internal control structwe is
designed to provide reasonable, but not absolute assurance
that these objectives are met. The concept of reasonable
assurance recognized that: (1) the cost of control should not
ID l��c
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City of Miami, Florida
!Votes to Financial Statements
9. FUND EQUITY
The following schedule lists the equity components of all City proprietary funds as of September 30, 1994 (in thousands):
Retained
Earnings
Total Fund
(Deficit)
Corninbuted
Equity
Enterprise Funds:
'Jnr*swvod
Capital
(Deficit)
G&O Enterprise Fund ..............................................
$ (2,781)
S 3.777
S 9%
Stadiums ..... .................................................
(5.000)
14.405
9,a05
Convention and Exhibition Centers .............. ... ............
(35.375)
57,185
21,810
Marinas ..................................... ... ............
(157)
2.787
2,630
Golf Courses . .................... ..........
(628)
405
(223)
Parking Garage ............................ .........
(5.002)
63�4
(4,368)
Solid Waste ........................... ..........
(12.184)
4,178
(8.006)
Other Funds ........................... .............
(854)
292
(562)
S(61,981)
S83.663
$21,682
h-d mal Service Funds
Fleet Management ................................................
S (8,506)
S 8,813
S 307
Property Maintenance ..............................................
(1.031)
273
(7581
Print Shop ........................................................
(520)
178
(342)
Procurement Management .........................................
(33)
23
(10)
Communications Services ..........................................
l78)
1,855
1.777
$00,168)
$11.142
S 974
See Note 11 for segment information regarding the enterprise funds.
.I The following schedule lists fund deficits for Governmental and Trust and Agency type funds as of September 30, 1994
(in thousands):
Rescue Services Special Revenue S (285)
Self Insurance Trust Fund (6,4721
Pension Administration Trust Fund (34)
In addition to the above fund deficits, the City also experienced cash deficits in several of its operating funds which were
..:,a temporarily remedied by loans from other funds. See note 5. It is management's intention to replenish these deficits and,
accordingly. in February 1995. the City initiated a review process to "right -size" its operations with the goal of reducing its
fiscal year 95-96 budget by $30 million. As part of this initiative, srgn�nt rroncessions obtained from the sanitation union are
expected to reduce the Solid Waste Department's fiscal year 95-96 budget by $10 million. In addition, several departments are
being consolidated and certain operations not directly related to the City's basic services are expected to be discontinued by
September 30, 1995. Early retirement plans have been agreed to in principle by the City's administration and unions leadership
with the purpose of reducing the City's work force by approximately 400 employees by September 30, 1995. The implementa-
tion of the proposals discussed above are expected to strengthen the City's financial condition.
II
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CURRENT YEAR COMMENTS AND RECOMMENDATIONS
Financial Condition
i Observation
The City's cash position needs improvement. Over the last several years, the City's cash position has been
affected br many factors, including:
increase demand for and cost of providing public services (e.g., police and fire protection) while the tax
base and tax rates have remained relatively flat over the last several years;
• Rates for services (primarily in the enterprise funds) have not been sufficient to cover related expenses;
• Higher employee health care costs and other employee benefit programs-,
• increase costs from litigation and other liability claims, including the legal costs to defend such claims;
Incremental cos- associated with the recovery from Hurricane Andrew-, and
• Reliance on one-time revenue sources to fund recurring expenses.
Recommendation
In February 1995, City Administration initiated several programs designer! to "right -size" its operations in
order to address the cash situation and to strengthen the City's financial condition. The Administration's plans
are estimated to reduce the City's operating budget by approximately $30 million. In conjunction with these
programs, Administration should also consider the following:
• Challenge all costs!
• Demand from department heads: entrepreneurial spirit, creativity, bottom line thinking, cost/benefit
analysis, and a flatter organizational structure-,
• Streamline all the processes, including delivery of services, approvals, "paper shuffling" and cross
functional activities;
• Establish rates for services which cover the cost of the services provided;
k. • Use technology to achieve efficiency and effectiveness. Technology should be the tool that does the
work; people should be the service providers and the decision makers. Investing in technology rvill
provide long-term economic efficiencies through reductions in other costs;
• Develop a long-term action plan for the finances of the City;
• Review all nonproductive assets to determine whether more favorable economic benefits can be
achieved;
` • Privatize or "out source" departments and services;
• Eliminate the reliance on onetime revenue sources to fund recurring expenses; and
• Establish emplo)= incentive programs to identify opportunities for increasing productivity and
performance and reducing waste.
• Change budget amendment procedures from solely a year-end occurrence to periodically during the
t year, as circumstances develop or the need arises.
The City should ensure that these measures become inculcated in its culture and that the benefits generated
become permanent. The City must avoid the possibility that a "budget deficit," as defined by Florida Statute,
does not occur for two consecutive years. Othcn%ise, the Financial Emergency Statutes could be invoked.
40
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Downtown Developmer ;honty ("DDA") - DDA was
created by the City in 1965 pwzuani to Chapter 65-1090 of
the General Laws of Florida and City Code Section 14-25,
DDA is governed by a board appointed by the City
Commission and was established for the purpose of
furthering the development of the Downtown Miami area.
The Commission must approve the millage levied on the
special taxing district established to fund DDA. Therefore,
the City is financially accountable and is discretely
presenting DOA as a governmental fund type in the
accompanying financial statements.
Department of Off -Street Parking ("DOSP") - DOSP
was originally created in 1955 by a special act of the Florida
State Legislature and subsequently incorporated into the
Oty's Charter in 1968. The DOSP is an agency and
instrumentality of the City, which owns and operates
parking facilities within the City. The City Commission has
reserved the right to confirm new members of the Off -
Street Parking Board, to establish and fix rates and charges
for parking services, to approve the DOSP operating budget
and to authorize the issuance of revenue bonds. Therefore,
the City is financially accountable and is discretely
presenting DOSP as a proprietary fund type in the
accompanying financial statements.
ECONOMiC CONDITION AND OUTLOOK
The City situated at the mouth of the Miami River on
the western shores of Biscayne Bay, is a main port of entry
in Florida and the county seat of Metropolitan Dade County
which encompasses 2,000 square miles of Florida's
southeastem region. The City comprises 34.3 square miles
of land and 19.5 square miles of water.
The City's diversified economic base is comprised of
tight manufacturing, trade, cornmerce, wholesale and retail
trade, and tourism. While the aty's tourist trade remain, an
important economic force, the great gains the City has
made in the areas of international banking and business, real
estate and trans -shipment have diversified the economic
base.
Located in the center of a hemispheric market of more
than 700 million people, and easily accessible to Europe and
Africa, Miami's strategic location and international
conxnerce infrastructure make it the ideal location for
international trade.. As a result of expanding economies in
several Latin American countries, international trade has
been growing at double digit rates in the Miami area. Miami
International Airport became in 19W the world's number
one airport for handling international cargo. In 1995 its cargo
tomulge increased 20% reading 3.4 Million tons. Cargo
tonnage through the Port of Miami increased by 4.8% in
1995, reaching 5.8 M'►lion tons.
MAJOR 1141"r ATiVES
For me year. A Neighborhood Enhancement Teams
Program ("NET" y was implemented in 1992. Thirteen (13)
NET offices, located in neighborhoods throughout the City,
provide citizens with quick and effective access to municipal
govemment. Community -based teams, composed of police
officers, fire fighters, code inspectors, job counselors, and
6
other City st; •ovide services based on the needs of the
residents of Tim individual neighborhoods During the year,
Certificates of Use, Occupational Licenses and
Owner/Builder Permits were added to services provided
The expanded NET Police Patrol, together with community
leaders and residents began designing new crime fighting
and community policing strategies to focus directly on crime
prevention.
The participative management approach implemented
,n prior years with the formation of Labor/Management
Committees at departmental and citywide levels continued
To make measurable progress during the year.
Capital projects in excess of $5.1 million were
completed during the year. Significant accomplishments
were the modernization of the Orange Bowl Stadium to
accomodate both football and soccer activity and the related
parking lot modifications; the completion of Fire Station
No. 12, one of the most advanced facilities in South Florida;
major renovations to numerous parks; and other Public
Works projects.
In February 1995, the City initiated a review process to
"right -size" its operations with a goal of reducing its fiscal
year budget by $30 million. With the cooperation of the four
union presidents and Labor/Managemeni Committees the
City was able to exceed their goal with an actual reduction
of the FY 96 operating budget by $36.4 million or 12.3
percent.
The major initiatives were as follows:
o Eliminated 322 positions to save approximately $22
million.
a Achieved a SID million savings in the Solid Waste
Department by reducing both the workforce: and the
waste disposal cost.
® Eliminated nineteen executive positions.
Streamlined and eliminated City wide duplication by
eonsdidating several departmental functions.
In July 1995, the City Commission approved a bond program
to address immedate cash flow requirements. The bond
program authorized the funding of pension contn'butions and
compensated absences. In December 1995, Non -Ad
Valorem, Revenue Bonds amounting to $72 million were
issued.
The City Commission has also approved several major
projects and programs intended to increase efficiency,
improve services and increase revenue. These include the
development of Watson island property into a S25 million
botanical garden visitor attraction- The Commission has also
approved the negotiation of a management contract to
develop a regional water sports center at the Coast Guard
Hangar.
For the future. The City has maintained the same
operating millage since fiscal year 1987-1988. The most
significant fee assessed by the City, its solid waste fee, has
not been increased since 1985. More effective utilization W.
the City's resources, obtained by consor'idating operations
and other cost -savings measures, has allowed the City to
City of Miami, F . _. rida
Notes to Financial Statements
• Prior to October 1st, the budget is legally enacted
through passage of an ordinance and adoption of the
budget report.
• Management may not make changes to the adopted
budget without the approval of a majonty vote of the
Commission.
• The Commission may transfer among departments
any part of an unencumbered balance of an appropri-
ation to a purpose for which an appropriation for the
current year has proved insufficient. At the close of
each fiscal year, the unencumbered balance of each
appropriation reverts to the fund from which it was
appropriated and is subject to future appropriations.
• Budgets are monitored at varying levels of classifica-
tion detail, however, budgetary control is legally
maintained at the fund level except for the General
Fund, which is maintained at the departmental level.
Budgeted amounts in the accompanying general pur-
pose financial statements are as originally adopted, or
as amended by the City Commission throughout the
year. During the year, supplementary appropriations
were approved by the Commission totaling approxi-
mately $17 million. All budget amendments require City
Commission approval.
(3) Encumbrances
Encumbrance accounting., under which purchase or-
ders, contracts, and otiver commitments for the expen-
diture of monies are recorded in order to reserve that
portion of the applicable appropriation, is employed in
the General and Capital Projects Funds. On the nor--
GAAP budgetary basis, encumbrances are recorded as
expenditures of the current year. On s GAAP basis,
encumbrances outstanding at year-end are reported as
reservations of fund balance since they do not consti-
tute expenditures or fiabi ties since the cornmitmertts
will be honored during the subsequent year.
(4) Excess of Expenditures Over Appropriations
in Individual Funds
Special Revenue Funds:
Rescue Services ....................... S 58
Metro Dade Tourist Tax ............... 316
(5) Deficiency of Revenues and Other Sources
In fiscal 1995, the City had a net deficiency of revenues
and other sources of appirw6mately $26 m:Mon under
appropriations. The deficiency resutted from receiving
approximately $12.5 rit1W less in planned revenues
and incurring unplanned expenditures for police and fire
overtime, clam payments, and other. The deficiency
became apparent in February 1995 and the City imrne-
diately began t)te process of correcting the deficiency
through several actions inedud(ng workforce reductions,
cost reductions and operating efficiencies. The benefits
of these measures are expected to reduce operating
costs of the City by VW4VAW S36 million in 19%. In
33
addition, the City Commission approved a bond pro-
gram in July 1995 to finance the City's current ane
future pension contribution. On December 1, 1995 the
City issued $62 million of Pension Bonds to fund ap-
proximately $25 million of fiscal 1995 pension contncu-
tions and approximately S37 million for future conuibv
bons.
E. Pooled Cash and Investments
The City maintains an accounting system in which substan-
tially all cash, investments and accrued interest are recorded
and maintained in a separate group of accounts. All such
cash and investments, including accrued interest, are re-
flected as pooled cash and investments. Investments are
stated at cost or amortized cost. which approximates mar-
ket. All investments consist of U.S. governmental obliga-
tions and prime commercial paper. Interest income is allo-
cated based upon the approximate proportionate balances
of each fund's equity in pooled cash and investments. No
interest is charged to funds having deficit balances.
Individual fund overdrafts (deficit pooled cash accounts)
have been reported as an interfund payable in the respective
fund with an offsetting interfund receivable reported, in are
other fund (See Note 5). The funds fisted below maintained
separate cash and investment balances in the accompany-
ing general purpose financial statements.
• G & 0 Enterprise Fund
• APO Pension Trust Fund
• GESE Pension Trust Fund
• Deferred Compensation Agency Fund
The following discretely presented component units main-
tained separate cash and investment balances under the
component units column in the accompanying general pur.
pose financial statements. In addition, the funds maintained
separate restricted cash and investment accounts in conV&
ance with debt requirements. (See Note 4)
• Miarni Sports and Exhibition Autfmrity
• Downtown Development Authcxity
• Department of Off -Street Parking
F. cash Equivalents and Investments
Cash equivalents consist of demand deposits with banks,
investments with original maturities at time of purchase of
three months or less and equity in the CVs rash manage-
ment pool.
Investments are carried at cost plus accrued interest except
for investments in the deferred compensation agency fund
which are reported at market.
G. Pension Investments
Pension investments for the FIPO and GESE Trust Funds are
carried at cost. Debt securities are adjusted for amortization
of premiums and discounts. Premiums and discounts are
amortized using the straight-line basis over the life of the
9 -�
Ik�$
i �"j
lim
City Of Miami, F1.. jda
Notes to Financial Statements
9. FUND EQUITY (DEF1CM
The following schedule lists the equity components of all City proprietary funds and the fund deficit for Trust and Agency
funds as of September 30, 1995 (in thousands):
Retained
Eamings Total Fund
(Deficit) Contnbuted Equity
Entwprise Funds: Unreserved Capital (Deficit)
G&O Enterprise Fund .............................................. $ (3,153) S 4,241 S 1,088
Stadiums ......................................................... (5.557) 14.405 8,848
Convention and Exhibition Centers .................................. (35.934) 57,185 21,251
Marinas.......................................................... (666) 2.787 2,121
Golf Courses ................................ .................. (960) 405 (555)
Parking Garage ............................ . .............. (4.600) 634 (3.966)
Solid Waste ................................... ... ............. 0 5,864) 4.638 (11,226)
Other Funds .................................. .. (824) 292 (532)
S (67.558) $84,587 S 17,029
lntemal Service Funds:
Fleet Management .............................. ................ $ 110.51%) S 9.844 S (752)
Property Maintenance .............. ... ........ (1,843) 273 (1,570)
Print Shop ............................... ........ 1687) 178 (509)
Procurement Management ......................................... (76) 23 (53)
Communications Services ........................... .... ....... (1,211) 1.855 6"
Self Insurance..................................................... (93.088) — (93,A88)
$007,501) $12,173 S(95,328)
Trust and Agency Fund
Pension Administration Trust Fund............................................................. S(24,469)
See Note 11 for segment information regarding the enterprise funds.
The City has implemented operating efficiency and financing plans to cover these deficits, which at September 30, 19
included a cash deficit of approximately $45 million. Starting in February of 1995, the City began a process to "right -see"
operations and, acconfingty, reduced City-wide expenditures by $36 million in the 1996 Budget In addition, in Juty 19951
City Commission approved a bond program to address the immediate cash flow requirements. On December 1, 1995, the C
issued the first series of pension bonds in the amount of SU million to cover current and future pension mitributions. Tlx
band proceeds funded the temporary deficit created in the Pension Administration Trust Fund arising from timing of fund
The Self -Insurance deficit includes a $77 million actuarially determined liability, which is expected to be funded within the n
frve years through the implementation of effective risk management programs, through increased funding from norr
operations, and through issuance of debt if considered economically *tVd4vtoW4 advantageous.
48
1i
Audit Aijviaery Committee
July 8, 1"6
Page 2 of 2
IV lutercal Audit update
Sujan (7jubM the City's InItmal Auditor, presented an updoic report that
included discussion On:
a Fraud oovswrri* luw inwrne housing being built in Coconut Grove.
* Fraud cor-crminG Movill Stc-vvn's Boatyard.
Oijective txinvorning revenue ScacTaTion is always mci wluich cxcAvds
the dcpartmemW oxptuhttae budget.
• Dixussed advantases of having anew computer suditor.
V Sri Upddle
Phil T,Uney mpur*j on the SCI System impIcAnontation as rolk)WS:
® Hoc not gone hvc Yet.
® Current delay results from ft new plan ftt imcluda ft pumhular
module in the imple=Wiea plan. Two intofaa prubltnis exist with
the pwo;bjiuing mudulc and oac gnodification.intO he comf4eNd prior to
COMS live.
VI Now vmaium
New buaincss as fallowing wd-i diRcuwd:
Ncw LIAjam - 11Y. 2 yeast Wm for the chniuman has expitrA. It was
nVeed in delay a6fing a new chairman untlL acw =tnbcrx, if any, ov
in pLv.,-- in the rn"ntime, W Samhcz will confuma to chair the
commitlet.
Seetioa 2 .237. nissmtion of tibc Miami City Codt was reviewed
and it war &Ictntirted that the commifte Is in comp1Wm>.- with the
basic fwwtiow as *uthMz,*1 in this smHon of the code.
VU Isext Meeting& Adjende
• ne noxt medu%, for Ow hGam! Audit Adviiary Convnittea was
sohMuW for OcWber 7. 1995, 10:00
• 1U agw& will imiu&
• Audit Mwag&n$q4 Taftor
• SO Imp1mmtWon updaft
IFUCTM MMA
InU=td Audit qAO
Approvcd. O A 1u tn*ha--.A—
r, MAIMMA