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Audit Report 2014-5 CCAA USDA Grant Powder Coating System
InternalAuditDepartment AuditReport2014-5 CollierCountyAirportAuthority USDAGrant/PowderCoating System DwightE.Brock ClerkoftheCircuitCourt 3299TamiamiTrailEast Suite#402 Naples,FL34112-5746 www.collierclerk.com Issued:February20,2014 1 Preparedby:MeganGaillard,SeniorInternalAuditor ReportDistribution:CollierCountyAirportAuthority(CCAA) LeoOchs,Jr.,CountyManager MarkIsackson,DirectorofCorporate,Financial,&ManagementServices JeffKlatzkow,CountyAttorney NickCasalanguida,GrowthManagementDivisionAdministrator GeneShue,GrowthManagementDirectorofOperationsSupport Cc:DwightE.Brock,ClerkoftheCircuitCourt CrystalK.Kinzel,DirectorofFinance&Accounting DaleW.Phillips,InternalAuditManager TABLEOFCONTENTS SUMMARY..................................................................................................................................2 OBJECTIVE.................................................................................................................................3 SCOPE..........................................................................................................................................3 BACKGROUND..........................................................................................................................4 OBSERVATIONS,RECOMMENDATIONS,&MANAGEMENTRESPONSES...................7 CONCLUSION...........................................................................................................................11 ADDITIONALMANAGEMENTRESPONSEANDCOMMENTS.......................................11 EXHIBITA–MANUFACTURINGINCUBATORII...............................................................12 EXHIBITB–MANAGEMENTTIMELINE............................................................................14 Thefilesanddraftversionsofauditreportsremainconfidentialandprotectedfrompublicrecordsrequests duringanactiveauditunder Nicolaiv.Baldwin(Aug.28,1998DCAofFL,5 th District)andFlorida Statute119.0713.Work-paperssupportingtheobservationsnotedwithinthisreportwillbecomepublic recordandcanbemadeavailableuponrequestoncethefinalauditreporthasbeenissued. 2 ThedraftauditreportwasreleasedtotheDepartmentforManagementResponseonFebruary3,2014.TheGrowth ManagementDivisionFinanceandOperationsManagerprovidedthemanagementresponsesonFebruary14,2014. RevisedmanagementresponsewasprovidedonFebruary18,2014. Summary TheCountyhasnotprovidedpropermanagementoversightforoperationsandleasesattheImmokaleeRegional Airport.Instancesofnon-compliancehavebeendetected. Thefollowingobservationsweregeneratedduringthisreview: 1.Approximately$163,000wasspentforapowdercoatingsystemthatwasnevercompletedandwasnotputto theintendeduse,whichviolatesgrantassurances/conditions. a.Grantoragencyapprovalwasnotobtainedwhentheuseofthepowdercoatingsystemwaschanged. b.Equipmentwasmissing(i.e.diptanks). c.Aportionofthepowdercoatingequipmenthasbeenrelocatedtostorage. 2.ThepartialpaymentrequestsubmittedtotheUSDAwasnotsignedbyanarchitectorengineerasrequiredby theformsandcontainedconflictinginformation. 3.TheCountyhasnotcompliedwithF.A.C.assetrequirementsorCMA5809. Thefollowingotherobservationsweregeneratedduringthisreview: 1.ManufacturingincubatorIIleaseconcerns: a.TheleaseexpiredonApril13,2007andnonewleasewasexecuted. b.Theleaseappearstohavebeencontinuedonamonthtomonthbasis,buttheinitialcontractand amendmentsdidnotprovideatermformonthtomonthcontinuation. c.Rentisnotbeingchargedatfairmarketvalue. d.LatepaymentsandtermsofpaymentswerenotapprovedbytheBCC/CCAA. e.Interestandlatepaymentfeesdonotappeartohavebeencharged. Failuretocomplywithgrantorrequirementsmay:resultinauditfindings,jeopardizecurrentandfuturegrant funding;resultindisbarmentfromreceivinggrantfunding,requirerepaymentofgrantfunds,resultintermination ofthegrant,impactfuturegrantawards,and/orresultinliabilityfordamagesformisrepresentation. 3 Objective Theobjectivesofthereviewwereto:1)validatetheexistenceofthepowdercoatingequipment;2)determine whetherthepowdercoatingequipmenthaspropervaluation;3)determinewhetherallpowdercoatingequipment wasreceived;and4)determinecompliancewiththeUnitedStatesDepartmentofAgriculture(USDA)Rural Development(RD)grantrequirements. Scope Thereviewconsistedof,butwasnotlimitedtothefollowingtasks: ReviewoftheUSDARuralBusinessEnterpriseGrant(RBEG)pre-application,application,awardletter,grant agreement,grantamendments,letterofconditions,grantassurances,andgrantattestations; ReviewofDepartmentofCommunityAffairs(DCA)-CommunityDevelopmentBlockGrant(CDBG) documentation; ReviewofapplicableGovernmentalAccountingStandardsBoard(GASB)Statements; ReviewofapplicableCodeofFederalRegulations(CFR’s); ReviewofapplicableitemsfromtheStateofFloridaGeneralRecordsScheduleforStateandLocal GovernmentAgencies; ReviewofapplicableFloridaStatutes; ReviewofapplicableFloridaAdministrativeCodes(F.A.C.); ReviewofapplicableBoardofCountyCommissioner(BCC)OrdinancesandResolutions; ReviewofapplicableBCCMeetingMinutes,AgendaItems,andBackupDocumentation; ReviewofapplicableCollierCountyAirportAuthority(CCAA)Resolutions; ReviewofapplicableCCAAMeetingMinutesandAgendaItems; ReviewofCCAAgrantfilesincludingpayrequests,designplans,andphotographs; Reviewofapplicableleaseagreements/participatingpartyagreementsforImmokaleeRegionalAirport; ReviewofapplicableCountyManagerAgency’sdirectives(CMA’s); ReviewofClerk’sFinanceandAccountingDepartmentcapitalassetrecords; ReviewofpriorClerk’sInternalAuditReportsandsupportingauditwork-papers; Observationofthemanufacturingincubatorfacilityandpowdercoatingequipment; InterviewswithCollierCountyAirportAuthoritystaff; InterviewswithClerk’sFinanceandAccountingstaff; Interviewswithacitizen;and Reviewofdocumentationprovidedbyacitizen. 4 Background Powdercoatingisadrypowdertypicallyappliedelectrostaticallytoanitemthencuredunderheattoformabond. Thepowdercreatesahardfinishthatistougherandthickerthanconventionalpaint.Powdercoatingismainlyused forcoatingmetal(i.e.householdappliances,automobiles,vehicleparts).Thepowdercoatingprocessincludesthree basicsteps:partpreparation/pre-treatment,powderapplication,andcuring. OnMarch26,1999,theCCAAsubmittedanapplicationtotheFloridaDepartmentofCommunityAffairsfora CommunityDevelopmentBlockGrant(CDBG)EconomicDevelopmentgrantrequestingfundstoconstructa USDAapproved20,000squarefootmanufacturingincubatorfacility(PhaseII).Theprojectwasfortheexpansion ofanexistingbusiness(GlobalManufacturingTechnology,Inc.)attheImmokaleeRegionalAirport.Thegrant applicationindicatedtheprojectwouldbescaledbacktoasmallerbuildingiffullgrantfundingfromtheUSDA wasnotreceived. Thefundingbreakdownfortheprojectwasasfollows:$750,000fromCDBGfunds,$500,000fromtheUSDA,and $139,000fromtheCCAAforatotalestimatedconstructioncostof$1,389,000. InSeptember1999,theCCAAsubmittedaRuralBusinessEnterpriseGrant(RBEG)pre-applicationtotheUSDA. Theconstructiongrantapplicationindicatedthegrantwouldbe“forConstructionofa20,000sq.ft.structuralsteel framebuildingtohouse:a)PhaseIIofGlobalManufacturingTechnology,Inc.incubatorfacility;b)abonded storagefacilityfornon-hazardousmaterials;andc)acompleteU.S.Customsoffice.Thefacilitywouldbeadjacent totheexistingincubatorfacilityandwouldincludesitework,allutilities,landscaping,securityandsurfacewater managementassociatedwithcomprehensivebusinessparkmasterplan.” Thefundingbreakdownfortheprojectwasasfollows:$750,000fromCDBGfunds,$500,100fromtheUSDA,and $139,000fromtheCCAAforatotalestimatedconstructioncostof$1,389,100. OnOctober1,1999,theCCAAreceivedtheawarded/executedsub-granteeandcontractualagreementfor $750,000ofCDBGgrantfundsrequiringaCountymatchof$639,000(whichmayincludeothergrantfunds)dated September29,1999.Fundsawardedwereforadministrationcostsandbuildingconstruction.Accordingtothe awardpackage,constructionwastostartbyJune28,1999andbecompletedinDecember2000. TheCCAAdidnotreceivetheanticipated$500,000USDAgrant;however,theCCAAensuredthecontinuationof theprojectthroughreallocationoftheirbudgetandtransferringfundsfromotherprojectstothePhaseII manufacturingincubatorfacility.TheCCAAreappliedforareducedUSDAGrant. OnJuly13,2000,theCCAAExecutiveDirectorsubmittedarevisedRBEGgrantapplicationtotheUSDA requestingtoreducetheamountoftheRBEGGrantto$250,000.Therevisedtotalestimatedcostoftheprojectwas $1,579,000.Theestimatedfundingbreakdownfortheprojectwasrevisedasfollows:$690,000fromCDBGfunds, $250,000fromUSDAfunds,and$639,000fromaCollierCountyContribution. OnMarch9,2001,theUSDAprovidedtheCCAAtheLettersofConditionforthe$250,000RuralBusiness EnterpriseGrant.TheletterestablishedconditionswhichmustbeunderstoodandagreedtobytheCCAApriorto theUSDAgivingthegrantapplicationfurtherreviewandconsideration. OnNovember5,2001,theUSDAgrantapplicationpackageExhibit#2indicatedthepowdercoatingfacilitywould consistofprimaryequipment:firedbatchoven,conveyorbelts/overheadelectrichoistgantrysystem,rinse/dip tanks,transferbooms,handpushconveyorsystem,powder-cartridgebooth,andpowdergunswithhopper. OnDecember10,2001,theCCAAapprovedResolution01-34whichestimatedthecostoftheprimarypowder coatingequipmenttobeapproximately$250,000tobepaidforfromtheUSDAgrant.Resolution01-34estimated thecostofsecondaryequipment(i.e.outsidepropanestoragetanks,holdingtanks,andevaporatorsystem)tobe approximately$100,000whereGlobalManufacturingTechnology,Inc.(tenant)wouldberesponsibleforthe purchaseofthesecondaryequipmenttobenegotiatedintheleaseagreementfortheincubatorfacility. 5 OnMay30,2002,theCCAAChairmanprovidedanupdatefortheprojectstatusregardingthemanufacturing buildingandthepowdercoatingequipmentattheBCC–CCAAWorkshop.TheCCAAChairmanindicatedthe powdercoatingequipmentportionoftheprojecthadnotbeenfinishedandallportionsofthemanufacturing incubatorsupportfacilityhadbeencompletedwithinbudgetandontimeexceptthepowdercoatingequipment.The CCAAChairmanindicatedtheUSDAgrantwouldbeusedforaportionofthepowdercoatingequipmentandthe CCAAhopedtoobtainadditionalgrantstocoverthecostofthepowdercoatingequipment.Note:Additionalgrant fundingwasnotobtainedforthecompletionofthepowdercoatingsystem. OnJune25,2002,theBCCapprovedtheacceptanceofa$250,000grantfromtheUSDA. OnJuly30,2002,theCertificateofCompletionwasissuedforthebuilding.Thedesignandconstructionofthe incubatorfacilityhadbeencompletedinthesummerof2002.Multipledelaysoccurredthroughouttheprojectbased ondesigndecisionsandintegrationofthepowdercoatingsystemincludingadditionalrequiredworkforthepowder coatingsystem. OnFebruary24,2003,GlobalManufacturingTechnology,Inc.sentalettertothegrantoragencyregardingthe participatingpartyagreementrequiringjobcreation.Theletterindicatedthepowdercoatingsystemisincomplete. OnJune24,2003,theBCCdeclaredGlobalManufacturingTechnology,Inc.indefault,fornotbeingableto performthetermsoftheParticipatingPartyAgreement.Additionally,thesecondarypowdercoatingequipmentwas notinstalledleavingthepowdercoatingsysteminoperableasapowdercoatingsystem. OnNovember18,2003,duringaBCCmeeting,theBCCapprovedabudgetamendmenttoallocate$21,000tothe tenantforleaseholdimprovementsandexecutedaparticipatingpartyagreementwithFloridaArchitectural Products,Inc.Theincubatorhadremainedvacantformorethanoneyear(sincetheCertificateofCompletionwas issuedonJuly30,2002).Theleaseholdimprovementsincludednewrestroomconfiguration,officespaces,and redesigningofthepowdercoatingsystem. OnNovember18,2003,aParticipatingPartyAgreementwasexecutedbetweenFloridaArchitecturalProducts,Inc. andtheBCCforthemanufacturingincubatorII.Thetenantwasrequiredtomeetthetermsoftheinitial participatingpartyagreementincludingjobcreationandretention. OnFebruary9,2004,duringaCCAAmeeting,theCCAAdiscussednegotiationoftheFloridaArchitectural Productsleasetoincludetheconversionofthepowdercoatingsystemintoawetsystem;however,tenant improvementswouldcostanadditional$21,000whichwascoveredundertheobligationsoftheCCAAinthelease. Oncethedesignworkforthechangesbegan,itwasapparentthatthecostwouldbegreaterthananticipatedforthe conversion.TheCCAAmotionedtoapproveabudgetamendmentfor$13,000plus10%contingencywiththe understandingthatanyofthecontingenciesnotusedfortheconversionwouldbereturnedtotheCCAAandthe projectscopecouldnotbeexpandedtoconsumethecontingency.Themotionpassedunanimously. Theinitialestimateof$21,000wasforcostsasfollow:$9,000forthetenantimprovementallowance($2,000from theCCAAand$7,000fromFinancialAdministrationandHousing)and$12,000forthepowdercoatingconversion ($6,000fromtheCCAAand$6,000fromFinancialAdministrationandHousing). OnMarch9,2004,duringaBCCmeeting,theBCCapprovedanadditionalbudgetamendmenttoincreaseupto $16,000ofadditionalestimatedcostsfortheconversionofthepowdercoatingsystemandotheragreedupon improvements.Theprojectincludedbuildingtwooffices,installingtwointeriorrestroomdoorsthrougharated firewall,andcreatinga10’x14’openingthrougharatedfirewallintheassemblyareabayintothebonded warehousebay.FundswerepaidthroughtheGeneralFund(001)ReserveforContingencies. OnJune15,2004,theFirstAmendmenttotheParticipatingPartyAgreementbetweenFloridaArchitectural Products,Inc.andtheBCCwasexecuted.Theamendmentretroactivelychangedthecommencementdateto April14,2004becauseoccupancypermitswerenotobtaineduntilApril14,2004.Theleaseexpiredon April13,2007.Itdoesnotappearanewleasewasexecutedoncetheleaseexpired. 6 In2011,InternalAuditcompletedsitevisitstoobservethemanufacturingincubatorIIandthepowdercoating system.Thepowdercoatingsystemhadbeenpartiallyinstalledforprimaryequipmentincludingapowdercure oven,conveyorizedcartridgepowderbooth,powdersprayequipment,handpoweredconveyorsystem,diptank systemincludingdiptanks,powdercoatingbatchovenwithanabovehood,powderbooth.Atthetimeofthe inspectionthediptankswereunabletobelocatedbyAirportstaff.Itdidnotappearsecondaryequipmenthadbeen installed.AportionoftheequipmentwasrelocatedtoahangarandnotlocatedinthemanufacturingincubatorII. Thepowderequipmentdoesnotappeartohavebeenfullyoperationalandwasnotusedasapowdercoatingsystem. Powdercoatingequipmentinuseincludesthehandoperatedtransferbooms,spraybooth,andbatchoven. 7 Observations 1)Approximately$163,000wasspentforapowdercoatingsystemthatwasnever completedandwasnotputtotheintendeduse,whichviolatesgrantassurances/conditions. OnMarch9,2001,theUSDAprovidedtheCCAAtheLettersofConditionforthe$250,000RuralBusiness EnterpriseGrant.TheLetterofConditionsrequired“anychangesinprojectscope,sourceoffunds,scopeof services,oranyothersignificantchangesintheprojectorapplicantmustbereportedtoandapprovedbyRural Developmentbywrittenamendment…”. TheUSDA1942-Ggrantrequirementsindicate“Thegranteeshallusethepropertyintheprojectorprogramfor whichitwasacquiredaslongasneeded,whetherornottheprojectorprogramcontinuestobesupportedbyFederal funds.Whenitisnolongerneededfortheoriginalprojectorprogram,thegranteeshallusethepropertyin connectionwithitsotherfederallysponsoredactivities…”Otherusesoftheequipmentarepermissiblewiththe grantoragencieswrittenpermission. ThescheduleofvaluessubmittedtotheUSDAindicatedaportionofthegrantfundswouldbeusedtoinstallthe powdercoatingsystem;theprojectrequiredadditionalbonding,permits,exhaustfans,lighting/electricalwork, ceilinglifts,additionalbracingforexhaustfans,andequipment.Theportionofthepowdercoatingsystemthatwas installedwasrecordedasanimprovementtothebuilding. BasedonpaymentrequestsandinformationprovidedbyCCAAstaff,theestimatedcostforthepowdercoating system(partial)isapproximately$163,000.TheUSDAportionofthepowdercoatingsystem(partial)is approximately$114,800.Thepowdercoatingsystemwasincompleteandnevercompleted.Thepowdercoating systemwasneverputtoitsintendeduse. TheUSDAGrantAssurancesforConstructionPrograms(OMBApprovedNo.0348-0042)requirestheapplicant “Willnotdisposeof,modifytheuseof,orchangethetermsoftherealpropertytitle,orotherinterestinthesiteand facilitieswithoutpermissionandinstructionsfromtheawardingagency…”TheCCAAdidnotobtainwritten permissionand/orinstructionsfromtheUSDA. Thepowdercoatingsystemwaspartiallydismantledandrelocatedtostorage.Aportionofthesystemremainsin themanufacturingincubatorIIandisbeingusedforadifferentuse.Usingpartofthepowdercoatingsystemfora differentactivityisasignificantchangeinproject.ThediptankswereunabletobelocatedbyAirportstaff. TheUSDA1942-Ggrantrequirementsindicate“Whenrealpropertyisnolongerneeded…returnallrealproperty, furnishedorpurchasedwhollywithFederalgrantfundstothegrantor.Inthecaseofpropertypurchasedinpartwith Federalgrantfunds,thegranteemaybepermittedtotaketitletotheFederalinterestthereinuponcompensatingthe FederalGovernmentforitsfairshareoftheproperty.”ItispossibletheUSDAwillneedtobereimbursedforthe grantfundsusedforthepowdercoatingsystemsincethesystemwasneverputtoitsintendeduse. Thegrantorwasnotnotifiedanddidnotprovideawrittenamendmenttothegrantfortheprojectchange.The USDAallowsforsimilarservicesorprojectusesforequipmentobtainedwithFederalfinancialassistance,but wouldneedtoapprovethechangeinwritingpriortothechangebeingallowed. WhenAssuranceAgreementsarebreachedorthereareviolations,theUSDAmay,atitsoption:discontinuefunding orenforcetheagreementbysuitforspecificperformanceorbyanyotheravailableremedy.Bynotmaintainingthe assetfortheintendeduse,theCCAAmaybeliabletoreimbursethegrantoragencyforfundsusedforthepowder coatingequipment. Recommendations: TheCountyshouldnotifytheUSDAofgrantassurance/conditionviolationsandallchangestotheproject.A writtenwaiverforchangestotheprojectandwaiverofviolationsshouldbeobtained. 8 TheCountyshouldcomplywiththeCodeofFederalRegulations(CFR’s),grantagreements,andgrant assurances. Whenassetsand/orinfrastructurearepaidforthroughgrantfundingthendisposedorusedforotheractivities, theCountyshouldreceiveapprovalfromthegrantoragency. TheCountyshouldprovideFinancewiththeappropriatepaperworktoreducetheasset’srecordedvalueand updatechangesforequipmentlocation. CountyManagementResponse : “Thecountywillworkwiththegrantor,USDeptofAgriculture(USDA),todeveloparesolutiontotheauditfinding regardingthepotentialviolationsofgrantassurancesrelatedtothepowdercoatingequipment/system. CountystaffwillworkdiligentlytocomplywithapplicableCFR’s,grantagreements,andgrantassurancesforall grantprojects. TheAirportAuthoritywillnotdisposeofanyproperty,regardlessofwhetheritwaspurchasedwithgrantfundsor countydollars,withoutfollowingtheproperprocessinthefuturetoensurecompliancewithanyapplicable regulationswhichincludeCFRs,agreementsandassurances.Staffagreespermissionfromthegrantoragencyto disposeofanypropertyacquiredwithgrantfundsshallrequireapprovalbeforedisposition.Thisprocedurewillbe properlyfollowedinthefuture. ThecountywillprovideFinancewiththeappropriatepaperworktoreflectanynecessaryadjustmentstothevalue ofassetsinquestion.” 2)ThepartialpaymentrequestsubmittedtotheUSDAwasnotsignedbyanarchitector engineerasrequiredbytheformsandcontainedconflictinginformation. FormRD1924-18(OMBApprovedNo.0575-0042)usedbytheUnitedStatesDepartmentofAgriculture(USDA) RuralDevelopment(RD)FarmServiceAgencyforpartialpaymentsubmissionsrequiresanarchitect’sor engineer’scertificationforthecompletedworkandestimates. OnAugust21,2002,theAirportFinanceManagersignedthepartialpaymentrequest(number3)onbehalfofthe CollierCountyAirportAuthority(CCAA)indicatingthesubmissionwasapprovedbytheCCAA.OnAugust21, 2002,QualityControlBuilders,Inc.,thecontractor,signedthepartialpaymentrequest(number3)indicatingwork hadbeencompletedinaccordancewiththecontractdocumentsandrequestingpaymentforservicesrendered. Thepartialpaymentrequest3(formRD1924-18)submittedtotheUSDAwasnotsignedandcertifiedbyan architectorengineer.Thecertificationisusedtoindicateworkhasbeeninspectedbythearchitect/engineerand thequantitiesshownintheestimatearecorrect,serviceswererendered,andworkwasperformedinaccordance withcontractdocuments. Theapplicationandcertificateforpaymentapplicationnumber15wassubmittedtotheUSDAwithoutthe engineer’scertificateforpayment.Thisindicatessiteobservationsmaynothavebeenperformedpriortothe submission. ThereleaseandaffidavitsignedonAugust21,2002bythecontractorindicatedinconsiderationof$68,987,the contractorwillreleasetheBoardofCountyCommissioners(BCC)ofanyfutureclaims.Paymentapplication number15totheCCAAindicatedthecurrentpaymentduewas$68,897($100discrepancy).TheUSDA reimbursedtheCountyforthepaymentrequestcontainingthediscrepancy. Inspectionsforquantitiesofmaterialsreceived,servicesrendered,andcontractcomplianceshouldbecompleted priortotheCCAAapprovingpaymentforthecontractorforservicesbilledand/orsubmittingthepaymentrequest tothegrantoragency.Withoutpropervalidationofworkcompleted,theCountymayinaccuratelyapprove paymentsforcontractors.Alldocumentationshouldbethoroughlyreviewedpriortoapprovalforpaymentor submissiontothegrantoragencytoensuretheconsistencyandaccuracyoftheinformationtopreventproject 9 delays,increasedliability,orgrantorrejection.Wheninaccurateinformationissubmittedforagrant,itmay jeopardizethegrantfunding. Recommendations: TheCountyshouldtakecarewhencompletinggrantpaymentsubmissionstoensureallrequiredcertifications arecompletedpriortothesubmissionrequestingreimbursementfromthegrantoragency. TheCountyshouldnotapprovepaymentswithoutrequiredcertifications. TheCountyshouldmorethoroughlyreviewdocumentationpriortomakingpaymentsforservicesrenderedto ensureconsistencyandaccuracy. CountyManagementResponse : “Thecountywillbemorediligentinsubmittingpaymentapplicationstoensureallnecessarypaperworkis completedproperlybeforerequestingpayment. Countystaffwillbemorediligentaboutsubmittingpaymentrequeststoensurethepaymentrequestshavethe propercertificationsinaccordancewithgrantorprovisionsandtherelatedagreements. Countystaffwillbemorediligentaboutreviewingdocumentationmorethoroughlybeforesubmittingrequestsfor payment.” 3)TheCountyhasnotcompliedwithF.A.C.assetrequirementsorCMA5809. FloridaAdministrativeCode(F.A.C.)Chapter69I-73.003(2)requires“IndividualRecordsRequiredforeach propertyitem…Relatedindividualitemswhichconstituteasinglefunctionalsystemmaybedesignatedasa propertygroup.Apropertygroupmaybeaccountedforinonerecordifthecomponentitemsareseparately identifiedwithintherecord.” CMA#5809indicatesthecustodianisultimatelyresponsibleforthepropercareanduseofallpropertyassignedto orprovidedforusebythedepartment.Thecustodianisresponsibleformaintainingup-to-dateassetrecordsandto provideupdatestoFinanceaschangesoccur. InJanuary2011,InternalAuditobservedthepowdercoatingequipmentandmanufacturingfacility.Portionsofthe powdercoatingsystemhadbeenremovedfromthemanufacturingfacilityandrelocatedtostorageindicatingthe itemsshouldhavebeenidentifiedseparatelywithinthepropertygroup.Airportstaffwereunabletoprovidealistof equipment/itemsobtainedwhenthepowdercoatingsystemwaspurchased.Alumpsumbillingwastheonly recordprovided. F.A.C.Chapter69I.73.003(3)(c)ContentofPropertyRecordsrequiresthephysicallocationtobeidentifiedforeach asset.Whenassetsaredisassembledandaportionoftheequipmentmovedtostorage/hangar,theassetrecords shouldbeupdatedtoreflectthechange.Withoutproperlyrecordingthelocationoftheasset,itmaygivethe appearanceoftheftorfraudandcausefinancialinformationtobeinaccurate. Assetsshouldbeproperlycontrolled,tracked,andmonitored.Whenassetsarenotproperlyrecordedandthereisa lackofanaudittrail,itmaycausefinancialinformation/assetrecordstobeinaccurate.Properrecordsmustbe availabletoensuretheaccuracyofassetrecords. Recommendations: TheCountyshouldcomplywithFloridaStatutes,FloridaAdministrativeCodes,andCountypoliciesand procedures. TheCountyshouldprovideFinancewiththeappropriatedocumentationtoupdateassetrecords. 10 CountyManagementResponse : “ThecountywillstrivetocomplywithFloridaStatutes,FAC’s,andcountypoliciesandprocedures. AfterananalysisisperformedbyStaff,documentationwillbepresentedtoFinanceforanyadjustmentstoasset valuesand/orrecordsasconsiderednecessary.StaffwishestoreviewanysuchadjustmentswithFinancestaffto ensureallpartiesareinagreementwiththeproposedrevisions.” 11 Conclusion AccordingtoCCAAminutes,observation,andinterview;thepowdercoatingsystemwasnevercompleted. Secondaryequipmentwasrequiredtohaveafunctioningpowdercoatingsystem.Secondaryequipmentwasnot obtained.Oncetheprimarypowdercoatingequipmentwasinstalled,theequipmentwasdismantledandaportionof theequipmentwasmovedtostorage.Grantmoneywasusedtopurchaseandinstallthepowdercoatingsystem.The grantorhasnotprovidedwrittenapprovalforthechangeofuse,asrequiredbythegrantconditions. Allrequirementsofthegrantapplications,assurances,andagreementsshouldbemetorspecificallyaddressedwhen projectschange.Propergrantorapprovalshouldbeobtainedpriortochangingprojectsand/ordisposingofassets purchasedwithgrantfunds. Failuretocomplywithgrantorrequirementsmay:resultinauditfindings,jeopardizecurrentandfuturegrant funding;resultindisbarmentfromreceivinggrantfunding,requirerepaymentofgrantfunds,resultintermination ofthegrant,impactfuturegrantawards,and/orresultinliabilityfordamagesformisrepresentation. Auditsdonotrelievemanagementoftheirresponsibilities.ItistheresponsibilityofCountymanagementto understandandimplementtheproperproceduralcontrolsinordertoreduceandlimittheriskoffraud,error,and misappropriationofCountyassets.InternalAuditmayrecommendimprovementsinauditreports,butultimatelyit isthedutyanddecisionofCountymanagementtoformulateprocessesandcontrolsthatensurecompliancewith Federalregulation,Statestatute,Countyordinance,andCountypolicies. Recommendations: TheCountyshouldproperlymonitorgrantassetstoensurecompliancewithfederalrequirements. TheCountyshouldcompletetheappropriatepaperworkwhendisposingofanassettoensureassetsareproperly recorded. TheCountyshouldreviewtheCDBGgrantforcompliance.TheCountyshouldworkwiththegrantoragencyto determineiftheCountyhasfurtherobligationsunderthegrant. o Jobcreationrequirementsandprogramincomeshouldspecificallybereviewed. TheCountyshouldverifytenantshavevalidleasesandinsurance. AdditionalCountyManagementComments: “WiththemergeroftheAirportAuthorityintotheGrowthManagementDivision,theAuthorityhasamorerobust supportsysteminrelationtograntsmanagementaswellasmonitoringofcountyapprovedpoliciesandprocedures (whichincludeproperlymonitoringandsafeguardingofassets).Capitalassetshaverecentlybeen100%physically inspectedbyGMDstaff(unrelatedtoairportoperations)toensureanindependentvalidationofassetrecordsfor thecostcenterdirectorchange. CountystaffiscurrentlyreviewingtheCDBGgrantcompliancewithregardtothejobcreationrequirementsand programincomeinconjunctionwiththeleasereview. StafflooksforwardtoremediatingthesefindingsandwillworkwiththeClerk’sOfficeonthecorrectionsand keepingtheproperpartiesnotifiedofcommunicationsfromthegrantor.” InternalAuditResponsetoManagementCommentsandAdditionalComments : InternalAuditgratefullyacknowledgesthecooperationandassistancefromCountystaff.Theassistanceand responsesprovidedbythedivisiongreatlyassistedintheauditprocessforthereview. 12 13 ImmokaleeRegionalAirport–2013 CollierCountyPropertyAppraiser–AerialImage ManufacturingIncubatorII IncubatorII 14 15 ManagementTimeline ExecutiveAirport Director Starting Ending Notes JohnDrury1994Approx.September2002 BobTweedieOctober2002May2003Interim GeneSchmidtMay2003December2004 TeresaCookDecember2004December2009 DebraBrueggermanDecember2009May2010Interim PennyPhillippiMay2010September2010Interim ThomasChrisCurrySeptember2010September2013