2018-1 Capital Investment for Diversification (CID) Incentive Program Arthrex, Inc. and Arthrex Manufacturing, Inc
Internal Audit Department
Audit Report 2018-1
Capital Investment for
Diversification (CID) Incentive
Program
Arthrex, Inc. and Arthrex
Manufacturing, Inc.
Dwight E. Brock
Clerk of the Circuit Court
3299 Tamiami Trail East
Suite #402
Naples, FL 34112-5746
www.collierclerk.com
Issued: February 6, 2018
1
Prepared by: Michael Harder, Senior Internal Auditor
Report Distribution: Board of County Commissioners
Leo Ochs, Jr., County Manager
Jeff Klatzkow, County Attorney
Nick Casalanguida, Deputy County Manager
Mark Isackson, Director, Corporate Financial & Management Services
Jace Kentner, Director, Business and Economic Development
Amy Patterson, Director, Capital Project Planning, Impact Fees and Program Mgt.
Cc: Dwight E. Brock, Clerk of the Circuit Court and Comptroller
Crystal K. Kinzel, Director of Finance & Accounting
James D. Molenaar, Internal Audit Manager
TABLE OF CONTENTS
SUMMARY ..................................................................................................................................2
OBJECTIVES ...............................................................................................................................2
SCOPE ..........................................................................................................................................2
BACKGROUND ..........................................................................................................................2
MANAGEMENT RESPONSE .....................................................................................................3
The files and draft versions of audit reports are confidential and exempt from public records requests during an active
audit under Nicolai v. Baldwin (Aug. 28, 1998 DCA of FL, 5th District) and §119.0713, Florida Statutes. Workpapers
supporting the observations noted within this report become public record and will be made available upon request
once the final audit report has been issued.
2
Internal Audit provided a draft of this report to the Office of Business and Economic Development for
management response on January 18, 2018. County management provided that response on January 22,
2018.
Summary
This audit engagement generated the following observations regarding the Capital Investment for
Diversification (CID) Incentive Program agreements with Arthrex, Inc., and Arthrex Manufacturing, Inc.
(Arthrex):
Testing for the period ended December 3, 2016, of the CID agreement entered into on May 26,
2015 (CID #1), confirmed compliance with all requirements and therefore is eligible to be paid
the first installment under the agreement of $41,153.45.
Testing for the period ended December 3, 2017, of CID #1 confirmed compliance with all
requirements and therefore is eligible to be paid the second installment under the agreement of
$41,153.45.
Testing for the period ended December 12, 2017, of the CID agreement entered into on March
8, 2016 (CID #2), confirmed compliance with all requirements and therefore is eligible to be
paid the first installment under the agreement of $143,241.95.
Arthrex has complied with all obligations contained in both agreements and therefore is eligible to be paid
a total payment of $225,548.85.
Objectives
The objective of the audit engagement was to validate that Arthrex complied with all requirements contained
in both CID program agreements.
Scope
The audit engagement consisted of, but was not limited to, the following tasks:
Reviewing applicable Florida Statutes;
Reviewing applicable Board of County Commissioners (BCC) agenda items and related meeting
minutes;
Reviewing the BCC’s Capital Investment for Diversification Incentive Program agreements with
Arthrex;
Validating Arthrex’s payment of calculated impact fees;
Checking the Tax Collector’s records of tax payments; and
Examining documentation of Arthrex offering and providing at least 50% of the employee’s cost of
health care coverage.
Background
On March 24, 2015, the Board of County Commissioners (BCC) approved the Capital Investment for
Diversification (CID) Incentive Program which was designed to increase Collier County’s economic
development competiveness. The CID program was a “proposal to advance Collier County’s economy by
encouraging development of facilities, space and suitable land for targeted businesses thereby enhancing
the competitiveness in our economic development efforts.” The BCC has previously created a series of
performance based financial incentives that targeted new job creation, but according to the executive
3
summary presented at the March 24, 2015 meeting, “[w]hile these incentives provide necessary tools to
induce the creation of sustainable, high wage jobs, a gap exists in the incentive program with respect to the
area of private capital investment.” The CID program was intended to fill this gap by providing grant
monies of up to 100% of the value of the transportation impact fees assessed and paid. In order to enhance
and further expand the CID incentive, the BCC, on May 26, 2015, approved an amendment to the program
to include not only the transportation impact fees, but also the impact fees for law enforcement, jail,
government buildings, and EMS.
Eligibility for the program was dependent on the applicant being a targeted business as defined by the State
of Florida’s Qualified Target Industry List, and was limited to, “new buildings or grey shell space within
an existing building, that has yet to be issued a final end user certificate of occupancy. . . .” Once the BCC
accepted the applicant into the program and all impact fees were prepaid, the following specific
requirements are to be met annually to remain eligible for repayment:
The facility must be operated as a Targeted Industry as evidenced by a certified County approved
method;
The employer must offer and pay at least 50% of the employee’s cost of health care coverage; and
The project must remain current on all local tax liabilities.
Contingent upon meeting the above annual requirements, the CID incentive provides for four equal annual
installments of the grant amount commencing on the first anniversary of the issuance of the Certificate of
Occupancy for the facility.
The BCC has approved two CID program agreements with Arthrex; one on May 26, 2015, (CID #1) in an
amount up to $164,613.82 and one on March 8, 2016, (CID #2) in an amount up to $572,967.80. The
anniversary of the issuance of the Certificate of Occupancy for CID #1 is December 3 and for CID #2 is
December 12.
Testing done by staff from both the Office of Business and Economic Development and Internal Audit
verified the following:
Testing for the period ended December 3, 2016, of CID #1 confirmed compliance with all
requirements and therefore is eligible to be paid the first installment under the agreement of
$41,153.45.
Testing for the period ended December 3, 2017, of CID #1 confirmed compliance with all
requirements and therefore is eligible to be paid the second installment under the agreement of
$41,153.45.
Testing for the period ended December 12, 2017, of CID #2 confirmed compliance with all
requirements and therefore is eligible to be paid the first installment under the agreement of
$143,241.95.
By meeting the annual requirements of its CID #1 and CID #2 program agreements, Arthrex has qualified
to receive a total payment in the amount of $225,548.85.
Management Response
“I have reviewed the submitted Audit Report #2018-1 regarding Arthrex Inc. and Arthrex Manufacturing
Inc.’s compliance with incentive criteria established by the Capital Investment for Diversification Incentive
Program with Collier County, for two agreements approved May 26, 2015 and March 8, 2016. I concur
with the audit summary and consider Arthrex Inc. and Arthrex Manufacturing Inc. in compliance with the
obligations within the Capital Investment for Diversification Program.
4
Staff appreciates the professional and pragmatic approach exhibited by the Internal Audit Department for
this performance validation process.”
Internal Audit gratefully acknowledges the cooperation of both Arthrex and the Office of Business and
Economic Development’s management and staff for their support in the audit process.