open letter to the florida legislative auditing committee

8/2/2019 Open letter to the Florida Legislative Auditing Committee

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Friday, April 27, 2012

The Florida LegislatureJoint Legislative Auditing Committee111 West Madison StreetRoom 876Claude Pepper BuildingTallahassee, FL 32399

Senator Jim NormanRepresentative Debbie MayfieldSenator Arthenia L. JoynerSenator Evelyn J . LynnSenator Maria Lorts Sachs

Senator Stephen R. WiseRepresentative Larry AhernRepresentative Daphne D. CampbellRepresentative Jeff ClemensRepresentative Bryan NelsonRepresentative Kenneth Roberson

Timothy "Chaz" StevensPO Box 1123Deerfield Beach, FL 33443

Sent via: email and fax

Dear Honored Officials;

In the September 21, 2011 letter to Representative Hazelle Rogers, the Joint LegislativeAuditing Committees review of the City of Lauderdale Lakes noted:

A 34.5% increase in the millage rate and an across-the-board increase of all SpecialAssessment funds

An illegal transfer of CRA money The need for a complete redo of the Citys Finance Department

Since that report, blistering incompetence, unabashed cronyism, and outright criminal felony

acts, once transacted in the shadows of that city, now take place in the light of day. To wit:

Lauderdale Lakes cannot finalize its FY11 audit -- their own auditor noting, thenumbers dont add up. Amazingly, the Citys exact cash position remains yet amystery

The FY12 budget is seriously flawed and does not correct any of the substantive issuesoutlined by your committee

FY13-17 budgets are also deeply flawed


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Frustratingly, while those in charge of Lauderdale Lakes have willfully, intentionally, andrepeatedly violated numerous Florida laws, concerned taxpayers have stood helplessly by andwatched:

1. Money, derived from Special Assessment fund increases (both illegal and excessive),being transferred to the General Fund, and from there, recklessly misspent

2. What once stood at $1.7M, the CRA loan now exceeds $2.5M3. A proposed lease-buyback that only stood to benefit the lessee4. Restructuring of various substantial debts with protracted terms

Recently, the Broward Office of Inspector General launched an investigation (OIG 11-021) ofLauderdale Lakes City Manager Jonathan Allen and determined he engaged in intentional bidsplitting [FS 838.22] and other misconduct and created both real and apparent conflicts ofinterest.

Allens transgressions continue as he ignored the LACs advice; installing two unqualifiedindividuals as the Finance Director and Assistant City Manager.

Clear rookie mistakes of his; gaffes made by someone well outside of their element.

Take the case of his hiring of Marie Elianor; once former assistant to the Oakland Park CityManager and now Lauderdale Lakes Finance Director. A woman who admitted:

She was not balancing cash, had no idea which fund cash belonged to, and was notrecording pooled cash properly

For FY12, she left out the building fund, overstated (by some $600,000) the budgetsdebt and the fire fee, and could not answer simple millage questions

Has consistently overstated the General Fund cash balances, revenues (suggested98% of taxes collected in December, 2011), and the 2012 cash flow analysis

What is most troubling is Elianors inability to produce the FY11 financial statements that arerequired to complete previous years audit. And, as a direct result of Elianors mistakes andcontrary to Florida statutes, the Citys FY12 budget has yet to be amended.

As the City looks to move forward, their Long Range Plan is based upon a flawed andoverstated FY12 budget as noted by both City and County auditor. Those in charge alsocontinue to incorporate Special Assessment fund transfers and provide regular financialupdates with overstated cash positions and clearly fictitious accounting.

With the financial situation in Lauderdale Lakes growing worse by the day and given your own

staffs recommendations, the need for an Auditor General review is now prudent, obvious, andlong overdue.

I stand ready to assist.


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Timothy Chaz StevensWinner 2010 New Times Activist of the YearMyActsOfSedition.com

Enclosures: (1)

I. September 2011 letter to Representative Hazelle Rogers


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MIKE HARIDOPOLOSPresident

THE FLORIDA LEGISLATUREJOINT LEGISLATIVE AUDITING COMMITTEE

Senator Atthenia L. JoynerSenator Evelyn J . LynnSenator Ma ria Lorts SachsSen atot Stephen R. Wise

Honorable Hazelle P. RogersCo rporate Park ofinverrary

Senator Jim Norman, ChairRepresentative Debbie Mayfield, Vice Chair

September 21 , 2011

3800 Inverrary Bouleva rd , Suite 100-JLauderhill, Florida 33319Dear Representative Rogers :

DEAN CANNONSpeaker

Represen tat ive Larry AhernRepresentative Daphne D. CampRepresentative Jeff ClemensRepresentative Btyan NelsonRepresentative Kenneth Roberso

This letter is in response to your letter, dated July 15, 2011, to the Joint Legislative AuditingCommittee (Committee), regarding your concerns relating to the City of Lauderdale Lakes (City)and requesting an audit of the City by the Auditor General. The City is experiencing variousfinancial problems and $1.7 million of Community Redevelopment Agency (CRA) funds havebeen transferred from the CRA Trust Fund to the City's General Fund to apparently covergeneral operating expenses of the City.Our office has reviewed your letter, as well as news articles, the most recent financial auditreport, and other documents, and have spoken with the Acting City manager. Below is asummary of issues, thoughts, and the Committee staff recommendation: Audit Findings Included in the City 's Audit Report for the Fiscal Year Ended September 30,2010:

o The auditors reported the following seven audit findings: (Note: The first four findin gswere considered to be significant deficiencies by the CPA firm.)1. Deteriorating Financial Conditions (#20 10-01 ): Application of financial conditionassessment procedures indicated deteriorating financial conditions at the City. The

auditors recommended that the City follow the recommended practice of the GFOAand establish a formal policy on the level of unreserved fund balance that should bemaintained in the general fund. The City's response stated that a Financial Recoveryand Sustainability Plan is being developed which will outline the steps to enhance thefinancial condition over a short-term and long-term period. It further stated that theFY 2011-12 budget would include an appropriation to begin a multi-year process torestore the fund balance to a more acceptable level.

Kathryn H. DuBose, Co ordinator111 West Madison Stteet, Room 876, Claude Pepper Building, Tallahassee, Florida 32399-1400Telephone (850) 487-4110 Fax (850) 922-5667

jl ac@ leg.state.fl.us


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Honorable Hazelle P. RogersSeptember 21, 2011

2. Year End Closing Entries (#20 10-02): Balance sheet accounts , such as accountsreceivable and accounts payable, were not properly reconciled to reflect theappropriate balances as of year-end. The auditors recommended that the Cityconsider developing formal year-end closing procedures to reduce the need fornumerous adjustments to the financial records during the audit process and the delayin the preparation of financial reports needed by management and the auditors. TheCity's response stated that the Financial Services Department Director and/ordesignee will evaluate the existing year-end closing procedures and makeimprovements as needed.

3. Other Postemployment Benefits (OPEB) (#2010-03): The City did not consult anactuary to perform an assessments of the other postemployment benefits to determinethe effects of an OPEB obligation on the City 's financial statements. The auditorsrecommended that the City obtain the services of an actuary to calculate the OPEBobligation. The City's response stated that the Financial Services DepartmentDirector and/or designee will work with the Purchasing Division to obtain theservices of an actuary to calculate the OPEB obligation and that the FY 2011-12budget would contain sufficient funding to pay for such services.

4. Annual Budget Process (#2010-04): The budget provided to the auditors from theCity's financial reporting system did not match up with the City's approved budget inits entirety, and, although the budget was amended during the fiscal year, the financialreporting system was not updated for the amendments. The auditors recommendedthat the City more accurately evaluate operational performance by revising currentbudgeting procedures to provide for updating the current year's budget as soon asbudget amendments are approved. The City's response stated that all current year'sbudget amendments, when approved, would be accurately updated in the financialsystem prior to the end of the month that the amendments were approved.

5. User Access (#2010-05): Procedures performed during the audit to test the accesslevels for several users disclosed that the access levels for certain users were notconsistent with their job functions and duties. The auditors recommended that theCity review the access controls of its employees to determine that employees onlyhave access to functions as required and considered necessary to carry out theirassigned job duties . The City's response stated that the Financial ServicesDepartment performed a comprehensive citywide workflow systems audit of allcomputer users, and standardized forms were enhanced and a dual depmiment reviewand sign-off process was established as a result.

6. Approval of Journal Entries (#2010-06) : Journal entries were being entered andposted into the City's financial reporting system without the review and approval ofthe financial director or a designated staff within the finance depmiment. Theauditors recommended that a policy be adopted whereby all joumal entries will beapproved by the finance director or other designated staff within the financedepartment and are accompanied by full explanation and by reference to adequate

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supporting documentation. The City's response stated that the Financial ServicesDepartment Director and/or designee now reviews and approves all journal entriesand journal reports would be completed monthly as opposed to annually.

7. Monthly Financial Statements (#2010-07): No financial statements are beingpresented to the City Council during regular council meetings. The auditorsrecommended that the finance department implement a process to present eithermonthly or quarterly financial statements to the City Council during regular councilmeetings and that reports should include key performance measures to understand thefinancial condition of the City. The City's response stated that the Financial ServicesDepartment developed a Budget and Brief Report which includes revenues andexpenditures, budget versus actual, for all City funds, cash on hand, debt serviceobligations, and outstanding payables. The Report will be distributed monthly to theMayor, Commission, and senior staff.

Implementation of corrective action to address any audit findings included in the audit rep01tis the responsibility of the City's board and management, as well as the citizens living in theCity. The City's responses to the audit findings indicate that the Commission and staff areserious about implementing corrective actions to address the audit findings. The AuditorGeneral's Office is the state's CPA firm and does not have any enforcement authority. Itwould only result in a duplication of effort to direct the Auditor General's Office to perforn1an audit on the same areas that have already been subjected to audit.

Forensic Audit of the City's Community Redevelopment Agency:A forensic audit of the City's Community Redevelopment Agency (CRA) is currently beingperformed by a forensic accounting firm hired by the City. It is our understanding, based onconversations with the City's Acting City Manager, that the forensic auditors are: (1)reviewing the transfers of CRA funds to the City and how the funds were ultimately used bythe City, and (2) scheduled to present the audit findings to the CRA Board at its September20, 2011, meeting. It would be beneficial to delay any decision regarding an audit by theAuditor General until after this audit report has been issued, in order to review any auditfindings that may be included in the report.

Additional corrective actions being taken by the City (per review of Commission meetingagendas and conversation with Acting City Manager):o The City's FY 2011-12 budget has a proposed property tax millage rate increase to9.5000 mills (an increase of 34.21% from the rolled back rate). A debt service millage

rate of 1.3560 is also proposed to fund the debt service on the general obligation bondsapproved in 2004 by the voters. These increases are considered to be necessary in orderto address the City's deteriorating financial condition. The resolution was approved atthe first budget hearing on September 12, 2011; the second budget hearing is scheduledfor September 26, 2011.

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Honorable Hazelle P. RogersSeptember 21, 20 11

o The City has approved an increase in the stormwater fee for FY 2011-12 in order to meetdebt and operational service requirements associated with proposed major capitalimprovement stormwater projects.

o The City has approved an increase in the solid waste service charges for FY 2011-12 inorder to pass the costs charged to the City by the vendor for residential curbside solidwaste and recycling services on to the residents benefiting from the services.

o The City has approved an increase in the annual fire assessment rates for FY 2011-12 inorder to cover the expenses associated with fire response operations.

o A resolution to authorize the Acting City Manager and the City Attorney to investigateand report on available financing options, including but not limited to securing debt withCity assets, both real and personal, to support the City's current and future financialneeds was approved at the September 12, 2011, Commission meeting.

o The City has a consulting firm evaluating the Financial Services Department to determineif any restructuring needs to be done and what additional internal controls need to beimplemented.

o City management is cunently evaluating the individual who perforn1ed the transfers ofthe CRA funds to the City's general fund in order to determine if this employee shouldremain in the position with the City.

o The Acting City Manager confirn1ed that the City Commission has not declared a state offinancial urgency as contemplated by s. 447.4095 , F.S.

To recap, based on review of information available related to the City's cunent financialproblems, the City appears to be making a concerted effort to address the audit findings includedin its FY 2009-10 audit report. The City Commission and management staff have been and arecontinuing to review the internal controls smTounding the financial accounting and repmiingsystem and implementing revisions as they deem necessary. In addition, property taxes andother fees and assessments are being increased in an effmi to address the City's deterioratingfinancial condition. In addition, a forensic audit is currently in progress relating to the use ofCRA funds, and an audit report is expected to be issued in the near future.In accordance with Section 218.39, F.S ., the District has obtained annual financial audits of itsaccounts and records by an independent ce1iified public accountant (CPA) and has filed the auditreports with the Auditor General's Office as required. Pursuant to Section 218.39(8), F.S., theseaudits are required to be conducted in accordance with mles of the Auditor General promulgatedpursuant to Section 11.45 , F.S. The Auditor General has issued Rules of the Auditor General,Chapter 10.550- Local Governmental Entity Audits and has adopted the auditing standards setforth in the publication entitled Government Auditing Standards (2003 Revision) as standards forauditing local governmental entities pursuant to Florida law.

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If there are any concerns relating to the work of a licensed CPA firm, such concerns should bedirected to the Florida Board of Accountancy (Board). Pursuant to Chapter 473, F.S., the Boardwas created in the Depatiment of Business and Professional Regulation to regulate the practiceof public accounting and adopt rules to implement the provisions of law, including rules relatingto competence and technical standards and discipline. Such rules include references to rules ofthe Auditor General. Every CPA and CPA firm in the state is governed and controlled by thislaw and these rules. Neither the Auditor General' s Office nor the Committee have thejurisdiction to review and comment on the professional judgment applied by a CPA fin11.Section 11.45(3), Florida Statutes, provides, in part, that the Auditor General may, pursuant tohis own authority, or at the direction of the Legislative Auditing Committee, conduct audits ofthe accounts and records of any governmental entity created or estabbshed by law. The auditsperformed by the Auditor General's Office of local governmental entities, when directed by theCommittee, are put on the schedule to be initiated after priority issues, such as statutorilymandated assignments, are completed as staffbecome available.Recommendation:Since the City is in the process of implementing various pobcies, procedures, and other measuresto address the City's deteriorating financial condition, Committee staff recommends that thedecision regarding whether the Auditor General should perform an audit be delayed untilDecember 2011 or later. Such a delay should allow time to see if the measures implemented bythe City will be effective in resolving the current financial-related issues. At that time,Committee staff will make the necessary inquiries to determine the stah1s of the City's progressin resolving its financial-related issues and make a recommendation to the Committee as towhether an audit of the City by the Auditor General would be beneficial.If you have any questions or further concerns, please do not hesitate to call Debbie White,Legislative Analyst, at (850) 487-4110.Sincerely,

; ; ? ~ ~ ~ . / ~ Representative Debbie a field

Chai , Joint Legislative Auditing Committee Chair, Joint Legislative Auditing Committee

cc: David Martin, Auditor General

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open letter to the florida legislative auditing committee

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