Agenda 03/27/2018 Item #11I03/27/2018
EXECUTIVE SUMMARY
Recommendation to accept the preliminary response from County Management and Economic
Incubators Incorporated to Internal Audit Report #2018-2 regarding Economic Incubators, Inc.
(EII) and Business and Economic Development Division (County Staff) dated February 27, 2018.
OBJECTIVE: To respond to Internal Audit Report #2018-2 dated February 27, 2018.
CONSIDERATIONS: On February 27, 2018, the Clerk’s Internal Audit Manager delivered a draft of
Internal Audit Report #2018-2 to the County Manager’s Office requesting that management responses be
returned by March 13, 2018. On March 8, 2018, the County Manager forwarded via email a request made
on behalf of the EII Executive Committee for a time extension for submission of audit responses (emails
attached). The request was denied by the Clerk who advised that the Internal Audit Report would be
published for the record on March 21, 2018 and presented to the Board on March 27, 2018.
In an effort provide the County Commission with balanced information, EII and County staff completed
to the best of its ability the draft response to the internal audit delivered to the County Manager on
February 27, 2018 on Wednesday evening March 21, 2018. The report is included as backup material in
this Executive Summary and has been provided electronically to the Clerk’s Office.
At approximately 4:00p.m. on March 21, 2018, the Clerk published a new version of the internal audit
report on this subject. Having not seen the version of the final Internal Audit Report before it was
published on the County Commission meeting agenda by the Clerk’s Office on March 21, 2018, County
staff and EII staff are unsure if the final Internal Audit Report has changed in any material way from the
draft Internal Audit Report which is the focus of the management responses contained herein. Therefore,
EII and County staff reserve the right and demands the time to review this new report and provide
complete responses to any new allegations.
FISCAL IMPACT: None.
GROWTH MANAGEMENT IMPACT: None
LEGAL CONSIDERATIONS:
RECOMMENDATION: To accept the preliminary response from County Management and Economic
Incubators Incorporated to Internal Audit Report #2018-2 regarding Economic Incubators, Inc. (EII) and
Business and Economic Development Division (County Staff) dated February 27, 2018.
Prepared by:
Leo E. Ochs, Jr., County Manager
ATTACHMENT(S)
1. March 8 2018 EMail (DOCX)
2. March 9 2018 Email (DOCX)
3. Management Response - 03.21.18 (DOCX)
4. Exhibit One (PDF)
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03/27/2018
5. Exhibit Two (PDF)
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03/27/2018
COLLIER COUNTY
Board of County Commissioners
Item Number: 11.I
Doc ID: 5186
Item Summary: Recommendation to accept the draft response from County Management and
Economic Incubators Incorporated to Internal Audit Report #2018-2 regarding Economic Incubators, Inc.
(EII) and Business and Economic Development Division (County Staff) dated February 27, 2018. (This
item is a Companion to Item 13B) (Leo E. Ochs, Jr., County Manager)
Meeting Date: 03/27/2018
Prepared by:
Title: Executive Secretary to County Manager – County Manager's Office
Name: MaryJo Brock
03/21/2018 7:15 PM
Submitted by:
Title: County Manager – County Manager's Office
Name: Leo E. Ochs
03/21/2018 7:15 PM
Approved By:
Review:
County Attorney's Office MaryJo Brock Level 3 County Attorney's Office Review Skipped 03/21/2018 7:15 PM
Office of Management and Budget MaryJo Brock Level 3 OMB Gatekeeper Review Skipped 03/21/2018 7:15 PM
County Manager's Office Leo E. Ochs Level 4 County Manager Review Completed 03/21/2018 7:21 PM
Board of County Commissioners MaryJo Brock Meeting Pending 03/27/2018 9:00 AM
11.I
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-----Original Message-----
From: OchsLeo
Sent: Thursday, March 08, 2018 2:12 PM
To: Dwight E. Brock <Dwight.Brock@collierclerk.com>
Subject: FW: EII
Good Afternoon Dwight,
Earlier this afternoon, I received the email below from Mr. Grant indicating EII's need for additional time
to fully respond to the lengthy internal audit report recently completed by your staff. Given the scope
and complexity of the draft audit findings and the previously planned absence of individuals whose input
is critical to completing the comprehensive management response, I find Mr. Grant's request to be
reasonable. This would likely place the report on the April 10 BCC meeting agenda.
Please call me to discuss at your convenience. Thanks.
Regards,
Leo
-----Original Message-----
From: Richard Grant [mailto:rgrant@gfpac.com]
Sent: Thursday, March 08, 2018 1:30 PM
To: OchsLeo <Leo.Ochs@colliercountyfl.gov>
Subject: EII
Leo
EII will be unable to fully review and satisfactorily respond to the draft audit until March 30, 2018. I
have long standing plans to be out of town from March 9-19. Our chair is still and has been out of town.
Other executive committee members also have travel plans. Our staff is very busy. EII suggests that the
clerk be advised of this and he be requested to allow an extension of time to fully respond so as to
include comments that will be provided to your office by EII.
________________________________
Under Florida Law, e-mail addresses are public records. If you do not want your e-mail address released
in response to a public records request, do not send electronic mail to this entity. Instead, contact this
office by telephone or in writing.
11.I.1
Packet Pg. 293 Attachment: March 8 2018 EMail (5186 : EII Audit Report)
-----Original Message-----
From: Dwight E. Brock [mailto:Dwight.Brock@collierclerk.com]
Sent: Friday, March 09, 2018 9:51 AM
To: OchsLeo <Leo.Ochs@colliercountyfl.gov>
Subject:
Leo,
The clerk of Courts will be presenting it’s audit report as scheduled March. There is nothing in this report
that has not been known by everyone for a very long time.
Respectfully
Dwight Brock
Clerk
Sent from my iPhone
________________________________
Under Florida Law, e-mail addresses are public records. If you do not want your e-mail address released
in response to a public records request, do not send electronic mail to this entity. Instead, contact this
office by telephone or in writing.
11.I.2
Packet Pg. 294 Attachment: March 9 2018 Email (5186 : EII Audit Report)
1
M E M O R A N D U M
DATE: March 21, 2018
TO: James Molenaar, Internal Audit Manager, Clerk of Court
FROM: Leo E. Ochs, Jr., County Manager
SUBJECT: MANAGEMENT RESPONSE: DRAFT INTERNAL AUDIT REPORT #2018-2
REGARDING ECONOMIC INCUBATORS, INC. AND BUSINESS AND
ECONOMIC DEVELOPMENT DIVISION DATED FEBRUARY 27, 2018
EII and County staff have reviewed the submitted draft Internal Audit Report #2018-2 regarding
Economic Incubators, Inc. (EII) and Business and Economic Development Division (County Staff)
dated February 27, 2018. The following management responses are limited to this report dated
February 27, 2018. Having not seen the version of the final Internal Audit Report before it was
published on the County Commission meeting agenda by the Clerk’s Office on March 21,2018,
County staff and EII staff are unsure if the final Internal Audit Report has changed in any material
way from the draft Internal Audit Report which is the focus of the management responses contained
herein. Therefore, EII and County staff reserve the right and demands the time to review this new
report and provide complete responses to any new allegations.
EII Management and its Board of Directors as well as County Management have serious concerns
with this largely unbalance and inaccurate internal audit document. It not only fails to adhere to the
universally accepted internal auditing standards from the International Institute of Internal Auditors,
but it fails in material ways to adhere to the Clerk’s own Internal Audit Policy. Beginning with its
meandering, ever expanding, and seemingly endless scope, to the repeated use of inflammatory
language, attempted character assassination, unsupported and erroneous findings and conclusions,
the Clerk’s internal audit attempts to unfairly characterize the operation of the business accelerator
as poorly managed and unsustainable.
In fact, in a relatively short period of time, the accelerator program has provided Collier County
citizens with resources to build strong businesses and created a pathway for diversifying the local
economy. The program has brought millions of state and federal grant dollars home to Collier
County and helped inject several million dollars of venture investment into the community.
With respect to its financial management, EII was given an unqualified opinion that its financial
statements fairly represent, in all material respects, the financial position of EII as of September 30,
2016, in accordance with generally accepted accounting principles accepted in the United States of
America and it is fully anticipated that the recently completed single audit for FY 2017 will also
have an unqualified opinion.
Finally, the inclusion of unsubstantiated allegations made about Dr. Marshall Goodman eight years
ago are irrelevant, clearly outside the legitimate scope of this audit and appear to be driven by
ulterior motives. Dr. Goodman’s responses follow:
Response from Dr. Goodman: I have had a 30 year career administratively leading some of the
nation’s largest most complex and highly regarded universities, rising to the rank of Full Professor,
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serving on hundreds of prestigious boards, with noted honors received in recognition of my service,
as well as appointments to numerous positions of trust, as well as serving one Governor
(Wisconsin), and being appointed as a Governor’s representative (Governor Rick Scott) on the
Central Florida Regional Planning Council.
While Regional Chancellor at USF Polytechnic, the campus became involved in a highly publicized
Florida legislative action that ultimately led to a successful separation from USF, and the founding
of Florida Polytechnic, Florida’s 12th state university.
The USF April 9, 2012, Management Letter cited in the Draft Internal Audit (February 27, 2018)
was never disclosed to me by USF, nor was I ever interviewed as part of the review by USF, or
shown any of the findings. I was not copied on the Management Letter.
The two direct complaints that were anonymously cited in the Management Letter against me were
both dismissed as unfounded. First, on a charge of paying an above market rate on a lease with a
donated return, the finding was: “UAC’s review determined the allegation to be unfounded.”
On a second allegation involving a purported “cash swap” on a rental lease, the finding was “no
‘cash swap’ occurred.”
I left USF on good terms, with each party wishing each other well, with a full payout from USF of
funds owed, all within in a general release agreement between the USF Board of Trustees and
myself. Furthermore, the release agreement cites the following: “Neither this Agreement, nor
anything contained herein, is to be construed as an admission by USF or Dr. Goodman of any
liability, wrongdoing or unlawful conduct whatsoever.”
While the Management Letter lists eleven violations of USF regulations and procedures, the
responsibility for these were on the institution and its Board and not me per se, with Mr. John
Bresler, Executive Director, Finance & Administration, being held directly responsible for the
alleged violations. Mr. Bresler challenged these findings in Court, as was his right, won his case,
and received a settlement from USF. After this matter was resolved, Mr. Bresler went on to be
hired as the Chief Finance Officer of Florida Polytechnic University, a clear statement of that
Board’s confidence in him.
I applied for the position of Executive Director of the Naples Accelerator (Economic Incubators Inc.
had yet to be formed), through a nationwide search conducted by CareerSource of SWFL. I was
interviewed first by a CareerSource staff member, and then extensively later by the CareerSource
Search Committee, and then an in-depth interview with the Chair of the CareerSource Board Ken
O’Leary who wanted to review my experience with USF. He in-turn personally interviewed my
references.
Management Responses to Audit Findings.
1. Finding 1: EII misrepresented expenditures and project status of Grant #SL025 to the DEO, the
BCC, and the Clerk to obtain payments for contracts with State and Federal Grant deliverables.
EII’s Response.
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1. Correct; Clerk’s assertion “On June 1 and June 15, 2017, EII Submitted invoice submittal
packages #13, #14 to DEO”.
EII’s response: This statement is correct.
2. Incorrect; Clerk’s assertion that “On June 19, 2017 DEO Program Manager rejected these
invoices because the Immokalee project was not 100% complete.”
EII’s Response: The email language “resubmit the invoice(s) showing 100% completion”
was direction from the DEO Program Manager pursuant to their policies and procedures. EII
staff was directed to resubmit Invoices #13, #14 and #16 in a single package indicating
100% completion.
3. Incorrect; Clerk’s assertion that “On June 20, 2017, Dr. Marshall Goodman, President and
CEO of EII, submitted Invoice Package #16 to DEO, knowingly mispresenting 100%
completion of the Immokalee Accelerator and all associated sub-tasks.
a. Incorrect; Clerk’s assertion that “The final invoice represented completion of all
deliverables in order to receive the balance of the $1,200,000 in DEO Grant funds”.
EII’s Response: This is a false statement, based on discussion with the DEO Program
Manager, the project was complete to DEO’s satisfaction. EII was directed to submit
final invoices reflecting 100% completion.
b. Incorrect; Clerk’s assertion that “None of the culinary equipment was received as of
June 28, 2017 when Dr. Goodman claims 100% completion.
EII’s Response: EII was responsible for providing the cash match for the equipment in
compliance with the DEO grant. The funds for the cash match were obligated to the
purchase of the equipment prior to the June 30th end date.
c. Incorrect; Clerk’s assertion that “The CEO of EII knowingly submitted an unsigned
AIA Architect’s Certification ($441,374.10) representing completion of work that was
not complete.
EII’s Response: The entire package was accepted by DEO as submitted. EII has been
in contact with the architect and he is aware of the Clerk’s concern. EII continues to
have a good relationship with the architect and offers to seek his signature to resolve this
particular concern.
d. Incorrect; Clerk’s assertion that “Compass Construction knowingly provided a false
Application and Certification for Payment (AIA Document G702) to EII, missing the
Architect’s signature; EII included this certification as supporting documentation on
Invoice Submittal Package #16.
EII’s Response: This is a misrepresentation of the timeline. The DEO accepted the
documents as submitted as “substantive equivalents” certifying that the project is
complete.
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4. Incorrect; Clerk’s assertion that “EII submitted false invoices as evidence of payment in
order to receive reimbursement before the close of the grant on June 30, 2017. The false
invoices represented the County’s Purchase Order number as the “Invoice” number
compared to an actual invoice submitted to County by the vendor in August 2017 (Exhibit 1-
F), page 10, after the majority of the equipment was actually delivered”
EII’s Response: This is a false statement. The invoices referenced by the Clerk were
submitted to the State to clearly identify the equipment ordered using the DEO grant funds
as cash match and the USDA funds awarded to the County. As stated above EII was
obligated to provide cash match in the amount of $111,424.00. EII is concerned by the
accusatory language used by the Clerk in this sub finding.
5. Incorrect; Clerk’s assertion that “EII wrote $974,439.08 in checks to its vendors, held the
checks without issuing them to vendors, and presented copies of the checks to DEO to elicit
payment, in our opinion, is fraud based on Florida Statutes 812.015 and 837.06.”
EII’s Response: EII is concerned the Clerk’s opinion incorrectly characterizes EII’s
normal business processes.
a. Correct; Clerk’s assertion that “EII wrote the checks for payment to its vendors
between the dates of June 26 and June 29, 2017, four days prior to the grant expiration
pursuant to the direction of the grantor.
EII’s Response: pursuant to EII’s regular course of business processes, EII provides
check requests to its Accounting Firm that handles the disbursement of funds.
b. Incorrect; Clerk’s assertion that “The checks were not presented to the vendors until
after receipt of DEO funds, contrary to the reimbursable grant requirements.
EII’s Response: The normal procedure is that EII picks up the checks from the
accountant’s office, brings them to CEO for signature, then the Business Specialist mails
the checks via US Postal Service, first class mail. Although EII staff do not have
recollection of specifically mailing these particular checks, EII is confident that the
normal procedure of picking up the checks and then mailing them was followed. EII
staff do confirm the work was completed as required by the June 30, 2016 deadline.
6. Incorrect; Clerk’s assertion that “Dr. Goodman knowingly submitted copies of the checks
as proof of payment when he knew that the checks were not going to be sent to their vendors
until after EII received the payment from DEO.”
EII’s Response: This is a false statement. EII followed its normal business practices.
a. Incorrect; Clerk’s assertion that “Copies of checks presented to DEO were not
cancelled checks, as required in the Grant Agreement, and as EII had submitted in prior
invoice submittals.
EII’s Response: The copies of the checks were submitted at the request of the DEO
Program Manager pursuant to a telephone conversation with EII staff held on June 19,
2017, as referenced in 5a, herein above.
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b. Incorrect; Clerk’s assertion that “EII received payment from DEO on July 17, 2017,
and subsequently released the checks to their vendors and the County.
EII’s Response: Payment was received from DEO on July 17, 2017, however, checks
were released in compliance with the normal business process.
7. Incorrect; Clerk’s assertion that “Dr. Goodman failed to include the requirement
certification statement above signature block.”
EII’s Response: EII submitted invoices based on the sample invoices provided by the DEO
Program Manager on October 26, 2017. EII will provide an amended invoice with the
language sought by the Clerk if required by DEO.
8. Correct; Clerk’s assertion that “EII did not submit photographs of the post-construction and
remodeling, as required in the grant agreement.
EII’s Response: The state accepted the documents and paid the grant invoices without the
post-construction and remodeling pictures.
9. Incorrect; Clerk’s assertion that “EII falsely claimed 100% completion for the acquisition
of all necessary State and local permits on June 29, 2017. The permit history for the Florida
Culinary Accelerator @ Immokalee was confirmed by Claudine Auclair, the Business
Center for Collier County operations and Regulatory Management, shows the first permit
was applied for on September 30, 2016 and the first Temporary Certificate of Occupancy
was issued in December 2017.
EII’s Response: The task from the scope of work was “The purpose of this grant is to
establish the Immokalee Culinary Arts & Services Incubator Facility” and the associated
task was “copies of all designs, plans, and permits obtained or required to be obtained for
the purpose of accomplishing the project”. All documentation supporting the task was
submitted during the grant period. The State has no provisions to provide additional
documentation after the grant period expired.
a. Correct; Clerk’s assertion that “Permit was applied for on September 30, 2016”
b. Incorrect; Clerk’s assertion that “First Temporary Certificate of Occupancy was not
issued until December 2017.
EII’s Response: The First Temporary Certificate of Occupancy was issued on
December 1, 2017.
c. Correct; Clerk’s assertion that “Temporary Certificate of Occupancy was extended on
January 9, 2018”
d. Correct; Clerk’s assertion that “Final Certificate of Occupancy was issued on January
17, 2018
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e. Incorrect; Clerk’s assertion that “State licensing from the Department of Business and
Professional Regulation, applied for on or about January 19, 2018, was subsequently
approved on February 7, 2018.”
EII’s Response: On December 13, 14, 20, and 22, 2017; January 19, 2018; February 1
and 7, 2018, their email communications with Federal, State regulatory partners
regarding the licensing process. On February 7, 2018, the license was approved and the
inspection was scheduled for February 10, 2018. On February 10, 2018, The Culinary
Accelerator @ Immokalee was granted their license from the State of Florida.
County Management Response: Management disagrees with and disputes this finding.
In a conference call with Florida Department of Economic Opportunity (DEO)
representatives, which was held on October 5, 2017, at the request of the Clerk, Mr.
Brock was advised on four separate occasions by Greg Britton, Division Director,
Strategic Business Development, Adam Callaway, Esq, and other DEO representatives
that EII had met “the minimum performance standards” for Grant Agreement #SL025
and were therefore, in compliance with the grant terms and conditions. Refusing to
accept these statements the Clerk proceeded to badger the DEO’s legal counsel
questioning his understanding of Florida law, asking him how long he had been a
lawyer, and demanding written assurances for which the DEO had no requirement to
provide. Despite this unprofessional and aggressive line of questioning by the Clerk,
the DEO through its representatives continued to maintain the sufficiency of the grant
documentation. Most importantly, neither EII nor the County Staff have been
advised by the grantor agency of a single finding of grant non-compliance with
respect to award of either DEO Agreement SL007 or SL025.
The first paragraph under the heading “Lessons Learned from the Lost Funding from
Grant #SL007” is inaccurate and misleading. The following facts are germane:
A critical component of the accelerator development process was obtaining a
$2,500,000 State of Florida appropriation (FY 2014/2015 Specific Appropriation
2256A), which was signed by the Governor in June, 2014. The original DEO Grant
Agreement approval process was protracted as result of implementation of new state
grant policy requirements. Even though the money was appropriated and approved
by the Governor a lengthy grant agreement was required. As the completion of a
grant agreement lingered an updated construction completion estimate for the
culinary accelerator in Immokalee was required.
The appropriation was memorialized in Grant Agreement SL007 with the DEO and
approved by the BCC on November 18, 2014. There was a further delay with an
advance of funds and grant funding did not commence until approximately January
1, 2015. Grant funding terminated at the end of the State’s fiscal year on June 30,
2015. Unfortunately, with the delayed start to grant funding only $723,525.51 (29
percent) of the appropriated $2,500,000 was spent.
The delay in finalizing Grant Agreement SL007 prompted the County to propose
adjustments to the DEO Project schedules and also to seek an extension of the
legislative funding appropriations into the State Fiscal Year 2016. The re-
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appropriation of remaining funds was approved by the Florida legislature but, was
vetoed by the Governor.
Recommendation: Management disagrees with the Internal Auditor’s
recommendations.
2. Finding 2: Irregularities found in solicitation 17-7167 for the procurement of the Kitchen
Equipment for the Florida Culinary Accelerator @ Immokalee.
Response from the Procurement Services Division. “Procurement acknowledges that
solicitation 17-7167 for the procurement of the kitchen equipment for the Florida Culinary
Accelerator in Immokalee was advertised on May 26, 2017, with a due date of June 9, 2017.
This conflicts with the dates stated in the internal audit, which indicates a May 23, 2017,
advertisement date.
The condensed advertising period of 14 days was at the request of the Division to meet a
pending grant deadline.
The solicitation was advertised on the County’s prior bid platform hosted by Vision Internet.
This platform does not have a commodity code which specifically targets the manufacturing,
distribution, and sales of commercial kitchen and/or food preparation equipment.
The audit suggests that commodity code 39300 – Food Service Distributors/Products should
have been utilized in advertising this opportunity. This commodity code specifically targets
the sale and distribution of food. Commercial restaurant and/or kitchen equipment are not
included in this commodity code.
In addition to the solicitation being publicly available, it was also brought to the attention of
firms under three commodity codes: 28500 - Electrical Equipment; 42000 - Furniture,
General; and 91007 - Millwork and Cabinetry. These codes were included because it was
our understanding that the facility was being remodeled and the kitchen equipment would be
a part of the remodel.
A total of 32 vendors downloaded the specifications from the bid platform. There was one
responsive and responsible bid received from W.H. Reynolds TriMark Strategic, which was
awarded the bid.
At the time of advertisement, the solicitation contained the following language:
“On May 10, 2016, the BCC approved a $112,536.00 USDA Rural Business Development
Grant (RBDG) grant application for the Florida Culinary Accelerator at Immokalee
(Immokalee Accelerator) equipment purchases.” This was contained within the background
statement, which further articulated various and general funding sources from the State of
Florida, USDA, and the Economic Development Administration.”
County Management Response: Management disagrees with and disputes this finding.
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On July 12, 2016, the BCC approved resolution 2016-160 authorizing the County
Manager to apply for the USDA RBDG for up to $200,000 to equip the FCA@I,
culinary accelerator, and to execute related documents to effectuate receipt of the grant.
After review of Collier County’s RBDG application, the USDA awarded $112,536 to
equip the Florida Culinary Accelerator @ Immokalee.
On May 26, 2017, the Procurement Services Division released notices of invitation to
Bid No 17-7167 to 887 vendors for ‘Florida Culinary Accelerator at Immokalee Kitchen
Equipment Procurement’. Thirty-Two (32) solicitation packages were downloaded, and
one (1) bid was received on June 9, 2017, from Trimark Strategic Equipment LLC. Staff
reviewed the single submittal and the BCC approved the Award to Trimark strategic
equipment LLC (the vendor) on June 27, 2017 on agenda item 16.F.3. The Bid award of
County Contract 17-7167 for equipment procurement and installation for the FCA@I
was funded by $112,536 of USDA RBDG grant funds, combined with $111,424 in
matching funds provided by the EII, a total of $223,960.
Trimark Strategic Equipment LLC installed all the procured items and equipment and
submitted Invoice 2935165 on November 30, 2017, which was submitted to the Clerk’s
SAP (goods receipt module. “MIGO”) for payment on December 29, 2017.
To date, no payment has been made under the aforementioned PO by the Clerk of Courts
Finance Department. Although County Staff and EII have worked closely with the Clerk
of Courts’ Finance Department, they indicated no payment will be forthcoming. County
Staff has approved payment in accordance with the terms and conditions of the PO.
The Clerk’s failure to pay Trimark Strategic Equipment LLC jeopardizes the receipt of
awarded federal and state grants earmarked for this purchase. Under the terms of the
already once extended grant agreement, reimbursement from the USDA RBDG must
occur before June 30, 2018. The Clerk’s refusal to pay this legal invoice will cause the
following burden to be placed upon the taxpayers of Collier County: 1) a $223,960
liability; 2) loss of $112,536 in federal USDA dollars; 3) loss of $111,424 in state DEO
dollars; 4) exposure to a lawsuit from Trimark Strategic Equipment LLC; 4) loss of
another vendor willing to do business with Collier County; 6) diminished opportunity to
obtain future DEO grant dollars; 7) and diminished opportunity to obtain future USDA
grant dollars.
Recommendation: Management disagrees with the Internal Auditor’s recommendations.
Procurement Services Division: “In response to the recommendation that law enforcement
be consulted concerning possible bid rigging; the solicitation was publicly advertised, there
were 32 vendors that downloaded the specifications, and no barrier to entry existed. In
conclusion, we find no evidence of either bid rigging, a barrier to entry, or collusion.”
Action Plan: None.
3. Finding 3. EII and the County Staff misrepresented Grant #SL007 Deliverables to DEO and
the BCC on the Annual Accomplishment Reports.
EII’s Response:
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Incorrect; Clerk’s assertion that “EII and Collier County reported unsubstantiated numbers
regarding Jobs Created and Capital Investment & Expenditures to the Grantor Agency,
DEO, for Grant #SL007 in the Annual Report covering Fiscal Year 2016 and Fiscal Year
2017.”
EII’s Response: Quarterly numbers are reported and then, at the end of the year, an annual
update is prepared as shown in this document. For FY 2016 and FY 2017 EII staff worked
closely with County Staff and the Participants in the Accelerator. Jobs and investment
dollars are reported by the participants with signed attestations. EII does not validate the
jobs as grant #SL007 was awarded to the County. County Staff validates these numbers. EII
also would like to thank the Clerk’s team for working closely with EII staff to clean up the
master spreadsheet document that is used today for participant tracking.
Management’s Response: Management disagrees with and disputes this finding.
There is no merit to this finding. On February 13, 2018, an amendment to DEO
Agreement SL007, was approved by the BCC and subsequently fully executed, see
attached Exhibit #1. The County met its positive return of benefit to the State of Florida
based on venture investment agreed in the amendment to Agreement SL007. The
venture investment documentation was reviewed and accepted by the DEO as
memorialized in the approved amendment.
EII is not a party to DEO Agreement SL007.
All reports to the DEO, as required by Agreement SL007, are reviewed by EII, County
Staff, including Grants Compliance Staff, and the DEO. There have not been any
negative reports or concerns raised except in this internal audit.
Recommendation: Management disagrees with the Internal Auditor’s recommendations.
EII has contractual duties under its agreement with Collier County related to the collection
and reporting of information which is properly overseen and monitored by County Staff.
Action Plan: As agreed in DEO Agreement SL007, continue monitoring and reporting to
the DEO.
4. Finding 4. The County Staff failed to provide oversight and fiscal controls to protect taxpayer
funds regarding EII, creating an environment that fosters improper salary payments, improper
travel expenditures, reduced revenues, undocumented “bartering” transactions, unbudgeted
executive bonuses, increased financial liabilities, and jeopardizes the sustainability of both
Naples and Immokalee accelerator projects.
Management’s Response: Management disagrees with and disputes this finding.
This finding mischaracterizes BCC-approved contractual terms with EII.
County Staff and EII have worked diligently to improve the quality of reports, policies
and procedures, and internal controls.
The FY 2017 BCC-approved Agreement with EII did not explicitly cover all the
personnel expenses, as currently found in the FY 2018 Agreement. The intent was for
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business income from accelerator operations to play a larger role in the accelerator
program. The BCC-approved FY 2018 Agreement, as well as all previous agreements,
create the public-private partnership which allows for the highly-qualified community
businessmen and women on EII’s Board of Directors to establish salaries and benefits in
order to recruit and retain staff and utilize program income and private contributions in
furtherance of the business plan. The Clerk is very familiar with the policies created by
these contractual terms, but refuses to accept them.
The Clerk’s comments how private contributions were expended on bonuses is
misplaced as the BCC’s approved agreement provides EII with the flexibility to spend
private contributions and business income in furtherance of operations.
Since the inception of the public private partnership with EII the Clerk has spent
countless hours investigating “personnel expenses.” In 2016 the Clerk refused to pay
cell phone and travel expenses and questioned if they were legitimate “personnel
expenses” in running a complex economic development operation. In FY 2017 County
Staff sought to resolve this issue by having the BCC approve Article IV of the FY 2017
Agreement, between Collier County and EII. That amendment clearly states that “It is
intended that personnel expenses, [are] to be construed as broadly as possible to ensure
[the] maintenance of staffing requirements” [emphasis added]. Despite the BCC’s
acceptance and approval of this language, the Clerk still spends untold hours and
numerous meetings seeking to deny 401k costs as personnel expenses.
The Clerk’s assertion under the heading “Unauthorized Matching 401k Contribution” is
unfounded. The contribution to a 401k is in line with compensation practices in the
industry, a 401k is a needed benefit to hire and retain talented people. The FY 2018 the
County specifically authorizes 401k contributions.
Since the inception of the public-private partnership, the Agreements have delegated the
negotiation of participant rates to the administrative entity (EII), which is best positioned
to assist the companies seeking to grow in Collier County. The annual approval of the
Agreement with EII which delegates the authority to discount should be the final
authority on the subject matter.
The section with the header “Undocumented ‘Bartering’ Transactions” mischaracterizes
and fails to recognize the terms of the BCC’s approved Agreement with EII related to
the County’s accelerator program, which allows EII to determine fees for participants.
The section with the header “Increased Financial Liability” fails to provide any facts to
support the misstatements.
County Staff on its own volition, and in an effort to expedite the Clerk’s review, was
forced to go to extreme measures including the following: 1) make hard copies of
payment requests for hand delivery to the Clerk; 2) make digital PDFs of payment
requests; 3) conduct follow up calls to Clerk staff to move requests through the Clerk’s
SAP system because the Clerk has no system for following Action’s Items in its
accounting system; 4) provide subject matter expertise to the Clerk’s staff in tax,
business and accounting systems; and 5) when it appeared that EII would be forced to
shut down, County Staff initiated a BCC agenda item to seek the guidance of the BCC in
order to save the County’s Accelerator program.
EII’s Response.
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Incorrect; Clerk’s assertions that “in the audit report that EII made improper payments to
the staff of EII”.
EII’s Response: The FY 2017 contract between EII and the County clearly states that “It is
intended that the personnel expenses, to be construed as broadly as possible to ensure
maintenance of staff requirements….” It does not exclude bonuses; travel allowances and
401K savings plan matching payments. During the year it was determined by the EII Board
of Directors (Board) and the Collier County Business & Economic Development Division
(County Staff) that it was in the best interest of EII to rightfully provide those compensation
benefits to the staff of EII. In today’s low unemployment environment, it is a necessary
business requirement to provide a full array of compensation benefits to attract and retain
competent staff. The Clerk understands this and provides this benefit (457k) to his
employees.
Incorrect; Clerk’s assertion that “Unbudgeted Bonuses and the Audit Report’s contention
that $1,527.96 is unaccounted”.
EII’s response: The auditors came up with that amount by taking the actual amount paid to
the staff for bonuses of $20,112.05 and subtracting the amount of bonuses that have been
granted by the Board which remains unpaid of $18,584.09. These two numbers are mutually
exclusive and subtracting one from the other is invalid. Please refer to the charts on page 34
of the audit report. Therefore, this must be removed from the report.
Incorrect; Clerk’s assertion that “$20,112.05 was paid from Business Income while there is
no entry under private donations.”
EII’s Response: Again as the scope is a range from inception until sometime in February
2018, it is hard to determine which FY or period this statement is referenced. In order to
facilitate cash flow transfer, the balance sheet notes a “Due to” and “Due From.”
Incorrect; Clerk’s assertion that “…EII is unable to account for bonus payments made
during Fiscal year 2017.”
EII’s Response: Based on the TriNet payroll invoices, which the Clerk’s Office has, one
can clearly see that EII has accounted for the bonus payments. The audit comments and
table need to be removed from the report. Here is the analysis the Clerk’s auditors should
have done to avoid making false accusations.
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We are pleased to see that the audit report duly notes that the total payments by the County
for EII compensation did not exceed the contracted amount of $309,800 which is the direct
result of the COO ensuring that this did not happen.
Incorrect; Clerk’s assertion that “the audit report makes mention of the 2.9% salary
increase in the FY 2018 budget is not understood.
EII’s Response: It was properly agreed with the County and is clearly and transparently
disclosed in the County contract in Exhibit B2. Therefore, the Clerk’s inclusion of this
should be eliminated because it’s irrelevant.
Incorrect; Clerk’s assertion that “…EII has failed to establish reserve funds pursuant to the
Agreement with Collier County.” is without merit.
EII’s Response: The contract clearly states “…. Business Income may be used or held in
reserve until such time as it is required or carried forward to the Project 's next fiscal year.
Ell 's establishment of a Reserve Fund to meet its future cash flow and capital requirements
is authorized.” There is no time-certain for a reserve, nor is it mandatory. Therefore, the
comments by the Clerk must be removed from the report.
We are also glad to see the Clerk has acknowledged that the various personnel compensation
components like 401K company match and other benefits are now clearly delineated in the
agreement. This excellent result was due to robust, constructive dialogue between EII and
County Staff to ensure that possible vague items in the previous agreement were given more
clarity.
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Incorrect; Clerk’s assertion, “As noted above the Clerk’s repeated assertion of an
unaccounted amount of $1,527.96 on page 33 of the report in reference to Table 4.”
EII’s Response: The inappropriate calculation by the audit staff. That comment, Table 4,
and Exhibits 4-D and 4-E must be removed from the report as inaccurate.
Incorrect; Clerk’s assertion that “Travel Allowances as Additional Executive
Compensation regarding W-2s and 1099.”
EII’s Response: Noack & Company, Janet Noack, CPA was not totally correct in stating
the Travel Allowances have to be reported to the IRS via W-2’s. This has properly been
done via Form 1099’s from EII and not W-2’s as indicated because they are not employees
of EII.
Incorrect; Clerk’s assertion that “As noted above the agreement with the County clearly
allowed broad interpretation when it came to personnel costs so on page 37 and Exhibits 4-H
and 4-I EII Response.”
EII’s Response: This should be excluded from the Audit Report. The County paid no more
than the contracted amount for compensation.
Incorrect; Clerk’s assertion that Increased Financials Liabilities and that EII does not
submit timely reimbursement requests which has caused EII to access a bank line of credit
for periodic cash short falls”.
EII’s Response: EII submits payment requests on a timely basis to the County, but the
Clerk’s convoluted and inconsistent payment processes has resulted in protracted time
periods for reimbursement forcing EII to draw down on its line of credit to make the payroll
payments. Otherwise the staff would have to be furloughed resulting in great disruption.
Incorrect; Clerks assertion, that “that Dr. Goodman and COO Jennifer Pellechio do not
have financial/accounting/bookkeeping backgrounds and that this function is not in their job
descriptions.
EII’s Response: This is not accurate, Dr. Goodman has extensive management experience
and Jennifer Pellechio has a MBA with years of financial experience.
Incorrect; Clerk’s assertion that “The Audit Report’s conclusions starting on page 38 of the
report are all without merit and represent a far-reaching attempt at characterizing EII as an
out of control organization. It’s contention that the internal controls are “woeful” is without
merit.”
EII’s Response: With only three staff members the basic internal control of segregation of
duties is accomplished as best as possible and it is further augmented by the use of an
independent CPA firm, Noack & Company, to do the accounting and financial statement
preparation. All the reports are sent to the County monthly and are very clear and
transparent. In addition, EII’s accounts are audited annually by another CPA firm, Tuscan
& Company, who gave EII a clean audit report opinion for FY 2016. The audit for FY 2017
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is currently in its final stages and all indications are that it will likewise produce a clean
opinion.
Recommendation: Management disagrees with the Internal Auditor’s recommendations.
Action Plan: None.
5. Finding 5. EII, with the consent of the County Staff, has discounted their Program Income with
“promotional” rents while claiming cash flow concerns and not meeting revenue targets.
EII’s response:
Incorrect; Clerk’s assertions regarding discounted program incomes.
EII’s Response: The promotional discounts EII has had to offer to keep occupancy at an
acceptable level is the result of market conditions. Prices, rents, etc. are a function of the
marketplace. Markets change. Markets in Florida are greatly impacted b y numerous factors
such as seasonality, the national economy, and even Hurricanes. When necessary and
appropriate, discounts are implemented to help the goal of supporting local entrepreneurs
and recruiting those out of the area to create a vibrant soft-landing economy. This was a
business decision approved by the EII’s Board. Discounts are not the cause of periodic cash
issues. Delayed reimbursement by the Clerk is the root cause of the periodic cash issues.
EII is a public/private collaboration and EII looks forward to this collaboration and a more
expedited release of payroll funds.
Incorrect; Clerks assertion regarding Table 5.
EII’s Response: Table 5 contains errors and inaccurate information and cannot be relied
upon.
Management’s Response: Management disagrees with and disputes this finding.
Since the inception of the public-private partnership the BCC’s approved Agreements have
delegated the negotiation of participant rates to EII.
Recommendation: Management disagrees with the Internal Auditor’s recommendations.
Action Plan: None.
6. Finding 6: EII failed to meet the Business Income and Private Contributions targets in FY 2017
pursuant to the Agreement between the BCC and EII.
Incorrect; Clerk’s assertion regarding private in-kind contributions.
EII’s Response: The FY2017 agreement allowed the $50,000 to include in-kind per
contributions.
Table 6 on page 42 of the Audit Report is incorrect. The auditor has misinterpreted the FY
2017 contract. The contract required EII to generate at least $115,200 of Business Income in
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FY 2017 but the number included in Table 6 is Net Business Income after expenses which is
incorrect. In fact, Business Income after normal deductions for Bad Debts and Rent
Promotions for FY 2017 actually amounted to $140,609 as compared with the incorrect
amount in Table 6 of $23,564. In addition, the Contract indicated EII was to raise Private
Contributions in FY 2017 which brought the total to $165,200 of internally generated
funding. In FY 2017 Private Donations in cash reached $37,523 and brought total internally
generated funding to $178,132, or 7.8% higher than indicated in the Contract. The Audit
Report incorrectly shows Private Donations and Total Funding were only $20,256 and
$43,820, respectively.
Since EII more than exceeded the total Contract requirement the whole finding must be
removed because it is completely incorrect.
In addition, Table 7 on page 42 is also incorrect. That table states Private-in-Kind (PIK)
donations were $92,955, however, PIK in FY 2017 amounted to $118,491. Therefore,
another error must be removed from the report.
With regards to the Revenue Reuse Plan, despite attempts by EII to prepare it properly the
County was unable to provide guidance on how to do so. It was a badly crafted document
that did now work as intended. Therefore, the Clerk’s assertion that EII failed to produce
accurate reports in unfounded.
Management’s Response: Management disagrees with the finding.
The Revenue Reuse Plan is a tracking and monitoring tool used by County Staff to
evaluate the County’s accelerator program.
The section titled “Budget Amendment” should be stricken or rewritten to accurately
state supported facts.
Recommendation: Management disagrees with the Internal Auditor’s recommendations.
Action Plan: None.
7. Finding 7: EII Failed to meet their revenue target for the first quarter of FY 18 based on
continued rent promotions, un-sustained participation, failure to collect budgeted private
contributions, and failure to open the Immokalee facility.
EII’s Response.
Incorrect; Clerk’s assertion regarding private in-kind contributions.
EII’s Response: The FY2017 agreement allowed the $50,000 to include in-kind personal
contributions.
Table 6 on page 42 of the Internal Audit Report is incorrect. The auditor has misinterpreted
the FY 2017 contract. The contract required EII to generate at least $115,200 of Business
Income in FY 2017 but the number included in Table 6 is Net Business Income after
expenses which is incorrect. In fact, Business Income after normal deductions for Bad
Debts and Rent Promotions for FY 2017 actually amounted to $140,609 as compared with
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the incorrect amount in Table 6 of $23,564. In addition, the Contract indicated EII was to
raise Private Contributions in FY 2017 which brought the total to $165,200 of internally
generated funding. In FY 2017 Private Donations in cash reached $37,523 and brought total
internally generated funding to $178,132, or 7.8% higher than indicated in the Contract.
The Audit Report incorrectly shows Private Donations and Total Funding were only $20,256
and $43,820, respectively.
Since EII more than exceeded the total Contract requirement the whole finding must be
removed because it is completely incorrect.
In addition, Table 7 on page 42 is also incorrect. That table states Private-in-Kind (PIK)
donations were $92,955, however, PIK in FY 2017 amounted to $118,491. Therefore,
another error must be removed from the report.
With regards to the Revenue Reuse Plan, it is a monitoring tool provided to County Staff.
The Clerk’s assertion that EII failed to produce accurate reports in unfounded.
Please see the below analysis of the variance in Net Business Income versus the Budget for
the first quarter of FY 2018. We still strongly disagree with the Clerk’s method of
calendarizing budget which was clearly articulated to the Chief Deputy Clerk on January 2,
2018, and outlined in Exhibit 7-A on page 45 of the Audit Report.
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The Audit Report is correct in pointing out that EII did not attain its budget goal of $20,000
in Private Contributions in Q1 FY 2018 which was explained previously to the County as a
timing issue. To achieve a fair and balanced portrayal of the situation, the Clerk should
have reported that EII achieved $25,000 in the subsequent month of January 2018 and was,
therefore, ahead of plan. In fact, the Private Contributions through February 2018 total
$45,504 versus a budget of $20,000. It’s up to the Clerk to determine if he wants to
continue to make these remarks but he must present a fair and balanced view as well. The
Clerks comment of “Additionally, EII does not discuss their failure to collect the budget
Private Contributions.” is without merit and needs to be removed from the report.
The Audit Report correctly indicates that EII Immokalee location did not produce net
revenue in Q1 FY 2018 ($2,425) because of a failure to get the Culinary component open.
This was not a failure of effort by EII staff, but is attributable to unforeseen issues with the
County’s building (subdividing a building and then reconnecting the fire alarm systems).
Given the nature and complexity of the program and systems in the EII half of the building,
EII has always placed a high priority of the safety of the facility, and on “doing it right”
rather than doing it fast. The public’s safety has and will remain our paramount concern.
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What does need to change and has changed thanks to the involvement of the County
Manager and the BCC is greater streamlining in the County reimbursement practices,
allowing EII to report directly to the County Staff and Clerk’s office simultaneously. EII
believes further cooperation in the future between the County Staff and Clerk’s staff will
further efficiencies, avoid duplication of effort, and result in faster reimbursements and
therefore lessen cash flow burdens on those who do business or partnerships with Collier
County.
Recommendation: Management disagrees with the Internal Auditor’s recommendations.
Action Plan: None.
8. Finding 8: EII, County Staff, and the owners of Kraft Office Center, LLC have failed to correct
a zoning violation that has hindered accelerator participants from registering as businesses and
obtaining required business tax receipts in Collier County.
Management’s Response: Management disagrees with and disputes the finding.
The opinion of the County’s Zoning Director is attached as Exhibit #2.
Action Plan: County staff will facilitate discussions with the land owner regarding efforts
to update the PUD Master Plan
9. Finding 9: EII failed to timely and accurately file IRS Form 990 tax returns, thereby
jeopardizing their tax-exempt status.
EII’s Response.
First to be clear, EII has filed its Form 990s on time using the IRS granted filing extensions.
We know the Clerk’s Office feels using the legally permissible time extensions equates to a
late filing, but we disagree with this and so does our CPA firm, Tuscan & Company. In fact,
in a letter dated January 12, 2018, to Jennifer Pellechio from Tuscan & Company they
advised:
This letter was provided to the Clerk’s Office by Ms. Pellechio on February 12, 2018, but
the Clerk’s audit staff choose to ignore the expert advice.
The Audit Report is correct that the Form 990 is missing the number of average weekly
hours for Officers, Directors, Trustees, Key Employees, Highest Compensated Employees
and Independent Contractors on Form 990, Part VII, Column B. The CPA firm of Noack &
Company completed the Form 990 for EII and EII relied on their expertise. Tuscan &
Company will be doing the Form 990 for FY 2017. In addition, EII will inquire whether an
amended Form 990 is needed for FY 2016.
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As noted above, EII and its accounting firm, Tuscan & Company, disagree with the Clerk’s
Office assertion that using legally permissible IRS extensions to file returns means an
untimely, or late, filing. The IRS is the authority on permissible filings and authorized
extensions.
The rent payments to Kraft Office Center LLC were made by the County, but it seems those
payments should have been reported on the EII Form 990 so EII will inquire whether an
amendment is required.
Management’s Response: Management disagrees with and disputes the finding.
Recommendation: Management disagrees with the Internal Auditor’s recommendations.
Action Plan: None.
10. Finding 10: EII has failed to follow the business plan approved by the BCC on May 13, 2014.
EII’s Response.
EII welcomes an independent and impartial professional review of its program performance
and achievements. EII has followed the business plan, with recognition by the County
administration and BCC members, that it was only a plan - a starting point on which to build
and evolve the program as opportunities allowed.
EII is proud that it has worked closely with the County administration, our state level
legislative leaders, our local and state-wide universities, and dozens of local business and
community and SWFL regional organizations to constantly grow entrepreneurial
opportunities. Two state grants (totaling $4.5 M), one USDA grant, and one EDA grant
(that was refused due to a Governor’s veto of the matching funds) have all been
collaborative efforts as the program has evolved.
EII follows up on every opportunity and policy direction it receives from those to whom it
directly reports on a day-to-day basis. EII is in constant contact with County Staff on a daily,
if not an hourly basis. Phone records, calendar meetings, as well as BCC interactions with
individual BCC members all validate the close working relationship that exists as a result of
this partnership.
Recommendation: Management disagrees with the Internal Auditor’s recommendations.
Action Plan: None.
11. Finding 11. EII’s revised business plan fails to address deficiencies.
EII’s Response.
Incorrect; Clerk’s assertion that “The revised business plan was submitted to select
individuals on or about January 3, 2018.
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EII’s Response: EII submitted a draft business plan on December 22, 2017, which was due
on or before December 31, 2017, per the contract. In addition, the final Business Plan was
submitted on January 3, 2018, which was due before the second BCC meeting in January.
But we do want to thank the Clerk for pointing out the typographical error concerning the
date on the cover letter.
Incorrect; Clerk’s assertion that “the revised business plan fails to address deficiencies”
EII’s Response: EII has made verbal and written reports to the BCC, County Manager, and
County Staff, and has worked closely with stakeholders throughout the program’s inception,
as required by the contract.
Those reports have been accepted and approved by County administration, and the
recognition of EII’s continual success in meeting its goals has resulted in further County
investment.
EII has made continual adjustments to its business plan on an operational level as State and
Federal opportunities became available. All programmatic changes and initiatives were fully
vetted and discussed with the County prior to implementation and execution.
As requested by the BCC at the October 24, 2017, meeting, EII updated its business plan
and submitted it to the County on January 3, 2018. This update was developed in
conjunction with County Staff and has met with its approval.
EII is continually alarmed by comments in the audit that are clearly questions concerning
economic development best practices and are not particularly well-informed. The focus of
an internal audit should be on the efficacy of internal controls. The unwillingness to learn
day-to-day operations is troubling and undermines the credibility of this audit.
The Draft Audit provides selective and self-serving examples of other accelerator/co-
working operations. For example, the audit report contains the price list of Venture X which
has an operation in Naples. On that list, it shows a Community Membership is $40 per
month, but the auditors failed to give a description of what this type of membership
comprised. Here is the description:
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Please note that the Community Membership only gives the participant one day of access
per month with each additional day of access costing $25 per day. In addition, they need to
pay to use a conference room. EII’s co-working comparable space option of $99 per month
is for unlimited access and free use of the conference room. There are more examples of
this misleading information, but it is not necessary to expand the length of our response.
Again, this is another example of the Audit Staff not presenting a fair and objective
presentation of the issues.
Action Plan: None.
12. Finding 12. County Staff failed to monitor and execute BCC approved 2017 and 2018 leases
and allowed over $1 Million dollars of improvements to a county airport property without a
proper lease. Additionally, $37,522.80 in rents remain uncollected and unpaid as of Feb 26,
2018.
Management’s Response: Management disagrees with the finding.
Collier County benefitted from improvements of approximately $1.3 million without
having to lower the rent or grant other lease concessions.
EII installed the fire alarm system throughout the entire building including next door in
the shutter manufacturers unit at no cost to the County.
EII installed a high-quality dumpster enclosure which benefits the County’s complex.
EII’s Response.
The Audit Report’s assertion that EII’s expenditure of over $1 million in leasehold
improvements was improper due to the lack of a lease with the County is bizarre. EII was
guided by the County to make the expenditures to keep the project moving. Getting the lease
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in place on time is out of EII’s control because of internal County issues. In addition, lease
payments are now current. The Audit Report’s contention that EII in some way failed to pay
$37,522.80 in rent has no basis in fact.
Recommendation: Management disagrees with the Internal Auditor’s recommendations.
Action Plan: None.
13. Finding 13. Mismanagement of Woodstock’s Micro-Market
EII’s Response.
Woodstock’s market is a pioneer of the self-service micro-market. Its purpose is to serve as
an outlet for locally crafted products, especially those developed and perfected at The
Florida Culinary Accelerator @ Immokalee. It continues to be a prototype where different
products and new consumer technology such as express payments systems can be tested, a
first for Collier County.
EII appreciates the Clerk’s visits and photography, and for noting the Woodstock’s minor
procedural errors, which have now been remedied. Procedures are now in place to ensure
there won’t be any reoccurrence.
Management’s Response: Management disagrees with the finding.
Recommendation: Management disagrees with the Internal Auditor’s recommendations.
Action Plan: None.
14. Finding 14. Multiple potential conflicts of interest exist within EII’s organization.
Management’s Response: Management disagrees with the finding.
The JP Consulting Team, LLC procurement was not self-dealing.
Fred Pezeshkan is not EII’s president. He is the chairman of the Board, a non-executive
director, and therefore, not an employee.
Regarding EII’s Chairman as the landlord having a conflict of interest, the Kraft Office
LLC and County lease were negotiated and entered into before he became a member of
EII’s Board. Ken O’Leary was the Chair and Joe Paterno was Vice Cahir of EII at the
time the lease was executed. Mr Pezeshkan’s relationship and transactions have been
fully disclosed and transparent. Importantly, the underlying transaction was at arm’s
length.
Exhibit 14-A, is another attempt to mislead by providing a partial information to support
a narrative. The full email should be provided. County Staff requested Exhibit 14-A’s
removal.
The Clerk inexplicably fails to read the Florida Commission on Ethics letter which
authorized Elizabeth Walkers work on behalf of Collier County. Ms. Walker facilitated
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amendment to DEO Agreement SL007 in a cost-effective manner. This finding must be
stricken and Ms. Walker needs paid as soon as possible.
The fact that Hyperteam, an accelerator participant, brings to Collier County world-class
IT capabilities is a testament to the success of the County’s accelerator program. This is
a perfect example of the accelerator program doing exactly what the Commissioners
intended. The Clerk’s desire to exclude Hyperteam from doing business with Collier
County for the mere fact it participated in the accelerator program is counterproductive.
The Plug Smart team worked very hard to establish itself in Collier County; therefore, it
comes as no surprise that they would be successful in obtaining work in Collier County.
There is no evidence that there was favoritism in County Procurement. County Staff are
unable to find any indication that Mr. Housh was promised additional County contracts
because of accelerator participation.
EII’s Response.
Incorrect; Clerk’s assertion that “Self-Dealing.”
EII’s Response: These two procurements in FY16 and FY17 respectively were $425.00
and $425.00 and were made with unrestricted funds; grant funds were not used. The
procurements under the policy fell into Category 1 and followed the procedures for
obtaining the services provided.
Thank you for bringing this to our attention, and this has already been addressed with our
conflict of interest policy that went into February 21, 2018.
Incorrect; Clerk’s assertion regarding EII’s Chairman as the landlord being a conflict of
interest, we’re sure you understand that many if not most companies and organizations have
relationships and transactions with related parties. However, if those relationships and
transactions are fully disclosed and transparent and the transfers of value are at arm’s length
there should not be an issue.
Two out of the 70+ firms that have been clients of the Accelerator since inception have
received funds for services rendered by Collier County: Hyperteam and Juice Technologies.
To the best of our knowledge, since EII was not involved in those procurements, we believe
both companies used the prescribed County procurement procedures to win those awards.
EII is not aware of any prohibition in its County contract that prohibits Accelerator clients
from competing for County contracts. Nor would such a prohibition make sense.
Recommendation: Management disagrees with the Internal Auditor’s recommendations.
Action Plan: None.
15. Finding 15. EII has failed to become a financially viable business entity and shows little or no
progress in that direction.
EII’s Response.
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As stated previously, EII is a Public/Private collaboration for the benefit of Collier County
residents. Without the funding provided by the County it would not be able to continue in
business. As delineated in the approved Financial Plan included in the current executed
contract with the Collier County it is expected that EII will need declining public funds
going forward. However, in the short term those funds are needed to achieve the hopes and
aspirations of the County for the Naples and Immokalee accelerators.
EII is alarmed by an inherent systemic failure of this audit to ignore the benefits received by
Collier County and its citizens through numerous events, companies, consultations that have
taken place through EII efforts and that of its Board. These benefits have been extensively
documented both in the local and regional media, in testimony before the BCC, and in all of
the quarterly and yearly reports made to the County, as expressed in our annual reports.
Management’s Response: Management disagrees with the finding.
Recommendation: Management disagrees with the Internal Auditor’s recommendations.
Action Plan: None.
16. Finding 16. EII and County Staff have failed to meet contract and facility deliverables during
Fiscal Year 2018.
Management’s Response: Management disagrees with the finding.
The Clerk fails to identify a contract term or deliverable that has not been met. In fact,
all deliverables have been completed as contracted.
The FCA@I facility has been open and this fact should be noted in the Draft Internal
Audit.
Had the Clerk reimbursed EII in a timely manner between March and October 2017, EII
would have been better positioned with cash flow to overcome delays in facility
preparation and Hurricane Irma.
EII’s Response.
As noted previously, the late opening of Immokalee has not been due to a lack of effort and
perseverance by EII. The County facility had numerous fire and safety issues due to the
complexity of dividing the facility into two units, as well as the disruption of the normal
course of business due to Hurricane Irma.
EII is extremely diligent in submitting payment requests on a timely basis to Collier County,
however, it relies on County Staff and the Clerk’s Office for the review and approval of
those payments. EII has recommended to the Clerk, that a staff member from their office be
sent to EII once a week or once every other week to work on any issues that they see or
foresee, so that questions or concerns they have can be mitigated in a professional manner.
Recommendation: Management disagrees with the Internal Auditor’s recommendations.
Action Plan: None
11.I.3
Packet Pg. 318 Attachment: Management Response - 03.21.18 (5186 : EII Audit Report)
25
17. Finding 17. EII and County Staff made numerous misrepresentations to the BCC, the Clerk,
and the taxpayers.
EII’s Response.
The Audit Report’s misrepresentation of Mr. Fred Krieger’s presentation at the BCC on
November 14, 2017, is without merit and taken out context.
The inclusion of the issues with Florida Kitchen are irrelevant to the audit and must be
excluded.
Regarding the Clerks’ comments on Revenue Reuse Plans and timely filing of Form 990’s
please refer to comments made previously.
The Clerk’s contention that EII has mixed cash and accrual accounting methods in their
budgets and actuals reporting is false. Accrual accounting is used for both processes. The
Clerk’s assertion that EII did this to inflate revenues compared to expenses is also false.
With the amount of time the Clerk’s Office has spent pursuing its audit objectives, surely it
fully understands EII’s “Order to Cash” and “Procure to Pay” business cycles. Clearly those
business cycles are so short, i.e. 30 days or less, it’s impossible to “game” or misrepresent
the financial results materially.
The Audit Report’s implications that Woodstock’s rent has not been recorded is also false.
Here is evidence it was recorded in for FY 2017:
Here is proof rent expense has been recorded in FY 2018:
11.I.3
Packet Pg. 319 Attachment: Management Response - 03.21.18 (5186 : EII Audit Report)
26
Management’s Response: Management disagrees with the finding. There is little or no
support for the assertions presented. What is provided is not factually accurate or taken out
of context.
Recommendation: Management disagrees with the recommendations.
Action Plan: None.
18. Finding 18. County Staff approved over $30,000 in unauthorized and unbudgeted expenditures
on behalf of EII for the Accelerator Projects.
Management’s Response: Management disagrees with the finding.
$1,631.96 for propane, water, and sewer to test the County’s culinary equipment:
There should be no misunderstanding that EII only manages Collier County’s
accelerator program in conjunction with the well-established principles concerning
public-private partnerships.
Collier County procured and owns the equipment in the FCA@I. EII did not have
the budget to buy the propane to test the County’s equipment or to establish the
sanitary water and sewer connection to the County-owned facility.
County Staff did in fact pay $1,631.96 for propane, water, and sewer to test the
County’s equipment from the Office of Business and Economic Development’s
operations account to finalize the County’s $223,960 procurement, which should be
paid by state and federal monies.
$28,900 for purchase of project management software and services, customer
management software and services, and Microsoft Share Point and services:
This was not made on behalf of EII for the County’s accelerator program.
11.I.3
Packet Pg. 320 Attachment: Management Response - 03.21.18 (5186 : EII Audit Report)
27
Collier County maintains a robust economic development program and the IT
services and items outlined in Table 10 represent the FY 2016 purchase of project
management software and services, customer management software and services,
and Microsoft Share Point and services for the Business and Economic Development
Division. To allocate this software and services procurement to only EII or the
accelerator program is incorrect.
Because these are IT purchases, there was two levels of procurement review within
the County (Procurement Services Division and Information Technology Division).
There is no “potential conflict of interest.” At the time of procurement there were
two vendors recognized by the Information Technology Division to be providers of
Share Point services. The Executive Alliance Group Inc., from Stuart, FL,
graciously withdrew from the bidding because it did “not have a Share Point
resource available to address this scope of work.” Please note that Hyperteam was
already an established County vendor prior to the procurement.
The fact that Hyperteam is an accelerator participant and brings to Collier County
world-class IT capabilities is a testament to the success of the County’s accelerator
program. This is a perfect example of the accelerator program doing exactly what
the County Commission intended.
Recommendation: Management disagrees with the Internal Auditor’s recommendations.
Action Plan: None.
19. Finding 19. EII failed to facilitate capital investment
EII’s Response.
EII takes its business clients confidentiality extremely seriously. We do not release
proprietary information, business plans, and other company information without vetting both
the individual requesting the information and letting the company determine what if any
information it wants to release. It is up to the individual company to complete its own due
diligence on parties requesting company investment opportunities. We believe this follows
the best business and confidentiality practices as outlined by INBIA. We do point potential
investors to a wide variety of online, national and local venture and seed funds so that they
may acquire additional information on how to make such investments.
Management’s Response: Management disagrees with the finding.
The “anonymous individual” was engaged by both County and EII staff and policies
related to investors were followed.
County Staff found no correlation between Tim Cartwright being a former director of the
EDC and his relationship with the Adrenaline Fund and this information has no
relevance to the stated “finding.”
Recommendation: Management disagrees with the Internal Auditor’s recommendations.
Action Plan: None.
11.I.3
Packet Pg. 321 Attachment: Management Response - 03.21.18 (5186 : EII Audit Report)
28
20. Finding 20. EII and the County Staff are falsely stating that the Clerk is delaying their
payments, tarnishing their brand, and bringing them to the point of collapse; however, EII and
the County Staff have consistently failed to submit pay requests and contract deliverables in a
timely manner.
Management’s Response: Management disagrees with the finding.
EII’s Response: EII stands by and reiterates its January 8, 2018 letter.
Recommendation: Management disagrees with the Internal Auditor’s recommendations.
Action Plan: None
11.I.3
Packet Pg. 322 Attachment: Management Response - 03.21.18 (5186 : EII Audit Report)
Exhibit l
AGREEMENT NO SL007
_ AMENDMENThl―ERIWO
l l = |。 TO GRANTAGREEnT
` . ■,ISⅧ班 PARTMENT3F肥 ‰c oPPoRTLNW
AND
、, COLLIER COUNTY
On November24,2014,thc State of FIα idに Dcpttment of Economic OppoJは nityぐ `DEO'')and C。llicrCountyぐ `Grantc●")cn“red into Gmllt Agrccment SL007 cthe`■grcemcnf).The Apment was
amended on Orabout May 19,2015(“飾 endment l'')
WIIEREAS,the State appropnated s2,500,0∞tO d“Grantee fOrFY 2014/2015 h Speciflc Appropnatlon
2256A lに はn thc statO Economic Enhancelllent atld Development Tn,st Fund;and
WHEREAS,ofthe S2,50Kl,000 appropnated by the State,thc Cmntce rece市 ed a tomi Of s723,525 51 for
eligible costs.As OfJuno 30,2015,thc balance Ofthe FY 2014/2015 approprlat10n,Sl,776,474.49,was
ullenculllbercd and retumed to thc Statc h ac∞rdance with the tenns and condijons Ofthe Agreement;and
ⅧREAS,based On the amount of ttnds actually receivcd by the Gmntee undcr the Agreement the
Grantee has requested that a prop。口ほonatc prottdOn be applied tO somc of the Grantee's perfonnatlce
rcqulrements;
W硼 田REAS,both P磁 es atte that all Del市 embles set fO劇 b h Attachent l,to the Agreement as
nmended(ScOpc ofworkp,arc hereby d∝med eittr met h■1l or othenise waiveこ and
WIIEREAS,SectiOn Ⅱ A of the Agrcement provides that any amendmenttO the Agrcement shali be ln
wndng and Ыgned by thc PttstheretO.
NOW ΠEREFORE,in consideratton ofthe muluJ∞vcnants and obttgttons sct fOn heret dle receipt
and sufrlcLncy Ofwhに h are hereby acknowiedget tt P面 cs agrce to amcnd t詭 へ姿eIIICnt as fol10ws
l. ScciOn 2 a 2 ofAttachment l,ScOpe ofWOrt is hereby dcleted h its enthty and repla∝dw油
the following:
2 Grantec may tcmporady hvestadvanced inds,butany mtcrcst hcome eamed on such
釉nds shall either be rcmed tO DEO or applied agahst DEO's Obligaion tO pay under
船含淵 鶴繹 「
inte““"paymm Чuttmmt悧 ltt dcemd mけ md
2. S∝ion 2.l ofAtchentl,Scope ofWork,is hereby deleted h its enthw and rcplaced Ⅵl■the
fol19wing:
1■c Grantcc￢嗜∥coninue to submit quartcrly and annual rcpott fOr cach ofthe flve(5)
years fol10wingぬ c cx∝utlon of山 。Agreement in detcrnill“On of progress towarddd市 erables regardmg∞mplance witt the tentls of this Agrccmcnt Such repo由 宙 ∥provde updatcs。■
lme numberand,pcS OfCompanies recmited tO Fbttda that haveし =.atcd high vJueclnploッment Oppo動 匝れLs:
i nc amountoffo"ign dint hvestment gcnemcd by the F呵 ∝tiii nc amount and types ofexPort Opportunities realtt by Flodda Companies;
Page I of3
11.I.4
Packet Pg. 323 Attachment: Exhibit One (5186 : EII Audit Report)
AGREEMENTNO. SLOOT
iv.The number of enhepr€neurs that stay in the region and build their own businesses
as a direct result ofacceleralor activities; and
v.Progress in furErerance with the return of benefits described in Exhibit A to this
Scope of Work.
3. Section 2.h. ofAttachment l, Scope ofWork, is hereby deleted in its entirety and replaced with the
following:
h. The Grantee understands and agrees that it will be required to return to the State of
Florida all firnds received pursuant to this Agreement, less any financial consequences
imposed, ifthe project does not result in a positive retum ofbenefits to the people ofFlorida
(See Exhibit A to this Scope of Work). Criteria for determining a Positive Retum of
Benefits on State Funds arc:
i. Creation of 6l "Job Year Equivalents" as measured by one year of firll time
employment for one job, eligibility defined as accelerator staff, acc€lerator tenant
employees or documented gra.duates of the Acrelerator Network, employment in
Florida. See attsched Exhibit B - Positive Retum of Benefits on State Funds, which
constitutes an IMPLAN projection oftaxes for five years. Certification in the form
ofa written representation and waranty, signed by an officer of the Collier County
Soft Landing Accelerator and Accelerator Affiliared Entity (which is a tenant or
graduate or spinoff ofthe Accelerator Network or any Network Managed Activityr),
which identifies the number of jobs and corresponding "Job Year Equivalents"
represent€d on any of the following: Florida UCT 6 Form, IRS Form 1099, IRS
Schedule K-l (Form 11205 or Form 1065). The certification may also identifu
Florida-based jobs arising fiom joint venture parhers or participants of the
Acceleraror A.ffiliated Entity; OR
ii. Demonstration of $6,000,000 of cumulative private sector capital expenditures or
venture invesfuient resulting from an Accelerator A.ffiliated Entity. A purchase
qualifies as a capital expenditure if it has all of the following: a) tle Accelerator
Affiliate Entity owns or contols the asset which has a measurable future economic
value; b) has an estimated useful life of greater than a minimurn of I 2 months; c) the
item is not used for the resale directly to Accelerator Aftiliated Entity's customers;
and d) the item is not purchased for inventory to be used in production of the
Accelerator Affiliated Entity's products. A capital expenditure is considered an asset
ofthe Accelerator Atrrliated Entity and it is, therefore, capitalized in the financial
records. The following may be submitted as documentation to support capital
expenditures: lntemal R€yenue Service (IRS) Form 4562; and/or Certification in the
form of a written representation and warralty, signed by an officer ofthe Accelerator
Affiliated Entity, identifring and veriffing the capitalized expenditures showing up
on their balance sheet.
As hereby amended, the County has: (l ) met the prorated venture invesbn€nt resulting from
an Accelerator A.ffiliated Entity requirement; (2) exceeded the prorated deliverables; and
(3) has exceeded the local contibution. Accordingly, the only remaining obligation of
Collier County under the Agreement, as amended, shall be continued quarterly and annual
reporting requirements tfuougb June 30, 2019.
rNetwork Managed Activity means that the Ac.elerator Network will also provide
accelerator services to any facility in the SWFL Regional Five County (Collier, Lee,
Charlotte, Glades, Hendry) area, where a contract or memorandum of understanding
Page 2 of3
11.I.4
Packet Pg. 324 Attachment: Exhibit One (5186 : EII Audit Report)
AGREEMENT NO. SLOOT
(MOU) for inoubator/accelerator services has been executed, constituting Network
Managed Activity.
4. In tle event that ihis Amendment is in conflict with any provision in the Agreemen! as previously
amended, the terms of this Amendment will prevail. Except as provided herein, all other terms and
conditions ofthe Agreement, as amended, shall remain in effect.
5. Section I.F.l, within the "l3oveming Laws of the State of Florida" section of the Agre€ment is
hereby incorporated by reference as if fully restated herein.
IN WTNESS I{EREOF, by signature below, the Paiies agree to abide by the terms, conditions, and
provisions ofAgreement SL007, as amended.
Approved asto fo..u alld legaliサ:COllNTY AHORNEY'S OFFICEBOARD OF COUNW
COMN411SS10NERS
Dcp賀 缶lent ofEconomic Oppomnlty
3/ヽ /18
Approved as to fonn and legal suttciency,subJcct
only to島 ∥and prOpcr exccuton by thc Parties
OFFICE OF GENERAL COUNSL
OF ECONOMIC OPPORTUNITY
Approved Date:
Andy Solis,Chamman
Board ofCounty Conlmissioncrs
By:
Jennifer elpedio
六ilニ ユ11
Atest
Page 3 of 3
| ~~~ 1
11.I.4
Packet Pg. 325 Attachment: Exhibit One (5186 : EII Audit Report)
Exhibit 2
KentnerJace
From: BosiMichaelSent: Wednesday, March 21,20'18 8:35AMTo: KentnerJaceSubject RE: HELP
Jace,
From Review of the Cityview Database, I was unable to find any past or existing Notice of Violations for the Pine Ridge
Center PUD (Kraft Office Center). Staff is awarethatthe building located in the southwest corner of the PUD encroaches
within an area designated water management, which will have to be addressed the next request to modify the PUD, but
the uses and square footages contained within the Naples Accelerator and the Kraft Office Center are uses permitted by
thE PUD.
Sincerely,
mike
Mike Bosi, AICP, ZoninB Director, Collier County Growth Management Department
239-252-6819 - Office
239-7 84-7 467 - Cell
Tell us how we are doing by taking our Zoning Division SuNey at https://ooo.ql/exvqT.
11.I.5
Packet Pg. 326 Attachment: Exhibit Two (5186 : EII Audit Report)