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2018-2 Final Audit - Economic Incubators, Inc and Business and Economic Development Division Internal Audit Department Audit #2018-2 FINAL Economic Incubators, Inc. Business and Economic Development Division April 4, 2018 Dwight E. Brock Clerk of the Circuit Court 3299 Tamiami Trail East Suite #402 Naples, FL 34112-5746 www.collierclerk.com 1 Prepared by: James D. Molenaar, Internal Audit Manager Timothy Lo, Internal Auditor Gabriela Molina, Internal Auditor Mark Pasek, Internal Auditor Report Distribution: Board of County Commissioners Leo Ochs, Jr., County Manager Jace Kentner, Director of Office of Business and Economic Development Justin Loeb, Manager of Collier County Airport Authority Board of Directors of Economic Incubators, Inc. Dr. Marshall Goodman, CEO of Economic Incubators, Inc. CC: Dwight E. Brock, Clerk of the Circuit Court Crystal K. Kinzel, Chief Deputy Clerk TABLE OF CONTENTS BACKGROUND 2 SUMMARY OF FINDINGS 3 SCOPE 5 MANAGEMENT COMMENTS 6 FINDINGS DETAIL (OBSERVATIONS, CONCLUSIONS & RESPONSES) 16 SUMMARY 169 APPENDIX Attached NOTE TO READER (KEY):  Original Clerk Internal Audit Findings are identified in the red banner;  Collier County’s Bureau of Economic Development (BED)/ the Collier County Administrator’s response and Economic Incubators, Inc.’s (EII) response from March 21, 2018 are identified in the boxed text;  The Clerk’s Internal Audit responses to BED/EII’s comments are identified in red. The files and draft versions of audit reports remain confidential and protected from public records requests during an active audit under Nicolai v. Baldwin (Aug. 28, 1998 DCA of FL, 5th District) and Florida Statute 119.0713. Work papers supporting the observations noted within this report are public record and can be requested upon release of the final audit report. 2 BACKGROUND To date over $5 million has been spent for which the project has generated 19 validated jobs (three of which are EII staff) with an additional $2.6 million projected by EII staff through 2021 , totaling over $7.6 million in taxpayer support. The $1.2 million Florida Department of Economic Opportunity (DEO) grant awards spent include:  Falsified documents submitted to DEO  Tasks not completed on time, e.g. Immokalee Accelerator  Bidding irregularities for the commercial kitchen equipment Over $1 million spent on payments to EII’s three personnel without quantifiable results. Over $10 million in grant funds identified as a future need for the “successful” completion of the accelerator projects. Internal Audit uncovered numerous instances of misrepresentations, general malfeasance, and possible fraud. Contrary to the 2015 assertion of self-sustainability within 2 years, EII continues to fall short of revenue projections and continues to exponentially increase reliance on taxpayer funding. The Clerk of the Circuit Court and Comptroller Internal Audit Department (Clerk) conducted a review of the contracts and transactions surrounding payment requests submitted for reimbursement by EII. The Board of County Commissioner’s Office of Business and Economic Development (BED) is the county’s Fiscal Agent to the Agreement(s) and Economic Incubators, Inc. (EII) is the contracted vendor. Economic Incubators, Inc. was contracted to operate The Naples Accelerator, located at 3510 Kraft Road in Naples, FL and the Florida Culinary Accelerator @ Immokalee, not yet opened. The Naples Accelerator provides companies with offices, conference rooms, and office equipment. The Naples Accelerator was also intended to provide networking, mentoring and training to grow startups and small businesses. The Florida Culinary Accelerator @ Immokalee, while not operational, is located across from the Immokalee Regional Airport in Immokalee, FL. EII has a Board of Directors along with the executive staff of Dr. Marshall Goodman as the Chief Executive Officer (CEO) and Ms. Jennifer Pellechio, Chief Operating Officer (COO). This review is published after numerous meetings and discussions with EII’s Board of Directors, EII’s executive staff, and County staff regarding continuing inconsistencies with pay requests and grant deliverables. Overview The Clerk reviewed policies, procedures, and transactions regarding many of EII’s operations as the vendor contracted by the Board of County Commissioners (BCC) to carry out the accelerator projects in Collier County. 3 The Clerk found that EII knowingly submitted false information t o a grantor agency, Florida DEO. In addition, the Clerk has identified instances where EII and BED have made num erous misrepresentations to Grantor Agencies, the BCC, and the taxpayers. EII’s seemingly deceptive practices and failure to manage the accelerator projects gives the Clerk great concern. So much so, that the Clerk recommends the BCC evaluate its options regarding the FY2018 Agreement with EII, and take whatever actions it deems necessary. Many of the assertions made in this audit report regarding Dr. Goodman’s actions as President and CEO of Economic Incubators, Inc. (EII) appear to be similar to the findings in a 2012 USF Audit Report involving University of South Florida-Polytechnic. The 2012 report, in its entirety, is included in Appendix A of this report. Dr. Goodman’s representations to the Florida Department of Economic Opportunity (DEO) in 2017 appear to be consistent with the circumstances surrounding Dr. Goodman’s departure from University of South Florida-Polytechnic in 2012. The assertions made against Dr. Goodman in 2012 included financial mismanagement, improper accounting of building improvements, and potential side deals with the owner of the USF- Polytechnic incubator facility, in total the report lists eleven violations of USF policies and procedures by the former USF Regional Chancellor. The report is presented merely as background for current findings. SUMMARY OF FINDINGS Findings List The following findings have all been communicated to EII Board Members, EII staff, and the BED over the past four years. EII and the BED have failed to address many of these deficiencies when they were identified. 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 reported completion of projects not complete, misrepresented payments made, and submitted false invoices to elicit payments by DEO, Page 16. 2. Irregularities found in Solicitation 17-7167 for the procurement of the Kitchen Equipment for the Florida Culinary Accelerator @ Immokalee include possible bid rigging, misrepresentation of solicitation budget and use of potenti ally misleading commodity codes, Page 48. 3. EII and the BED misrepresented Grant #SL007 Deliverables to DEO and the BCC on the Annual Accomplishment Reports, asserting unverified jobs created and capital investment obtained, Page 57. 4. The BED 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 the Naples and Immokalee accelerator projects, Page 65. 4 5. EII, with the consent of the BED, has discounted their Program Income with “promotional” rents while claiming cash flow concerns and not meeting revenue targets, Page 84. 6. EII failed to meet the Business Income and Private Contributions targets in FY2017 pursuant to the Agreement between the BCC and EII, Page 88. 7. EII failed to meet their revenue target for the first quarter of Fiscal Year 2018 based on continued rent promotions, un-sustained participation, failure to collect budgeted private contributions, and the failure to open the Immokalee facility, Page 94. 8. EII, the BED, and owners of Kraft Office Center, LLC have failed to correct a zoning violation that has hindered the accelerator participants from registering as businesses and obtaining required business tax receipts in Collier County, Page 101. 9. EII failed to timely and accurately file IRS Form 990 tax returns for fiscal years 2015, 2016 and 2017, thereby jeopardizing their tax-exempt status, Page 103. 10. EII has failed to follow the business plan approved by the BCC on May 13, 2014 by failing to become self-sustaining, instead exponentially escalating taxpayer funds, annually, for years 2014 – 2018, Page 110. 11. EII’s revised business plan fails to, identify measurable performance including job creation or capital investment; identify specific marketing strategies; provide a revenue structure for sufficient operating income to be successful without dependence on taxpayer funds; address deficiencies in prior performance; or identify the additional equipment for successful operation of the accelerator projects, Page 114. 12. The Airport Manager and BED failed to monitor BCC approved 2017 and 2018 leases and they allowed over $1 million dollars of improvements to a county airport property without payment on the lease; $37,522.80 in rents remain uncollected and unpaid, Page 124. 13. Mismanagement of Woodstock’s Micro-Market including licensing, accounting, and inventory controls, Page 132. 14. Multiple potential conflicts of interest exist within EII’s organization including self-dealing, the Chairman of EII’s Board of Directors is the owner of the Naples Accelerator facility, and potentially improper rental arrangements, Page 137. 15. EII has failed to become a financially viable business entity and shows little or no progress in that direction, Page 148. 16. EII and BED have failed to meet contract and facility deliverables during Fiscal Year 2018, Page 153. 17. EII and BED have made numerous misrepresentations to the BCC, the Clerk, and the taxpayers including jobs created, capital investments made, project completion dates, and financial and budget status, Page 158. 18. BED approved $1,631.96 in unauthorized and unbudgeted expenditures on behalf of EII for the Immokalee Accelerator Project, Page 162. 19. EII failed to facilitate Capital Investments, Page 164. 5 20. EII and the BED have consistently failed to submit pay requests and contract deliverables in a timely manner, Page 167. REVIEW DETAIL Scope The objective of this review was to identify and report ongoing accounting, grant, and operational irregularities identified in EII’s pay requests to the Clerk and the State of Florida. Time period: September 10, 2013 to present (April 2018) Discussions were held with:  All Board of County Commissioners and the County Manager  EII Board of Director members  EII CEO – Dr. Marshall Goodman  EII COO – Jennifer Pellechio  Administrative Assistant – Nicole Kreuzer  BED Director – Jace Kentner  BED Accounting Technician – Phyllis Kraft-Hendrick  Executive Director of Corporate Business Operations – Tim Durham  The majority of the Naples Accelerator participants  Accelerator volunteers  DEO current and former staff  Nicole Temperton, Controller for TriMark Strategic The following documents were the basis for the review:  All agreements between EII and Collier County  All grant agreements  Reimbursement requests to Grantor Agencies  Annual Accomplishment Reports submitted to Grantor Agencies  The County’s agreement with USDA  EII Executive Board and Board of Directors meeting minutes  Payroll Reimbursement Requests FY17 and FY18  Financial reports, ledgers, and statements submitted to Collier County as supporting documentation for reimbursement requests  Email correspondence provided by EII as requested by the Clerk’s Int ernal Audit staff  Records on Sunbiz.org website  Accelerator Participant User Agreements  EII’s webpage for the Naples Accelerator  Newspaper articles and other publications related to the accelerators  Board Minutes and Records 6 Limitations: The Clerk’s Internal Audit staff has encountered considerable resistance when requesting records from EII and BED. Management Comments The Draft Audit was submitted for management’s comments on February 27, 2018. Management provided publically available comments to th e BCC on March 21, 2018. Management’s comments have been incorporated into this report. Over the course of the last year, we have held numerous meetings and phone calls with EII staff and EII Board members outlining the findings now identified in this report. The Chief Deputy Clerk worked with the Director of BED to identify process deadlines to specifically meet the March 27, 2018 BCC meeting. Additionally, the Clerk’s Internal Audit staff made numerous offers to meet with the Director of BED after this report was transmitted to him on February 27, 2018. The Clerk’s Internal Audit staff offered unlimited time to meet to review the work-papers and answer any questions. Late On Friday, March 9, 2018, The Director of BED called the Chief Deputy Cler k to schedule a time to meet. The Chief Deputy Clerk offered Sunday, March 11, 2018, but the BED Director was not available. The Chief Deputy Clerk offered Monday, March 12, 2018, but the BED Director was not available. The Chief Deputy Clerk then offered Tuesday, March 13, 2018, at 8:00 am before the scheduled BCC meeting, BED Director tentatively accepted pending his meeting on Monday with Dr. Marshall Goodman. 7 Finally, late on Monday March 12, 2018, the Director of BED scheduled a meeting at the Off ice of Business & Economic Development for the following day, Tuesday March 13, 2018 (fourteen calendar days/ten business days later) and only for a period of 90 minutes. 8 9 The Director of BED nor EII representatives had any written responses to the findings and did not provide any supporting documentation that is contrary to the findings in this report. The Director of BED stated at this meeting that he does not have authorization fro m the County Manager to respond at this time. The Director of BED requested the following changes: 1. Request for additional time before the Clerk presents this Audit to the BCC on March 27, 2018. The three reasons given for the request are that the two weeks is not enough time to respond and EII’s Board of Directors are out of the Country until March 30, 2018. Additionally, the Grand Opening of the Culinary Accelerator @ Immokalee will be on March 28, 2018, the day after the Clerk’s scheduled presentation to the BCC. The Director has concerns of the political fall-out that will cloud this event and possibly dissuade political dignitaries from attending. Internal Audit response: Refer to timeline discussed in the emails above 2. Request for the narrowing of the Scope. The Director of BED stated that the Scope is “undefined?” and appears to go all the way back to the creation of EII. Internal Audit response: The Scope includes ongoing identified audit concerns from inception to present and is defined on Page 5. 3. Request for a change to the “tone and toxic language.” The Director of BED objects to the use of the terms fraud, misuse, and misrepresentation. Internal Audit response: The tone of the audit is not intended to be “toxic” but factual and informative. We have been cautious not to assert fraud and have specifically referenced possible 10 fraud for further review as warranted. 4. Request to remove the April 9, 2012 USF Audit Report from the Appendix. The Director of BED stated that this report will “will draw fire that does not need to be drawn ” and is outside the scope of the audit. Internal Audit response: The report and assertions were not initiated by the Clerk and is presented in the appendix as background for current findings. 5. Request that all emails cited in the findings be presented in full in the appendix. Internal Audit response: Internal Audit has agreed to include all referenced emails, in full, within the body of the report, work papers and/or the appendix. The CEO of EII also suggested the following, while not authorized from EII’s Board of Directors to respond to any of the findings: 1. The report is too one-sided; it does not include any of EII’s accomplishments. Internal Audit response: The audit is not intended to be sided in any direction, but to identify audit concerns. 2. The report does not include the improvements to the operation that have been implemented. Internal Audit response: Improvements to the operation, if any, should be included in the management’s written response. 3. The report does not include the added-value realized by the Immokalee Airport facility by having EII’s accelerator located there. Internal Audit response: Any perceived value-added should be included in management’s written response. 4. The report only shows the present value (actual dollar cost) of the money spent by EII, not the full breadth and width of the economic value that will be realized in the years to come. Internal Audit response: Any perceived breadth and width economic value to be realized in future years should be included in management’s written response. 5. The Clerk should conduct an Econometric Analysis of EII’s operations to provide a more balanced view of benefits generated to Collier County. Internal Audit response: It is not the Clerk’s role to create an Econometric analysis for EII. Should EII provide any models or supporting documentation, Internal Audit will receive and analyze the information. Upon Internal Audit’s review, the Clerk’s staff will report the findings to the BCC and the taxpayers. 11 Please note that while the CEO of EII has not been authorized by EII’s Board of Directors to respond as of March 13, 2018, he indicated disagreement with all of the findings . County Management and EII Responses as of March 13, 2018 The Draft Audit 2018-2 was submitted for management response on February 27, 2018. At the time of the meeting on March 13, 2018, the Director of BED did not have authorization from the County Manager to provide a written response to these findings. The CEO of EII stated that EII staff had reviewed the Draft Audit 201 8-2 at the offices of the Director of BED. EII also requested and received permission to provide a copy of the Draft Audit Report to the Chairman of EII’s Board of Directors, Mr. Fred Pezeshkan and to the Vice -Chairman of EII’s Board of Directors, Mr. Dick Grant. The Director of BED and representatives of EII were asked if any finding presented in this report was inaccurate, incomplete, or incorrect.  The Director of BED provided comments for three findings; Finding #1, Finding #14, and Finding #18. The Director of BED did not provide comments for the remaining seventeen findings.  The CEO, COO, and Volunteer Accountant of EII provided comments for three findings; Finding #4, Finding #12, Finding#13, and Finding #17. The Director of BED and EII’s verbal comments from the March 13, 2018 meeting have been included in this report. On Wednesday March 21, 2018, County Management and staff provided their written response to these findings: Combined EII and BED Response: EII and County staff have reviewed th e 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 2 7, 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. County staff is aware of ongoing concerns. The County Manager asked , and the Chief Deputy Clerk explained, the timeline needed to incorporate management’s responses. The Clerk did not add any new findings, and in fact, incorpora ted EII’s and County staff’s 12 verbal comments and recommended changes from the meeting on March 13, 2018. Combined EII and BED Response: 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 P olicy. 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. The purpose of the Clerk’s audit is to bring to the attention of management deficiencies and/or concerns for corrective action, if any. The scope is clearly defined as since September 10, 2013 to present (page 5), going back to the presentation of the White Paper in 2013. The Clerk follows Florida Statutes in auditing. Combined EII and BED Response: 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 in ject several million dollars of venture investment into the community. The Clerk has been unable to validate many of the assertions made by EII staff. The Clerk is concerned that Grant funds may be recaptured by the Grantor Agency due to misrepresentations made by EII and County staff. Combined EII and BED Response: 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. It is worth noting that the FY2016 Audit completed on June 5, 2017, with EII’s response on July 10, 2017, does not provide an assurance on EII’s Internal Controls, while the opinion for the FY2016 financial statement audit contained seven significant comments: 1. 2016-1: Review and Approval of Accounting Transactions Should Be Increased. 2. 2016-2: Reconciliation of Fixed Assets Should Be Performed Monthly. 3. 2016-3: Monthly Reconciliation and Closing Process Should be Implemented. 13 4. 2016-4: Payroll Reports Should be Reconciled. 5. 2016-5: Additional Oversight Should be Provided by the Board of Directors. a. Review monthly bank reconciliations to ensure they are being performed in a timely manner. b. Review budget vs. actual statement on a monthly basis and investigate any unusual variances. c. Review monthly internal financial reports for any unusual or unex pected transactions or balances. d. Review payroll reports to ensure compensation agrees with approved rates. e. Review the policies and procedures with respect to benefits of key employees and officers to ensure adherence to written policies. f. Inquire of management and the independent auditors about significant risks or exposures facing the Company. Assess the steps management has taken to minimize such risks to the Company and review compliance with such steps. g. Review key internal controls with the management team and understand how these controls will be tested, maintained and monitored during the year. 6. 2016-6: The Board Should Approve Indirect Cost Allocation Policy. 7. 2016-7: Timely Payment of Sales Tax. The FY2016 external audit was result of the Clerk’s continued requests for financial information. EII was not able to produce monthly, nor, annual financial statements until July 2017. The Clerk also notes $680,110.16 in year end adjusting e ntries were recommended by Tuscan in the audit FY2016. The FY2017 external audit was tendered on March 3, 2018 with management’s responses dated March 22, 2018. While the Clerk’s Office has not fully vetted this document, we note that the following three comments were repeated: 1. 2016-2: Reconciliation of Fixed Assets Should Be Performed Monthly. 2. 2016-3: Monthly Reconciliation and Closing Process Should be Implemented. 3. 2016-6: The Board Should Approve Indirect Cost Allocation Policy. Combined EII and BED Response: 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: 14 The inclusion of the 2012 USF Report was provided as background. 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 Profess or, 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. According to the University of South Florida (USF) Memo published by Tampa Bay Online, “This resolution of Dr. Goodman’s employment renders the remaining review process impractical and unnecessary.” http://www.tbo.com/news/former-poly- chancellor-resigns-from-usf-431486 Dr. Goodman’s Response continued: 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.” Appendix A page 2-3 clearly states that the two complaints against Dr. Goodman were unfounded, while the remaining eleven violations of USF regulations and procedures, Appendix A pages 4-20 appear to be uncontroverted. Dr. Goodman’s Response continued: 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 [sic] Bresler, Executive Director, Finance & Administration, being held directly responsible for the alleged violations. Mr. Bresler 15 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. Dr. Goodman places responsibility for the eleven findings on “the institution and its Board and not me per se.” Dr. Goodman was the Regional Chancellor of said institution. Dr. Goodman’s Response continued: 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. 16 Findings 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 misrepresented expenditures and project status to the Florida Department of Economic Opportunity (DEO), the BCC, and the Clerk to obtain payments for contracts with State and Federal Grant deliverables. In July of 2016, EII entered into Grant Agreement #SL025 with the Florida Department of Economic Opportunity. Deliverable #3 of this grant, the Development of the Immokalee Culinary Arts & Service Incubator Facility, included six sub-tasks associated with the construction and space setup. In two invoices submittal packages to DEO, invoice submittal #13 on June 1, 2017 and submittal #14 on June 15, 2017, EII represented the six sub-tasks at various stages of completion. On June 28, 2017, EII then submitted invoice submittal #16, included in Appendix B, page 21, in which each sub-task and the overall Deliverable #3 is claimed to be 100% complete, with an invoice total of $1,200,000. The grant end date was June 30, 2017; The Florida Culinary Accelerator @ Immokalee was not complete as of January 15, 2018. Internal Audit performed a review of invoice submittal packages #13, #14, and #16 in regards to Deliverable #3 and has made the following observations: 1. On June 1 and June 15, 2017 EII submitted Invoices #13 and #14 to DEO. 2. On June 19, 2017 DEO Program Manager rejected these invoices because the Immokalee project was not 100% complete. Exhibit 1-A: Email from Katie Smith at DEO to COO Jennifer Pellechio at EII, on June 19, 2017. 17 3. On June 29, 2017 Dr. Marshall Goodman, President and CEO of EII submitted Invoice Package #16 to DEO, knowingly misrepresenting 100% completion of the Immokalee Accelerator and all associated sub-tasks when:  The final invoice represented completion of all deliverables in order t o receive the balance of the $1,200,000 in DEO Grant funds. Exhibit 1-B: Invoice #16 dated June 28, 2017, signed by Dr. Marshall Goodman, and submitted to DEO on June 29, 2017. Missing Certification Statement pursuant to Grant Agreement, pg. 32, Section A. v. 18  None of the culinary equipment was received as of June 28, 2017 when Dr. Goodman claims 100% completion. Exhibit 1-C: Photographs of the Immokalee facility on August 3, 2017, compared to October 3, 2017. The project was reported to be 100% complete as of June 30, 2017 and was still under construction on October 3, 2017. August 3, 2017 October 3, 2017 19 Exhibit 1-T: Photographs of the Immokalee facility on August 3, 2017, compared to March 28, 2018. The project was reported to be 100% complete as of June 30, 2017 and had their Grand Opening on March 28, 2018. August 3, 2017 March 28, 2018 20  The CEO of EII submitted an unsigned AIA Architect’s Certification ($441,374.10) representing completion of work that was not complete.  Compass Construction 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. Exhibit 1-D: DEO Grant #SL025, Page 32, Section A. x., requires certification by a licensed engineer using AIA forms G702 and G703. Certified by Compass Construction on June 28, 2017 “The undersigned Contractor certifies to the best of the Contractor’s knowledge, information and belief the Work covered by this Application for Payment has been completed in accordance with the Contract Documents, that all accounts have been paid by the Contractor for work for which previous Certificates of Payment were issued and payments received from the Owner, and that current payment shown herein is now due.” 21 Exhibit 1-E: AIA Architect’s Certification included in Invoice Submittal Package #16 with signature of Architect missing. Certified by Compass Construction on June 28, 2017 Missing Architect’s Signature 22 4. EII submitted false invoices as evidence of payment in order to receive reimbursement by DEO 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 act ual invoice submitted to County by the Vendor in August 2017 after the majority of the equipment was actually delivered. Exhibit 1-F: False Invoices included in Invoice Submittal Package #16. Please note that these ‘invoices’ are missing dates. 23 Exhibit 1-G: TriMark Strategic Invoice, validated, submitted to County for payment, dated August 25, 2017, with the County’s Purchase Orders referenced on July 6, 2017. 24 5. EII wrote checks to its vendors, held the checks without issuing them to the vendors, and presented un-tendered photocopies of the checks to DEO as proof of payment to vendors. The presentation of the checks to DEO to elicit payment, in our opinion, may be fraud based on Florida Statutes 812.014 and 837.06.  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.  The checks were not presented to the vendors until after receipt of DEO funds, contrary to the reimbursable grant requirements. * Exhibit 1-H: EII’s Accountant’s, Noack & Company, Comments on July 17, 2017 explaining that $957,154.72 negative balance in EII’s State Grant Account. “The State grant money was deposited before the checks were mailed to payees. The checks were written prior to the required closing date of the Grant, June 30.” 25 Exhibit 1-I: EII’s Reconciliation Report for th e account known as ‘State Grant’ dated July 17, 2017. (1.) As of July 2, 2017 there was -$974,439.08 in Un-Cleared Transactions. (2.) Un-Cleared Checks and Payments as of July 2, 2017, showing checks written between the dates of June 26 to June 29, 2017. The Highlighted check numbers appear in Invoice Submittal Package #16 as supporting documentation. (3.) On July 17, 2017 EII deposits $872,237.00 from the State of Florida Department of Economic Opportunity. (1.) (2.) (3.) 26 6. EII staff submitted copies of the checks to DEO as proof of payment. The following has been determined: • 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 received payment from DEO on July 17, 2017, and released the checks to their vendors and the County. 7. Dr. Goodman failed to include the required certification statement above the signature block attesting to the completion of the project. 8. EII did not submit photographs of the post-construction and remodeling, as required in the grant agreement. Exhibit 1-L: DEO Grant #SL025, Page 32, Section A. ix., requires site work photographs of the pre and post construction and remodeling. Exhibit 1-K: DEO Grant #SL025, Page 32, Section A. v., requires a certification statement above the signature block. Exhibit 1-J: DEO Grant #SL025, Page 32, Section A. ii., requires a cancelled check, electronic transfer or, a copy of the check and the bank statement highlighting the cancelled check. 27 *** Pictures of this space were NOT submitted to DEO with Invoice #16 on June 29, 2017, as required*** June 15, 2017 - Invoice Submittal #14 Exhibit 1-M: Photo of Immokalee facility interior space, under construction, submitted on the June 15, 2017 Invoice Submittal Package #14. 28 Exhibit 1-N: Photos of Immokalee facility interior space, under construction, during Internal Audit Site Visit on July 7, 2017, compared to EII’s site photo on or about June 15, 2017 from Exhibit 1-M. July 7, 2017 July 7, 2017 July 7, 2017 29 August 3, 2017 Exhibit 1-O: Photos of Immokalee facility interior space, under construction, during Internal Audit Site Visit on August 3, 2017 compared to October 3, 2017. October 3, 2017 30 9. On June 29, 2017, EII staff falsely claimed 100% completion and the acquisition of all necessary state and local permits. Whereas, the permit history for the Florida Culinary Accelerator @ Immokalee that was confirmed by Mrs. Claudine Auclair, the Business Center Manager for Collier County Operations and Regulatory Management, shows the first permit was applied for on September 30, 2016 and the first Tempo rary Certificate of Occupancy was issued in December 2017. Below is the history of the permits for this project:  Permit was applied for on September 30, 2016  First Temporary Certificate of Occupancy was not issued until December 2017  Temporary Certificate of Occupancy was extended on January 9, 2018  Final Certificate of Occupancy was issued on January 17, 2018  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, with Final Inspection on February 10, 2018. Lessons Learned from the Lost Funding from Grant #SL007 In a previous situation, the County’s Grant #SL007 with DEO, the time ran out for completion of the Naples Accelerator and the County lost grant funding. Grant #SL007 was only awarded $723,000 out of $2.5 million in approved funding. $350k was spent on furniture using expired tax-exempt certificates, and irregular bidding and solicitation processes were identified under the Naples Accelerator project. Since Grant #SL025 is a Cost Reimbursement Grant, EII had to spend the money and complete the deliverables before the close of the grant period on June 30, 2017, in order to receive reimbursement from DEO. Therefore, EII provided as part of Invoice Submittal Package #16 false statements of 100% completion, “invoices” un-cleared checks, and un-signed Architect’s statement AIA G702. EII also failed to submit pre and post construction photos and did not include the required certification above the signature block. Exhibit 1-P: Page 1 of Agreement #SL025 defining the type of agreement as a cost reimbursement agreement. 31 DEO Refuses to Provide Assurances to the Clerk On October 5, 2017, the Clerk had scheduled a conference call with Katie Smith, Greg Britton, and Adam Calloway from DEO. The County Manager, County staff, EII Board members, EII Executive staff, and the Clerk’s Internal Audit team were also present. During the conference call with DEO, the Clerk repeatedly asked DEO if Invoice Submittal Package #16 which included falsified supporting documentation was sufficient, even though the equipment was not received, that false invoices had been submitted, and that the checks provided were not cancelled or cashed? Katie Smith and Greg Britton from DEO stated numerous times, “We relied upon the documents we were given.” After the Clerk raised additional questions and concerns, DEO staff continued to state, “We relied upon the documents we were given.” The Clerk then asked if DEO staff would put in writing that DEO would not request payback of grant funds. Greg Britton responded with, “Why do you need it?” In a follow-up email on October 9, 2017, the Clerk requested a written assurance from DEO regarding the Clerk’s concerns that were communicated to DEO on October 5, 2017 (Appendix D, page 199). On October 12, 2017, Peter L. Penrod, General Counsel for DEO, responded to the Clerk’s request by stating, “I am, however, unaware of any legal requirement for DEO to provide you or your office with its [DEO’s] position on this matter. As such, DEO is not inclined to provide a written positio n at this time.” Mr. Penrod additionally stated, “[DEO does not] agree with your premise in your concluding paragraph that DEO is somehow required to provide your office with ‘assurances’ of any kind.” (Appendix E, page 204). Conclusion: The Immokalee Accelerator was not 100% complete on June 29, 2017, as claimed by EII’s invoice submittal, according to documentation, observations, and p hotographs obtained. EII made false statements and submitted falsified documents to the Grantor Agency, Florida DEO. DEO has been made aware of the Clerk’s findings and refuses to provide assurances that they will not recover funds. The Florida Culinary Accelerator @ Immokalee has not opened as of February 1, 2018. EII’s actions have created a risk that is no less than $1,200,000 in potential claw-backs and jeopardizes future grant opportunities. The BED failed to monitor the actions of the county’s vendor, EII. Recommendations:  The Board of County Commissioners should consider their alternatives in regards to the contract with EII and notify them of potential reimbursements that may be required to State of Florida and Federal grantors and/or the County taxpayers.  The BED needs to provide proper oversight and monitoring of County vendors.  The BED should monitor, evaluate, and review vendor actions and the County Manager should report to the BCC any deficiencies. 32 County Management Response: At the March 13, 2018 meeting between BED, County staff, EII staff and the Clerk’s Internal Audit team, the Director of BED stated that he is unaware of wh at the problem is, “DEO approved this, the filing was sufficient, DEO said this to your boss (The Clerk) four times during our conversation.” The Clerk’s Internal Audit staff then asked the Director of BED if there was anything specific he objected to or if he could provide any documentation that is contrary to this finding. The Director of BED replied, “no.” On Wednesday March 21, 2018, County Management and EII staff provided their written response to these findings Internal Audit Response to County Management Comments: The Director of BED was referencing the conference call on October 5, 2017 in which the Clerk explained to DEO that the documents DEO relied upon as sufficient were falsified, the work was not completed, and that goods had not been received before the end of DEO’s Fiscal Year (June 30, 2017). At least one month before the close of the grant on June 30, 2017, EII had known, or should have known, that the delivery of the equipment and the completion of the construction of the Immokalee facil ity would not be complete on time. Particularly since the County Purchase Order for the equipment was not issued until June 27, 2017 and not received by TriMark until July 6, 2017 (see Exhibit 1-G). 33 Exhibit 1-Q: Grant #SL025, page 32, detailing supporting documentation required to be submitted by Grantee. 34 On May 26, 2017, about one month before the close of DEO’s Fiscal Year, the COO of EII explains to EII’s external accountant that the state grant is not an advance grant, it is a reimbursable grant. Jennifer Pellechio stated in the May 26, 2017 email, “We must spend the $ - cut the check, invoice the state, then we are reimbursed.” See Exhibit 1-R below. Exhibit 1-R: Email from Jennifer Pellechio to Janet Noack on May 26, 2017. This email was provided to the Clerk’s Internal Audit on March 8, 2018, after numerous requests for supporting documentation. 35 On June 19, 2017, Katie Smith from DEO rejected Invoice Submittal Package #13 & #14 and instructed EII, “Please resubmit the invoice(s) showing 100% completion of the individual subtasks for payment.” Six minutes later, the COO of EII responded back to Katie Smith, “We understand and will resubmit invoices shortly.” Please note that the COO of EII does n ot allude to how EII will be 100% complete in the next nine days. Exhibit 1-A: Email from Katie Smith at DEO to COO Jennifer Pellechio at EII on June 19, 2017. Exhibit 1-S: Email response from COO Jennifer Pellechio at EII to Katie Smith at DEO, six minutes later on June 19, 2017 at 3:37 PM. 36 During the conference call on October 5, 2017, the Clerk asked DEO’s attorney if he was of the opinion that the invoice submitted was legal. DEO’s attorney, Mr. Greg Britton, responded, “The attorney has not had the opportunity to review the invoice for legality.” The Internal Audit Manager, James Molenaar, asked Greg Britton, “When will there be a time when the attorney will review the invoices and grant agreement?” Mr. Greg Britton responded, “It is not under the attorney’s purview and the attorney renders no opinion.” Ms. Katie Smith and Mr. Greg Britton both stated that they, “relied on the invoice DEO received on June 28th, 2017” despite the fact that the Mr. James Molenaar and Mrs. Crystal Kinzel had previously informed Ms. Katie Smith that TriMark confirmed that this was not their company invoice. The Clerk asserted, “The Invoice (submitted) cannot be correct because the goods had not yet been received and it was not the company [an official TRIMARK generated invoice] who created the invoices” (Appendix D, page 199). The “invoice” was provided by Stacy Parrish, a Project Coordinator for TriMark Strategic, and not the Billing Department for TriMark as confirmed by Nicole Temperton, Controller. This means that DEO is knowledgeable of the false statements and falsified documents s ubmitted for reimbursement in Invoice Submittal Package #16, in which case DEO has refused to offer a legal opinion as to legality. The reimbursement by DEO to EII does not appear to be legal, nor in compliance with contract requirements (see Exhibit 1-Q). The failure by DEO’s legal counsel to affirmatively state the reimbursement payment made by DEO to EII was legal is not necessarily indicative of the preclusion of a future finding of theft, fraud, or official misconduct. It is well known that the Florida Commission on Ethics (Commission) investigates matters involving the Misuse of Public Position by governmental employees. Moreover, public employees are prohibited from corruptly using or attempting to use their official positions or the resources ther eof to obtain a special privilege or benefit for themselves or others. [Sec. 112.313(6), Fla. Stat.]. Therefore, this matter may be ripe for a sworn complaint to be filed with the Commission office for further investigation and if applicable a public hearing. Ultimately, after a public hearing, the administrative law judge may recommend to the Governor that the public employee can be dismissed, suspended, demoted, censured, and/or fined in an amount of up to $10,000 per charge. Additionally, this matter may be ripe for a sworn complaint to be filed with an appropriate Law Enforcement Agency for further investigation and if applicable a public prosecution of any and all crimes by any public employee or person, including EII Employee(s)/Director(s). The com plaint may contain allegations of Theft, Official Misconduct, and participating in a Scheme to Defraud. The Scheme to Defraud statutes prohibits two types of frauds: 37 1. Systematic, ongoing course of conduct with the intend to defraud one or more persons, whether or not any specific misrepresentation is made; 2. Systematic, ongoing course of conduct with the intent to obtain property from one or more persons by false or fraudulent pretenses, representations, or promises. A statement or representation is “false” or “fraudulent” if it relates to material facts and is known to be untrue or is made with reckless indifference as to the truth or falsity, and is made or caused to be made with the intent to defraud. A statement or representation may also be “false’ or “fraudulent” when it constitutes a half-truth, or effectively conceals a material fact, with the intent to defraud. Under the law, every agent or employee representing or working for someone else, the employer, has a duty called a fiduciary duty to act honestly and faithfully in all of his dealings with the employer, and to transact business in the best interest of the employer, including a duty to make a full and fair disclosure to the employer of any personal interest or profit the employee expects to derive or has derived from any transaction in which he participates in the course of the employment. If, instead, the employee acts to make his personal decisions based upon his own personal interests such as, embezzling money, falsifying documents and/or making false statements regarding a grant, or even receiving a personal benefit from conflict of interest, the employee has defrauded the employer of the employee’s honest services and/or loyal services. Should a prosecution occur for the crime of a Scheme to Defraud, the prosecution must prove that the employee/person intended to breach a fiduciary duty, and that the employee foresaw, or reasonably should have foreseen, that the employer might suffer economic harm (such as claw back of grant funds) because of that breach. It is not necessary for the prosecution to prove that the defendant/employee was actually successful in defrauding anyone or successful in obtaining property by means of false or fraudulent pretenses, representations or promises. No r does the prosecution need to prove that anyone or entity lost any money or property as a result of the scheme. An unsuccessful scheme is as illegal as a scheme or plan that is ultimately successful. One must recognize that under the common law doctrine of Vicarious Liability, each member of a Scheme to Defraud is responsible for the actions of the other co-schemers performed during the course of and in furtherance of the scheme. County Management, the Director of BED and EII staff have been aware of above concerns as early as the July 14, 2017 meeting with the Clerk’s staff. On Wednesday March 21, 2018, County Management and EII staff provided their written response to these findings: Management Responses to Audit Findings. 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. 38 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. The Clerk notes that EII misstates the email referenced in Exhibit 1 -A and omits DEO’s twice stated references to the subtasks. Please refer to Exhibit 1-A, page 16, in the audit report. The actual quote from the June 19, 2017 email is as follows, “Jennifer – I am rejecting Invoice 13 and Invoice 14 for SL025. Please resubmit the invoice(s) showing 100% completion of the individual subtasks for payment. Also, in the new invoices, please note which subtask is 100% complete. Thank you! /s/ Katie Smith” Dr. Goodman submitted Invoice #16 on June 28, 2017 indicating “Task is 100% complete”. This is not true. 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 [sic] 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. Dr. Goodman’s assertion appears to be that EII was directed by DEO to submit final invoices reflecting “100% complete”, knowing that the tasks were not complete. On April 2, 2018, Dr. Goodman stated that pursuant to a telephone phone call with DEO, he was directed to submit final invoices. Dr. Goodman further asserted that EII was not required to “complete” the Immokalee accelerator; they are only required to “establish” the accelerator. According to the Florida Department of Financial Services website: 39 Also, according to the EII/DEO contract Deliverable 3: Exhibit 1-U: Grant Disbursement Information, Agency Name: Department of Economic Opportunity, Agency Contract ID: SL025. Exhibit 1-V: Grant #SL025, Deliverable 3, pages 29-30, version date April 12, 2016. Exhibit 1-W: Grant #SL025, Section 2.F.3. , pages 26, version date April 12, 2016 40 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. The Clerk notes EII’s confirmation that none of the culinary equipment was received as of June 28, 2017, as stated in the finding. Additionally, the cash match in the amount of $111,424.00 was not provided to the County prior to June 30, 2017 (see EII response 5.a., 5.b., 6.a., and 6.b. to follow). EII Check #2126 for $111,424.00 was received by the Clerk’s Finance Department on July 27, 2017. 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 th at was not complete. 41 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. Even though EII disagrees with this finding, the Clerk notes that EII’s external auditor, Tuscan, informed EII during the course of the FY2017 single audit of the same finding before March 3, 2018. The Clerk accepts EII’s admission that the referenced AIA Architect’s Certification was submitted to DEO unsigned, and that the AIA Certification remained unsigned by the architect until March 21, 2018. Grant #SL025 requires AIA certification (see Exhibit 1- D, page 20) for reimbursement. On April 2, 2018, Dr. Goodman asserted that “completion” is not required in the Grant agreement and that they were only required to “establish” the accelerator. Dr. Goodman stated that they met the “minimum standard requirement”. a. 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 In voice 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. The form submitted indicated Task - 100% complete, which was not true. The Clerk has contacted Compass Construction, no less than three separate occasions, for their explanation as to how they were 100% complete on June 28, 2017. As of March 28, 2018, Compass Construction has failed to provide a response. Mr. Bruce Downs, the Project Manager for Compass Construction, repeatedly answered the Clerk’s Internal Audit questions by replying, “(he) would get back to us.” As of March 28, 2018, Compass Construction had not provided documents or a response. EII provided the Clerk with the signed AIA Document G702 on March 29, 2018. The final signature from the architect is dated March 21, 2018. 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 42 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. The purchase of the culinary equipment was not complete as of June 30, 2017. The cash match was only “obligated” as of June 28, 2017. As described in the finding, EII submitted “invoices” from TriMark Strategic as evidence of payment in addition to a photocopy of the check (not the cancelled check) for EII’s cash match, to elicit payment from DEO. The County did not receive the cash match from EII until July 27, 2017. 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. This is a misrepresentation of the Clerk’s comment. Please refer to page 24 and note that the phrase “pursuant to the direction of the grantor” does not appear in the Clerk’s assertion. 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. The Clerk has noted EII’s overall lack of internal controls and questions the oversight of EII’s Board of Directors that would allow EII staff to write nearly $1 million dollars of checks and not tender them for payment. Furthermore, to write checks and hold them until funds are received, is a lack of proper controls causing misstatements in financial reporting. 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 43 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. The Clerk notes that EII staff cannot recall the details regarding nearly $1 million in checks for services and equipment not completed prior to the grant end date. Since EII staff cannot provide any additional information, the Clerk refers to Exhibit 1-H with EII’s external accountant’s comments dated July 18, 2017, “The State Grant money was deposited before the checks were mailed to payees. The Checks were written prior to the required closing date of the Grant, June 30.” Exhibit 1-I, (3), shows a deposit from State of Florida – Department of Economic Opportunity in the amount of $872,237.00 on July 17, 2017. 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. The Clerk has noted the lack of internal controls regarding EII’s “normal business practices.” Please refer to Appendix B, pages 75, 77, 87, 116, 134, & 135 for the checks that are identified in Exhibit 1-I (2). Please note that check #2123 was presented to DEO (Appendix B, page 79), then voided. 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. This assertion appears to imply that DEO requested documentation not in accordance with their contract, which requires cancelled check, not copies. 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. The Clerk accepts EII’s statement that payment was received from DEO on July 17, 2017. 44 The Clerk takes exception with EII’s “normal business process” respons e when, in a previous response, EII is unable to recall when the checks were mailed out. If checks were knowingly issued to vendors without sufficient funds to cover the checks, there may be additional legal concerns. The Clerk notes EII’s external accountant’s statement that “the State Grant money was deposited before the checks were mailed to payees.” On April 2, 2018, the EII COO stated that they only issued checks that could be covered and held the ones that could not be covered. 7. Incorrect; Clerk’s assertion that “Dr. Goodman failed to include the requirement [sic] 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. EII’s response indicates that EII has not certified the invoice, as required in the Grant Agreement, as of March 21, 2018, and apparently will only do so if required by DEO, see exhibit 1-K on page 26. The Clerk has concern that EII is relying upon a “sample invoice provided by DEO” in the course of administering a $2 million Grant , instead of adhering to the specific grant requirement of certifying the invoices (see Exhibit 1-Q). 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. The Clerk accepts EII’s admission that they did not provide photographs of the post - construction and remodeling, as required in the Grant Agreement. It also appears that DEO did reimburse EII without the photos required by the contract. 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. 45 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. The Clerk understands the purpose of the Grant. However, the deliverable for the task was “copies of all design, plans, and permits obtained or required to be obtained for the purpose of accomplishing the project” as noted by EII above. The Clerk understands this requirement to include the Final Occupancy permit, which was issued on January 17, 2018. “The State has no provisions to provide additional documentation after the grant period expired,” because the grantee was supposed to have the project completed before the end of the grant period. 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. The Clerk would argue that “December 1, 2017” is within the timeframe that Internal Audit identified as December 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 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 gran ted their license from the State of Florida. Based on the supporting documentation provided to the Clerk by EII on February 7, 46 2017, the Florida Department of Business & Professional Regulation approved the plans for the Florida Culinary Accelerator @ Immokalee on February 7. The Clerk will change the date from February 7, 2018 to February 10, 2018, which further proves the Clerk’s assertion the EII did not complete the project prior to June 30, 2017 as required by the Grant and as represented by EII. 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 n or 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. DEO’s verbatim response was “we relied upon the documents we were given.” DEO would not provide assurances of legal compliance, nor, assert that funds would not be required to be paid back. The representations by DEO were that they had relied upon the documents they were provided. Once advised by the Clerk’s Office that the documents were false, DEO refused to put in writing that they would not pursue recapture of funds. DEO indicated that they had not reviewed the information for legality but had relied upon the documents they were given. Dr. Goodman and Mr. Ochs continue to represent that DEO had “no problem with the invoices”. On April 2, 2018 the Director of BED stated that the “invoices” referenced in Exhibit 1-F on page 22 are “invoices” only to show what items were ordered. - 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 47 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-appropriation of remaining funds was approved by the Florida legislature but, was vetoed by the Governor. The County accepted grant SL007 for $2.5 million in 2014 and was unable to complete the project within the agreed upon timeframe, thereby losing $1,776,474.49 of Grant funds.  Recommendation: Management disagrees with the Internal Auditor’s recommendations. The Clerk notes that Management disagrees with the recommendations because County management disagrees with this finding. 48 2) Irregularities found in Solicitation 17-7167 for the procurement of the Kitchen Equipment for the Florida Culinary Accelerator @ Immokalee include possible bid rigging, misrepresentation of solicitation budget and use of potentially misleading commodity codes. The Value of the Solicitation Was Misrepresented to Possible Vendors. The invitation to bid (Solicitation 17-7167 Florida Culinary Accelerator@ Immokalee) was issued on May 26, 2017 for the procurement and installation of a list of kitchen equipment to be funded by a United States Department of Agriculture Rural Development (USDA) Rural Business Development Grant (RBDG) for the Florida Culinary Accelerator @ Immokalee (Bid invitation document 17-7167). The funds for procurement were to be available from USDA and matched with funds from EII’s Grant with DEO. WH Reynolds / TriMark Strategic was the only subsequent bid received for this solicitation and was ultimately awarded the bid. The bid invitation was requested by BED specifying that the BCC had approved a grant application to the USDA RGDB for $112,536. The bidding process took place electronically through the Collier County Online Bidding System “Bidding System” starting on May 26, 2017 with a solicitation deadline for June 9, 2017 at 3:00 PM. The bid invitation’s Public Notice stated that “All questions regarding the ITB must be submitted online on the Bidding System website” and “All solicitation responses” must be made on the official ITB response forms…” through the website. The Collier County Online Bidding system received one bid even though thirty-three vendors downloaded the specifications. The Commodity Codes Posted on the Collier County’s Bidding System Did Not Correspond to Kitchen Equipment. The invitation to bid included the following commodity codes: 28500 – Electrical Equipment, 28500 – Furniture, General, and 28500 – Millwork and Cabinetry. The invitation to bid used only one commodity code, 28500, for three different categories and did not utilize Food Service Distributor/Products as a category even though this is the primary description of what was being solicited. 28500 appears to be the code for Electrical Equipment however, it IS not the code for Furniture, General nor Millwork and Cabinetry. The code for Furniture, General is 42000 and the code for Millwork and Cabinetry is 91007. 49 Exhibit 2-A: Collier County Solicitation #17-7167 for the Florida Culinary Accelerator at Immokalee Kitchen showing Commodity Codes 28500. Exhibit 2-B: The Commodity Code 42000 for Furniture, General. Exhibit 2-C: Commodity 91007 for Millwork and Cabinetry. 50 Questions and Answers section On June 6, 2017, a question was submitted to the County’s online bidding system, w ith a subsequent response on June 8, 2017: The response of $112,000 failed to disclose the additional match funds of $111,424 from EII’s grant with DEO. The answer to the bid questions may have dissuaded other vendors (plan holders) from submitting bids. The equipment list and brands were uploaded to the bidding system and the vendors had the ability to add up the costs and calculate that they were potentially twice as high as the budget indicated by the County. Information about the additional funding was not included in the documents provided on the Invitation to Bid. BED States in an award letter addressed to Marshall Goodman of EII, dated June 20, 2017, that BED will make a recommendation to award the contract to the sole bidder, W.H. Reynolds, in the amount of $223,960. Exhibit 2-D: Commodity Code 39300 for Food Service Distributors/Products, which was a vailable, but not used in Solicitation #17-7167. Exhibit 2-E: Incorrect cost estimate or budget given in response to a question. 51 Undisclosed Matching Funds The above-mentioned response in Exhibit 3-C is incorrect, the actual budget for the equipment was higher than just $112,000 and BED failed to fully disclose all available funding sources. The first source is the USDA RBDG grant for $112,536 and the second source is a “local match” from EII in the amount of $111,424 which originated from DEO Grant #SL025 (Finding #1 above). On June 20, 2017, BED notified EII that Collier County was awarded a $112,536 grant from the U.S. Department of Agriculture’s Rural Business Development Program and that EII would need to remit funding in the amount of $111,424 ‘as soon as possible.’ EII and BED submitted funding to the Clerk’s Finance Department on July 27, 2017, thirty-seven days later. 52 Please note the following: 1. “The county will issue a purchase order in the amount of $223,960 on or about June 27, 2017 ,” which is two days before Dr. Goodman claims 100% completion of the task (see Finding #1 above); and 2. The funds were remitted to the Clerk’s Finance Department on July 27, 2017 , which is after EII received the DEO reimbursement on July 17, 2017 (see also Exhibit 1-I above). Exhibit 2-F: Letter from the Director of BED, Jace Kentner, instructing EII to remit $111,424 to the County for the purchase of the kitchen equipment. This document was remitted to the Clerk’s Finance Department on July 27, 2017, after EII received the reimbursement from DEO. 53 Bid awarded to WH Reynolds TriMark Strategic The bid awarded to a single bidder, WH Reynolds TriMark Strategic, for $223,960. Conclusion: The use of incorrect commodity codes and the under -valuation of the specific equipment could have easily dissuaded possible bidders. Of the thirty-three vendors that downloaded the specifications, only one vendor submitted a bid, WH Reynolds TriMark Strategic. Recommendation:  The Board of County Commissioners should consider referral to law enforcement and conduct an investigation into a possible bid-rigging scheme. On Wednesday March 21, 2018, County Management and EII staff provided their written response to these findings: 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 Clerk will change the date from May 23, 2017 to May 26, 2017. The condensed advertising period of 14 days was at the request of the Division to meet a pending Exhibit 2-G: Only bid received, in the amount of $223,960, which is the amount of the USDA RBDG Grant of $112,536 plus the matching funds of $111,424. 54 grant deadline. The Clerk questions the sequence of events that led to the Division submitting an ITB thirty-five days before the self-described “pending grant deadline.” The condensed advertising period of fourteen days left only twenty-one days before the 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. Commodity Code 39300 – Food Service Distributors/Products appears closer to “Commercial restaurant and/or kitchen equipment” than 28500 – Electrical Equipment, 42000 – Furniture, and 91007 – Millwork and Cabinetry. Please note, the Commodity Codes on all three shown on Exhibit 2-A, page 49, of the solicitation are 28500; 28500 – Electrical Equipment, 28500 – Furniture General, and 28500 Millwork and Cabinetry. The finding that the procurement had irregularities is valid. 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.” Please refer to Exhibit 2-E. On 6/6/2017, the question asked was, “is there a cost estimate or budget?” On 6/8/2017, the answer posted was, “Yes. The Budget is the 55 USDA RBDG Grant Value of $112,000.” The answer given is 56% of the reported budget amount of $200,000. The Clerk notes that the additional language provided in the response, above, “which further articulated various and general funding sources from the State of Florida, USDA, and the Economic Development Administration” was not included in the answer posted on 6/8/2017 (see Exhibit 2-E). Additionally, the answer posted on 6/8/2017 is stated as a definitive “The budget is the USDA RBDG Grant Value of $112,000. County Management Response: Management disagrees with and disputes this finding.  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 o f 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 fol lowing 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. 56 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.” The Clerk asserts that by stating a budget of $112,000 for over $223,000 in equipment listed, within a compressed timeframe, in addition to i mproper commodity codes used, may constitute a barrier to entry by potential bidders. Action Plan: None. 57 3) EII and the BED misrepresented Grant #SL007 Deliverables to DEO and the BCC on the Annual Accomplishment Reports, asserting unverified jobs creat ed and capital investment obtained. 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. In November 2014, Collier County entered into Grant Agreement #SL007 with the Florida Department of Economic Opportunity for the purpose of creating the Collier County Soft Landing Accelerator. Collier County Office of Business and Economic Development the Grantee (BED for the project) has contracted with Economic Incubators, Inc., the vendor, to serve as the Project’s Administrative Entity. It should be noted that the Agreement between EII and the County does not require EII to be responsibl e for the Creation of Jobs or Capital Investment, EII is merely responsible for reporting the number of jobs created and amount of capital investments made within the accelerator projects. The County is required to submit quarterly and annual reports for each of the five years to document and report the County’s progress towards meeting the grant deliverables. What this means to the taxpayers of Collier County is that even though EII is paid to track and report Jobs and Capital Investments, the failure to create jobs and/or capital rests solely on the pocketbook of the taxpayers of Collier County. The two primary County deliverables for grant #SL007 are the creation of 208 “Job Year Equivalents” or the demonstration of $12,500,000 in private sector capit al expenditures or venture investment by June 30, 2019. (Note: there was an amendment to the DEO grant agreement to reduce these requirements based on the reduced first year funding, as approved on the BCC Agenda of February 13, 2018.) EII provided the following data to the BED; the BED relied on this data and purportedly validated the information prior to submitting their report to DEO. Internal Audit reviewed the supporting documents assembled by the BED, as submitted to DEO, Supporting Documentation DEO SL007 Annual Report Parts 1, 2, & 3; as well as the attached master spreadsheets for Fiscal Year 2016 dated 9/30/2016 and for Fiscal Year 2017 dated 11/9/2017. In Fiscal Year 2017, EII asserts their job claims are supported by 52 I-9’s. However, in the supporting documentation, as submitted to DEO, 52 I-9’s are not present. Furthermore, Page 24 of Grant #SL007 identifies the Florida UCT 6 Form, IRS Form 1099, and IRS Schedule K-1 as acceptable verification and does not indicate the I-9 as an acceptable form of documentation. 58 Further review of Grant #SL007, and subsequent amendments, does not indicate that an I-9 Employment Eligibility Verification is acceptable supporting documentation. Additional review of EII’s agreements with Collier County also do not give instruction to use an I-9 for the purpose of validating a Job Year Equivalent. EII does not have documentation to support all of the claims about jobs and investments. According to Dr. Goodman, he cannot get documentation from participants, and as he describes it, because it is like herding cats. Dr. Goodman often refers to this as the “Start-up Culture.” In the course of the review, Internal Audit noted several discrepancies, inaccuracies, missing supporting documentation, as well as other irregularities. The summaries for Fiscal Year 2016 are provided as Table 1 and Fiscal Year 2017 as Table 2, below: Exhibit 3-A: Grant #SL007, version date July 1, 2014, Scope of Work 2.g.i., page 24. 59 Table 1 - Details of Claims Made by EII and BED compared to Internal Audit Validation for Fiscal Year 2016 Detailed Items EII and BED Reported to DEO Internal Audit Validated Supporting Documentation as Submitted to DEO Active Accelerator Participants 25 26 Total Accelerator Participants 37 37 Departures 12 11 Number of Entrepreneurs that Stay in the Region 37 35 (At least 1 company moved out of Florida) Claimed Jobs 51 11 (including EII staff of 3) Job Year Equivalents Not Reported BED Failed to Report Capital Investment $600,800.00 $90,000 Venture Investment $3,619,652 $530,370 Capital Expenditures Not Reported Not Documented Foreign Direct Investment Not Reported Not Documented Fiscal Year 2016 Exhibit 3-B: Annual Accomplishment Report as of September 30, 2016. 60 Table 2 - Details of Claims Made by EII and BED compared to Internal Audit Validation for Fiscal Year 2017 Detailed Items EII and BED Reported to DEO Internal Audit Validated Supporting Documentation as Submitted to DEO Active Accelerator Participants 37 35 Total Accelerator Participants 68 67 Departures 31 32 Number of Entrepreneurs that Stay in the Region 30 Internal Audit has found at least 2 companies that have relocated outside of Florida that EII has failed to report. Validated Jobs 64 19 (including EII staff of 3) I9’s in FY16 51 - I9’s claimed 1 - I9 provided in the Supporting Documentation I9’s in FY17 52 – I9’s claimed 7 – I9’s provided in the Supporting Documentation Job Year Equivalents 51.83 10.823 Capital Investment Not Reported $0.00 Venture Investment $12,268,626 $5,875,567.80 Capital Expenditures Not Reported $0.00 Foreign Direct Investment Not Reported $0.00 Fiscal Year 2017 Exhibit 3-C: Annual Accomplishment Report as of September 30, 2017, revised November 8, 2017. 61 EII continues to have difficulty reporting accurate and verifiable information as evidenced by the most recent Fiscal Year 2018 Quarterly Accomplishment Report. Exhibit 3-D: Email from BED on January 29, 2018, notifying EII of errors Quarterly Accomplishment Report and unverified jobs and venture capital reported. As of January 29, 2018 62 Conclusion: EII has failed to capture accurate and relevant data regarding participants in the accelerator projects since the inception of the project, and BED reported this inaccurate data to the Grantor Agency. The BED failed to validate the data presented to them by EII before reporting to the Grantor Agency. EII lacks the managerial capacity and internal controls to effectively manage and to accurately report on the performance of the accelerator projects, as required by the Grant Agreements. The BED, as well, has failed to enforce the duties and responsibilities of the vendor, EII, in c arrying out the administration of the accelerator projects. Failure by BED to accurately report progress to the Grantor Agency or to meet the Deliverables to Grant #SL007 creates financial risk to Collier County and jeopardizes future grant opportunities. Recommendations:  The Board of County Commissioners should consider their alternatives in regards to the contract with EII and notify them of potential reimbursements that may be required to State of Florida and Federal grantors and/or the County taxpayers.  The BED needs to provide proper oversight and monitoring of County vendors. Sufficient controls should be in place to capture, record, and validate reportable Grant requirements. On Wednesday March 21, 2018, County Management and EII staff provided th eir written response to these findings: Finding 3. EII and the County Staff misrepresented Grant #SL007 Deliverables to DEO and the BCC on the Annual Accomplishment Reports. EII’s Response: 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. The Clerk notes that after 4 years and $5 million, EII is only required to Report job creation, not actually create jobs. Furthermore, EII states in the response above that 63 they do not even validate the jobs created which reinforces the Clerk’s assertion that the numbers reported were unsubstantiated. 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’s Exhibit #1 Amendment to DEO Agreement SL007 reduced the number of jobs required of the County due to the County’s inability to spend the Gr ant funds received. Unfortunately, for the taxpayers this means that the original requirement of 208 jobs or $12.5 million in Capital Investment in no longer required to be met. 4 years and over $5 million with millions more expected to be requested and spent; only nineteen jobs (including EII’s three jobs) could be validated to date.  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. The BCC Grants Compliance Manager stated that her department “did not validate the jobs reported by EII to the County nor the subsequent County report to DEO. This is not the role and responsibility of the Grants Compliance staff. This is the responsibility of the Division [BED].” 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. The Clerk’s Internal Audit has identified several instances where claims reported to the County are missing supporting documentation in addition to other irregularities. Based on the supporting documentation provided by BED, the information reported by EII and then “validated” by County staff is materially inaccurate. Action Plan: As agreed in DEO Agreement SL007, continue monitoring and reporting to the DEO. 64 This implies continued funding through FY2019 with only 61 “Job Year Equivalents” or $6,000,000 in capital expenditure or venture investment , contractually required by 2019. 65 4) The BED 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 the Naples and Immokalee accelerator projects . The BED failed to provide oversight and fiscal control to protect taxpayer funds regarding EII, creating an environment that fosters improper salary payments, unbudgeted executive bonuses, improper travel expenditures, overspent personnel costs, reduced revenues (see #4 below), undocumented “bartering” transactions, increased financial liabilities, risk of lost grant funds, all of which endanger the sustainability of the Naples accelerator project. Table 3 - Total Compensation Paid to EII Staff for Fiscal Year 2017 Salary 401k Match (Validated as of 8/15/2017)* Bonus** Travel Allowance Total Compensation Dr. Marshall Goodman $165,375 $5,494 $12,009 $9,000 $191,878 Jennifer Pellechio $90,000 $2,814 $4,992 $3,600 $101,406 Nicole Kruezer $40,000 $1,249 $593 - $41,842 Payroll Taxes, 401k, and other costs $2,516.90 Totals $295,375 $9,557 $20,112.05 $12,600 $337,644.05 *The Clerk has Pay Records as of August 15, 2017, the point where EII expended the entire personnel cost budget of $309,800 six weeks before the end of the fiscal year on September 30, 2017. **The Clerk has records showing the allocation of $17,594 of the total amount of $20,112.05 to each member of the EII staff. $2,516.90 were categorized as Payroll Taxes, 401k Contributions, other costs associated with administering the bonuses. Salary and Additional Compensation EII’s CEO’s base salary was $165,375 during FY2017, and at least $191,878 with additional compensation. EII’s COO’s base salary was $90,000 during FY2017, and at least $101,406 with additional compensation. EII’s FY2018 budget included a 2.9% pay increase for all of EII’s staff. After the January 9, 2018 BCC meeting approval of continuing funds, EII provided December 2017 invoices reflecting the pay raises as paid retroactive to October 1, 2017. This is at the same time that EII has failed to establish reserve funds pursuant to Agreement with the Collier County. EII continues the escalation of discretionary expenditures, all while claiming fiscal constraints. Unauthorized Matching 401k Contribution EII paid a matching 401k contribution as a fringe benefit during FY2017. The payment of a matching 401k contribution is not an authorized use of the funds provided by the County , (see Exhibit 4-A below). This additional compensation was validated as $9,557 as of August 15, 2017, in which EII requested and received from Collier County in their Payroll Reimbursement Request s. 66 Exhibit 4-A: Article IV of the Fiscal Year 2017 Agreement between Collier County and EII. Article IV details allowable personnel costs, which does not include a matching 401K contribution. Exhibit 4-B: EII’s Executive Committee Meeting minutes from October 31, 2017 discussing the matching 401k contribution. The COO of EII was not able to find the minutes for the EII’s board action. 67 Following EII’s Executive Committee meeting on October 31, 2017, BED inserted “matching 401K contributions up to 5%” into the FY2018 Agreement, which was presented to the BCC on November 14, 2017. Improper Bonuses Paid EII’s Executive Committee and Board of Directors awarded a bonus to the staff of EII on December 7, 2016. The bonuses were not initially categorized separately in the financial statements, were not initially disclosed on Quarterly Revenue Reuse Plans filed with the County, and were paid with Program Income that was not sufficient to pay bonuses. On February 1, 2018, Dr. Goodman stated that there was no supporting documentation, no available research, and that no budget analysis was performed to show the fiscal impact of paying out the bonuses. Please see Table 4, below, details bonus payments and other associated costs: Table 4 - Bonus Payments to EII staff during Fiscal Year 2017. Bonus Payments – FY2017 Dr. Marshall Goodman, CEO $12,009.38 Jennifer Pellechio, COO $4,992.27 Nicole Kruezer, Administrative Assistant $593.50 Payroll Taxes, 401k, and other costs $2,516.90 Total $20,112.05 Exhibit 4-C: Article IV of the Fiscal Year 2018 Agreement between Collier County and EII. This Agreement in 2018 now includes “matching 401k contributions up to 5%” 68 Per phone conversation on August 31, 2017 between Clerk’s Internal Audit staff and the COO of EII, "the bonuses were recorded incorrectly, at first. The bonuses were paid out of donations, I believe, funds may have been borrowed out of other accounts. Bonuses [payments to TriNet] came directly out of the Operating Account because they didn't want to change anything from how regular salaries are paid.” On a conference call on October 11, 2017 at 2:30pm, COCC Internal Audit asked the CEO of EII additional questions about the Bonuses. Marshall stated, “Bonuses are allowable under the contract, and that some of the money may have come from Business Income but it came from Private Donations. Records will show that it may have been borrowed but paid back.” Please note that Exhibit 4-E shows $20,112.05 was paid from Business Income while there is no entry under Private Donations. Exhibit 4-D: Email from EII’s COO on February 8, 2018, showing the calculations for the bonuses in addition to payroll taxes and the 401k match. Exhibit 4-E: Year End Financial Statements (unaudited) Dated October 13, 2017 showing total ‘Payroll-Additional Comp-Non Reimb’ in the amount of $20,112.05. 69 The BED Director claims that he was unaware of the bonus payments as late as July 2017 and therefore did not provide proper oversight of their vendor, EII. The bonuses were not properly budgeted in Fiscal Year 2017, were neither approved by nor reported to the BCC, and contributed to EII’s self-described cash flow constraints. Bonuses are again not budgeted for in 2018 and EII made no indication that they planned to make bonus payments in Fiscal Year 2018 when they made their presentation to the BCC on November 14, 2017. EII paid the above-mentioned bonuses, while at the same time, claiming fiscal constraints. If the money was not spent on bonuses, it could have been used to establish a reserve fund, pursuant to the Agreement. Consequently, the bonus payments negatively affected the cash flow and sustainability of the accelerator projects. Date Issued Reporting Period Revised Bonuses Paid Included in Report Approved by Director of BED 2/2/2017 Q1 New No Tuesday, January 31, 2017 2/9/2017 Q1 Revised No Thursday, February 9, 2017 4/7/2017 Q2 New N/A Tuesday, April 18, 2017 5/5/2017 Q1 Revised No Friday, May 5, 2017 5/5/2017 Q2 Revised N/A Friday, May 5, 2017 6/1/2017 Q1 Revised Yes Missing 6/1/2017 Q2 Revised Yes Missing 6/24/2017 Q1 Revised Yes Missing 6/24/2017 Q2 Revised Yes Missing 7/17/2017 Q3 New Yes Missing 10/12/2017 Q1 Revised Yes Missing 10/12/2017 Q2 Revised Yes Missing 10/12/2017 Q3 Revised Yes Missing 10/12/2017 Q4 New Yes Missing Exhibit 4-F: Summary of all Revenue Reuse Plans approved by the Director of BED showing that he failed to approve any submissions or revisions on or after June 1, 2017. 70 Travel Allowances as Additional Executive Compensation EII’s executive staff are paid a Travel Allowance from Program Income generat ed by the Accelerator, in addition to their salaries and benefits. The CEO is given a $750 allowance monthly and the COO is given $300 allowance monthly. During Fiscal Year 2017, EII paid $12,600 in Travel Allowances to the Executive staff. The Travel Allowances are paid directly to EII staff from Program Income, bypassing the existing payroll administration service and without taxes being withheld. The Travel Allowance should therefore be considered additional executive compensation. On October 9, 2017, COO Jennifer Pellechio provided their external accountant’s response to the Clerk’s questions about how the Travel Allowances are administered. EII’s external accountant repeatedly warned EII’s Executive staff that the IRS would not view this as an “ac countable” plan and that the allowances would have to be recognized as income and reported on their W2’s. On February 11, 2018, Jennifer Pellechio provided her mileage logs and supporting documentation for Fiscal Year 2017. EII provided the 2017 Form 1099 showing $9,000 paid to Dr. Goodman, without a mileage log or receipts. October 9, 2017 email provided by COO Jennifer Pellechio Exhibit 4-G: Email from EII’s external accountant stating that EII’s Travel Policy requires receipts and mileage logs to be considered an “accountable” plan. 71 Overspent Personnel Costs The FY2017 Agreement included a budget of $309,800 to pay the personnel costs for three Full Time Equivalent (FTE’s) accelerator staff for the period of October 1, 2016 to September 30, 2017. The $309,800 was intended to cover salaries, benefits, payroll taxes and other personnel related costs through September 30, 2017 . Contrary to the FY2017 Agreement, EII’s executive staff budgeted for $376,734 (not including bonuses and the Travel Allowances paid). See EII’s 2017 Draft budget below: Please note that EII’s Draft budget included an allocation of $15,094 for “Retirement,” which is a matching 401k Account Contribution. The FY2017 Agreement does not include retirement account contributions as an allowable personnel related cost (see Exhibit 4-A above). Over the course of FY2017, EII expended a total of $355,075.89, which is $45,275 over budget from the $309,800 in county funding, and was paid from Program Income. Exhibit 4-H: Draft version of EII’s Proposed Budget for FY 2017. This budget details how EII plans to spend $376,734 on personnel related costs and notes that Collier County will only reimburse up to $309,800. Exhibit 4-I: Statement of Activity October 2016 – September 2017 for Economic Incubators, Inc., prepared by Noack & Company on October 13, 2017 (un -audited). 72 Reduced Revenues EII, with the consent of the BED , presented the FY2018 budget that contains the provision for a rental discount. The BCC approved the budget, with the included discount, on November 14, 2017. EII continues to give away as much as 40% of the total Rental Income in the form of “promotional” discounted rents to accelerator participants. In Fiscal Year 2017, EII discounted $95,772, or (37.2%) of $256,808 in Membership/Business Income revenue. EII missed their revenue targets in 2017 due in part to the discount. EII is continuing with the same policy in Fiscal Year 2018. Annual cost of rent paid directly by the County to Kraft Office Center, LLC. is $197,900 for Fiscal Year 2018. For the First Quarter of FY2018, October through December 2017, EII has discounted $19,400 or (36.3%) of $53,400 in Membership/Business Income revenue. The discounted rents have reduced revenues to $34,000 for this period. The Fiscal Year 2018 Budget anticipates significant future increase to revenues previously unrealized, this repeats significant over-estimates of budgeted revenues from prior years. Undocumented “Bartering” Transactions EII engaged in un-documented bartering practices with accelerator participants. For example, EII exchanged the use of office space for advertising credits in Fit Nation Magazine, an accelerator participant. EII failed to document the barter and lost the opportunity to collect revenue from this participant. Increased Financial Liabilities EII’s failure to submit reimbursement requests in a timely manner have caused EII to utilize a Letter of Credit established with First Florida Integrity Bank. The interest and fees charged on the Letter of Credit are not reimbursable but are being paid by Program Income generated by sub-leasing the accelerator space that is paid for by the taxpayers. Conclusion: EII’s internal controls are woefully inadequate or non-existent and led to the misuse of at least $76,850 of Program Income during Fiscal Year 2017. EII misused Program Income by paying $20,112 in executive bonuses, $11,463 in Travel Allowances, and $45,275 in over-spent personnel related costs contributing to EII’s Net Loss of ($27,069.65) from operations for fiscal year 2017 (unaudited). The overall lack of fiscal controls led to reduced revenues, undocumented “bartering” transactions, and increased financial liabilities. The BED failed to monitor the activities of their vendor, EII. EII’s misapplication of Program Income, failure to properly manage the administration of the accelerator projects clearly indicate EII’s inability to sustain the accelerator projects. On February 1, 2018, Dr. Goodman stated that he and COO Jennifer Pellechio do not have 73 financial/accounting/bookkeeping backgrounds and that this function is not in their job descriptions. The Clerk’s Office, on an ongoing basis, has provided EII with training and assistance regarding documentation and reporting; in addition to EII’s use of an external accountant and external auditor . EII continues to submit inaccurate reports in an untimely manner. Recommendations:  The Board of County Commissioners should consider their alternatives in regards to the contract with EII and notify them of potential reimbursements that may be requir ed to State of Florida and Federal grantors and/or the County taxpayers.  The BED should review contract terms to insure they include deliverables that are measurable, verifiable, and provide deadlines for performance of intended goals, e.g. the number of j obs they should be able to report, or should be required to create.  The BED should increase the overall level of monitoring of vendor’s operations.  The BED should mandate the implementation of appropriate internal controls.  The BED should monitor, evaluate, and review vendor actions and report to the BCC any contract deficiencies. County Management and EII Verbal Comments on March 13, 2018: Fred Krieger, Volunteer for EII, provided additional supporting documentation regarding the calculation of the Bonuses in Table #4, above, during the meeting on March 13, 2018. The documents included the TriNet invoices dated 12/27/2016 and 4/10/2017, which provide the full detail of the additional benefits that are associated in the bonus described. After Mr. Krieger e xplained the accrual of the associated expenses for employment taxes, matching 401k contributions, service fees, and workman’s compensation, the COO of EII stated that, “(she) did not include these invoices in the email I sent to them (the Clerk).” The Clerk’s Response: After numerous requests, by the Clerk’s Internal Audit staff, for supporting documentation that detailed the payout of the bonuses, the COO of EII finally provided the invoices with the previously requested information on March 13, 2018, well after the Audit Report had been issued for management response. On Wednesday March 21, 2018, County Management and EII staff provided their written response to these findings: 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 74 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. County staff and EII have worked to improve reporting, policies and procedures, and internal controls for 4 years at a cost of $5 million of taxpayer money. To date, only 19 jobs have been validated, EII’s reporting, policies and procedures, and internal controls are still problematic.  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 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. Management is correct; the Clerk is very familiar with the policies created by contractual terms. The Clerk notes that EII’s Board of Directors are granted limited authority regarding the operation of EII, by contract. EII’s Board of Directors and staff are custodians of public funds and all program income generated from County owned assets or County paid leases is constrained by contract. EII is organized as a 501(c)(3) non-profit and is therefore subject to strict regulation defined in the Internal Revenue Code. EII policies on employee pay and fringe benefits are subject to IRS regulations.  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. It is unclear what public purpose is served in a cash constrained organization by paying cash bonus to leased employees.  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, 75 [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 clearly understands the use of cell phones and travels expenses. The Clerk is concerned with the treatment of personnel expenses and the accurat e tax treatment for these expenses; please see Exhibit 4-G. As stated by management above, “County Staff and EII have worked diligently to improve the quality of report, policies and procedures, and internal controls,” which the Clerk asserts are still problematic. On April 2, 2018, EII staff stated that they have fixed the tax treatment of expenses going forward.  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. The Clerk agrees with management that 401k contributions are allowed for in the FY2018 Agreement and they were not allowed for in the previous agreements.  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 Clerk’s concern is that rates are discounted to the detriment of the sustainability of cash flow. The Clerk agrees it is the responsibility of EII’s Board of Directors and staff to collect rates that meet budget and support cash flow.  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 Clerk has requested support for the “bartering” transactions. On April 2, 2018, the COO of EII stated that EII no longer participates in bartering transactions. The last bartering arrangement was in June 2016 and that agreement has ended.  The section with the header “Increased Financial Liability” fails to provide any facts to support the misstatements. The Clerk notes that management disagrees with the premise that interest and fees charged to EII for the use of their Letter of Credit to cover payroll, over-spent personnel costs (see Exhibit 4-I), and travel allowances are in fact an increased financial liability. According to the FY2017 external audit, EII incurred $4,709 of interest expense through 76 September 30, 2017. On April 2, 2018, EII staff and CPA volunteer detailed the Interest Expense of $4,709 includes all interest expenses incurred, not just the Letter of Credit. EII’s COO then stated that the Letter of Credit was not used to cover payroll, it was utilized for the buildout of the Immokalee facility.  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. The Clerk does not require hard copies, nor, that copies be hand delivered. To the contrary, the Clerk has repeatedly requested that ALL invoices and supporting documents be submitted thru the automated Dolphin/SAP financial system that provides time tracking for the process. The County (BED) requested that all invoices be first sent to them from EII. This process has proven to delay the submission to the Clerk’s Office. The redirecting of the invoices first to the County (BED) was a direct result of the inability of EII to submit proper documentation with invoices. EII’s Response. Incorrect; Clerk’s assertions that “in the audit report that EII made improper payments to the staff of EII”. The Clerk continues to assert that EII made and/or improperly accounted for payments to staff. 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. EII, a 501(c)(3) organization, is subject to IRS rules and regulations regarding the compensation of employees. It is noted in this audit report that EII has not performed 77 nor commissioned salary and compensation surveys. It was further confirmed by the CEO of EII on February 1, 2018 that EII Board of Directors conducted no budget analysis and has no documentation to support their decision to award bonuses to EII staff. Th is calls into question the compliance of EII’s compensation policies with IRS regulations. 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. The Clerk’s Internal Audit team made numerous requests for supporting documentation regarding the bonus payouts. The documentation provided, until March 13, 2018, only showed a bonus payouts equaling $17,595.15 whereas the financial statements showed the payment of $20,112.05. The personnel related costs of the bonus payments were withheld from disclosure to the Clerk. The COO of EII stated in the March 13, 2018 meeting, “(she) did not include these invoices in the email I sent to them (the Clerk).” On April 2, 2018, the COO of EII stated that these particular TriNet statements were not sent because they were not part of the reimbursable personnel costs. 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.” The Clerk advises EII and BED that an increased level of monitoring and reporting is needed for segregated accounts, especially when dealing with program income generated on County owned assets and County paid leases. Even more so, when the contract specifically requires Business Income to be maintained separately from Private Contributions. On April 2, 2018, EII staff and volunteer CPA explained that this is one of the reasons that EII sub-contracts out the accounting function. Incorrect; Clerk’s assertion that “…EII is unable to account for bonus payments made during Fiscal year 2017.” 78 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. The TriNet statements detailing the Total Bonus Related Expenses were provided to the Clerk’s Internal Audit on March 13, 2018. Table 3 and Table 4 have been updated accordingly. On April 2, 2018, EII staff and Volunteer CPA stated the following regarding the bonus payments: 1.) The bonus payments were stated on the financial statements under Payroll Salaries- Earnings, the bonus payments were then re-classified to Payroll Additional Comp-Non Reimb on or about May 5, 2017. It is worth noting that the Clerk did not start receiving monthly financial statements from EII until July 2017. 2.) EII staff was not present when the EII Board voted on the bonuses. Dr. Goodman then clarified his earlier statement from February 1, 2018 by stating that “he” does not have any documentation or budget analysis to support the bonus payouts, if there is any EII’s Board of Directors would have it and that he was not involved. 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. While payment did not exceed budget, EII spent 100% of the budget six weeks prior to yearend. BED, on the behalf of EII, then attempted to request a budget amendment from the BCC in July 2017 to cover the shortfall, pleading cash shortages because of the 79 Clerk’s refusal to make payments. Incorrect; Clerk’s assertion that “the audit report makes mention of the 2.9% salary increase in the FY 2018 budget is not understood. The Clerk’s assertion that EII staff received 2.9% salary increase in FY2018 is correct. 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. The Clerk agrees that there is not a time-certain for the establishment of the Reserve Fund. However, the Clerk finds, while it is consistent with board action, the payment of bonuses to EII staff before the establishment of the Reserve Fund, may not be fiscally prudent in a cash constrained entity. We are also glad to see the Clerk has acknowledged that the various personnel compens ation 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. The Clerk disagrees with EII’s assessment of the changes made to the FY2018 agreement. The agreement went through fifteen-plus revisions before going to the BCC. The majority of changes proposed by the Clerk, including perfor mance requirements and specifically required deliverables (e.g. produce a certain number of jobs), were passionately argued against by the Director of BED to the benefit of EII. The current agreement can best be described as increased financial burden to the taxpayer with decreasing responsibility by EII. 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. 80 The Clerk’s Internal Audit team made numerous requests for supporting documentation regarding the bonus payouts. The documentation provided, until March 13, 2018, only showed a bonus payouts equaling $17,595.15 whereas the financial statements showed the payment of $20,112.05. The personnel related costs of the bonus payments were withheld from disclosure to the Clerk. The COO of EII stated in the March 13, 2018 meeting, “(she) did not include these invoices in the email I sent to them (the Clerk).” On April 2, 2018, the COO of EII stated that these particular TriNet statements were not sent because they were not part of the reimbursable personnel costs. 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. EII’s external accountant, nor the Clerk, were incorrect. Both gave EII the options for appropriate accounting for travel and allowances. Unfortunately, until both the Clerk and EII’s external accountant pointed to these issues, EII did not properly handle the expenses. On April 2, 2018, EII staff and volunteer CPA stated that the 1099’s have been completed and sent out. 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. The Clerk did not pay more than the contracted amount for compensation. EII, however, used $45,275 of program income for the remaining personnel costs. The Clerk’s concern regarding EII’s compensation policies is that EII’s Board of Directors and BED have failed to provide proper oversight of EII and documentation to support the justification of EII’s compensation policies appears to be lacking. Exhibit 4-B: EII’s Executive Committee Meeting minutes from October 31, 2017 discussing the matching 401k contribution. The COO of EII was not able to find the minu tes for the EII’s board action. 81 Exhibits 4-H and 4-I will remain in the audit report. These exhibits demonstrate the Clerk’s concern regarding EII’s compensation policies, which is without any apparent oversight from BED. More specifically, Exhibit 4-H shows that EII misallocated 100% of the $309,800 reimbursement from the county to salaries and 401k matching contributions, while the remaining personnel costs of $45,275 was paid from Program Income. Exhibit 4-H is a budget that was completed by EII staff, before the FY2017 agreement was prepared, and clearly shows EII planned to implement a matching 401k contribution that does not appear in the FY2017 agreement. 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. EII fully expended the County’s reimbursement six weeks before the end of the 201 7 fiscal year, in August 2017. EII has overspent personnel related costs throughout the year and paid bonuses as late as April 2017 (see previous response), thereby expending all of their cash and then utilizing the Letter of Credit to carry them until th e FY2018 Agreement was signed by the BCC. 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. 82 EII’s Response: This is not accurate, Dr. Goodman has extensive management experience and Jennifer Pellechio has a MBA with years of financial experience. This assertion is not the Clerk’s, but a direct quote from Dr. Marshall Goodman on February 1, 2018, while explaining to the Chief Deputy Clerk why EII has to outsource the bookkeeping and audit functions, in addition to explaining the inaccurate reporting of the financial statements. On April 2, 2108, EII staff stated that from the very beginning, it was recognized by BOCC that there was not enough funds to pay to hire an accountant. This was part of Southwest Work Force Development Board’s oversight. 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.” The Clerk stands by the assertion that EII’s internal controls are inadequate, as seemingly supported by their own external auditor. 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 is currently in its final stages and all indications are that it will likewise produce a clean opinion. The Clerk notes EII’s deficient internal controls are consistent in most findings in thi s report. The Clerk also notes that County Management appears to agree with this assessment in their first response to Finding #4 above. The external Auditor, Tuscan & Co., provided seven comments to the FY2016 audit, one of which is specifically “Additional Oversight Should be Provided by the Board of Directors.” The seven oversight and monitoring functions that should be provided by the Board of Directors were as follows: a. Review monthly bank reconciliations to ensure they are being performed in a timely manner. b. Review budget vs. actual statement on a monthly basis and investigate any unusual variances. c. Review monthly internal financial reports for any unusual or unexpected transactions or balances. d. Review payroll reports to ensure compensation agrees with approved rates. 83 e. Review the policies and procedures with respect to benefits of key employees and officers to ensure adherence to written policies. f. Inquire of management and the independent auditors about significant risks or exposures facing the Company. Assess the steps management has taken to minimize such risks to the Company and review compliance with such steps. g. Review key internal controls with the management team and understand how these controls will be tested, maintained and monitored during th e year. On April 2, 2018, EII’s volunteer CPA explained that he has corrected four of the seven Comments from the FY2016 external audit, and that only three comments are were repeated in the FY2017 external audit: 1. 2016-2 Reconciliation of Fixed Assets Should Be Performed Monthly. 2. 2016-3 Monthly Reconciliation and Closing Process Should be Implemented. 3. 2016-6 The Board Should Approve Indirect Cost Allocation Policy. Recommendation: Management disagrees with the Internal Auditor’s recommendations. Action Plan: None. 84 5) EII, with the consent of the BED, has discounted their Program Income with “promotional” rents while claiming cash flow concerns and not meeting revenue targets. EII and the BED included a provision in the FY2018 Agreement that allows EII to discount the rent charged to accelerator participants by as much as 50% of EII’s budgeted Program Income. EII has a published fee schedule for membership pricing that details the monthly rent for different office spaces available at the Naples Accelerator. EII offers a promotional rental discount of 50% for the first six months to attract participants to the accelerator. EII’s COO stated that, “the promotional rent is only granted to a participant for the first six months they are in the accelerator.” Internal Audit has found numerous instances where the promotional rent was granted to participants for more than one six -month period. Multiple discount periods to the same participant indicates a lack of internal controls. EII has been made aware o f this lack of controls and continues to grant the discounts (note: HyperTeam has received the 50% discounted rent multiple times over 2 years while collecting $437,500 in County contracts). Table 5 below shows some of the Naples Accelerator Participants that have received the 50% discount more than once. While this list is not a comprehensive listing of all participants and all lease periods, it clearly shows that EII lacks internal controls regarding the application of the promotional discount. Table 5: Naples Accelerator Participants Discounts Participant Time Period Gross Rent Discount Wegner Law PLLC 9/1/16 – 2/28/17 $750/month $375 Wegner Law PLLC 3/1/17 – 8/31/17 $750/month $375 Wegner Law PLLC 9/1/17 – 8/31/18 $750/month $375 Golf Life Navigators 12/1/16 – 5/31/17 $3000/month $1500 Golf Life Navigators 6/1/17 – 11/30/17 $3000/month $1500 Golf Life Navigators 12/1/17 – 1/31/18 $3000/month $1500 SeaWay Studios/5th Ave Films* 8/1/16 – 1/1/17 $500/month $250 5th Avenue Films 1/1/17 – 6/30/17 $500/month $250 5th Avenue Films 7/1/17 – 9/30/17 $500/month $250 5th Avenue Films** 10/1/17 – 9/30/18 $250/month *SeaWay Studios/5th Ave Films Participant User Agreement is $3,000 for 6 months, discounted 50% to $1,500 before applicable taxes. **5th Ave Films month-to-month agreement reflects the new pricing policy, according to COO of EII on April 2, 2018. The promotional rents prevent EII from collecting maximum rents. For FY2018, EII is projecting $250,000 in gross rent from the Naples Accelerator, less the promotional discount of $100,000 (40% of $250,000), leaving only $150,000 in potential participant income. The County is paying $197,891.98 in rent for FY2018. This amounts to an almost $50,000 net loss in EII’s rental income compared to the am ount the County pays. 85 The rental discount policy dates back prior to FY 2017. However, on October 25, 2016, EII’s Board of Directors approved an additional policy authorizing Dr. Goodman to determine flexible membership rates. Dr. Goodman states, “The selling point is due to the facility rent that is covered now by the County.” This means that rents collected are not expected to cover costs (please see Exhibit 5-A). In addition, even though we found no legal authority for EII to discount county funds, this was presented to the BCC in easily understood terms as part of the FY2018 Agreement Budget, which was approved. This un-controlled policy affects EII’s ability to become sustainable. Exhibit 5-A: October 25, 2016 Board of Directors meeting minutes where Dr. Goodman requests authorization from the EII Board to offer flexible rental rates because the facility rent is now covered by the County. Exhibit 5-B: EII’s fee schedule, publicly available on their website: https://naplesaccelerator.com/memberships/ 86 Conclusion: EII is not following their own published Fee Schedule resulting in lost revenues. The BCC and the taxpayers are paying 100% of EII’s rent; EII is sub-leasing the space at a net loss, and then uses the generated rental income to cover unauthorized costs, such as employee bonuses. The BED failed to mandate EII operate as a viable and sustainable entity over the past four years pursuant to EII’s Agreements with the BCC. Recommendations:  The Board of County Commissioners should consider their alternatives in regards to the contract with EII and notify them of potential reimbursements that may be required to State of Florida and Federal grantors and/or the County taxpayers.  The BED needs to provide proper oversight and monitoring of economic programs.  The BED should require county vendors to meet the approved business plan and contract. On Wednesday March 21, 2018, County Management and EII staff provided their written response to these findings: 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 by 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. County taxpayers subsidize EII’s rent 100% ($197,891 for FY2018), thereby eliminating the majority of EII’s operating overhead, EII then sub-leases to participants at a net-loss ($150,000 budgeted net rents), for a $47,891 shortfall . It is worth noting that EII’s identified competitors operating within Collier County DO NOT receive this subsidy and appear to operate without taxpayer subsidies. Incorrect; Clerks assertion regarding Table 5. 87 EII’s Response: Table 5 contains errors and inaccurate information and cannot be relied upon. The Clerk’s Internal Audit staff identified one date that is out of sequence and has made the appropriate change. The supporting documentation for these participants has been attached. The reader will notice that each Participant User Agreement in Table #5 has “50% Discount” noted in the description or unit price. The latest Participant User Agreement for 5th Avenue Films is reflective of the latest pricing policy according to EII’s COO on April 2, 2018. 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. The Clerk agrees that County management has delegated this responsibility to EII. The Clerk notes that EII’s internal controls are deficient, resulting in multiple applications of a promotion discount that is contrary to EII’s own stated policy of one discount for the first six-month period. The Clerk also notes that the discounts are fully at the discretion of EII’s Board of Directors. It is especially worth noting that Wegner Law, PLLC occupies an entire office (Full Office Rent $1500) however the Participant User Agreement states Half Office $750, to which the 50% discount is then applied to bring the total cost to only $375 per month. On April 2, 2018, the COO of EII stated that Wegner Law, PLLC leases only half of the office and that the other half is available for lease, if someone wants it. It greatly concerns the Clerk how EII sub-leases half of a ‘full’ office space to one participant for only $375, going on 2 years, and EII’s Board of Directors and County management do not see this as contributing to EII’s cash flow or sustainability issues. Recommendation: Management disagrees with the Internal Auditor’s recommendations. Action Plan: None. 88 6) EII failed to meet the Business Income and Private Contributions targets in FY2017 pursuant to the Agreement between the BCC and EII. Pursuant to the Fiscal Year 2017 Agreement between EII and Collier County, EII was required to meet a funding target of $165,200 from the operation of the accelerator projects. $115,000 was projected to come from Business Income (primarily from the subleasing of County rented s pace) and $50,000 was projected to come from Private Contributions. EII is required, per the Agreement, to report Business Income and Private Contributions quarterly to the County, on the Quarterly Revenue Reuse Plan. For FY2017, EII reported the following: Table 6 - Summary of EII Quarterly Revenue Reuse Reports (NET) as of 10/12/2017 - Revised and Final Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total Net Business Income $20,325 $17,635 ($-24,674) $10,278 $23,564 Net Private Contributions $0 $24,618 ($-4,362) $0 $20,256 Total $20,325 $42,253 ($-29,036) $10,278 $43,820 EII was required to generate $165,200 from operations during FY2017 but was only able to generate $43,820, a revenue shortfall of ($121,380) Cash. EII has countered this result by claiming Private In-Kind Donations made up the shortfall and that EII did in fact meet their revenue target for the year. However, EII did not track and report the Private In-Kind Donations until the 4th Quarter of 2017 making retroactive allocation of NON-CASH time equivalents. It is worth noting that Private In-Kind Donations are from individuals volunteering time, not money, to EII. Additionally, Private In-Kind Donations as of 10/12/2017 is un-audited. Please see Table 7 below: Table 7 - Summary of EII Reported Private In-Kind Donations as of 10/12/2017 – Revised and Final (unaudited) Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total NON-CASH Private In-Kind Donations 23,020 14,145 19,145 36,645 92,955 According to Article XXIX of the Agreement, EII was supposed to report, on a quarterly basis, their progress towards reaching the $165,200 budget. In the event EII fails to reach seventy percent (70%), which is $28,910 per quarter, BED is authorized to seek BCC ap proval of an adjusted budget. On October 12, 2017, EII reported 92,955 in Non-Cash Private In-Kind Contributions. EII then reported a combined $136,775 with which they claim exceeds the seventy percent target of $115,640. This is contrary to representations made by EII Board Chairman Fred Pezeshkan and Vice Chairman Dick Grant to the Clerk when they stated that EII does not count volunteer time as income. 89 Budget Amendment The Director of BED requested a Budget Amendment on July 11, 2017, in the amount of $137,965 , knowing that EII was failing to meet projected revenues. The Budget Amendment, Item 16F2, states that the additional funding is for the Florida Culinary Accelerator @ Immokalee and fails to identify the shortfall in Program Income at the Naples Accelerator or the overspending o f personnel costs. While on the agenda, the Clerk’s staff brought EII’s issues to the BCC’s attention, and the item was pulled from the agenda. Upon further review, Internal Audit found the following discrepancies with the proposed Budget Amendment: 1) Start-up funding for the Immokalee accelerator requested in July 2017. The Director of BED knew that the Immokalee accelerator was not complet e at the time of the requested Budget Amendment in July. The intended use of the funds was to cover the misallocati on of Personnel Cost Reimbursements described in Finding #4, see Exhibit 4-H on page 50. 2) Misrepresentation of 71 companies and 86 Job Year Equivalent publicly submitted to the BCC in July 2017. The Director of BED explained the misrepresentation was due t o a miscalculation in the spreadsheets. The companies and jobs claimed by the Director of BED in July 2017 contradict BED’s deliverable reported to DEO for Grant #SL007 described in Finding #3 on page 38, see Exhibit 3-C and Table 2. 3) The Director of BED knowingly and intentionally misrepresented to the BCC in July 2017 that construction of the Immokalee Accelerator is now complete (see Exhibits 1-C, 1-N, and 1-O in Finding #1). 4) The Director of BED requested funding for Rent and Insurance, on behalf of EII, for a lease that EII has failed to pay during FY2017 and that the Director of BED failed to route for signatures (see and Exhibit 12-B on page 85). 5) The Director of BED publicly submits to the BCC in July 2017 language in the proposed Budget Amendment that would eliminate the Exhibit G Roles and Responsibilities of Administrative Entity from the existing Agreement between Collier County and EII. This is another e xample of the measures taken by the Director of BED to minimize performance requirements for EI I while increasing the financial burden of EII to the taxpayers. Please see Exhibit 6-A, below. 90 Exhibit 6-A: Item 16F2, Budget Amendment of $137,965 for Economic Incubators, Inc. dated July 11, 2017. 91 Since Private In-Kind Donations are not cash, it is appropriate to say the EII only generated $43,820 in cash from operations, which is Program Income. This money should have been held in a reserve account to carry forward the operations into the next period, pursuant to their contract. However, as detailed in the observations above, EII’s Board of Directors and EII’s Executive staff used the funds to pay for such expenditures as bonuses, travel allowances, and over-allocated personnel costs. Conclusion: EII, in their numerous appearances before the BCC, failed to report the extent and reasons for their cash flow issues, failed to produce accurate Quarterly Revenue Reuses Reports, and failed to seek an adjusted budget in accordance with the Agreement. The BED failed to monitor the vendor, EII, which was entrusted with taxpayer funds to carry out the accelerator projects. Recommendations:  The Board of County Commissioners should consider their alternatives in regards to the contract with EII and notify them of potential reimbursements that may be required to State of Florida and Federal grantors and/or the County taxpayers.  The BED should provide proper oversight and monitoring of economic programs.  The BED should require county vendors to meet the BCC approved business plan and contract Date Issued Reporting Period Revised Bonuses Paid Included in Report Combined Business/ Private Donation Net Income Exceeded Target % of Business Income and Private Contributions Net Business Income Reported Exceeded Target % of Business Income Net Private Contributions Reported Exceeded Target % of Private Contribution In-Kind Contributions Reported Combined Net Private Contribution and In-Kind Contributions Exceeded Target % of Private Contribution and In-Kind 2/2/2017 Q1 New No N/A 2/9/2017 Q1 Revised No 42,132.09$ Yes 42,132.09$ Yes -$ No -$ -$ No 4/7/2017 Q2 New N/A 71,055.11$ Yes 39,032.11$ Yes 32,023.00$ Yes -$ 32,023.00$ Yes 5/5/2017 Q1 Revised No 42,132.09$ Yes 42,132.09$ Yes -$ No -$ -$ No 5/5/2017 Q2 Revised N/A 71,055.11$ Yes 39,032.11$ Yes 32,023.00$ Yes -$ -$ No 6/1/2017 Q1 Revised Yes 7,455.00$ No 7,455.00$ No -$ No -$ -$ No 6/1/2017 Q2 Revised Yes 42,252.00$ Yes 17,634.00$ No 24,618.00$ Yes -$ 24,618.00$ Yes 6/24/2017 Q1 Revised Yes 20,325.00$ No 20,325.00$ Yes -$ No -$ -$ No 6/24/2017 Q2 Revised Yes 42,253.00$ Yes 17,635.00$ No 24,618.00$ Yes -$ 42,253.00$ Yes 7/17/2017 Q3 New Yes (29,036.00)$ No (24,674.00)$ No (4,362.00)$ No -$ (29,036.00)$ No 10/12/2017 Q1 Revised Yes 43,345.00$ Yes 20,325.00$ Yes -$ No 23,020.00$ 23,020.00$ Yes 10/12/2017 Q2 Revised Yes 56,398.00$ Yes 17,635.00$ No 24,618.00$ Yes 14,145.00$ 38,763.00$ Yes 10/12/2017 Q3 Revised Yes (9,891.00)$ No (24,674.00)$ No (4,362.00)$ No 19,145.00$ 14,783.00$ Yes 10/12/2017 Q4 New Yes 46,923.00$ Yes 10,278.00$ No -$ No 36,645.00$ 36,645.00$ Yes Exhibit 6-B: Summary of all Revenue Reuse Plans submitted by EII to the County for FY2017, showing that In-Kind Contributions were not recorded or reported until October 12, 2017. 92 On Wednesday March 21, 2018, County Management and EII staff provided their written response to these findings: 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 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. The Clerk’s Internal Audit team sourced the information in Table #6 from the Revenue Reuse Report “Revised and Final 10.12.17” that was submitted by EII. The numbers reported in the table are the Net Business Income, as reported for each quarter. Net Private Donation Income is the reported Private Donation Incom e less the Private Donation Expense, as reported for each quarter. The Private In Kind (PIK) Donations were not included in this calculation because PIK is not cash. Please find the above - mentioned Revenue Reuse Plan included in Appendix H, page 224-226. The Clerk disagrees with EII’s assertion that they are allowed to use a Gross or Adjusted Gross number as the basis for assessment. The Revenue Reuse Plan calculates a net value. Even if EII’s assertion is allowed, EII’s response above conflicts with the Revenue Reuse Plan submitted. EII’s response further illustrates EII’s problematic reporting of deliverables. 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. Table 7 was sourced from the same Revenue Reuse Report as Table 6, Appendix H pages 224-226. 93 The Clerk notes that EII disagrees with their own Revenue Reuse Report submitted on or about October 12, 2017. The Clerk has noted previously that EII’s reporting capabilities are problematic. EII is responding that the PIK in FY2017 amounted to $118,491. This amount appears in the FY2017 external audit and was not made available to the Clerk until Monday March 26, 2018, five days after EII and the County submitted a written response and thirteen days after EII and County staff met with the Clerk’s Internal Audit team on March 13, 2018. 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. The Clerk reiterates that EII submitted 10 revisions to the Revenue Reuse Plan during FY2017. It appears now that EII disagrees with the final Revenue Reuse Report. The Clerk’s assertion that EII fails to produce accurate reports is well documented. On April 2, 2018, EII staff and CPA volunteer explained that the Revenue Reuse Form was badly designed and could not be filled out accurately. EII staff also asserted that reporting problems associated with the Revenue Reuse Report are the reason this report was removed from the FY2018 Agreement. 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. 94 7) EII failed to meet their revenue target for the first quarter of Fiscal Year 2018 based on continued rent promotions, un-sustained participation, failure to collect budgeted private contributions, and the failure to open the Immokalee facility. Net Business Income (rents and private contributions) received by EII for the First Quarter of Fiscal Year 2018 was $35,285, net of promotional discounts; which is an average of $11,761 per month. The First Quarter Net Business Income was budgeted at $61,443 according to EII’s “monthly calendarization budget”. EII missed this budget by $26,158. However, using the straight-line budget for the First Quarter, the budget would be $72,800 ($291,200 / 4 = $72,800). EII missed the First Quarter straight line budget by $37,515. Use of the FY2017 revenues associated with rental agreements that may no longer be in place can be overstating revenue, budget should be based upon existing agreements for the budget year, not prior year agreement revenues that are no longer in effect. Use of a single year’s rental activity does not provide enough data to reliably predict the seasonality of EII’s business cycle, especially considering that EII does not appear to have complete and accurate records of their participant leases. One of the contributing causes of the budget shortfall was due to EII failing to collect budgeted Private Contributions during the first quarter. EII collected less than $1,000 of the $20,000 budget for private contributions for the first quarter of 2018. An additional cause of the budget shortfall was due to EII failing to open the Florida Culinary Accelerator @ Immokalee as of January 15, 2018. The Immokalee facility, was to open in 2016 according to the 2014 Exhibit 7-A: Email from Fred Krieger on January 2, 2018, explaining the calendarization budget compared to the straight-line budget. 95 Business Plan, was later reported to open in November 2017, then early January 2018, now March 2018. The BCC approved budget shows that the Immokalee Accelerator will not be open during October and November, therefore $0 revenue is bu dgeted for these two months. The Immokalee accelerator was budgeted to generate $2,500 in revenue in the month of December but did not have the Grand Opening until March 28, 2018. Exhibit 7-B: Budget vs. Actual during the First Quarter of FY2018 showing the monthly net income budgeted using EII’s calendarization budget. Exhibit 7-C: Budget vs. Actual during the First Quarter of FY2018 showing the monthly net income budgeted to the straight line method ($291,200 / 12 months = $24,266) 96 Failure to Collect Budgeted Private Contributions. On February 1, 2018, Dr. Marshall Goodman and COO Jennifer Pellechio informed the Clerk’s Internal Audit staff that the anticipated $20,000 donation from Century Link will probably not be received this fiscal year. COO Jennifer Pellechio explained that EII followed up with Century Link and was informed that original pledge was only for three years, FY2015, FY2016, and FY2017. COO Jennifer Pellechio further explained that since EII has incomplete records prior to her joining EII, that they were unaware that FY2017 was the last year of the pledge. Therefore, EII is not likely to receive the $20,000 Private Contribution, as EII was planning on for the first quarter of FY2018. Furthermore, COO Jennifer Pellechio stated that they do not have a record of FY2015’s donation , that record “may be” with Southwest Workforce Development Board. Internal Audit requested supporting documentation for the three -year pledge from Century Link. Dr. Goodman explained, “There isn’t any.” EII’s Explanation for Revenue Shortfalls EII continues to attribute “Cash flow issues for payroll” as an ongoing problem. Since EII’s salaries are covered 100% by county funding, there is no basis for this claim. However, EII and BED have failed to submit payroll reimbursement requests in a timely manner (See Finding #16, pg. 81). It is also worth noting that EII fails to identify the cause of any operation cash flow shortages or how EII plans to correct these shortfalls. EII does not discuss their failure to collect the budgeted Private Contributions. Exhibit 7-D: EII’s Pay Request #FY18-06 submitted on January 19, 2018 describing the new anticipated schedule as late January 2018 – Early February 2018. 97 Exhibit 7-E: EII’s Pay Request #FY18-08 submitted on February 9, 2018 describing, “the Naples Accelerator new active participants were at a low.” Additionally, “The Florida Culinary Accelerator @ Immokalee has not come online yet.” 98 Failure to open the Immokalee Accelerator on time In August 2016, EII reported the Immokalee accelerator was a year late but they were pushing forward to complete the incubator. As of February 9, 2018, the Immokalee a ccelerator is still not open for the proposed business (see Exhibit 7-F below). Conclusion: EII has failed to generate sufficient revenues from operations. EII continues to overstate revenue potential, is unable to collect estimated private contributions, and is unable to generate revenues necessary to sustain operations, relying instead on taxpayer dollars. EII has continually misrepresented plans and accomplishments to continue funding. Recommendations:  The Board of County Commissioners should consider their alternatives in regards to the contract with EII and notify them of potential reimbursements that may be required to State of Florida and Federal grantors and/or the County taxpayers.  The BED should review documents submitted as deliverables and report deficiencies to the BCC.  The BED needs to increase their level of monitoring and reporting of EII’s operations . Exhibit 7-F: Naples Daily News article titled “Immokalee business accelerator taking clients” dated August 24, 2016. In 2016, the accelerator was already “more than one year late.” http://nplsne.ws/2bkDZry 99 On Wednesday March 21, 2018, County Management and EII staff provided their written response to these findings: 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. 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 tim ing 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. EII first explained the missed budget goal of $20,000 as a timing issue. At the February 1, 2018 meeting, EII’s COO explained that it was not a timing issue rather the corporate sponsor pledge was for three years and EII already received all three years (as of FY2017). The supporting documentation provided by EII for the corporate sponsor’s Private Contributions consist of two invoice s for FY2016 and FY2017. EII indicated on February 1, 2018 that they do not have any records of the FY2015 donation nor any other documentation of the pledge. 100 Since the Finding is specific to the First Quarter of FY2018, the audit relied upon the information thru that period (ending December 31, 2018). The financial statements for the Second Quarter are complete at the publication date of this report. The Clerk will review the Second Quarter deliverables, to validate EII’s response of $45,504 in Private Donations, upon receipt. Please refer to Exhibits 7-D and 7-E where EII fails to mention Private Contributions, or lack thereof. 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. The Clerk accepts EII’s admission that as of Q1 FY 2018 EII has failed to “get the culinary component open” (see also Finding #1). This is contrary to EII’s representation to DEO that the facility was 100% complete as of June 30, 2017. 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. The Clerk recognizes that EII has improved their reporting however, EII’s reimbursement requests and reporting of contract deliverables still contain errors (that continue to be communicated to EII staff and BED staff over the past year). Recommendation: Management disagrees with the Internal Auditor’s recommendations. Action Plan: None. 101 8) EII, the BED, and owners of Kraft Office Center, LLC have failed to correct a zoning violation that has hindered the accelerator participants from registering as businesses and obtaining required business tax receipts in Collier County. The space occupied by the Naples Accelerator at 3510 Kraft Road, Naples , Florida is not properly zoned for current use, as verified by the appropriate county staff and the EII’s Vice Chairman, a Board Certified Real Estate attorney who also represents the owner of the property, the Chairman of EII’s Board Mr. Fred Pezeshkan. EII does not pay the rent for the facility that houses the Naples Accelerator. The rent is paid directly by Collier County to Kraft Center, LLC in the amount of $197,891.98 for FY2018. See table 7, below. Table 7 - Lease with Kraft Center, LLC Year Rent – Base Rent of $192,128.14 with 3% Annual Increases 2017 $192,128.14 2018 $197,891.98 2019 $203,828.74 2020 $209,943.60 2021 $216,241.91 Total $1,020,034.37 This has become problematic because a violation of the Zoning may hinder the Accelerator participants (tenants/incubator start-up companies) from obtaining the appropriate business tax receipts from the Collier County Tax Collector. EII’s failure to comply with these laws is an impediment to the success of the Accelerator and participants, by an entity funded to facilitate other business’s compliance with business regulations. Conclusion: EII is occupying and the county is paying rent on a property that is not zoned for the current use. As a result, participants may be unable to obtain business tax receipts as required by law. EII, BED, and the owners’ of Kraft Office Center, LLC were made aware of this is sue in March 2017 and have failed to resolve this issue. Recommendations:  EII and the owners of the property need to seek the appropriate remedies from Collier County to correct the zoning issue. 102 On Wednesday March 21, 2018, County Management and EII staff provided their written response to these findings: 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 The Clerk’s office provided this information to EII almost one year ago. The Clerk was advised that business tax receipts could not be issued under the current zoning. The Clerk then confirmed the issue with Division Director of Planning and Zoning, Mr. Michael Bosi. The Exhibit provided by EII identifies the encroachment to be corrected. The Clerk notes that while County Management “disagrees and disputes the finding,” County Management will attempt to facilitate discussion with the land owner at some unspecified time in the future to correct the issue. On April 2, 2018 Dr. Goodman stated that Naples accelerator participants are still not able to obtain their Collier County Business Ta x receipts and defers to the Director of BED for further comment. 103 9) EII failed to timely and accurately file IRS Form 990 tax returns for fiscal years 2015, 2016 and 2017, thereby jeopardizing their tax-exempt status. EII’s Board of Directors Failed to Disclose the Number of Contributed Hours. The 990’s for FY2015 and FY 2016 reflect that none of the Directors received any benefits or contributed hours worked. On numerous occasions, individual members of EII’s Board of Directors have represented to the BCC and Clerk’s staff the amount of time (number of hours worked) spent working on “making EII a success.” EII has claimed numerous volunteer hours as donations but failed to document any in either FY2015 or FY2016. Exhibit 9-A: Page 7 of EII’s Revised 990, resubmitted on or about January 6, 2018, for Fiscal Year 2016 showing the Board of Directors received no benefits or contributed no hours. 104 EII’s Board of Directors Failed to Disclose Potential Conflicts of Interest or Direct Dealings Mr. Fred Pezeshkan, the Vice President Director of Economic Incubators, Inc. (EII) Board of Directors during Fiscal Year 2016, is considered by IRS Code to be an Interested Person for the purpose of reporting transactions on the 990 and 990 Schedule L. Mr. Fred Pezeshkan is also the Manger of Kraft Office Center, LLC, which is the owner of the property that the Board of County Commissioners of Collie r County leases for EII use. Therefore, Kraft Office Center, LLC is controlled by Mr. Fred Pezeshkan. Part IV. Line 28 (a) is the disclosure for business transactions with current or former officer, director, trustee, or key employee. Line 28 (c) is the disclosure for a transaction with an entity that is controlled by a current or former officer, director, trustee, or key employee. The reporting threshold for business transactions with an interested person is $100,000. Yes / No Exhibit 9-B: Page 4 of EII’s Revised 990 showing that EII claimed “NO” for any related party transactions. Exhibit 9-C: Rent Payments to Kraft Office Center, LLC from October 2015 through September 2016 showing $118,510.72 in payments, which is above the $100,000 minimum reporting level. 105 In Fiscal Year 2016, Kraft Office Center, LLC received $118,510 in lease payments from Collier County on behalf of EII, which meets the minimum reporting requirement for entity controlled by an interested person. The arrangement of the BCC paying rent on behalf of EII, directly to Kraft Office Center, LLC may impact required disclosures. EII Filed 990’s Late, After Extension Deadlines. EII was late to file the Fiscal Year 2015 IRS Form 990. The form was due on February 15, 2016 but was not received by the IRS until November 7, 2016. EII claims to have filed the a ppropriate extension requests. However, the extension is for three months and a second three-month extension is available if needed. Two extensions would have made EII’s due date August 15, 2016. (Note: The IRS made a change to the extensions, now there is only one six-month extension instead of two three-month extensions.) EII was also late to file the Fiscal Year 2016 IRS Form 990. EII’s due date was February 15, 2017, August 15, 2017 with extensions. EII was late and did not submit the return until on or about October 5, 2017. Internal Audit reviewed EII’s tax returns for FY2015 and FY2016 and found many inaccuracies, errors, and omissions. Internal Audit communicated these concerns t o EII staff and the BED. EII then revised and re-submitted the FY2016 IRS Form 990 on or about January 6, 2018. Internal Audit has not yet performed a full review of the newly revised tax return, however it appears that changes to prior filings are restating the entity’s status and circumstances still not corrected a nd certainly not accurate for prior years, e.g. policies and procedures. EII falsely claims to have the flowing policies and procedures. On January 8, 2018, COO Jennifer Pellechio indicated that these policies only exist in draft form and have not yet been adopted by EII’s Board of Directors. As of February 1, 2018, EII’s Board of Directors has not adopted these policies. Exhibit 9-D: EII’s Revised 990 for Fiscal Year 2016 where EII answers “YES” to having specific policies in place. 106 After 4 years of operations, EII does not appear to have approved policies and procedures. Exhibit 9-E: Email reply from COO Jennifer Pellechio on January 8, 2018, stating that these policies exist in draft format and have not been adopted by EII’s Board of Directors as of February 1, 2018. Exhibit 9-E: Email reply from COO Jennifer Pellechio on January 8, 2018 stating research on compensation has not been completed. 107 Conclusion: EII appears to lack the managerial capacity to accurately file their entity’s business tax returns in a timely manner. Failure to accurately and timely file tax returns with the IRS may result in EII losing their tax - exempt 501(c)3 status, jeopardizing grant fundi ng and hindering the ability to generate private donations, further reducing the entity’s ability to become self-sustaining. EII had to file for an extension for the FY2017 tax returns, due to the incomplete audit and not enough time for EII’s Board of Directors to review and approve before the February 15th due date. EII has not provided the Fiscal Year 2017 IRS Form 900 filing nor evidence of the required extension. Recommendations:  The Clerk suggests that ALL reports be filed timely and without extensions. On Wednesday March 21, 2018, County Management and EII staff provided their written response to these findings: 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. Be advised, FY2015 filed on the 2014 IRS Form 990 is date stamped November 7, 2016; which is late even if an extension was filed. Also, the FY2016 filed on the 2015 IRS Form 990 is dated by Noack and Company on September 28, 2017; which is late even with the extension that was filed. EII stated on April 2, 2018 that EII will switch from Noack to Tuscan to complete the filing of the IRS Form 990’s. 108 The Clerk agrees with Tuscan & Company’s advice. However, as of March 30, 2018, EII and Tuscan & Company had failed to provide the supporting documentation that shows EII did, in fact, request the extension. Based on prior years’ experience, the Clerk was concerned that EII failed to meet a contract deliverable to the BCC. Additionally, there had been discussion with the BCC specifically regarding extensions and the concerns created if EII is unable to file timely. 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. The Clerk accepts EII’s admission that EII has failed to accurately file the required IRS Form 990’s. The Clerk questions EII’s compensation policies and their compli ance with IRS rules and regulations (see response to Finding #4, above). The Clerk also questions EII’s use of “leased” employees as a potential work-around to IRS rules and regulations for compensation. 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 Clerk’s position is that 5 months and 15 days provided by the IRS for EII to prepare their tax returns is sufficient. The BCC’s Agreement requires, “Timely submit IRS Form 990 Return of Organization Exempt from Income Tax to the IRS with a copy to the County within one week of filing with the IRS.” The Clerk’s concern is that EII continues to use the filing extension date of August 15th which hinders evaluation of the entity. 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. The Clerk accepts EII’s admission that the 990’s have been filed inaccurately for FY2015 and FY2016. The Clerk looks forward to reviewing the revised forms in addition to the FY2017 990’s, when available. For the First Quarter of FY2018, Deliverable #6 of the Agreement, EII submitted the amended 990 for FY2016, not the FY2017 filing. Management’s Response: Management disagrees with and disputes the finding. Recommendation: Management disagrees with the Internal Auditor’s recommendations. 109 Action Plan: None. On April 2, 2018, EII added to their response for the Action Plan to: “replace accounting firm.” The Clerk appreciates that County Management disagrees with the Finding even with EII’s admission that previous filings were late and inaccurate, and that County Management’s action plan is stated as “none.” 110 10) EII has failed to follow the business plan approved by the BCC on May 13, 2014 by failing to become self-sustaining, instead exponentially escalating taxpayer funds, annually, for years 2014 – 2018. Internal Audit conducted a review of A Business Plan for Collier County Innovation Accelerators written by Dr. Marshall Goodman (of W3 Consultants at that time) on March 31, 2014. This plan was presented to the BCC on May 13, 2014 where it was approved for implementation. Dr. Goodman explains, “It is recommended that Collier County serve as the fiscal agent for the Accelerator Project. All State, Federal, and Grant funds received for this project should be received by Collier Board of County Commission and processed by the County Clerk’s office.” EII failed to abide by this recommendation when their CEO, Dr. Marshall Goodman, directly entered into the Agreement for Grant SL025 between Florida DEO (Grantor Agency) and Economic Incubators, Inc. (Grantee). Exhibit 10-A: A Business Plan for Collier County Innovation Accelerators Page 9, recommending all grants should go through the BCC and processed by the Clerk’s Office. 111 The business plan details the Pro Forma Assumptions which include a sustaining pledge $100,000 per year for fiscal years 2016-2023 (pg. 19.). Assumption #4 states, “Hired staff would need to recognize that after the 2 year period of seed money is utilized that their employment tenure is dependent on the Accelerators meeting their financial milestones.” Although the business plan only called for a sustaining pledge of $100,000 per year for Fiscal Years 2016 to 2023, EII has received $484,000 in FY2016, $505,000 in FY2017, and $800,000 for FY2018. Furthermore, EII indicated at the November 14, 2017 BCC meeting that EII will requ ire $2,300,000 in the county assistance over the next four years. Conclusion: At the November 14, 2017 BCC meeting, EII indicated a 50% reduction in county funds over the next four years. EII failed to advise the Board that the 2018 funding is 8 times ($800,000 compared to $100,000) what they told the BCC they would need according to the 10 year approved business plan on May 13, 2014. Additionally, EII’s presentation to the BCC indicates future required county funding of $2,300,000 over the next four years. According to Dr. Goodman in the Business Plan approved by the BCC on May 13, 2014, Collier County’s matching funds were only supposed to be $1,300,000 (total) over ten years ending in FY2023. The Accelerators were supposed to generate $9,532,369 in lease income over the same ten years ending in Exhibit 10-B: A Business Plan for Collier County Innovation Accelerators, Page 20. 112 FY2023 with a positive Fund Balance of $2,460,326 in cash. EII appears to lack the managerial capacity to operate the entity as proposed in the business plan approved by the BCC almost 4 years ago. At the direction of the BCC, as requested by Commissioner Saunders, EII was directed to update their business plan no later than the second BCC meeting in January 2018. EII submitted a revised business plan to select individuals, however the plan has not been publi cly presented to nor approved by the BCC (see revised Business Plan in Appendix K, page 250). Recommendations:  The Board of County Commissioners should consider their alternatives in regards to the contract with EII. On Wednesday March 21, 2018, County Management and EII staff provided their written response to these findings: 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. The business plan was presented publicly to the BCC, and the BCC voted to approve EII’s Business Plan as presented. Any changes to the Business Plan should have been made in public, with the full knowledge and approval of the BCC. “Evolving the program as opportunities allowed” has resulted in $5 million of taxpayer money spent on an entity that is not even required to produce jobs (see finding #3), or validate reported jobs. Dr. Goodman explained that shifting to an educational model is not changing the business plan. He stated that mentoring startups is education and EII has been doing that since its inception. 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 113 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. 114 11) EII’s revised business plan fails to: identify measurable performance including job creation or capital investment; identify specific marketing strategies; provide a revenue structure for sufficient operating income to be successful without dependence on taxpayer funds; address deficiencies in prior performance; or identify the additional equipment for successful operation of the accelerator projects. The draft revised business plan was submitted to select individuals for review on or about December 22, 2017. The final business plan was submitted on January 3, 2018. The revision to the business plan is the result of the BCC requesting an update as part of the FY2018 Agreement. EII has not publicly presented the revised business plan, nor has the BCC accepted the revised plan. The Business Plan is included in Appendix K, page 250. The 2018 EII revised business plan fails to provide measurable, verifiable, or quantifiable goals that EII will pursue, which, by their own 2014 Business Plan, said was an important first step (Exhibit 11-A below). This plan conspicuously fails to detail any accomplishments or successes from the past 4 years that EII will continue to build upon. Dr. Goodman, the plans author , has also failed to identify, discuss, and propose solutions for any of the operational deficiencies discovered in the past 4 years . He has failed to provide any detail regarding who EII’s target markets are, failed to describe what business services the y will provide to attract more participants, and failed to articulate EII’s competitive advantage. Moreover, in the past 4 years and over $5 million of taxpayer money has failed to explain the need for the additional $2,300,000 of County funding through 2 021. EII’s Board of Directors, volunteers, and staff claim to recognize the need to reduce dependency on government funding, but the plan fails to describe how EII will meet increased revenue projections that to date have been unmet. Milestones EII has failed to meet many of the milestones identified in the original business plan in the past four years of operating the accelerator projects. The newly revised business plan fails to identify any of the past milestones that were missed and failed to identify the causes or corrections for these failures. The most prominent example is the failure to open the Florida Culinary Accelerator @ Immokalee. The Immokalee Accelerator was originally to be open in 2015, according to Dr. Goodman’s statements to the public and the BCC. Failure to complete deliverables for Grant #SL007 caused the County to lose the grant funding. EII then received grant funds to complete the Immokalee Accelerator, this time by June 30, 2017. EII publicly stated to the BCC that it will be opened in November 2017, then early January 2018, and now March 28, 2018. The newly revised business plan shows that EII has apparently changed the stated mission of the accelerators from creating jobs or economic benefits to providing educational opportunities with millions in continued government funding. In fact, EII’s approved mission of job creation does not appear in the new business plan. 115 Exhibit 11-A: A Business Plan for Collier County Innovation Accelerators by Marshall Goodman, Ph.D., dated March 31, 2014 and approved by the BCC on May 13, 2014. 116 Financial Plan Revised 2018 Page 20 of the draft Business Plan includes the schedule Financial Plan FY2018 – FY2021. The schedule is presented with “$ in thousands” for each entry. The line item for County Funds for each year shows 800.0, 600.0, 500.0, and 400.0, this means $800,000 in FY2018, $600,000 in FY2019, $500,000 in FY2020, and $400,000 in FY2021. EII is thereby indicating to the BCC that they will be asking for $2,300,000 Collier County taxpayer funds through FY2021. While the draft budget shows declining County funding into the future, it fails t o articulate how EII will more than double its revenue in Fiscal Year 2019 and more than triple its revenue by Fiscal Year 2021. Exhibit 11-B: Page 20 of the 2018 Draft Business Plan. Business Income is proposed to increase by 124% in one year, yet EII has failed to meet revenue projections to date. 117 Target Market EII has failed to identify a target market, instead EII simply identified the entire population of the six counties that make up Southwest Florida. EII does not identify the number of potential users for either facility, benchmarks for occupancy, or other specifics as would be commonly expected of a business plan. Competitors EII characterizes their competitors as office space rentals without business start-up or acceleration services. Internal Audit conducted a review of the listed competitors that feature Venture X Naples, The Rocket Lounge, and Your Pro Kitchen . The Naples Accelerator Exhibit 11-C: Page 10 of the 2018 Draft Business Plan shows that the Target Market for is the entire six county region of Southwest Florida. Exhibit 11-D: Naples Accelerator Pricing - http://naplesaccelerator.com/memberships/ 118 Venture X offers a similar mix of virtual offices, co-working spaces, and offices along with similar amenities. Venture X Naples fee schedule shows competitive, if not lower, prices than EII is charging. EII failed to mention in the revised business plan, and to the BCC, that EII discounts up to 50% of the rents being charged to participants, which are already subsidized 100% by the taxpayers. In addition, EII has struggled to collect rent from participants, another detail EII failed to mention or offer a remedy or a solution as part of the revised business plan. Venture X Naples Exhibit 11-E: Venture X Naples Pricing - https://www.venturex.com/locations/florida/naples/ 119 The Rocket Lounge in Ft. Myers was created by a former Naples Accelerator participant and offers Co - Working Spaces, Accelerator Services, and Soft-Landing Services; seemingly in direct competition with the Naples Accelerator. Commercial Kitchen Similar to the Florida Culinary Accelerator @ Immokalee EII cited ‘Your Pro Kitchen’ as a competitor to the Immokalee accelerator, and even notated that this competitor had closed. Internal Audit spoke to the owner of Your Pro Kitchen about the market for commercial kitchen space in southwest Florida. The owner explained that over the course of five years they only had 56 food-based companies join their kitchen. The food handler and food service manager certification process was cumbersome. The owner then explained how most of her clients would join at the lowest priced membership level, obtain their certifications, then do the majority of their cooking from home. This made sustaining revenues difficult to collect, and brings into question the proposed business model for the Immokalee culinary project. While the commercial culinary accelerator has been successful in other markets, it appears to not be viable in Southwest Florida. The EII business plan offers no remedy to this failure or insight to overcoming the issues stated, other than the apparent shift to a taxpayer supported educational facility. Exhibit 11-E: Rocket Lounge, Founded by former Naples Accelerator participant Dieter Kondek - http://therocketlounge.com/about/ The Rocket Lounge 120 Additional Findings on the Revised Business Plan Commissioner Saunders requested the revised business plan no later than one week before the Board’s second meeting in January of 2018. EII provided a revised business plan for 2018 on January 3, 2018 to selected individuals. The revised business plan has not been accepted nor approved as of February 26, 2018. Internal Audit has reviewed the business plan and notes the following deficiencies: 1. The date on the business is January 3, 2017. The date inside the footer is January 2017, it should be 2018. 2. Goals and Objectives are not measurable or verifiable, as called for in the original business plan approved by the BCC on May 13, 2014. The only clearly stated objective in the proposed business plan is to hire more people with on going taxpayer support. 3. The business plan states EII’s Board of Directors “serve the critical management oversight and control role of the organization.”  EII’s Board of Directors did not require audited financial statements until they were requested by the Clerk.  EII’s Board of Directors provided no hours of support for Fiscal Years 2015 and 2016, according to the IRS Form 990’s filed for those years.  EII’s Board of Directors have business transactions involving interested persons that have not been disclosed on the IRS Form 990 for Fiscal Year 2016. (see Finding #12 to follow) 4. “Expect to enhance capability with additional equipment purchases.” EII fails to describe the use and need for the equipment purchases, fails to identify the costs or expected revenue increases, and fails to provide a cost/benefit analysis of these purchase s. 5. EII is proposing cooking classes and other educational uses for the Immokalee facility. The Immokalee facility does not appear to be zoned for educational use. 6. EII states a planned “Made in Immokalee” campaign on page 16. EII has not identif ied nor described the planned “Made in Immokalee” campaign, nor have they identified the expected costs to the taxpayers. 7. EII failed to describe and state the current status of the Hazardous Analysis and Critical Control Points (HACCP) Plan cited in the Critical Path to Open the Culinary Accelerator on page 18. The HAACP Plan is required to obtain FDA and USDA certifications for processing juices and meats in the facility. 8. The Financial Plan begins on page 19. The Fee Income Revenue Drivers sect ion cites demand to be “strong” and “very high” for co-working spaces in Southwest Florida. EII failed to identify their capacity for co-working spaces or office space in general, in fact, the Naples Accelerator has not been to capacity since opening. EII failed to identify revenues at full capacity, the variable expenses at any level of capacity, and failed to describe how EII will make up any shortfalls in revenue. 9. The business plan fails to identify corrective actions to mitigate Woodstock’s ongoi ng losses, ($3,373.08) from operations through November 30, 2018. EII failed to disclose sales information or a 121 break-even analysis for the micro-market. Recommendations:  The Board of County Commissioners should consider their alternatives regarding their contract with EII. On Wednesday March 21, 2018, County Management and EII staff provided their written response to these findings. 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. 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. As stated, the revised business plan fails to address deficiencies . 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. As stated, the revised business plan fails to address deficiencies . 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 fu lly vetted and discussed with the County prior to implementation and execution. As stated, the revised business plan fails to address deficiencies . 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. 122 The revised business plan has not been publically approved by the BCC. 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 Clerk’s Internal Audit team will continue to audit to the agreements surrounding payments and report to the BCC, and as mandated by Florida Statute. The Clerk’s Office is not required to learn the day to day operation s, our role is to audit to approved contracts. However, the Clerk’s staff has become very familiar with the day to day operations of EII, as evidenced by the detailed concerns noted in 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: The example of Venture X shows a competitor, identified in EII’s own updated Business Plan (see Appendix K, page 61), that operates in Collier County. The fee structure referenced for Venture X shows the range of membership pricing, which is comparable to EII’s fee structure (before EII’s 50% discount, see Finding #5 above and the discussion of Wegner Law, PLLC). The reference to Venture X is not intended to highlight one level 123 of membership. Dr. Goodman explained that this is not a fair comparison because Venture X is a shared office space in the private model (private sector) while EII is an accelerator in the public model (publicly subsidized). Please note that the Community M embership 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. 124 12) The Airport Manager and BED failed to monitor BCC approved 2017 and 2018 leases and they allowed over $1 million dollars of improvements to a county airport property without payment on the lease; $37,522.80 in rents remain uncollected and unpaid. BED failed to track EII’s leases and basic details such as payment due dates, late payment fees, renewal dates, and past due payments. As a result, there was no assurance that payments were made in a timely manner or recorded on the financial statements correctly. EII made over $1 million in leasehold improvements to County property without paying rent. EII made leasehold improvements to a county owned facility at the Immokalee Airport, using Grant funds, without a paying the lease in place, depriving the Collier County Airport Authority of $37,522.80 in rents for Fiscal Years 2017 and 2018. Conclusion: BED failed to record and monitor the 2017 and 2018 leases approved by the BCC resulting in $37,522.80 in unpaid rents accrued by EII to the Collier County Airport Authority. Lease and leasehold improvement activity, is a significant component of the Immokalee Airport annual budget and EII’s Grant with DEO. This review evaluated the internal controls of key operation al and financial components of this process, and notes that the implementation of the recommendations noted below, may further improve current fiscal operations. Recommendations:  The Board of County Commissioners should require leases be made current.  The County Manager should follow Florida Statute by properly supervising the care and custody of county property.  The BCC should be notified of all violations of the terms of EII’s lease of the Immokalee airport space.  Controls should be established to ensure that lease payments are made in a timely manner.  Late payment penalty clauses should be enforced in all leases.  Policies and procedures should be implemented for managing all leases and leasehold improvements of property. County Management Response: At the March 13, 2018 meeting with the Director of BED, EII staff, and the Clerk’s Internal Audit team , EII disputed this finding by stating that EII is current on their Immokalee lease for FY2018 and that there is no other lease for which that they owe back rent. EII’s Volunteer Mr. Fred Krieger, stated that EII has fully amortized the lease and is current. The Clerk’s Internal Audit staff informed Mr. Krieger that the lease from the previous year was not paid, which is the majority of the $37,522.80 that EII is has failed to pay. Mr. Krieger stated, “There is no other lease, there is not a lease for last year.” 125 EII’s COO Jennifer Pellechio then explained, “There was a lease for FY2017 but EII does not have to pay that lease because we never signed it.” Mr. Krieger indicated that he was unaware of the FY2017 lease obligations. Mr. Krieger defended EII’s position by explaining that it happens all the time in business, in the private sector, where someone enters a lease, renovates the property, and then beg ins to pay the lease after they move in. Dr. Marshall Goodman claims that the County has realized a significant increase in value of the Immokalee Regional Airport as well as to the value of the building that EII leases because EII made improvements to the systems already in place. Internal Audit Response to County Management Response: This is an example of the measures taken by the Director of BED and EII staff. On one hand, EII intentionally withheld signing the FY2017 lease in an attempt to avoid payment to the taxpayers of Collier County of no less than $32,162.40 in lease payments due in FY2017. On the other hand, EII reported to DEO the deliverable is “100% complete” for the purpose of receiving the reimbursable grant, even though the lease was not executed by EII’s own admission as of June 28, 2017 (see Exhibit 12-A below). The FY2017 lease that is un-signed by EII is enforceable as it was publicly approved by the BCC on September 13, 2016. The County has fulfilled its obligation to EII by providing the space. In effect, EII took possession of the space, made over $1 million in leasehold improvements to the space, and then stated to the Clerk’s Internal Audit staff that EII does not owe rent for FY2017 because they never signed the lease. EII intentionally withheld signing the FY2017 lease and is withholding payment owed to Collier County Airport Authority. Included in Invoice Submittal Package #16 (referenced in Finding #1) dated June 28, 2017 is a statement detailing that EII has negotiated the lease for the Immokalee facility but has not executed the lease because, “the ’Federal agency’ notified EII that the lease was not able to be executed.” EII subsequently claimed on the June 28, 2017 submittal to DEO that the lease “will be executed at the July 11, 2017 [BCC] Commissioner meeting” (which is after the closing date of the Grant, see Finding #1). The current lease for FY2018 was approved by the BCC on December 12, 2017, with an effective date of October 1, 2017. 126 The Director of BED failed to route the FY2017 lease for signatures because, “grant funding for the project had not been finalized,” as explained by the Director in the Executive Summary publicly submitted for the December 12, 2017 BCC meeting (see Exhibit 12 -B below). It is unclear as to what authority the Director of BED was acting under when he decided that he was not going to route the lease, which was approved by the BCC, for signatures. However, the Director of BED apparently had no objection to allowing EII access t o the space for the purpose of constructing the Immokalee accelerator beginning in February 2017 and did not receive the Certificate of Occupancy until January 17, 2018. Exhibit 12-A: Invoice Submittal Package #16 to DEO for Grant funds, dated June 2 8, 2017, explaining that EII negotiated the lease for the Immokalee facility. EII further explains why, acting on the advice of the “Federal agency,” EII has not executed the lease. 127 Exhibit 12-B: Executive Summary for the December 12, 2017 BCC meeting s ubmitted by the Director of BED, Jace Kentner, for the approval of the EII Lease at the Immokalee Regional Airport. 128 Exhibit 12-C: Executive Summary for the July 11, 2017 BCC meeting referenced by EII in Exhibit 12 - A, the meeting that EII will purportedly sign the lease for the Immokalee facility. Please note that EII attempts to have the BCC fund the lease for FY2017 through a Budget Amendment. (1) (3) (2) (4) (5) 129 The Director of BED made multiple intentional misstatements to the BCC in the Executive Summary, also described in Finding #6 and Exhibit 12-C, above. 1) Start-up funding for the Immokalee accelerator requested in July 2017. The Director of BED knew that the Immokalee accelerator was not complet e at the time of the requested Budget Amendment in July. The intended use of the funds was to cover the misallocation of Personnel Cost Reimbursements described in Finding #4, see Exhibit 4-H on page 50. 2) Misrepresentation of 71 companies and 86 Job Year Equivalent publicly sub mitted to the BCC in July 2017. The Director of BED explained the misrepresentation was due to a miscalculation in the spreadsheets. The companies and jobs claimed by the Director of BED in July 2017 contradict BED’s deliverable reported to DEO for Grant #SL007 described in Finding #3 on page 38, see Exhibit 3-C and Table 2. 3) The Director of BED knowingly and intentionally misrepresented to the BCC in July 2017 that construction of the Immokalee Accelerator is now complete (see Exhibits 1-C, 1-N, and 1-O in Finding #1). 4) The Director of BED requested funding for Rent and Insurance, on behalf of EII, for a lease that EII has failed to pay during FY2017 and that the Director of BED failed to route for signatures (see and Exhibit 12-B on page 85). 5) The Director of BED publicly submits to the BCC in July 2017 language in the proposed Budget Amendment that would eliminate the Exhibit G Roles and Responsibilities of Administrative Entity from the existing Agreement between Collier County and EII. This is another ex ample of the systematic and ongoing course of conduct by the Director of BED to minimize performance requirements for EII while increasing the financial burden of EII to the taxpayers. During the March 13, 2018 meeting, Mr. Krieger indicated that he was u naware of the FY2017 lease obligations. It appears that EII has not fully disclosed all contracts, agreements, and liabilities to their volunteer CPA. Mr. Krieger defended EII’s position by explaining that it happens all the time in business, in the priva te sector, where someone enters a lease, renovates the property, and then begins to pay the lease after they move in. An arrangement allowing for leasehold improvements prior to the commencement of lease payment should be negotiated into the lease prior t o execution. Dr. Marshall Goodman claims that the County has realized a significant increase in value of the Immokalee Regional Airport as well as to the value of the building that EII leases because EII made improvements to the systems already in place. At the meeting on March 13, 2018, Dr. Goodman did not provide support, written or otherwise described, to quantify this claim. Dr. Marshall Goodman’s claim to the increase in values for the Immokalee Regional Airport are erroneous. Whereas, EII’s false certification by Compass Construction and failure to obtain the Architect’s signature on the AIA Document G702, which was subsequently submitted to DEO for reimbursement on June 28, 2017, actually jeopardizes funding from a Grantor Agency claw-back (see Exhibit 1-E in Finding #1). 130 Exhibit 1-E: AIA Architect’s Certification included in Invoice Submittal Package #16 with signature of Architect missing. Certified by Compass Construction on June 28, 2017 Missing Architect’s Signature 131 On Wednesday March 21, 2018, County Management and EII staff provided their written response to these findings: 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 requested the BCC pay the Immokalee rent as part of the July 11, 2017 proposed budget amendment, see Exhibit 12-C.  EII installed the fire alarm system throughout the entire building including next door in the shutter manufacturers unit at no cost to the County. The Clerk recognizes the fire alarm system is an improvement to the County -owned facility. However, the Clerk questions EII’s use of Grant Funds to install a fire alarm system in the adjacent unit, which is clearly outside the scope of Grant #SL025. The Fire Alarm cost was included in the Compass Construction Scope of Work and can be found on Appendix B, Page 84, Item #240 in the amount of $12,805 and represented as 100% complete as of June 30, 2017. Please note that EII attributes the Fire Alarm ‘issues’ were a contributing factor in the late opening of the Immokalee facility, see EII’s response to Finding #16, below.  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 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. In September 2016, the BCC approved lease for FY2017, which is the lease that EII submitted to DEO as supporting documentation (see Finding #1 and Appendix B, page 28-42), and that the Director of BED failed to route for signatures (see Exhibit 12 -B). The lease is valid and payable upon approval by the BCC. EII’s COO stated on March 13, 2018 that EII does not have to pay for FY2017 lease because they never signed it. 132 Recommendation: Management disagrees with the Internal Auditor’s recommendations. Action Plan: None. The Clerk responded to EII’s and County staff’s verbal comments from the March 13, 2018 meeting in the Draft Audit Report submitted to the BCC on March 21, 2018. 13) Mismanagement of Woodstock’s Micro-Market including licensing, accounting, and inventory controls. EII Management Displayed an Expired Business Tax Receipt; and Failed to Obtain a Current Collier County Business Tax Receipt Business operating in Collier County must have a county business tax receipt. The receipt is for the privilege of engaging in a business activity either for profit or non-profit. Business Tax Receipts run through September 30th and are to be renewed by September 30th of the followin g year or are held delinquent and are penalized. During the week of January 22, 2018, internal audit conducted several unannounced on -site visits of Woodstock’s located at 3510 Craft Rd., Suite 100, Naples, Florida. One visit included examining Woodstock’s Collier County Business Tax receipt. We found the business tax receipt had expired on September 30, 2017, 118 days prior to our visit. Inadequate Inventory Management In examining the Woodstock’s food service location, we found numerous expired food items in both the Exhibit 13-A: Expired Collier County Business Tax Receipt #162093 as of January 22, 2018. 133 dry storage and refrigerator sections of the retail sales operation. The lack of inventory management may contribute to increased inventory expenses, the extent of which cannot be determined due to the absence of inventory records. During this visit, internal audit additionally noted: the lack of a triple basin sink; the $3,000+ coffee machine does not appear to have readily available location to clean and sterilize certain parts as required; and dust and biological growth appeared to be present in the retail coolers. Failing to thoroughly clean refrigeration units and disposing of any items that expired may be a violation of EII’s Annual Food Permit Number 2018-R-1707006. EII’s absence of reliable inventory records and inventory management increases the risk of inventory misappropriation and excess inventory costs. EII should continue to report losses of operations by regularly and thoroughly conducting physical inventories with recordkeeping sufficient to verif y the accuracy of the inventory count; and provide inventory information useful to BED and EII management. Food and supply purchases should contain descriptions adequate to ensure a correct determination of book inventory. The inventory results, including any shortages, should be reviewed by EII management with a signoff indicating management review. A spoilage/waste log should also be required, noting the amount of disposed inventory. Inventory and waste records should reconcile to the revenue tracking sheets which include beginning and ending inventory predetermined time periods. Procedures and training to ensure appropriate future food storage should be implemented. Random audits of food storage should be performed, and supplies and inventory should be securely stored to reduce the risk of misuse or misappropriation. This is important as it impacts the Accelerator project’s ongoing revenues and expenses through Program Income, staffing, and other costs. Exhibit 13-B: Expired Beverages Exhibit 13-C: Expired Food Products 134 Woodstock’s License Notably, the President and CEO of EII, at the direction of the BCC created an updated business plan for the Accelerators, dated January 3, 2017 [sic]. In his 2018 updated business plan, the CEO makes the below assertion regarding the timing of this Annual Food Permit: On January 25, 2018, the Clerk’s Internal Audit staff spoke with Mr. Holzworth and another official from the Department of Agriculture and Consumer Services. During the conversation, the internal audit manager learned that there are many of these food permits located throughout the state of Florida, i.e. it is not unique to Woodstock’s. Mr. Holzworth indicated he may have said that this permit was the first of its kind, however this would have been years ago when he made this statement. He further stated, “it is the same type of permit issued to convenience stores, there is nothing unique or particular about [Woodstock’s] permit, in fact they have [micro-markets] all over the state and many are in Orlando.” Failure to Conspicuously Display Requisite Documentation at Permitted Location A food permit from the Florida Department of Agriculture and Consumer Services is required of nearly to operate a food establishment or retail food store. (F.S.A. § 500.12) The Department of Agriculture and Consumer Services is the exclusive regulatory and permitting authority for all food outlets, retail food stores, food establishments, convenience stores, and minor food outlets, and application for a food permit must be made on forms provided by the Department Generally, a food permit from the Department of Agriculture and Consumer Services is required of any person who operates a food establishment or retail food store. A common method of insuring that prescribed standards of quality and purity are met is by inspection of specified establishments. The conspicuous display of the permit issued to the owner, subsequent to an inspection, is required by Florida Statute (F.S.A. § 500.12(8)). During review, IA also found EII management failed to display its 2018 Annual Food Permi t inside this retail location. Upon the internal audit manager’s discussion with EII’s COO, it was discovered that this permit was on a desk of the second floor of EII, and not properly posted. Exhibit 13-D: Excerpt from A Business Plan for Collier County Innovation Accelerators Update, January 3, 2017[sic] Deliverable 5 - Final 135 Recommendations:  Business receipts should be kept current  Receipts and permits should be appropriately displayed  Inventory should be reviewed and kept current County Management Response: At the March 13, 2018 meeting, Jennifer Pellechio, COO of EII, stated they were not aware of the expiration dates. However, now that it has been brought to their attention they have removed all expired items from Woodstock’s. The COO also stated that EII will continually monitor the expiration dates of food products. On Wednesday March 21, 2018, County Management and EII staff provided their written response to these findings: 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. Exhibit 13-E: Image of the 2018 Annual Food Permit 136 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. The Clerk notes that County Management fails to recognize deficiencies of their vendor. 137 14) Multiple potential conflicts of interest exist within EII’s organization including self - dealing, the Chairman of EII’s Board of Directors is the lessor of the Naples Accelerator facility, and potentially improper professional services arrangements. Internal Audit has noted the following conflicts of interest within EII’s organization. Self Dealing EII’s COO, Jennifer Pellechio, owns a consulting business, JP Consulting Team, LLC., that has received payments directly from EII for work. JP Consulting Team charged EII $85 per hour for desig ning a flyer for the Consumer Electronics Trade Show as well as Invitations to a fundraising event for the introduction of the French Chef. EII has paid JP Consulting Team, LLC. $850 for these two projects. The Chairman of EII’s Board of Directors is the Lessor of the Naples Accelerator Facility The Chairman of EII’s Board of Directors, Mr. Fred Pezeshkan, is the manager of Kraft Office Center, LLC., which houses the Naples Accelerator. Collier County pays rent, on behalf of EII, directly to Kraft Center, LLC. FY2018 rent is $197,900, and the total rent over the 5-year lease term is over $1 million. It is worth noting that while EII has not paid the County for their use of the facility that houses the Immokalee accelerator (see Finding #11 above), Mr. Pezeshkan and Kraft Office Center, LLC. have always received their rent payment on time from the taxpayers. BED Hired VCTC & Appropriation Services, LLC to Provide Professional Services to Support Collier County in Seeking Authorization for an Amendment to it’s Agreement #SL007, as Amended, with the DEO. Elizabeth Walker, the Former DEO Agreement Manager of Grant #SL007, is the Represented LLC Manager and/or Owner. The BED hired VCTC & Appropriation Services, LLC. It is worth noting that Elizabeth Walker was a former Agreement Manager at DEO and was responsible for the very grant (SL007) for which she us now providing professional services. The BED has submitted two invoices on behalf of “Elizabeth Walker” (see Exhibit 14-C). The first invoice was on November 21, 2017 in the amount of $2,793.75 and the second invoice was on January 17, 2018 in the amount of $2,493.75. Additionally, the BED Director requested a $50,000 Purchase Order for ongoing consulting. This was not approved by the County’s Purchasing Department. Exhibit 14-A, below, shows an email conversation between Elizabeth E. Walker from DEO, County staff, Director of BED, and the CEO of EII regarding the accuracy of reported capital investments and jobs reported of an Accelerator participan t company. The email discussion shows Elizabeth Walker’s intimate knowledge of the Accelerator on an operational level, for which she is the Agreement Manager for Grant #SL007, while working for DEO. VCTC & Appropriation Services, LLC/Elizabeth Walker was tasked to submit draft documents to DEO for amendments to Agreement #SL007. 138 Exhibit 14-A: Elizabeth E. Walker email on September 20, 2016 stating, “I do not understand how this project is contributing to a positive return of benefits to the people of Florida.” At the request of the Director of BED, the entire email is included. Please note that this email is desc riptive of EII and BED’s inability to validate capital investments and jobs created by the Accelerator participants. Additionally, the second paragraph references a June 23, 2016 email from Mr. Zand in which he was quoted, “no employees and no capital raised for the US subsidiary.” 139 Exhibit 14-B: Elizabeth E. Walker, Agreement Manager for Grant #SL007 140 Exhibit 14-C: Proposal by VCTC & Appropriation Services, LLC to seek an Amendment to Grant #SL007 submitted by Elizabeth E. Walker, Owner. 141 Exhibit 14-D: State of Florida Commission on Ethics addressed to Ms. Elizabeth Walker stating that F.S. 112.3185(4) applies to her as a former Agreement Manager. 142 The Clerk Has Been Advised That People Are Being Awarded County Contracts For Re- locating Into The Naples Accelerator. EII participants have been awarded no less than $558,362 in county contracts since joining the Naples Accelerator. 1.) HyperTeam USA joined the accelerator on October 1, 2015 and has invoiced $43 7,500 to the County since September 19, 2016, while receiving the 50% Promotional Discounted Rent from the Naples Accelerator for over two years. 2.) Juice Technologies, Inc., dba Plug Smart, was assured additional county contracts if they would move into the accelerator, as reported to the Clerk from the owner Richa rd D. Housh. Juice Technologies moved from existing commercial space into the accelerator on November 30, 2016 and has invoiced $120,862.42 since July 18, 2017. Prior to joining the Naples Accelerator, Juice Technologies had one contract with Collier County $2,980.00 dated June 6, 2016. Exhibit 14-E: HyperTeam USA, a current participant in the Naples Accelerator, has invoiced the County $437,500 since joining the Accelerator on October 1, 2015. 143 Exhibit 14-F: Juice Technologies, Inc., a former participant in the Naples Accelerator, has invoiced $120,862.42 since moving into the Naples Accelerator on November 30, 2016. $120,862.42 between 7/18/2017 and 2/9/2018, since joining the Naples Accelerator $2,980.00 on 6/6/2016, prior to joining the Naples Accelerator Joined the Naples Accelerator on November 30, 2016 144 EII Does Not Have a Written Conflict of Interest Policy EII does not have a written and approved Conflict of Interest policy, as confirmed by COO Jennifer Pellechio on January 8, 2018. Conclusion: EII’s lack of internal controls and lack of conflict of interest policy(s) creates significant risk fraud and the misuse of taxpayer money. Absence of a written conflict of interest policy and/or violation of conflicts may jeopardize EII’s 501(c)3 status. Recommendation:  The Board of County Commissioners should consider their alternatives in regards to the contract with EII and notify them of potential reimbursements that may be required to State of Florida and Federal grantors and/or the County t axpayers.  EII should adopt a written and approved conflict of interest policy as well as other operational policies and procedures. County Management Response: At the March 13, 2018 meeting, t he Director of BED objected to the Elizabeth Walker email referenced in Exhibit 14-A, saying that the email was regarding the recognition of AirFi Network’s, an Accelerator participant, foreign direct investment for reporting purposes. The Director states that the highlighted text which states, “I do not understand how this project is contributing to a positive return of benefits to the people of Florida” is regarding AirFi Networks and not the Accelerator projects as a whole. Internal Audit Response to County Management Response: Internal Audit’s intention was not to insinuate that the DEO or Elizabeth Walker questioned the positive return of benefits regarding the Accelerator projects in Exhibit 14-A. Rather, this email was intended to show that Elizabeth Walker, the Agreement Manager for the Grantor Agency (DEO), was intimately Exhibit 14-G: Email reply from COO Jennifer Pellechio on January 8, 2018 that EII’s Board of Directors has not approved a written Conflict of Interest Policy. 145 aware of the performance of the Grantee (EII) on an operational level, and she was questioning the fiduciary responsibility of EII management; thereby demonstrating a possible conflict of interest precluding her from being employed to assist with this grant agreement upon her terminating her employment with DEO. At the request of the Director of BED, Internal Audit has included the enti re email in Exhibit 14-A. The Clerk has been unable to determine the legality of payment requested in the amo unt of $5,287.50 due to the questioned conflict of interest with DEO. On Wednesday March 21, 2018, County Management and EII staff provided their written response to these findings: 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. County management concedes to EII’s response to this finding.  Fred Pezeshkan is not EII’s president. He is the chairman of the Board, a non-executive director, and therefore, not an employee. The Clerk’s Internal Audit team will change all references to Mr. Pezeshkan to be ‘Chairman’ and recognizes that Mr. Pezeshkan is 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 [sic] 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. The Clerk agrees with EII’s timing of the lease and Mr. Pezeshkan’s membership on EII’s Board of Directors. The Clerk reiterates the finding is a ‘POTENTIAL CONFLICT OF INTEREST.’ First, EII failed to disclose Mr. Pezeshkan as a disqualified person or interested person on the IRS Form 990’s (see finding #9, page 103). Second, EII did not have a Conflict of Interest Policy in place until February 21, 2018 (one month ago).  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 full email was provided in the Draft Audit Report submitted to the BCC on March 21, 2018, pursuant to the verbal comments made by the Director of BED at the March 13, 2018 meeting. 146  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 amendment to DEO Agreement SL007 in a cost-effective manner. This finding must be stricken and Ms. Walker needs paid as soon as possible. Please refer to Exhibit 14-D and note that the Florida Commission on Ethics does not state Elizabeth Walker is “authorized” to work on behalf of Collier County.  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 Clerk has no desire to exclude anyone or any company from doing business with Collier County. The Clerk is noting that an accelerator participant, renting office space subsidized by the taxpayers of Collier County, received over $400,000+ in Collier County contracts since joining the accelerator. The fact that HyperTeam receives taxpayer subsidized rent creates the possibility that HyperTeam has a pricing advantage over other local competitors. Again, the Clerk has identified this as a ‘POTENTIAL CONFLICT OF INTEREST.’  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. See Exhibit 14-F. 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. The Clerk notes that EII has addressed this concern. Incorrect; Clerk’s assertion regarding EII’s Chairman as the landlord being a conflict of interest, 147 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. The Clerk reiterates that this is a ‘Potential’ conflict of interest due to EII ’s failure to disclose the transactions on the IRS Form 990’s and that EII’s Board of Directors did not have a Conflict of Interest Policy in place until February 21, 2018. 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. The Clerk does not seek to prohibit anyone or any company from com peting for County contracts. The Clerk’s concern is the unfair advantage these companies may have by utilizing taxpayer subsidized rent. On April 2, 2018, EII staff stated that they were unaware of the quantity and value of contracts awarded to HyperTeam. Recommendation: Management disagrees with the Internal Auditor’s recommendations. Action Plan: None. 148 15) EII has failed to become a financially viable business entity and shows little or no progress in that direction. The 2014 Agreement between the County and EII executed on October 1, 2014 states that “the Collier Accelerator’s [sic] must be largely self-sustaining, with positive cash flow, and positive end of the year fund balances.” It is further noted in Attachment 1 of this agreement in the Scope of Work that “Collier County intends for this project to create a financially self-sustaining program.” Finally, the CEO of EII has reported in the Accelerator Revenue and Cost Analysis that the time period for substantial sustainability “can take anywhere from 18-24 months before incubators/accelerators achieve a form of sustainability.” Furthermore, Article XXVII of the Fiscal Year 2018 Agreement calls for the establishment of a self- sustaining organization. However, the Chairman of EII’s Board of Directors, Mr. Fred Pezeshkan is under the assumption that EII is under no obligation to become a self -sustaining organization. Exhibit 15-A: Article XXVII on page 11 of the FY2018 Agreement which states, “The establishment of a self-sustaining organization is paramount to the relationship created by this Agreement.” 149 Accelerator Costs EII has estimated its Accelerators will cost $1,086,500 for Fiscal Year 2018, of which $800,000 is to be covered directly by Collier County taxpayer funds; $211,200 in business income generated by subleasing county leased space, at a loss, to participants and the remaining $80,000 to be generated from private contributions (for both Naples Accelerator and Immokalee Accelerator), which they have failed to meet in any prior year. This will result in EII generating a Net Surplus of $4,700. As of January 15, 2018 EII has not collected the projected private contributions nor met projected incomes. This failure to obtain private contributions and meet projected business income is estimated to continue a financial shortfall between forecasted revenues and both Accelerator operational costs throughout the remainder of the year. Since the Accelerators’ inception in 2014, first under the management of Southwest Workforce Development Board, then on September 14, 2014 as the newly created Economic Incubators, Inc., the Clerk has had difficulty obtaining documents and financial information. EII has expended over $5 million of taxpayer money since 2014 (no less than $2,469,929 from Collier County + $2,723,525 from DEO Grants + $112,536 in USDA Grants) however, EII did not produce audited financial statements for Fiscal Years 2014 and 2015. EII did not produce audited financial statements for FY2016 until July 2017 and the Clerk has not received Fiscal Year 2017 audited financial statements as of February 1, 2018. If new viable participants are not secured during Fiscal Year 2018, the long-term sustainability of EII remains in question. This concern is exacerbated by the current absence of activities at the Immokalee Accelerator, and the fact that the participant rate and business income in the Naples Accelerator has decreased for the First Quarter of Fiscal Year 2018. The Clerk is aware that during Fiscal Year 2017-2018, proposed funding by the State of Florida of $5,750,000 was requested and denied. This request for grant funds is contrary to the 2014 business model requiring all grants to go through the County. EII and BED planned to ask for $10,500,000 for the State Fiscal 18-19 request. To date, requests for funding have not been approved. Exhibit 15-B: Paragraph 3 on page 2 of the January 8, 2018 Letter to the BCC by Mr. Fred Pezeshkan and Dr. Marshall Goodman. 150 The proposed 2018 draft business plan perpetuates total continued reliance on taxpayer funds to sustain the entity. Exhibit 15-C: Email from Dr. Marshall Goodman to Jace Kentner on June 26, 2017 discussing how to request $10,500,000 from the State of Florida in Fiscal Year 18-19. 151 Dr. Goodman Stated That He Knew Immokalee Would Never Become Self-Sustaining On February 1, 2018. Dr. Marshal Goodman explained to the Clerk’s staff that he knew from the very beginning that the Immokalee Accelerator would never be able t o sustain itself. He stated that he had many meetings with prior Commissioners and he would ask, “how can a community of 20,000 poor people support this accelerator (in Immokalee)? It can’t. I was told don’t worry about it, it’s a County issue, you are just the service provider, we (Commissioners) want it there.” Dr. Goodman concluded by saying, “that is the original plan, if you want an accelerator in Naples, then Immokalee gets one, don’t worry about it.” As of February 15, 2018, the Florida Culinary Accelerator @ Immokalee is still not operational. Recommendations:  The Board of County Commissioners should consider their alternatives in regards to the contract with EII and notify them of potential reimbursements that may be required to State of Florida and Federal grantors and/or the County taxpayers.  EII should develop and implement a business plan to assure that the Accelerators are “largely self-sustaining with positive cash flow and positive end of the year fund balances” not previously achieved.  The CEO of EII and the BED should ensure that all future grants are compliant with the EII Business Plan and contracts. Exhibit 15-D: Collier County to Host Groundbreaking Event for the Florida Culinary Center @ Immokalee, Press Release dated February 24, 2017. The Director of BED states, “This is another bold and well calculated project.” 152 On Wednesday March 21, 2018, County Management and EII staff provided their written response to these findings: Finding 15. EII has failed to become a financially viable business entity and shows little or no progress in that direction. EII’s Response. 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 forwa rd. However, in the short term those funds are needed to achieve the hopes and aspirations of the County for the Naples and Immokalee accelerators. As stated in the finding, EII has failed to become a financially viable business entity as portrayed in the 2014 adopted business plan. 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. It is not within the Clerk’s purview to speculate on the value of perceived benefits and how that would offset EII’s contractual obligation to become a self -sustaining entity, four years and $5 million dollars later. Management’s Response: Management disagrees with the finding. Recommendation: Management disagrees with the Internal Auditor’s recommendations. Action Plan: None. 153 16) EII and BED have failed to meet contract and facility deliverables during Fiscal Year 2018 Failure to Open the Florida Culinary Accelerator @ Immokalee The Florida Culinary Accelerator @ Immokalee was originally scheduled to open in 2015. EII misrepresented to Florida DEO on June 29, 2017 that the facility was 100% complete, even though it was not. On November 14, 2017, Dr. Goodman told the BCC, “We have scheduled an open house of the business office on November 29th with the opening of the culinary operation in early January.” An article dated December 15, 2017 (Exhibit 16-A, below) shows the accelerator is now scheduled to open in mid- January. As of January 15, 2018, EII has failed to hire any of the staff that will be operating the Immokalee facility and EII only has a Temporary Occupancy Permit to work out of the business office. (Note: EII has hired two staff members for the Immokalee Accelerator on or about February 1, 2018 .) EII’s latest assertion is that the Florida Culinary Accelerator @ Immokalee will have a soft -opening in February (no specific dates) and a Grand Opening on March 28, 2018 (see Appendix J). Please note that the latest projected opening date is six months into the fiscal year, which means EII will have accrued six months of expenses for the facility and lost four months of generating revenue. On March 28, 2018, EII’s operation of the Immokalee accelerator will be $19,400 below budgeted revenues ($4,850 x 4 months = $19,400) and will have accrued $16,081 in rent expenses for leasing the facility ($2,680 x 6 months = $16,081). 154 The above article states that the delay in opening the Immokalee Accelerator was due to “unforeseen regulatory issues.” On February 1, 2018, the Dr. Marshall Goodman and COO Jennifer Pellechio stated that “they have been on a learning curve with everything for Immokalee. We didn’t even know what permits or licenses we needed. The problem is the State (Florida), the Culinary Accelerator is in a gray area.” It is clear that EII did not sufficiently research the permitting or licensing requirement s for the Immokalee Accelerator prior to spending over $1.2 million in taxpayer dollar s. Exhibit 16-A: Immokalee Bulletin news article on December 15, 2017 stating that the accelerator is scheduled to open in mid-January (2018). https://immokaleebulletin.com/news/culinary- accelerator-immokalee-nears-completion/ 155 Failure to File Payroll Requests in a Timely Manner BED sent the October and November 2018 payroll reimbursement requests to the Clerk for processing on December 19, 2017 and then falsely claimed that the Clerk was delaying payment. See timeline below: Timeline of EII Pay Requests for FY2018 Date Event 11/14/2017 BCC Approves EII Contract 11/22/2017 Jennifer Pellechio Sent Deliverable #2 to BED – October Financials 11/28/2017 Jennifer Pellechio Sent Deliverable 1 to BED – Payroll FY18-01, FY18-02, FY18-03 to BED 11/30/2017 Jennifer Pellechio Sent email recap to all parties (county & clerk), however there was no PO# at this time and BED had not approved the request 11/30/2017 James Molenaar emailed Jennifer Pellechio and copied EII Board Member that the Clerk had not received the pay request documents 11/30/2017 EII Board Chairman Fred Pezeshkan emailed Jennifer Pellechio to “get it to the Clerk ASAP” 12/7/2017 Jennifer Pellechio claimed to have a fully executed contract from County 12/11/2017 Phyllis, The BED Accounting Technician, sent an email to EII Staff that the BED has a PO (Clerk was not included in this communication, Clerk staff has confirmed SAP has doc and the PO doc date) 12/12/2017 Phyllis sent email that FY18-01 & FY18-02 was submitted through the system (Clerk does not have record of receiving this email on this date, this information was obtained by Clerk staff from Jennifer Pellechio) 12/15/2017 Jennifer Leslie emailed the Clerk’s Accounting Supervisor, that the documents had been uploaded to SAP as previously agreed business practice. Suzanne was not in the office on Friday; and on the 19th both pay requests were downloaded 12/19/2017 Jennifer Pellechio sent email to entire group checking status before the upcoming BCC meeting on January 9, 2018. Pay Requests are in the process of being Audited. 1/8/2018 EII sends letter to BCC threatening to shut the doors, refusing to use their Letter of Credit to sustain operations and chastising the Clerk for non -payment less than the 45 days allowed by statute 1/9/2018 BCC Meeting - The Clerk, again, advised the BCC of the continuing issues with EII EII, while claiming cash flow shortfalls, gave their staff a 2.9% pay increase for 2018. EII withheld December Pay Requests until after the BCC meeting on January 9, 2018, BED submitted the first payroll reimbursement for December that included the 2.9% pay increase, retroactive to October 1, 2017. The retroactive payment is listed as “Retro-Re” on the payroll summary sheet with the following amounts; Marshall Goodman $799.32, Nicole Kreuzer $193.32, and COO Jennifer Pellechio $435.00. Recommendations:  The Board of County Commissioners should consider their alternatives in regards to the contract with EII and notify them of potential reimbursements that may be required to State of Florida and Federal grantors and/or the County taxpayers. 156 On Wednesday March 21, 2018, County Management and EII staff provided their written response to these findings: 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. The Clerk notes the business office for the Immokalee facility has been open since the receiving the Certificate of Occupancy on January 17, 2018, and that the Grand Opening was on March 28, 2018.  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. The Clerk identified and communicated to EII the numerous pay request deficiencies. EII did not have financial statements for FY2016 nor FY2017, nor monthly statements until July 2017. It is also worth noting that EII expended the entire personnel reimbursement six weeks before the end of fiscal year 2017. The cash flow problems with EII continue to be revenue generating deficiencies and spending beyond periodic cash flow. EII’s Response. As noted previously, the late opening of Immokalee has not be en 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. The Clerk’s Office has devoted 1,000’s of hours to assisting EII and the County, including QuickBooks education for EII’s COO, contract review and recommendations, and reporting of deficiencies. It is not the Clerk’s job to correct their short comings. The 157 taxpayers should not have to fund ongoing staff to assist the vendor in performing. Recommendation: Management disagrees with the Internal Auditor’s recommendations. Action Plan: None 158 17) EII and BED have made numerous misrepresentations to the BCC, the Clerk, and the taxpayers including jobs created, capital investments made, project completion dates, and financial and budget status. Contrasting Goals: EII volunteer, Fred Kreiger, stated to the BCC on November 14, 2017, “the first thing we said, we need to stop using county money.” In contrast, EII and BED have indicated that they will need $2.3 million in Collier County funding over the next four years. Additionally, EII and BED are planning on requesting $10.5 million in future grants. EII’s Mission to Create Jobs and Economic Investment or to Provide Education? The 2014 plan was for the Accelerators to report Jobs Created in the County. The 2018 revised plan indicates they will become another education facility requiring ongoing and increasing subsidies from the taxpayer. The Immokalee facility may not be zoned for educational purposes, the current zoning is for culinary kitchen/manufacturing; and the Naples Accelerator zoning violations remain unresolved. It is worth noting that the operator of the now-closed Florida Kitchen (startup rental operation ) that had to close due to low participation rates and participants skirting the rules & regulations. This is an example of a kitchen accelerator in Collier County, cited by EII in their business plan, which had to close shop after 5 years because they could not sustain the operation due to participants cooking from home while presenting their certifications from the accelerator. It appears that while the model may work in other locations, it may not be a viable model in Collier County. Accurate Reporting to the BCC During Fiscal Year 2017, EII failed to provide accurate Revenue Reuse Plans to the BCC, pursuant to the Agreement. BED failed to enforce this provision of the Agreement. EII failed to accurately and timely file their IRS Form 990’s. EII has failed to open the Immokalee Facility after nu merous promises made to the BCC, citizens of Immokalee, and the taxpayers of Collier County. The Clerk is not the first to notice this, as example see emails from prior EII Board member, Thomas R. Grady, regarding his concerns (see Appendix L). EII Mixed Cash and Accrual Accounting Methods in their Budget vs. Actuals Report EII’s budget proposal is misleading or what may be construed as an intentional attempt to mislead the BCC and the Public. EII is unable to meet revenues at the same time not reporting expenses, which paints a much better picture than reality. EII used the Accrual method for recording Revenues and Cash Method for recording Expenses, this has the misleading effect of inflating Net Revenues compared to Expenses. EII rationalized mixing accounting methods on the same schedule by stating “they are not operating in there yet (regarding the Immokalee facility)” even though they have a lease and are accruing expenses. 159 Additionally, it does not appear from financial reports that the rent from Woodstock’s Micro-Market has been recorded. Woodstock’s rent was reportedly pre-paid by grant funds for January 1, 2017 through December 31, 2017. Recommendations:  The Board of County Commissioners should consider their alternatives in regards to the contract with EII and notify them of potential reimbursements that may be required to State of Florida and Federal grantors and/or the County taxpayers. County Management Response: Fred Krieger, Volunteer for EII, stated during the March 13, 2018 meeting that EII’s financial systems were a mess before, but now they have corrected these problems and EII is no longer mixing cash and accrual methods. Mr. Krieger further stated that EII is now properly amortizing all expenses and leases. Internal Audit Response to County Management Response: Internal Audit will continue to monitor EII’s contract deliverables for accuracy and completeness. As of March 16, 2018, Internal Audit found no evidence of payments on the FY2017 lease nor the accrual of the FY2017 lease obligation in the financial statements submitted to the Clerk. On Wednesday March 21, 2018, County Management and EII staff provided their written response to these findings: 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 160 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: The payment on January 12, 2017 was prepayment for the calendar year of 2017 (thru December 31, 2017), EII’s fiscal year ends on September 30, 2017. The rent payment was recorded as part of the State Grant funds during FY2017, not as a pre -paid expense (asset). The Clerk notes that EII is now recording Woodstock’s rent through Accounts Payable on a monthly basis. The Clerk questions EII’s use of Grant Funds to prepay rent past the June 30 th end of the DEO’s fiscal year. The Clerk also questions how EII recorded the three months of free 161 rent at the beginning of the lease. 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. 162 18) BED approved $1,631.96 in unauthorized and unbudgeted expenditures on behalf of EII for the Immokalee Accelerator Project. Internal Audit identified recorded expenditures related to Collier County Accelerators and paid from the Business & Economic Development Office (BED) funds. Expenditures 1-4 relate to utilities for the Immokalee Accelerator, were not budgeted under the BED purchasing group, and should have been paid by Economic Incubators as part of their budgeted expenses. This understates the costs of the Accelerator. Table 9: BED Payments for Services at the Immokalee Accelerator that are the responsibility of EII Vendor Name Amount Status Public Purpose 1 AMERIGAS PROPANE LP $1,120.84 Paid PROMOTE ECON. DEVELOP. IN COLLIER COUNTY 2 IMMOKALEE WATER & SEWER DISTRICT $218.40 Check cashed MAINTAIN BUILDING SERVICES 3 IMMOKALEE WATER & SEWER DISTRICT $256.50 Check cashed 06/26/17-08/03/17 170 AIR 4 IMMOKALEE WATER & SEWER DISTRICT $36.22 Check cashed HEALTH HAZARD SAFETY Total $1,631.96 Recommendations:  Expenditures should be authorized and properly reported . On Wednesday March 21, 2018, County Management and EII staff provided their written response to these findings: 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. 163  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. The Clerk accepts the Director of BED’s admission that County staff did in fact pay $1,631.96 for propane, water, and sewer because EII failed to properly budget for these expenses. $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.  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 procurem ent 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. This sub-finding was removed from the Draft Audit Report submitted to the BCC on March 21, 2018 pursuant to the verbal comments and explanation provided by the Director of BED at the March 13, 2018 meeting. Recommendation: Management disagrees with the Internal Auditor’s recommendations. Action Plan: None. 164 19) EII failed to facilitate Capital Investments, assist in creation of viable business plans for participants, provide assistance in accelerating client independence. An individual reported to the Clerk’s office that he had gone to the Naples Accelerator looking to invest in start-ups or possible venture investing. This individual was told that EII does not really do that, and they should contact Tim Cartwright with the Adrenaline Venture Funds. Tim Cartwright is a former director of the Economic Development Council of Collier County. The individual then requested business plans for any of the Accelerator participants for review and possible investment. The individual was told that there were not business plans on file and that EII does not really do that. This individual asked to remain confidential in fear of retaliation. Exhibit 19-A: The Naples Accelerator’s website explains the process for utilizing the ‘Naples Adrenaline Fund’ http://naplesaccelerator.com/resources/funding/. 165 Recommendations:  The Board of County Commissioners should review this report and EII’s activity and reporting. Exhibit 19-B: The Naples Adrenaline Fund is not listed on the Adrenaline Fund website: http://www.adrenalinefund.com/ 166 On Wednesday March 21, 2018, County Management and EII staff provided their written response to these findings: 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. 167 20) EII and the BED have consistently failed to submit pay requests and contract deliverables in a timely manner. EII and BED submitted the Financial Reports for two months (October -November) to the Clerk’s SAP system on December 19, 2017. The Clerk’s role is to audit to BCC contracts, we review EII’s documentation. EII continues to create a “crisis” to get paid and the BCC continues to fund them – But the taxpayers need to know what they are paying for and not getting. This is not the first time this has happened, it appears to be a tactic. Whereas EII and BED delay processing the payment requests for as long as they can and then pressure the Clerk to make immediate payment without taking sufficient and statutory time to review the submittal. Please note the emphasis on ‘promptly’. Due to EII’s lack of controls, lack of management capacity, lack of oversight on the part of the BED, and the risk of fraud, the Clerk has determined the risk associated with anything submitted by EII is extremely high. The Clerk will conduct a full audit of every reimbursement request from this entity going forward and will not be pressured by any vendor with this level of risk to make any payments without full satisfaction as to completen ess and legality. Exhibit 20-A: January 8, 2018 letter from Fred Pezeshkan, Chairman of EII’s Board, and Dr. Marshall Goodman, President and CEO of EII, questioning the Clerk’s role in auditing Agreement Deliverables. Exhibit 20-B: January 8, 2018 letter from Fred Pezeshkan, Chairman of EII’s Board, and Dr. Marshall Goodman, President and CEO of EII demanding ‘prompt’ attention to reimbursement requests. 168 On Wednesday March 21, 2018, County Management and EII staff provided their written response to these findings. 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 169 Global Comments from County Manager’s Office The following comments have been provided by the County Manager ’s Office on April 3, 2018 in summary of County Management review, attached as Appendix M, page 302. a) I think it is problematic to impute motive in the internal audit. The document, for credibility’s sake, should be as objective as possible. b) Where internal controls have been improved or corrected, that should be duly noted. c) The efficacy of policy decisions (BCC) and the business model, in general, are outside the scope of an examination of internal controls. d) Reasonable people will likely view the installation of a code compliant fire suppression system at the Immokalee facility as an “improvement.” Summary In summary, the Clerk’s Office has spent thousands of hours assisting EII in an attempt to get financial and other information. Clerk’s staff went so far as to try to construct statements when they could not be produced. The Clerk’s staff even provided hours of QuickBooks training to the COO. Yet four years and over $5 million later, EII is unable to meet even basic financial and operational requirements, provide accurate reports, correct zoning violations, nor successfully operate either the Naples or Immokalee Accelerators. 170 Table 10: Summary of Taxpayer Funds Paid to EII from 2013 to Present Taxpayer Funds To Date – All Sources County Funds – Dr. Marshall Goodman Consulting Fees FY2014 $70,617 County Funds – 2015 Actual FY2015 $65,845 State Grant #SL007 (Finding #1, pg. 30) - $2,500,000 awarded, only $723,525 received FY2015 $723,525 Collier County Matching Funds to Grant #SL007 FY2015 $46,017 County Funds – 2016 Actual FY2016 $340,637 Collier County Matching Funds to Grant #SL007 FY2016 $124,412 Business Income Expended FY2016 (Audited) FY2016 $244,981 County Funds (Finding #4, pg. 65) – 2017 Actual FY2017 $309,800 Collier County Matching Funds to Grant #SL007 FY2017 $8,412 State Grant #SL025 (Finding #1, pg. 16) – Florida DEO to EII FY2017 $2,000,000 Federal Grant – USDA RBDG (Finding #2, pg. 50) FY2017 $112,536 Kraft Office Center, LLC – Rent for the Naples Accelerator (Finding #8, pg. 101) FY2014–FY2017 $323,466 Business Income Expended FY2017 (Un-Audited) FY2017 $316,925 Fiscal Year 2018 Quarter 1 Rent Promotions (Finding #4, pg. 65) FY2018 $19,400 Unpaid Rent for the Immokalee Accelerator (Finding #12, pg. 124) FY2016-2017 $37,522 Fiscal Year 2018 Collier County Funding – Payroll Reimbursement through Pay Request #FY18-08, pay period ending 1/31/2018 FY2018 $124,234 Fiscal Year 2018 Collier County Funding – Rent Payment to Kraft Center, LLC., October 2017 through March 2018 FY2018 $98,946 Sub-Total To Date $4,967,275 Collier County Budget Remaining in FY2018 Remaining FY2018 Payroll Reimbursement (estimated) FY2018 $430,352 Remaining FY2018 Rent Payments to Kraft Office Center, LLC FY2018 $98,946 Sub-Total Through Fiscal Year End 2018 FY2018 $529,298 TOTAL ESTIMATED BUDGET AT FISCAL YEAR END 2018 $5,496,573 BUDGET PROJECTIONS THROUGH 2021 EII Future Funding Requests through FY2021 (See Exhibit 11-B, pg. 116) FY2019-2021 $1,500,000 Kraft Office Center, LLC, remaining Lease ending 2021 FY2019-2021 $630,012 Sub-Total Remaining Budget 2019-2021 $2,130,012 TOTAL ACTUAL AND FORECAST FY2014-2021 $7,626,585 Appendix Appendix A: USF Audit Report, April 9, 2012. Page 2 Appendix B: EII Invoice Submittal Package #16 to DEO on June 28, 2017 Page 21 Appendix C: DEO Grant #SL025 Page 156 Appendix D: Clerk’s Request for Legal Opinion from DEO on October 9, 2017 Page 199 Appendix E: DEO General Counsel Response to Clerk’s Request Page 204 Appendix F: Email and Signed AIA Certification dated March , 2018 Page 210 Appendix G: Participant User Agreements for Table 5, Reflecting Multiple Applications of the 6-Month 50% Discount Page 214 Appendix H: FY2017 Quarter 4 Revenue Reuse Report, Revised and Final October 12, 2017, referenced in Table 6 and Table 7 Page 224 Appendix I: EII Fundraising Plan FY2018, March 1, 2018. Page 227 Appendix J: Immokalee Culinary Connection Day Event Sponsorship Opportunities. (n.d.). Page 247 Appendix K: A Business Plan for Collier County Innovation Accelerators Update, January 3, 2017. Page 250 Appendix L: Thomas R. Grady Email Correspondence with Economic Incubators, Inc. Page 283 Appendix M: Email with County Management Global Comments Page 302 The following news articles detail Dr. Goodman’s departure from University of South Florida - Polytechnic: http://www.tbo.com/news/former-poly-chancellor-resigns-from-usf-431486 http://www.dailymail.co.uk/news/article-2059174/Its-university--know-School-blows-10-000- Captain-Kirks-chair-life-size-Darth-Vader-stormtrooper.html http://www.usforacle.com/news/view.php/688217/Charges-of-mismanagement-engulf-Poly http://www.tbo.com/news/education/two-usf-poly-administrators-resign-after-internal- review-397304 http://www.tampabay.com/news/education/college/report -details-financial-mismanagement- at-usf-poly/1226835 Appendix, Page 1 MEMORANDUM TO: David M. Touchton Interim Regional Chancellor, USF Polytechnic FROM: Kate M. Head, CPA, CFE, CISA Associate Director DATE: April 9, 2012 SUBJECT: 12-032 Management Letter – USF Polytechnic Construction Contracts On October 4, 2011, University Audit and Compliance received an EthicsPoint complaint regarding improper contractor activity with the construction management company that was renovating the Blue Sky West (BSW) leased facility in Lakeland, Florida. The complainant alleged that the former Regional Chancellor entered into an arrangement with the construction management company to “hide” the cost of the adult slide and artwork by excluding these items from the proposal and invoices and then recouping the costs by overstating the actual cost of other renovation work. UAC’s review determined this allegation to be unfounded since the cost of these items (totaling $30,169) was funded through the USF Foundation (USFF) fund LC0011. The results of this review were communicated to the reporter on December 1, 2011. In February 2012, a second allegation was reported to the Interim Regional Chancellor and was forwarded to UAC for review. The complainant alleged that the former Regional Chancellor had made an arrangement with the lessor of the Blue Sky East (BSE) facility in Winter Haven, Florida, to charge USF Polytechnic (USFP) an above-market rental rate, and then the lessor would return the “excess” to USFP as a donation. The purpose of this arrangement was allegedly to provide a flexible funding source for expenditures that were not allowable using state appropriated funds. Without a complete assessment of the rents in the area, rent abatements being offered at the time, and other assessments not included in the base rent, UAC cannot determine if the rate was above market. However, since both the lease payment and the donation were being accounted for in the same USFF fund (LC0011), no “cash swap” occurred. The lease payments from inception of the lease until March 31, 2012, totaled $196,555. Total pledged donations totaled $199,398. Our review also found that the lessor had agreed to pay the cost of providing soft drink vending and subsequently billed the costs as equipment rental. The “equipment rental costs” were paid from Education and General (E&G) carry forward funds in violation of USF procedures, which prohibit the purchase of refreshments with state funds, unless there is a specific statutory authority. During our review, we noted eleven violations of USF System regulations and procedures and/or generally accepted accounting principles that had a material impact on accurate financial reporting. Appendix A Appendix, Page 2 The objective of this report is to communicate these violations. Since this project is not an audit, a full internal control review was not performed. Management should not rely on this report to assess the internal control structure, as a whole, over leases and leasehold improvements. Within ten days, please provide either your actions taken and actual implementation dates or your actions planned and expected implementation dates within the Team Central Follow-Up System. Please contact us at 974-2705 if you have any questions. cc: John Long, Chief Operating Officer and Sr. Vice President, Business and Finance Nick Trivunovich, Chief Financial Officer and Vice President, Business and Finance Alice Murray, Regional Vice Chancellor, Campus Planning & Facilities Operations, USFP Josh Bresler, Executive Director, Finance & Administration, USFP Appendix, Page 3 MEDIUM PRIORITY RISKS RESOLVED 1.A three-year prepaid rent agreement was not properly accounted for.No Financial Accounting and Reporting Manual for Higher Education Section 408 states, “When organizations incur costs that relate to future rather than current-period activities, amounts expended should be reported as assets. Thus, items such as prepaid insurance and prepaid rentals should be recorded as assets and amortized over the periods to which the charges relate.” USFP entered into a three-year lease arrangement for 10,000 square feet of office space in the Pilot Bank building in Lakeland beginning on April 1, 2011. The lease terms required all three years of the rent to be prepaid. However, after the first year of the lease, the lease could be terminated with 60 days’ notice, and any remaining prepaid rent would be refunded. The purchase order (PO) properly delineated these terms and conditions, and the lease agreement was competitively bid. On April 5, 2011, an invoice for $424,999 was received from the landlord and processed for payment using carry forward funds (Fund 10009). All three years of rent were expensed (Operational Unit USFP, Department 544000, Account 56500 Rental Space and Facilities). The correct treatment for prepaid expenditures is to record the prepayment as an asset in a balance sheet account (Account 14020 Prepaid Expense) and then transfer the costs to an income statement account (Account 56500) as the service period occurs. As a result of this mistreatment, expenditures were overstated and assets were understated by $390,624 in fiscal year 2010-2011. Proper treatment should have been as follows: Proper Recording of Prepaid Rent FY 2010-2011 to FY 2013-2014 Fiscal Year Rent Expense (Account 56500) Prepaid Rent (Account 14020) 2010-2011 $34,374.99 $390,623.61 2011-2012 138,531.21 252,092.40 2012-2013 142,687.14 109,405.26 2013-2014 109,405.26 0 Recommendation: USFP should work with the USF System Controller’s Office to ensure that prepaid rent is properly recorded. Management Attention Required: ☐Immediate ☒Urgent ☐Timely Resources/Effort Required: ☐Significant ☐Moderate ☒Minimal Appendix, Page 4 MEDIUM PRIORITY RISKS RESOLVED 2.Leases greater than 5,000 square feet were not competitively bid, and no exemption was approved by the President or her designee. No USF Regulation 4.012, Leasing Regulation requires that all leases of 5,000 square feet or more be competitively bid. An exemption is permissible for specialized research, medical, or education facilities if the President, or President’s designee, certifies in writing that the facility is available from a single source and that compliance with competitive bid requirements would be detrimental to the USF System. USFP has not been delegated authority to approve exemptions. The Blue Sky West facility in Lakeland (6,428 square feet) was not competitively bid. According to the Associate Regional Chancellor, the Blue Sky West facility was selected from a list of available properties provided by the Lakeland Downtown Development Authority (LDDA) in partnership with the Lakeland Community Redevelopment Agency (LCRA). The LDDA required that the Blue Sky West facility be located in downtown Lakeland. The LCRA pledged $31,500 toward the lease (August 1, 2009 - July 31, 2012). There was no formal exemption prepared or approved, as required. The College of Technology and Innovation (CTI) off-campus lab space (initially 13,139 square feet) was also not competitively bid. According to the Associate Regional Chancellor, the CTI lease was the only available and viable space that USFP could identify. Due to the specialized research needs of this facility, an exemption is likely to have been granted. UAC verified with the Division of Purchasing that no written exemption was on file. Recommendation: USFP should comply with USF Regulation 4.012 and competitively bid all leases of more than 5,000 square feet or obtain a proper exemption. Location requirements can be included in the Invitation to Negotiate. Management Attention Required: ☐Immediate ☒Urgent ☐Timely Resources/Effort Required: ☐Significant ☒Moderate ☐Minimal 3.Leasehold improvements were not properly accounted for as construction in progress until the renovation was complete and then capitalized. No A leasehold improvement is an improvement made to a leased building paid for with USF System funds. This improvement will revert to the lessor at the expiration of the lease. The Statewide Financial Statement Capital Asset Guidance and Rules for Tangible Personal Property states, “A capital asset is real or personal property with a cost equal to or greater than an established capitalization threshold and an estimated useful life extending beyond one year.” The state’s capital asset policy for statewide financial statements includes capitalizing leasehold improvements greater than $100,000. Appendix, Page 5 MEDIUM PRIORITY RISKS RESOLVED Examples of costs that would be included as part of a leasehold improvement include: interior partitions made up of drywall, glass, and metal; miscellaneous millwork, carpentry, lumber, metals, steel, paint, acoustic, drywall, and plaster ceilings; restroom accessories; electric lighting fixtures; and interior floor finishing including carpet, vinyl and tile. Leasehold improvements should not include moveable equipment or office furniture that is not attached to the leased property. Renovations to a leased space normally occur prior to occupancy, or shortly after occupancy. USFP Campus Planning and Facilities Operations utilized Crossroads Construction to perform renovations to leased space. While project numbers were set up to capture renovations of some of the leased properties, and product codes were used to help differentiate initiatives, costs incurred were not charged to project accounts in four instances. Since all renovations were expensed as incurred, they were not reviewed by the USF System Office of Facilities Planning and Construction at year-end to determine if the project was completed and should be reviewed for proper capitalization by the USF System Controller’s Office. Those renovations recorded to fund 50000 (CIP) which are still in progress at year-end are recorded as Construction in Progress in the USFP financial statements. Leasehold Improvements Greater Than $100,000 Project/Lease Project Charged to CIP as of 6/30/11 Expensed as of 6/30/11 Should be Capitalized as of 6/30/11 Charged to CIP after 6/30/11 Expensed after 6/30/112 CTI Lab/Aspyre Properties 490801 0 $660,641 $660,641 (CIP) $160,208 $411,976 BSE Incubator/ The 6/10 Corporation None 0 56,641 56,641 (CIP) Project Complete Project Complete BSE Media Lab/The 6/10 Corporation1 490803 0 0 0 291,772 231,811 BSW/Marco Bay None 0 120,548 120,548 (LHI) Project Complete Project Complete Blue Sky Recruitment Center, Wauchula/ Lodge #17 None 0 119,233 119,233 (LHI) Project Complete Project Complete Total $0 $957,063 $957,063 $451,980 $643,787 1Does not include equipment capitalized after 6/30/11 of $116,905. 2Period reviewed ended November 30, 2011. Appendix, Page 6 MEDIUM PRIORITY RISKS RESOLVED Recommendation: USFP should use project codes to account for all renovation projects of leased space to ensure that these costs are properly accumulated and reported as Construction in Progress at year-end. At the end of these projects, the costs should be reviewed by the USF System Controller’s Office and appropriately recorded as leasehold improvements, minor renovations, or furniture, fixtures, and equipment. Management Attention Required: ☐Immediate ☒Urgent ☐Timely Resources/Effort Required: ☐Significant ☒Moderate ☐Minimal 4.Tenant improvements were not obtained in accordance with USF policies on competitive pricing. The Blue Sky East tenant build-out was performed by the lessor, The 6/10 Corporation. According to the Associate Regional Chancellor, a condition of the lease was that all tenant build-out was to be performed by the lessor’s company, which had engineers, architects, and construction management in place. The lessor wanted to control all changes to the leased space in order to ensure all tenant spaces were consistent. Lease Section 6.02 states, “Tenant shall not commit actual or constructive waste upon the Premises, or materially alter the exterior or interior of the space without the prior written consent of the landlord. At the time of granting such approval, Landlord shall inform Tenant whether such alterations will have to be removed upon termination of the Lease, at Tenants cost and Expense…Tenant shall submit to landlord all plans and specifications with respect to any intended improvements or alterations to the Premises and shall not proceed with any work unless and until it has received Landlord’s approval in writing.” The lease does not state that tenant improvements must be done by the lessor. Lease Section 6.03 states, “At the expiration of the Lease, Tenant may remove from the Premises all personal property, including fixtures, belonging to the Tenant. Tenant shall repair any damage caused by such removal.” In addition to the tenant build-out paid for by the lessor, USFP requested additional tenant improvements, which were performed by the lessor and billed to USFP totaling $35,176.26. No Appendix A, Pg. 120 Appendix, Page 7 MEDIUM PRIORITY RISKS RESOLVED Work Performed by Lessor and Paid by USFP September 15, 2009 (Lease Begin Date) - December 31, 2011 Invoice Date Amount Account Description of Work 10/19/09 $3,086.46 54950 Provide and install inner duct from Telco facility to Suite 240, floor coring, and firewall penetration 10/21/091 3,724.78 54950 Card access cabling/security camera 10/21/091 4,297.12 54950 Electric strikes, contacts, and readers 10/21/091 4,880.04 54950 Provide and install KS card access equipment 10/21/09 6,776.08 54950 CAT 5E cabling 10/26/09 2,924.00 54950 Lighting 10/26/09 3,600.00 54950 Lower front area sprinkler lines to accommodate awning 11/02/09 664.23 53300 Two triangle fabric panels for front area 11/12/09 612.55 54300 Lighting for front grouping 03/08/10 2,765.00 54950 Electrical connections for lighting of front area and cubicles-8 ports total 02/03/11 1,846.00 54950 5-20 A duplex outlets and 7 CAT-5E Total $35,176.26 1These three invoices all appear to be related to the installation of a card access system/security system. COMPASS Procedure: Purchases - Determining Method of Purchase states, “Competitive pricing is the accepted standard to follow to assure that the university is obtaining commodities, goods and services at the best possible price with an appropriate level of quality. Purchasing practices good public administration policies to insure that purchases are made at the best possible prices and within the standards of conduct. The purchase of commodities, goods or services with a value greater than $5,000 and less than $24,999 must have quotations, either verbal or written; verbal quotes must be documented; at least two quotes are required. Formal written price quotes are not required for the purchase of commodities, goods or services amounting to less than $5,000. However, verbal quotes must be documented at least two quotes are required the purchase of commodities, goods or services with a value greater than $25,000 and less than $74,999 requires at least three (3) written quotations.” Since the lessor also has a donor relationship with the University, the appearance of a fair and equitable awarding of the tenant improvement work is even more critical. Appendix, Page 8 MEDIUM PRIORITY RISKS RESOLVED Recommendation: USFP should obtain competitive pricing for all tenant renovations, unless there is an expressed prohibition in the negotiated lease. USF construction management service agreement vendors should be used for renovations whenever possible to ensure that the vendor quality is maintained. Management Attention Required: ☐Immediate ☒Urgent ☐Timely Resources/Effort Required: ☐Significant ☒Moderate ☐Minimal 5.The number of change orders was excessive. Construction contracts define the scope of a contractor’s work and how the contractor will receive compensation. Unlike other types of contracts, most construction projects require changes to the original scope of work contemplated at the outset of the contract. Accordingly, construction contracts normally permit the owner to make unilateral changes to the project during the construction process. The change orders related to a construction project can significantly alter the costs of a project to the owner or the contractor. As a result, change orders must be tightly controlled. USFP construction contracts with Crossroads Construction contained numerous change orders. Change order requests were properly completed and approved by both USFP Campus Planning and Facilities Operations, as well as the Division of Purchasing; however, on four projects, the change orders appeared to be excessive (greater than 10%) and many were not directly related to unanticipated structural issues or material and supply cost increases but appeared to be related to repeated changes in the design plan and additional work added/new scope to an original proposal. UAC compared the total value of all original POs to Crossroads Construction to the total value of change orders for these leasehold improvement projects. The cost of the projects increased 73% due to change orders: No Appendix, Page 9 MEDIUM PRIORITY RISKS RESOLVED Leasehold Improvement Projects Crossroads Construction1 As of November 30, 2011 Leasehold Original PO Change Orders Final PO % Increase Blue Sky West $100,450 $11,396 $111,846 11% Blue Sky Wauchula 107,478 20,194 127,672 19% One Poly Place 66,794 34,145 100,939 51% CTI/RFID 569,096 553,596 1,122,692 97% Total $843,818 $619,331 $1,463,149 73% 1Does not include the BSE Media Lab in which 85% of the costs of the project were direct payments for equipment. According to the Associate Regional Chancellor, the reasons for the excessive change orders included the following: •Design changes during the project, which resulted in significant shifting of costs, re- done work, and upgraded materials. •Unanticipated electrical issues and structural issues due to design or space utilization changes after the proposal. •Major scope additions to the CTI/RFID lab, such as a $330,280 increase for a biofuel lab, were added to the original Construction Management Service proposal by a change order to the original purchase order, instead of creating a new one. Recommendation: USFP should improve their monitoring and oversight of change orders to ensure they are reasonable, appropriate, and cost effective. Management Attention Required: ☐Immediate ☒Urgent ☐Timely Resources/Effort Required: ☐Significant ☒Moderate ☐Minimal 6.Technology purchases were made without the advance approval of the Office of the Vice President for Technology. Competitive bids for equipment were executed by the contractor; however, an exemption from the requirement that USF perform the bid process was not obtained from the Division of Purchasing. No USF System Policy 0-518, Technology Acquisition Policy, effective August 1, 2008, requires that all technology purchases made by all entities and funding sources at the University must be Appendix, Page 10 MEDIUM PRIORITY RISKS RESOLVED reviewed and approved by the Office of the Vice President for Information Technology or his designee. Technology purchases are defined as, but not limited to, audio visual and PC equipment for conference rooms and classrooms; non-USF Computer Store standard hardware, network, or communication infrastructure; technology contracts exceeding $5,000; and consulting contracts greater than $5,000. USF System Regulation 4.0200, Solicitation Requirements-Competitive, Section 2, states, “The purchase of commodities or contractual services exceeding $75,000 shall be awarded pursuant to a competitive solicitation, unless otherwise authorized.” Section 6 states, “The award of a competitive solicitation shall be publicly posted by Purchasing and Property Services, located at the Tampa campus, for 72 hours excluding Saturdays, Sundays or Florida State University System holidays.” On April 11, 2011, USFP entered into a construction management contract (PO 8000002347) with Crossroads Construction to install a video wall and audio system at Blue Sky East for $230,635. This contract included a purchase of equipment from the Whitlock Group for $215,678, which included $189,040 in equipment cost, $12,953 in sales taxes, and $13,685 in installation and freight costs. On July 22, 2011, this PO was reduced by $197,993 ($185,040 plus sales tax of $12,953) and a new PO was processed on August 2, 2011, to direct pay the Whitlock Group $185,040 (PO 8000002523). According to the Whitlock Group invoice, dated August 5, 2011, the order was placed on April 1, 2011. UAC was unable to determine if the goods and services were ordered prior to the Division of Purchasing authorizing the contract and PO on April 11, 2011. The Invitation to Bid was issued by Crossroads Construction on March 2, 2011, and responses were due on March 10, 2011. A Request for Proposal listing the specific equipment (make and model) to be used in the construction of the media wall was included with the bid invitation. The list of equipment needed was developed by a consultant hired by USFP. According to Campus Planning and Facilities Operations, the former Regional Chancellor hired a consultant (PO8000002215) in November 2010 to design and write specifications for a video wall system for USFP’s Blue Sky East location. On July 27, 2011, USFP entered into a construction management contract (PO 8000002506) with Crossroads Construction to install a TV production studio at Blue Sky East for $431,175. This contract included a purchase of equipment from Encore Broadcast Solutions for $411,693. On August 4, 2011, this PO was reduced by $369,689 ($348,716 plus sales tax of $20,973), and a new PO was processed on August 15, 2011, to direct pay Encore Broadcast Systems $348,716 (PO 8000002534). According to the Encore Broadcast Systems invoice dated October 26, 2011, the order was placed on August 9, 2011. While both sets of equipment were competitively bid by Crossroads Construction, an exemption from the requirement that USF perform the competitive bid process was not obtained from the Division of Purchasing. In addition, there was no evidence that approval was obtained as required from the Office of the Vice President for Technology. Appendix, Page 11 MEDIUM PRIORITY RISKS RESOLVED Recommendation: USFP should comply with USF Regulation 0-518 by obtaining authorization for all technology purchases in advance. USFP should comply with USF Regulation 4.02030 by obtaining competitive bids or exemptions from bid from the Division of Purchasing. Management Attention Required: ☐Immediate ☒Urgent ☐Timely Resources/Effort Required: ☐Significant ☐Moderate ☒Minimal 7.Appliances were purchased using state appropriations.No COMPASS Procedure: Accounts Payable - Prohibited Purchases/Payments from State Funds, prohibits the purchase of refrigerators, stoves, microwaves, dishwashers, and coffee pots without specific or implied statutory authority. USF Regulation 4-02040 (6), Purchase of Commodities or Contractual Services states, “Items requested that are of a personal nature or for personal convenience of employees shall not be purchased. Examples are: fans, heaters, coffee pots, mugs, refrigerators, microwaves, picture frames, wall hangings, smoke/air filters and various decorative items.” The Blue Sky East facility was renovated prior to moving in. The renovations were not included in a construction manager service agreement since the property renovations were performed by the lessor (The 6/10 Corporation) who had their own staff of architects, engineers, and contractors. The appliances for this location (microwave, refrigerator, coffee maker, vacuum, toaster, and icemaker) were purchased from Lowe’s Home Center. The PO (8000001856) for $2,328 did not contain any documentation indicating that any special authorization had been obtained. The quote provided, valid through October 30, 2009, was paid using E&G carry forward funds (Fund 10009) totaling $2,323. UAC also noted that there were appliances paid for in the renovation of Blue Sky West. The appliances were contained in the contract with Crossroads Construction and paid for with carry forward funds (Fund 10009). On November 5, 2009, Crossroads Construction requested a change order to credit the cost of the appliances ($2,491 plus 12% Construction Manager Fee) noting that these items were to be purchased directly by the owner. The change order was approved by the Associate Regional Chancellor. The December 14, 2009, application for payment shows both a charge and credit for appliances. Campus Planning and Facilities Operations indicated to UAC that Crossroads Construction was supposed to donate the appliances; however, the Unit Development Director indicated that the only in-kind donation from Crossroads Construction was a foosball table. The PO (8000001860) for $2,328 did not contain any documentation indicating that any special authorization had been obtained. The quote provided, valid through October 30, 2009, was paid for with E&G carry forward funds (Fund 10009) totaling $2,323. When a new building or new space is being built out, it is not unusual for appliances to be Appendix, Page 12 MEDIUM PRIORITY RISKS RESOLVED included in the construction management service agreement proposal. The purchase of these items is not being questioned; however, the appropriateness of the funding source is being questioned. Recommendation: USFP should remove the $4,646 from Fund 10009 and charge an appropriate funding source. Management Attention Required: ☐ Immediate ☒ Urgent ☐Timely Resources/Effort Required: ☐Significant ☒Moderate ☐Minimal 8.Beverage machines and beverages were intentionally miscategorized as equipment rental and were paid for with state appropriations. No COMPASS Procedure: Accounts Payable - Prohibited Purchases/Payments from State Funds, prohibits the purchase of refreshments unless expressly provided by law. The lessor of Blue Sky East billed USFP $200-300 a month for equipment rental. According to the Associate Regional Chancellor, the $300 a month fee was to reimburse the lessor for beverage machines provided. The former Regional Chancellor instructed the Administration and Finance office to find a way to pay for the beverages and beverage machine rental. According to Campus Planning and Facilities Operations, they were instructed by the Executive Director, Administration and Finance, to enter a requisition for the monthly equipment rental. The requisitions were approved by the Executive Administrative Specialist and the Office Assistant in Campus Planning and Facilities Operations. The requisitions and resulting POs contained the description, “Monthly equipment rental for USFP Blue Sky East location at $200 per month” and “Monthly equipment rental for USFP Blue Sky East location at $300 per month”, respectively. A project quotation attached to the PO in July 2011 characterized the purchase as, “Equipment rental, 12 months service, Blue Sky East.” There was no additional information provided. A total of 19 invoices totaling $4,900 were paid covering the period July 1, 2010, through January 31, 2012. The $200 was an estimate of what the beverage machine rental and actual beverage costs would be. When more beverages were dispensed than anticipated, the amount was increased to $300. The invoices were paid from Operating Unit LKL, Fund 10009, Department 542300, Product LK9004, and Account 56900. The first six invoices had been approved by the Associate Regional Chancellor of Campus Planning and Facilities Operations. Appendix, Page 13 MEDIUM PRIORITY RISKS RESOLVED Summary of Purchases Beverage Equipment Rental and Supplies Requisition Number PO Number PO date PO Amount Paid 0080002246 8000002068 7/15/2010 $3,600 $2,800 0080002704 8000002483 7/18/2011 3,600 2,100 Total $7,200 $4,900 After our fieldwork was completed, but prior to issuance of this report, an expenditure transfer was made to move $4,900 from Fund 10009 to the incubator auxiliary (Fund 08019). Recommendation: USFP has discontinued this arrangement effective January 31, 2012, and $4,900 has been removed from Fund 10009 and transferred to the incubator auxiliary (Fund 08019). Auxiliary funds may be used for refreshments related to official events, but the use of auxiliary funds for ongoing refreshments may not be appropriate. The nature of the expenditure should be clearly identified on the proposal, requisition, and invoices to prevent inappropriate expenditures from being authorized and/or inappropriate funding sources from being used. Management Attention Required: ☐Immediate ☒Urgent ☐Timely Resources/Effort Required: ☐Significant ☒Moderate ☐Minimal 9.Leases with The 6/10 Corporation do not consistently handle rent abatements. USFP entered into a lease with The 6/10 Corporation for space in the 6/10 Plaza in Winter Haven, Florida, to house the Blue Sky East incubator. The 3,400 square foot space was located in the back half of suite 240. According to Campus Planning and Facilities Operations, the front half of suite 240 was to be an emergency command center. When not in use, Blue Sky East activities were to take place in the space, which was to be configured as generic workspace No Appendix, Page 14 MEDIUM PRIORITY RISKS RESOLVED The 6/10 Corporation Donations January 1, 2010 – March 31, 2012 Donor Donation Amount Due Date Paid Paid Date The 6/10 Corporation $33,232.96 3/31/10 $33,232.96 4/12/10 The 6/10 Corporation 33,232.96 9/30/10 0 Outstanding The 6/10 Corporation 33,232.96 3/31/11 33,232.96 2/28/11 The 6/10 Corporation 33,232.96 9/30/11 33,232.96 9/1/11 The 6/10 Corporation 33,232.96 3/31/12 0 Outstanding The 6/10 Corporation 33,232.96 9/30/12 0 Not Due Total $199,397.76 $99,698.88 In addition, the lessor abated the rent for the Blue Sky East media lab for the first nine months. The value of this nine-month rate abatement at $15 per square foot is $42,300. The reason for abating the rent for the second lease and effectively reimbursing the rent for the first lease is not known. Due to this abated rent, the average rent was $10.91 per square foot per year ($4,700 a month times 24 months = $112,800/33 months is $3,418 a month times 12 months = $41, 018/3,760 sq. ft. = $10.91). Our review of similar market rents being advertised as of February 2012 shows the market rate for properties of a similar size and location ranging from $10 to $15, averaging $12.25. However, Winter Haven office property rentals have been trending downward since 2008 and are currently averaging under $14 per square foot. Without comparing other rent assessments and abatements being offered at the time, it is not possible to conclude whether the rent amount is unreasonable. The leases for the Blue Sky East Media Lab and USFP Brain Lab were negotiated after the rent donation from The 6/10 Corporation by USFP’s outside legal counsel. Due to the donor relationship with The 6/10 Corporation at the time of the negotiation, it is imperative that USF be able to demonstrate that no preferential treatment was given to The 6/10 Corporation. While a competitive bid was not required (since the additional space was less than 5,000 square feet), in light of the donor relationship, it may have been prudent to do so. Recommendation: USFP should negotiate all rate abatements as part of the rental agreement rather than accepting donations from lessors. The USF System is currently undertaking a review of donor/vendor relationship policies. USFP should ensure all donor/vendor relationships comply with new guidance developed. Management Attention Required: ☐Immediate ☒Urgent ☐Timely Appendix, Page 15 MEDIUM PRIORITY RISKS RESOLVED Resources/Effort Required: ☐Significant ☒Moderate ☐Minimal 10.There was no financial statement disclosure of lease obligations.No USFP had 7 off-campus lease obligations as of June 30, 2011. The liabilities associated with these lease obligations were not disclosed in the financial statement or its footnotes. Since USF does not permit POs to cross fiscal years, there was no established encumbrance to reflect these liabilities. The Auditor General was advised of this omission and chose not to make an adjustment to the financial statements before issuance on February 21, 2012. The remaining lease obligation for the 7 leases was $1,093,778 for base rent, of which $390,624 is prepaid and $96,517 is utility and pass-through costs for assessments. (See Exhibit A for details by lease.) In addition, the USFP Brain Lab lease contains a $115,700 build-out allowance that must be repaid on a prorated basis if the lease is terminated early. Recommendation: USFP should ensure that financial statements and footnotes contain appropriate disclosure of long-term obligations, such as lease obligations. Management Attention Required: ☐Immediate ☒Urgent ☐Timely Resources/Effort Required: ☐Significant ☒Moderate ☐Minimal 11.Incubator tenant revenues were not being matched with operational expenditures.No Both Blue Sky East and Blue Sky West have clients which are either residential or virtual. Rent and other service fees are billed and collected through FAST Accounts Receivable and are recorded in an auxiliary fund. According to the Executive Director, Administration and Finance, tenant rents and utility assessments were determined based on the square footage of space at a rate of $15 per square foot. This is consistent with USFP cost per square foot of Blue Sky East, but is substantially higher than USFP cost per square foot of Blue Sky West ($2.80). The BSE lease was awarded at a below market rate since the lessor was interested in supporting the incubator efforts. Common Area utility costs of the leases are built into the utility assessments for the incubator clients, and a $50 fixed technology fee is charged to cover internet, telephone, and cable costs. The rates were kept equitable to prevent clients from having the perception of being charged different rates for essentially the same service at either location. Residential clients are also charged a facility/program services fee to cover the cost of community events, seminars, promotional material, and internship development. Appendix, Page 16 MEDIUM PRIORITY RISKS RESOLVED Expenditure Transfer to Move Tenant-Related Costs Account Code Expense Fund Dept. Product Amount 56500-Facilities Rental Rent 10009 542300 LK9004 (BSE) $23,364.76 56500-Facilities Rental Utilities 10009 542300 LK9004 (BSE) 3,237.50 52050-IT Services IT Services 10009 542300 LK9004 (BSE) 1,825.00 52500-Utilities Utilities 10009 542300 LK9003 (BSW) 1,712.50 52050-IT Services IT Services 10009 542300 LK9003 (BSW) 2,475.00 Total $32,614.76 Expenditures related to the incubator facility are incurred based on utilization and not based on collection; therefore, the costs incurred and not recovered should have been moved. None of the operating costs associated with the virtual clients and/or other services have been transferred into the auxiliary fund. Recommendation: USF Polytechnic should distribute the portion of the incubator operating costs (rent, utilities, information technology costs, cleaning costs, etc.) being offset by tenant rentals to the auxiliary fund on a monthly basis as the expenditures are being incurred, or during the monthly tenant billing process. A new chartfield should be set up to record due to/due from USFF account LC011. This will permit all incubator operating costs being funded with donations (in the USFF) to be paid by USF directly. This will permit more accurate and timely reporting of activities. Management Attention Required: ☐Immediate ☒Urgent ☐Timely Resources/Effort Required: ☐Significant ☒Moderate ☐Minimal Appendix, Page 17 EXHIBIT A USFP Lease Obligations As of 6/30/11 Facility Begin End Months Base Rent as of 6/30/11 Other Obligations Remaining Base Rent Obligation Other Obligations (Utilities, CAM1) Current Funding Source BSW 08/01/09 7/31/12 13 $1,500 $19,500 N/A USFF BSE Incubator 9/15/09 9/30/12 15 4,250 $2,329 63,750 $34,935 USFF BSE Media Lab 1/10/10 9/30/12 15 4,700 2,603 70,500 39,045 USF Blue Sky Wauchula/ Recruiting Facility 2/1/10 1/31/13 19 1,000 19,000 N/A USFP2 USFP Brain Lab 2/1/11 2/1/14 31 2,519 $727 78,089 $22,537 USFP2 CTI/RFID 2/1/10 1/31/13 19 14,023 266,437 N/A USFP One Poly Place (prepaid) 4/1/11 3/31/14 9 12 12 11,458.33 11,802.08 12,156.14 390,624 N/A USFP Rath Center/ International Partnerships 5/1/11 4/30/14 34 $5,467 $185,878 Build-out reimbursement obligation3 USFF4 USFP Total $1,093,778 $96,517 1Common area maintenance/pass-through costs at current commitment; these are subject to increase. 2Hernando County Industrial Development Authority paid $500 of the rent from July 2010 - January 2011. 3The lease includes a build-out allowance of $115,770. In the event the lease is terminated, the pro-rated cost of the build-out must be reimbursed. 4$1,667.67 a month is funded by USFF account LC0015 (USFP Applied Neurological & Cognitive Electronics Lab) through March 31, 2012. The City of Winter Haven Community Redevelopment Agency donated $15,000 toward startup costs. Appendix, Page 18 EXHIBIT B Incubator Tenant-Related Operational Costs1 March 1, 2011 – March 31, 2012 Incubator Expenditure Description Funding Source Expenditure Amount Allocated to Incubator2 Billed Cost Unrecovered Costs BSE Rent USFF (LC011) $55,250 $24,310 $13,727 $10,583 BSE CAM USFF (LC011) USFP (10009)3 15,977 569 7,280 (in above) 7,280 BSE Utilities USFF (LC011) USFP(10009)3 13,815 1,818 6,879 4,112 2,767 BSE Cleaning Costs USFP (10009) 4,800 2,112 0 2,112 BSE Verizon/ Bright House USFP (10009) 4,136 1,820 2,350 (530) BSE Copier USFP (10009) 296 130 0 130 BSE Refreshments USFP (10009) 3,300 1,452 0 1,452 BSE Other Recovered Costs N/A 16,450 (16,450) Subtotal $99,961 $43,983 $36,639 $7,344 BSW Rent USFF 19,500 9,360 13,143 (3,783) BSW Utilities USFP (10009) 13,148 6,311 1,837 4,474 Appendix, Page 19 Incubator Expenditure Description Funding Source Expenditure Amount Allocated to Incubator2 Billed Cost Unrecovered Costs BSW Verizon/ Bright House USFF (LC011) USFP (10009) 1,320 5,155 3,108 2,550 558 BSW Cleaning USFP (10009) 4,235 2,033 2,033 BSW Copier USFP (10009) 1,628 781 781 BSW Security USFP (10009) 721 346 346 BSW Other Program Services N/A 22,850 (22,850) Subtotal $45,707 $21,939 $40,380 ($18,441) Other 50 (50) Total $145,668 $65,922 $77,069 ($11,147) 1Expenditures included above are not comprehensive. Only ongoing obligations which could be associated with a specific incubator location have been included. This includes USFP expenditures properly coded to LK90003 and LK9004 and USFF expenditures related to the operating lease and internet. USFF expenditures were not being differentiated by incubator space; therefore, no other costs could be allocated, including programmatic costs. We did not perform a search for additional expenditures that may have been miscoded or not otherwise identified as BSE or BSW. 2BSE incubator space is 1,500 square feet or 44% (1,500/3,400). BSW incubator space is 1,800 square feet or 48% (1,800/3,760). The remaining square footage of BSW is common area, per the rate worksheet provided to UAC by USFP. 3CAM and utilities adjustment in July 2011 were charged to Fund 10009, not to the USFF. Appendix, Page 20 Appendix B Appendix, Page 21 Appendix, Page 22 Appendix, Page 23 Appendix, Page 24 Appendix, Page 25 Appendix, Page 26 Appendix, Page 27 Appendix, Page 28 Appendix, Page 29 Appendix, Page 30 Appendix, Page 31 Appendix, Page 32 Appendix, Page 33 Appendix, Page 34 Appendix, Page 35 Appendix, Page 36 Appendix, Page 37 Appendix, Page 38 Appendix, Page 39 Appendix, Page 40 Appendix, Page 41 Appendix, Page 42 Appendix, Page 43 Appendix, Page 44 Appendix, Page 45 Appendix, Page 46 Appendix, Page 47 Appendix, Page 48 Appendix, Page 49 Appendix, Page 50 Appendix, Page 51 Appendix, Page 52 Appendix, Page 53 Appendix, Page 54 Appendix, Page 55 Appendix, Page 56 Appendix, Page 57 Appendix, Page 58 Appendix, Page 59 Appendix, Page 60 Appendix, Page 61 Appendix, Page 62 Appendix, Page 63 Appendix, Page 64 Appendix, Page 65 Appendix, Page 66 Appendix, Page 67 Appendix, Page 68 Appendix, Page 69 Appendix, Page 70 Appendix, Page 71 Appendix, Page 72 Appendix, Page 73 Appendix, Page 74 Appendix, Page 75 Appendix, Page 76 Appendix, Page 77 Appendix, Page 78 Appendix, Page 79 Appendix, Page 80 Appendix, Page 81 Appendix, Page 82 Appendix, Page 83 Appendix, Page 84 Appendix, Page 85 Appendix, Page 86 Appendix, Page 87 Appendix, Page 88 Appendix, Page 89 Appendix, Page 90 Appendix, Page 91 Appendix, Page 92 Appendix, Page 93 Appendix, Page 94 Appendix, Page 95 Appendix, Page 96 Appendix, Page 97 Appendix, Page 98 Appendix, Page 99 Appendix, Page 100 Appendix, Page 101 Appendix, Page 102 Appendix, Page 103 Appendix, Page 104 Appendix, Page 105 Appendix, Page 106 Appendix, Page 107 Appendix, Page 108 Appendix, Page 109 Appendix, Page 110 Appendix, Page 111 Appendix, Page 112 Appendix, Page 113 Appendix, Page 114 Appendix, Page 115 Appendix, Page 116 Appendix, Page 117 Appendix, Page 118 Appendix, Page 119 Appendix, Page 120 Appendix, Page 121 Appendix, Page 122 Appendix, Page 123 Appendix, Page 124 Appendix, Page 125 Appendix, Page 126 Appendix, Page 127 Appendix, Page 128 Appendix, Page 129 Appendix, Page 130 Appendix, Page 131 Appendix, Page 132 Appendix, Page 133 Appendix, Page 134 Appendix, Page 135 Appendix, Page 136 Appendix, Page 137 Appendix, Page 138 Appendix, Page 139 Appendix, Page 140 Appendix, Page 141 Appendix, Page 142 Appendix, Page 143 Appendix, Page 144 Appendix, Page 145 Appendix, Page 146 Appendix, Page 147 Appendix, Page 148 Appendix, Page 149 Appendix, Page 150 Appendix, Page 151 Appendix, Page 152 Appendix, Page 153 Appendix, Page 154 Appendix, Page 155 GRANT AGREEMENT STATE OF FLORIDA DEPARTMENT OF ECONOMIC OPPORTUNITY Agreement# SW25 THIS GRANT AGR~EMENT ("Agreement") is made and entered into by and between the State of Florida, Department of Economic Opportunity roEO"), and Economic Incubators, Inc. ("Grantee"). DEO and Grantee are sometimes referred to herein individually as a "Party" and coflectively as "the Parties." I. GRANTEE AGREES: A. Performance Requirements: Grantee shall perform the services specified herein In accordance with the terms and conditions of this Agreement and all of its attachments and/or exhibits, which are incorporated by reference herein. B. Type of Agreement: This Agreement is a cost reimbursement agree.ment. C. Acreement Period: The term of this Agreement begins on July 1, 2016, and ends on June 30, 2017. DEO Is not obligated to pay for costs incurred by Grantee related to this Agreement prior to its beginning date or after its ending date. Grantee acknowledges that while no extension of this Agreement is contemplated, if an extension is necessary due to events beyond the control of Grantee, any cons.ideratlon of an extension will be subject to the availability of funds and further conditioned upon Grantee's satisfactory performance of all duties and obligations hereunder, as determined byDEO. D. Agreement Payment: This Agreement shall not exceed $2,000,000.00 which shall be paid by DEO in consideration for Grantee's provision of services as set forth by the terms and conditions of this Agreement. The State of Florida and DEO's performance and obligation to pay under this Agreement is contingent upon an annual appropriation by the Legislature. DEO shall be the final authority as to the availability of funds for this Agreement, and as to what constitutes an "annual appropriation" of funds to complete this Agreement. If such funds are not appropriated or available for the Agreement purpose, such event will not constitute a default on DEO or the State. DEO agrees to notify Grantee in writing at the earliest possible time if funds are not appropriated or available. The cost for services rendered under any other Agreement or to be paid from any other source Is not eligible for reimbursement under this Agreement. Page 1 of42 Version date: 04/12/2016 Appendix C Appendix, Page 156 E. Requirements of paragraphs (a)-(i) of subsection 287 .058(1), Florida Statutes (F.S.): 1. Grantee shall submit bills for fees or other compensation for services or expenses in sufficient detail for a proper pre-audit and post-audit thereof. 2. If travel expenses are authorized, Grantee shall submit bills for such travel expenses and shall be reimbursed only in accordance with section 112.061, F.S. 3. Grantee shall allow public access to all documents, papers, letters or other materials made or received by Grantee in conjunction with this Agreement, unless the records are exempt from section 24(a) of Article I of the State Constitution and section 119.07(1), F.S. It is expressly understood that DEO may unilaterally cancel this Agreement for Grantee's refusal to comply with this provision. 4. Grantee shall perform all tasks contained in Attachment 1, Scope of Work. 5. Receipt by Grantee of DEO's written acceptance of the units of deliverables specified herein is a condition precedent to payment under this Agreement and is contingent upon Grantee's compliance with the specified performance measure (i .e., each deliverable must satisfy at least the minimum acceptable level of service specified in the Scope of Work and DEO shatt apply the applicable c~lteria stated in the Scope of Work to determine satisfactory completion of each deliverable). 6. Grantee shall comply with the criteria and final date by which such criteria must be met for completion of this Agreement. 1. Renewal: This Agreement may not be renewed . 8. If Grantee fails to perform in accordance with the Agreement, DEO shall apply the financial consequences specified herein. 9. Unless otherwise agreed in writing, intellectual property rights to preexisting property will remain with Grantee; whereas, intellectual property rights to all property created or otherwise developed by Grantee specifically for DEO will be owned by the State of Florida through DEO. Proceeds derived from the sale, licensing, marketing, or other authorization related to any such DEO-controlled Intellectual property right shall be handled in the manner specified by applicable state statute. F. Governing Laws of the State of Florida: 1 . Grantee agrees that this Agreement is executed and entered Into in the State of Florida, and shall be construed, performed, and enforced in all respects in accordance with the laws, rules, and regulations of the State of Florida. Each Party shall perform its obligations herein in accordance with the terms and conditions of the Agreement. Without limiting the provisions of Section II.D., Dispute Resolution, the exclusive venue of any legal or equitable acti on that arises out of o r relates to the Agreement shall be the appropriate state court in Leon County, Florida; in any such action, the Parties waive any right to jury trial. For avoidance of doubt, should any term of this Agreement conflict with any applicable law, Page 2 of 42 Version date: 04/12/2016 Appendix, Page 157 rule, or regulation, the law, rule, or regulation shall control over the provisions of this Agreement. 2. If appJJcable, Grantee agrees that it is in compliance with the rules for e -procurement as directed by Rule 60A-1 .030, f.A.C . and that it will maintain eligibility for this Agreement through the MyFioridaMarketplace.com system. 3. DEO shall ensure compliance with section 11.062, F.S., and section 216.347, F.S. Grantee shall not~ In connection with this or any other agreement with the State, directly or indirectly: (1) offer, confer, or agree to confer any pecuniary benefit on anyone as consideration for any State officer or employee's decision, opinion, recom111endation, vote, other exercise of discretion, or violation of a known legal duty; or (2) offer, give, or agree to give to anyone any gratuity for the benefit of, or at the direction or request of, any State officer or employee. For purposes of clause (2), Hgratuity" means any payment of more than nominal monetary value in the form of cash, travel, entertainment, gifts, meals, lodging, loan.s, subscriptions, advances, deposits of money, services, employment, or contracts of any kind. Upon request of DEO's Inspector General, or other authorized State official, Grantee shall provide any type of information the Inspector General deems relevant to Grantee's integrity or responsibility. Such information may include, but shall not be limited to, Grantee's business or financial records, documents, or files of any type or form that refer to or relate to this Agreement. Grantee shall retain such records In accordance with the record retention requirements of Part V of Attachment 2, Audit Requirements. 4. Grantee agrees to reimburse the State for the reasonable costs of investigation incurred by the Inspector General or other authorized State official for investigatkms of Grantee's compliance with the terms of this or any other agreement between Grantee and the State which results in the suspension or debarment of Grantee. Such costs shall include, but shall not be limited to: salaries of investigators, Including overtime; travel and lodging expenses; and expert witness and documentary fees. Grantee shall not be responsible for any costs of investigations that do not result in Grantee's suspension or debarment. Grantee understands and wiiJ comply with the requirements of subsection 20.055(5), F.S., including but not necessarily limited to, the duty of Grantee and any of Grantee's subcontractors to cooperate with the inspector general in any Investigation, audit, inspection, review, or hearing pursuant to section 20.055, F.S. S. Public Entity Crime: Pursuant to section 287.133(2)(a), F.S., a person or affiliate who has been placed on the convicted vendor list following a conviction for a public entity crime may not submit a bid, proposal, or reply on an agreement to provide any goods or services to a public entity; may not submit a bid, proposal, or reply on an agreement with a public entity for the construction or repair of a public building or public work; may not submit bids, proposals, or replies on leases of real property to a public entity; may not be awarded or perform work as a Grantee, supplier, subcontractor or consultant under an agreement with any public entity and may not transact business with any public entity in excess of the threshold amount provided In section 287.017, F.S., for Category Two for a period of thirty- six (36) months from the date of being placed on the convicted vendor list. 6. Advertising: Subject to chapter 119, F.S., Grantee shall not publicly disseminate any information concerning this Agreement without prior written approval from DEO, including, Page 3 of42 Version date: 04/12/2016 Appendix, Page 158 but not limited to mentioning this Agreement in a press release or other promotional material, identifying DEO or the State as a reference, or otherwise linking Grantee's name and either a description of the Agreement or the name of DEO or the State In any material published, either in print or electronically, to any entity that Is not a Party to this Agreement, except potential or actual authorized distributors, d~alers, resellers, or service representatives. 7. Sponsorship: As required by section 286.25, F.S ., If Grantee is a nongovernmental organization which sponsors a program financed wholly or In part by state funds, including any funds obtained through this Agreement, it shall, in publicizing, advertising, or describing the sponsorship of the program, state: "Sponsored by {Grantee's name) and the State of Florida, Department of Economic Opportunity." If the sponsorship reference is in written material, the words "State of Florida, Department of Economic Opportunity'' shall appear in the same size letters or type as the name of the organization. 8. Mandatory Disclosure Requirements: a. Conflict of Interest: This Agreement is subject to chapter 112, F.S. Grantee shall disclose the name of any officer, director, employee, or other agent who is also an employee of the State. Grantee shall also disclose the name of any State employee who owns, directly or indirectly, more than a five percent (5%) interest in Grantet! or its affiliates . b. Convicted Vendors: Grantee shall disclose to DEO if it. or any of its affiliates, as defined in section 287 .133(1)(a) of the Florida Statutes, is on the convicted vendor list. A person or affiliate placed on the convicted vendor list following a conviction for a public entity crime is prohibited from doing any of the activities listed In Section I.F.5 above for a period of thirty-six (36} months from the date of being placed on the convicted vendor list. c. Vendors on Scrutinized Companies Usts: If this Agreement is in the amount of $1 million or more, in executing this Agreement, Grantee certifies that it is not listed on either the Scrutinized Companies with Activities in Sudan list or the Scrutinized Companies with Activities in the Iran Petroleum Energy Sector Ust, created pursuant to section 215.473, F.S., or engaged in business operations In Cuba or Syria. 1} Pursuant to section 287.135(5), F.S., OEO may immediately terminate this Agreement for cause if Grantee is found to have submitted a false certification or if Grantee is placed on the Scrutinized Companies with Activities in Sudan list, the SCrutinized Companies with Activities in the Iran Petroleum Energy Sector List or has been engaged In business operations In Cuba or Syria, during the term of the Agreement. 2) If DEO determines that Grantee has submitted a false certification, DEO will provide written notice to Grantee. Unless Grantee demonstrates in writing, within ninety (90) days of receipt of the notice, that DEO's determination of false certification was made in error, DEO shall bring a civil action against Grantee. If DEO's determination is upheld, a civil penalty equal to the greater of $2 million or twice the amount of Page4 of42 Version date: 04/12/2016 Appendix, Page 159 this Agreement shall be imposed on Grantee, and Grantee will be ineligible to bid on any Agreement with an agency or local governmental entity for three (3) years after the date of DEO's determination of false certification by the Grantee. 3) In the event that federal law ceases to authorize the states to adopt and enforce the contracting prohibition identified herein, this provision shall be null and void. d. Discriminatory Vendors: Grantee shall disclose to DEO if it or any of its affiliates, as defined by section 287.134(1)(a.), F.S. appears on the discriminatory vendor list. An entity or affiliate placed on the discriminatory vendor list pursuant to section 287.134, F .s . may not: 1) submit a bid, proposal, or reply on a contract or agreement to provide any goods or services to a public entity; 2) submit a bid, proposal, or reply on a contract or agreement with a public entity for the construction or repair of a public building or public work; 3) submit bids, proposals, or replies on leases of real property to a public entity; 4) be awarded or perform work as a contractor, subcontractor, Grantee, supplier, sub- Grantee, or consurtant under a contract or agreement with any public entity; or 5) transact business with any public entity. 9. Abuse, Neglect, and Exploitation Incident Reporting: In compliance with sections 39.201 and 415.1034, F.S., an employee of Grantee who knows or has reasonable cause to suspect that a child, aged person, or disabled adult is or has been abused, neglected, or exploited shall immediately report such knowledge or suspicion to the Florida Abuse Hotline by calling 1-8Q0-96ABUSE, or via the web reporting option at http://www.dcf.state.fl.us/abuse/report/, or via fax at 1-800-914-0004. 10. Information Release: a. Grantee shall keep and maintain public records required by DEO to perform Grantee's responsibilities hereunder. Grantee shall, upon request from DEC's custodian of public records, provide DEC with a copy of the requested records or allow the records to be inspected or copied within a reasonable time per the cost structure provided in chapter 119, F.S., and In accordance with all other requirements of chapter 119, F.S., or as otherwise provided by law. Upon expiration or termination of this Agreement, Grantee shall transfer, at no cost, to DEO all public records in possession of Grantee or keep and maintain public records required by DEC to perform the service. If the Grantee keeps and maintains public records upon completion of the Agreement, the Grantee shall meet all applicable requirements for retaining public records. All records stored electronically must be provided to DEC, upon request from the DEO's custodian of records, in a format that is compatible with the information technology systems of DEO . Page Sof42 Version date: 04/12/2016 Appendix, Page 160 b. If DEO does not possess a record requested through a public records request, DEO shall notify the Grantee of the request as soon as practicable, and Grantee must provide the records to DEO or allow the records to be inspected or copied within a reasonable time. If Grantee does not comply with OEO's request for records, DEO shall enforce the provisions set forth in thi s Agreement. A Grantee who fails to provide public records to DEO within a reasonable time may be subject to penalties under section 119.10, F.S. c. DEO does not endorse any Grantee, commodity, or service. No public disclosure or news release pertaining to this Agreement shall be made without the prior written approval of DEO. Grantee is prohibited from using Agreement information, sales values/volumes and/or DEO customers in sales brochures or other promotions, including press releases, unless prior written approval Is obtained from DEO. d. Grantee acknowledges that DEO is subject to the provisions of chapter 119, F.S., relating to public records and that reports, invoices, and other documents Grantee submits to DEO under this Agreement may constitute public records under Florida Statutes. Grantee shall cooperate with DEO regarding DEO's efforts to comply with the .requirements of chapter 119, F.S. e . If Grantee submits records to DEO that are confidential and exempt from public disclosure as trade secrets or proprietary confidential business information, such records should be Identified as such by Grantee prior to submittal to DEO. Failure to identify the legal basis for each exemption from the requirements of chapter 119, F.S., prior to submittal of the record to DEO serves as Grantee's waiver of a claim of exemption. Grantee shall ensure that public records that are exempt or confidential and exempt from public records disclosure requirements are not disclosed except as authorized by law for the duration of the Agreement term and following completion of the Agreement if the Grantee does not transfer the records to DEO upon termination of the Agreement. f. Grantee shall allow public access to all records made or received by Grantee in conjunction with this Agreement, unless the records are exempt from section 24(a) of Article I of the State Constitution and section 119.07(1), F.S. For records made or received by Grantee in conjunction with this Agreement, Grantee shall respond to requests to Inspect or copy such records In accordance with chapter 119, F.S. g. In addition to Grantee's responsibility to directly respond to each request it receives for records made or received by Grantee in conjunction with this Agreement and to provide the applicable public records i n response to suc;:h request/ Grantee shall notify DEO of the receipt and content of such request by sending an e-mail to PRReguest@deo.myflorida.com within one (1} business day from receipt of such request . h. Grantee shall notify DEO verbally within twenty-four (24) chronological hours and In writing within seventy-two (72) chronological hours if any data in Grantee's possession related to this Agreement is subpoenaed or improperly used, copied, or removed (except in the ordinary course of business) by anyone except an authorized representative of DEO. Grantee shall cooperate with DEO in taking all steps as DEO Page 6 of42 Version date: 04/12/2016 Appendix, Page 161 deems advisable to prevent misuse, regain possession, and/or otherwise protect the State's rights and the data subject's privacy. 1. IF THE GRANTEE HAS QUESTIONS REGARDING THE APPLICATION OF CHAPTER 119, FLORIDA STATUTES, TO THE GRANTEE'S DUTY TO PROVIDE PUBLIC RECORDS RELATING TO THIS AGREEMENT, CONTACT THE CUSTODIAN OF PUBLIC RECORDS by telephone at 850-245-7140, via e-mail at PRReguest@deo.mvtlorida.com, or by mail at Department of Economic Opportunity, Public Records Coordinator, 107 East Madison Street, Caldwell Building, Tallahassee, Florida 32399-4128. 11. Funding Requirements of Section 215.971(1), F.S.: a . Grantee and its subcontractors may only expend funding under this Agreement for allowable costs resulting from obligations incurred during the Agreement period. To be eligible for reimbursement, costs must be In compliance with laws, rules and regulations applicable to expenditures of State funds, including, but not limited to, the Reference Guide for State Expenditures (http://www.myfloridado.com/aadir/reference guide/). h. Grantee shall refund to DEO any balance of unobligated funds which has been advanced or paid to Grantee. c. Grantee shall refund to DEO all funds paid in excess of the amount to which Grantee or its subcontractors are entitled under the terms and conditions of the Agreement. G. Grantee Payments: 1. Grantee will provide DEO's Agreement Manager invoices In accordance with the requirements of the State of Florida Reference Guide for State Expenditures (with detail sufficient for a proper pre-audit and post-audit thereof. Invoices must also comply with the following: a. Invoices must be legible and must clearly reflect the goods/services that were provided in accordance with the terms of the Agreement for the invoice period. Payment does not become due under the Agreement until the invoiced deliverable(s} and any required report(s) are approved and accepted by DEO. b. Invoices must contain the Grantee's name, address, federal employer identification number or other applicable Grantee identification number, the Agreement number, the invoice number, and the invoice period. DEO or the State may require any additional information from Grantee that DEO or the State deems necessary to process an invoice. c. Invoices must be submitted In accordance with the time requirements specified In the Scope of Work. Page 7 of42 Version date: 04/12/2016 Appendix, Page 162 z. At DEO's or the State•s option, Grantee may be required to invoice electronically pursuant to guidelines of the Department of Management Services. Current guidelines require that Grantee supply electronic invoices in lieu of paper~based invoices for those transactions processed through the system. Electronic invoices shall be submitted to DEO's Agreement Manager through the Ariba Supplier Network (ASN) In one of the following mechanisms- EDI810, cXMl, or web-based invoice entry within the ASN . 3. Payment shaiJ be made In accordance with section 215.422, F.S., Rule 691·24, F.A.C., and section 287.0585, F .5., which govern time limits for payment of invoices. Section 215.422, F.S ., provides that agencies have five (5) working days to inspect and approve goods and services unless the Scope of Work specify otherwise. DEO has twenty (20) days to deliver a request for payment (voucher) to the Department of Financial Services . The twenty (20) days are measured from the latter of the date the invoice is received or the goods or services are received, inspected and approved. The Scope of Work may specify conditions for retalnage. Invoices returned to a Grantee due to preparation errors will result in a delay of payment. Invoice payment requirements do not start until a properly completed invoice is provided to DEO. DEO is responsible for all payments under the Agreement. 4. Section 55.03(1), F.S ., identifies the process applicable to the determination of the rate of interest payable on judgments and decrees, and pursuant to section 215 .422(3)(b), F.S., this same process applies to the determination of the rate of interest applicable to late payments to vendors for goods and services purchased by the Sta~e and for contracts which do not specify a rate of interest. The applicable rate of Interest is published at: http:ljwww.mvfloridacfo.com/aadir/interest.htm H. Finallnvoice: Grantee shall submit the final invoice for payment to OEO no later than 45 days after the Agreement ends or is terminated. If Grantee fails to do so, DEO, in Its sole discretion, may refuse to honor any requests submitted after this time period and may consider Grantee to have forfeited any and all rights to payment under this Agreement. 1. Return or Recoupment of Funds: 1. Grantee shall return to OEO any overpayments due to unearned funds or funds disallowed pursuant to the terms of this Agreement that were disbursed to Grantee by DEO. In the event that Grantee or its Independent auditor discovers that overpayment has been made, Grantee shall repay said overpayment within forty (40) calendar days without prior notification from DEO . In the event that DEO first discovers an overpayment has been made, DEO will notify Grantee by letter. Should repayment not be made in a timely manner, DEO shall be entitled to charge interest at the lawful rate of interest on the outstanding balance beginning forty (40) calendar days after the date of notification or discovery. Refunds should be sent to DEO's Agreement Manager, and made payable to the ,.Department of Economic Opportunity.'' z. If authorized and approved, Grantee may be provided an advance as part of this Agreement. Page 8of42 Version date: 04/12/2016 Appendix, Page 163 3. Notwithstanding the damages limitations of Section II. F., if Grantee's non-compliance with any provision of the Agreement results in additional cost or monetary loss to DEC or the State of Florida, DEO can recoup that cost or loss from monies owed to Grantee under this Agreement or any other Agreement between Grantee and any State entity. In the event that the discovery of this cost or loss arises when no monies are available under this Agreement or any other Agreement between Grantee and any State entity, Grantee will repay such cost or loss In full to DEO within thirty (30) days of the date of notice of the amount owed, unless DEC agrees, in writing, to an alternative tlmeframe. J. Vendor Ombudsman: A Vendor Ombudsman has been established within the Department of Financial Services. The duties of this individual include acting as an advocate for vendors who may be experiencing problems In obtaining timely payment(s) from a state agency. The Vendor Ombudsman may be contacted at (850) 413-5516 or by calling the Chief Financial Officer's Hotline, (BOO) 342-2762. K. Audits and Records: 1. Representatives of DEO, the Chief Financial Officer of the State of Florida, the Auditor General of the State of Florida, the Florida Office of Program Policy Analysis and Government Accountability or representatives of the federal government and their duly authorized representatives shall have access to any of Grantee's books, documents, papers, and records, including electronic storage media, as they may relate to this Agreement for the purposes of conducting audits or examinations or making excerpts or transcriptions. 2. Grantee shall maintain books, records, and documents in accordance with generally accepted accounting procedures and practices which sufficiently and properly reflect all expenditures of funds provided by DEO under this Agreement. 3. Grantee shall comply with all applicable requirements of section 215.97, F.S., and Attachment 2, Audit Requirements; and, if an audit is required thereunder, Grantee shall disclose all related party transactions to the auditor. 4. Grantee shall retain all Grantee records, financial records, supporting documents, statistical records, and any other documents (including electronic storage media) pertinent to this Agreement in accordance with the record retention requirements of Part V of Attachment 2, Audit Requirements. Grantee shall cooperate with DEO to facilitate the duplication and transfer of such records or documents upon request of DEO. 5. Grantee shall include the aforementioned audit and record keeping requirements in all approved subrecipient subcontracts and assignments. 6. Within sixty {60} days of the close of Grantee's fascal year, on an annual basis, Grantee shall electronically submit a completed Audit Compliance Certification (a version of this certification is attached hereto as Attachment 3) to audlt@deo.mvflorida.com. Grantee's timely submittal of one completed Audit Compliance Certification for each applicable fiscal year will fulfill this requirement within all agreements (e.g., contracts, grants, Page9 of42 Version date: 04/12/2016 Appendix, Page 164 memorandums of understanding, memorandums of agreement, economic incentive award agreements, etc.) between DEO and Grantee. 7. Grantee shall (i) maintain all funds provided under this Agreement in a separate bank account, or (ii) Grantee's accounting system shall have sufficient internal controls to separately track the funds from this Agreement. There shall be no commingling of funds provided under this Agreement, with any other funds, projects, or programs. DEO may~ in its sole discretion, disallow costs that result from purchases made with commingled funds. L Employment Eligibility Verification: 1. Executive Order 11-116, signed May 27, 2011, by the Governor of Florida, requires DEO contracts in excess of nominal value to expressly require Grantee to: a. Utilize the U.S. Department of Homeland Security's E-Verify system to verify the employment eligibility of all new employees hired by Grantee during the Agreement term; and, b. Include in all subcontracts under this Agreement, the requirement that subcontractors performing work or providing services pursuant to this Agreement utilize the £-Verify system to verify the employment eligibility of all new employees hired by the subcontractor during the term of the subcontract. Z. E-Verify is an Internet-based system that allows an employer, using Information reported on an employee's Form 1-9, Employment Eligibility Verification, to determine the eligibility of all new employees hired to work in the United States after the effective date of the required Memorandum of Understanding (MOU); the responsibilities and elections of federal contractors, however, may vary, as stated in Article II.D.l.c. of the MOU. There is no charge to employers to use E-Verify. The Department of Homeland Security's E-Verify system can be found at: http:ljwww.dhs.gov/files/programs/gc 1185221678150.shtm 3. If Grantee does not have an E-Verify MOU in effect, Grantee must enroll in the E-Verify system prior to hiring any new employee after the effective date of this Agreement. M. Duty of Continuing Disclosure of legal Proceedings: 1. Prior to execution of this Agreement, Grantee must disclose all prior or on-going civil or criminal litigation, investigations, arbitration or administrative proceedings (Proceedings) involving Grantee (and each subcontractor) in a written statement to DEO's Agreement Manager. Thereafter, Grantee has a continuing duty to promptly disclose all Proceedings upon occurrence. 2. This duty of disclosure applies to Grantee's or subcontractor's officers and directors when any Proceeding relates to the officer or director's business or financial activities. Details of settlements that are prevented from disclosure by the terms of the settlement may be annotated as such. Page 10of42 Version date: 04/12/2016 Appendix, Page 165 3. Grantee shall promptly notify DEO's Agreement Manager of any Proceeding relating to or affecting the Grantee's or subcontractor's business. If the existence of such Proceeding causes the State concern that the Grantee's ability or willingness to perform the Agreement is jeopardized, Grantee shall be required to provide DEO's Agreement Manager all reasonable assurances requested by OEO to demonstrate that: a. Grantee will be able to perform the Agreement in accordance with its terms and conditions; and b. Grantee and/or its employees, agents, or subcontractor(s) have not and will not engage in conduct in performing services for OEO which is similar in nature to the conduct alleged in such Proceeding. N. Assignments and Subcontracts: 1 . Grantee agrees to neither assign the responsibility for this Agreement to another party nor subcontract for any of the work contemplated under this Agreement, or amend any such assignment or subcontract, without prior written approval of DEO. Any sublicense, assignment, or transfer occurring without the prior approval of DEO, shall be null and void. 2. Grantee agrees to be responsible for all work performed and all expenses incurred in fulfilling the obligations of this Agreement . If OEO .permits Grantee to subcontract all or part of the work contemplated under this Agreement, including entering into subcontracts with vendors for services, it is understood by Grantee that all such subcontract arrangements shall be evidenced by a written document containing all provisions necessary to ensure subcontractor's compliance with applicable state and federal law. Grantee further agrees that OEO shall not be liable to the subcontractor for any expenses or liabilities incurred under the subcontract and Grantee shall be solely liable to the subcontractor for all expenses and liabilities incurred under the subcontract. Grantee, at Its expense, will defend DEO against such claims. 3. Grantee agrees that all Grantee employees, subcontractors, or agents performing work under the Agreement shall be properly trained technicians who meet or exceed any spedfied training qualifications. Upon request, Grantee shall furnish a copy of technical certification or other proof of qualification. All Grantee employees, subcontractors, or agents performing work under the Agreement must comply with all DEO security and administrative requirements identified herein. DEO may conduct, and Grantee shall cooperate in, a security background check or otherwise assess any employee, subcontractor, or agent furnished by Grantee. OED may refuse access to, or require replacement of, any of Grantee's employees, subcontractors, or agents for cause, including, but not limited to, technical or training qualifications, quality of work, change in security status, or non-compliance with DEC's security or administrative requirements identified herein. Such refusal shall not relieve Grantee of its obligation to perform all work in compliance with the Agreement . DEO may reject and bar from any facility for cause any of Grantee's employees, subcontractors, or agents. Page 11of42 Version date: 04/12/2016 Appendix, Page 166 4. Grantee agrees that the State of Florida shall at all times be entitled to assign or transfer its rights, duties, or obligations under this Agreement to another governmental agency in the State of Florida, upon giving prior written notice to Grantee. In the event the State of Florida approves transfer of Grantee's obligations, Grantee remains responsible for all work performed and all expenses incurred In connection with the Agreement. In addition, this Agreement shall bind the successors, assigns, and legal representatives of Grantee and of any legal entity that succeeds to the obligations of the State of Florida. 5. Grantee agrees to make payments to the subcontractor within seven {7) working days after receipt of full or partial payments from DEO In accordance with section 287.0585, F.S., unless otherwise stated in the Agreement between Grantee and subcontractor. Grantee's failure to pay its subcontractors within seven (7) working days will result in a penalty charged against Grantee and paid to the subcontractor In the amount of one-half of one {1) percent of the amount due per day from the expiration of the period allowed herein for payment. Such penalty shall be in addition to actual payments owed and shall not exceed fifteen (15} percent ofthe outstanding balance due. 6. Grantee shall provide a monthly Minority and Service-Disabled Veteran Business Enterprise Report for each invoice period summarizing the participation of certified and non-certified minority and service-disabled veteran subcontractors/material suppliers for that period, and project to date. The report shall include the names, addresses and dollar amount of each certified and non-certified Minority Business Enterprise and Service-Disabled Veteran Enterprise participant and a copy must be forwarded to DEC's Agreement Manager. The Office of Supplier Diversity at (850) 487-o915 will assist in furnishing na111es of qualified minorities. DEC's Minority Coordinator at (850) 245-7260 will assist with questions and answers. 7. DEO shall retain the right to reject any of Grantee's or subcontractors employees whose qualifications or performance, In DEC's judgment, are Insufficient. 0. MyFioridaMarketPiace Transaction Fee: disbursements of State financial assistance to a recipient are exempt from this Transaction Fee pursuant to Rule 60A-1.032{l){i), F.A.C. P. Nonexpendable Property: 1. For the requirements of this Section of the Agreement, "nonexpendable property" Is the same as "property" as defined in section 273.02, F.S., {equipment, fiXtures, and other tangible personal property of a non-consumable and nonexpendable nature, with a value or cost of $1,000 or more, and a normal expected life of one year or more; hardback-covered bound books that are circulated to students or the general public, with a value or cost of $25 or more; and hardback-covered bound books, with a value or cost of $250 or more). z. All nonexpendable property, purchased under this Agreement, shall be listed on the property records of Grantee. Grantee shall inventory annually and maintain accounting records for all nonexpendable property purchased and submit an inventory report to DEO with the final expenditure report. The records shall include, at a minimum, the following information: property tag identification number, description of the item{s), physical location, name, make or manufacturer, year, and/or model, manufacturer's serial number(s), date of acquisition, and the current condition of the item. Page 12of42 Version date: 04/12/2016 Appendix, Page 167 3. At no time shall Grantee dispose of nonexpendable property purchased under this Agreement for these services without the written permission of and in accordance with Instructions from DEO. 4. Immediately upon discovery, Grantee shall notify DEO, in writing, of any property loss with the date and reason(s) for the loss. 5 . ·Grantee shall be responsible .for the correct use of all nonexpendable property furnished under this Agreement. 6. A formal Agreement amendment is required prior to the purchase of any item of nonexpendable property not specifically listed in the approved Agreement budget. 1. Title (ownership) to all nonexpendable property acquired with funds from this Agreement shall be vested in DEO and said property shall be transferred to OEO upon completion or termination of the Agreement unless otherwise authorized in writing by DEO. Q. Requirements Applicable to the Purchase of or Improvements to Real Property: Pu.rsuant to section 287 .05805, F.S., if funding provided under this Agreement is used for the purchase of or improvements to real property, such funds are contingent upon Grantee granting to OEO a security Interest in the property in the amount of the funding provided by this Agreement for the purchase of or improvements to the real property for five (S) years from the date of purchase or the completion of the improvements or as further required by law. R. Information Resource Acquisition: Grantee shall obtain prior written approval from the appropriate DEO approving authority before purchasing any Information Technology Resource (ITR) or conducting any activity that will impact OEO's electronic information technology equipment or software, as both terms are defined in DEO Policy Number S.Ol, In any way. ITR includes computer hardware, software, networks, devices, connections, applications, and data. S. Insurance: During the Agreement, including the Initial Agreement term, renewal(s), and extensions, Grantee, at its sole expense, shall maintain insurance coverage of such types and with such terms and limits as may be reasonably associated with the Agreement. Providing and maintaining adequate insurance coverage is a material obligation of Grantee, and failure to maintain such coverage may void the Agreement. The limits of coverage under each policy maintained by Grantee shall not be interpreted as limiting Grantee's liability and obligations under the Agreement. All insurance policies shall be through insurers licensed and authorized to write policies in Florida. Upon execution of this Agreement, Grantee shall provide DEO wrlttef! verification of the existence and amount for each type of applicable insurance coverage. Within thirty (30) days of the effective date of the Agreement, Grantee shall furnish DEO proof of applicable insurance Page 13 of42 Version date: 04/12/2016 Appendix, Page 168 ~overage by standard ACORD form certificates of Insurance. In the event that any applicable coverage is cancelled by the insurer for any reason, Grantee shall immediately notify DEO of such cancellation and shall obtain adequate replacement coverage conforming to the requirements herein and provide proof of such replacement coverage within fifteen (15) business days after the cancellation of coveri:)ge. The insurance certificate must name DEO as an additional Insured and identify DEC's Agreement Number. Copies of new insurance certificates must be provided to DEO's Agreement Manager with each insurance renewal . DEO shall be exempt from, and in no way liable for, any sums of money representing a deductible in any insurance policy. The payment of such deductible shall be the sole responsibility of Grantee providing such insurance. The following types of insurance are required. 1. Grantee's Commercial General Liability Insurance: Unless Grantee is a state agency or subdivision as defined by section 768.28(2), F.S., Grantee shall provide adequate commercial general liability insurance coverage and hold such JiabUity insurance at all times during this Agreement. A self-insurance program established and operating under the laws of the State of Florida may provide such coverage. 2. Workers' Compensation and Employer's Uability Insurance: Grantee, at all times during the Agreement, at its sole expense, shall provide commercial insurance of such a type and w ith such terms and limits as may be reasonably associated with the Agreement, which, as a minimum, shall be: workers' compensation and employer's liability insurance in accordance with chapter 440, F.S., with minimum employer's liability limits of $100,000 per accident, $100,000 per person, and $500,000 policy aggregate. Such policy shall cover all employees engaged in any Agreement work. 3. Other Insurance: During the Agreement term, Grantee shall maintain any other insurance as required in Attachment 1, Scope of Work. T. Confidentiality and Safeguarding Information: 1 . Each Party may have access to confidential information made available by the other. The provisions of the Florida Public Records Act, Chapter 119, F.S., and other applicable state and federal laws will govern disclosure of any confidential information received by the State of Florida. 2. Grantee must Implement procedures to ensure the appropriate protection and confidentiality of all data, files, and records Involved with this Agreement. 3. Except as necessary to fulfill the terms of this Agreement and w ith the pe rmission of DEO, Grantee shall not divulge to third parties any confidential information obtained by'Grantee or its agents, distributors, resellers, subcontractors, officers, or employees in the course of performing Agreement work, including, but not limited to, security procedures, business Page 14 of 42. Version date: 04/12/2016 Appendix, Page 169 operations information, or commercial proprietary information in the possession of the State or DEO. 4. Grantee agrees not to use or disclose any information concerning a recipient of services uoder this Agreement for any purpose not in conformity with state and federal law or regulations except 4l!pon written consent of the recipient, or his responsible parent or guardian when authorized by law, if applicable. 5. If Grantee has access to either DEO's network or any OEO applications, or both, in order to fulfill Grantee's obligations under this Agreement, Grantee agrees to abide by all applicable DEO Information Technology Security procedures and policies. Grantee (including its employees, sub-contractors, agents, or any other individuals to whom Grantee exposes confidential information obtained under this Agreement), shall not store, or allow to be stored, any confidential information on any portable storage media (e.g., laptops, thumb drives, hard drives, etc.} or peripheral device with the capacity to hold information. Failure to strictly comply with this provision shall constitute a breach of Agreement. 6. Grante~ shall notify DEO in writing of any disclosure of unsecured confidential information of DEO by Grantee, its employees, agents, or representatives which is not in complian~e with the terms of this Agreement (of which it becomes aware). Grantee also shall report to DEO any SecuritY Incidents of which it becomes aware, including those incidents reported to Grantee by its sub-contractors or agents. For purposes of this Agreement, "Security Incident" means the attempted or successful unauthorized access, use, disclosure, modification, or destruction of DEO information in Grantee's possession or electronic interference with DEO operations; however, random attempts at access shall not be considered a security Incident. Grantee shall make a report to DEO not more than seven (7) business days after Grantee learns of such use or disclosure. Grantee's report shall identify, to the extent known: (i) the nature of the unauthorized use or disclosure, (ii) the confidential information used or disclosed, (Iii) who made the unauthorized use or received the unauthorized disclosure, (iv) what Grantee has done or shall do to mitigate any delet~rious effect of the unauthorized use or disclosure, and (v) what corrective action Grantee has taken or shall take to prevent future similar unauthorized use or disclosure. Grantee shall provide such other information, Including a written report, as reasonably requested by DEO's Information Security Manager. 7. In the event of a breach of security concerning confidential personal information involved with this Agreement, Grantee shall comply with section 501.171, F.S., as applicable. When notification to affected persons is required under this section of the statute, Grantee shall provide that notification, but only after receipt of DEO's approval of the contents of the notice. Defined statutorily, and for purposes of this Agreement, "breach of security'' or "breach" means the unauthorized access of data in electronic form containing personal data. Good faith acquisition of personal information by an employee or agent of the Grantee is not a breach, provided the Information is not used for a purpose unrelated to the Grantee's obligations under this Agreement or is not subject to further unauthorized use. u. Warr anty of Ability to Perform: Page 15 of42 Version date: 04/12/2016 Appendix, Page 170 Grantee warrants that, to the best of its knowledge, there is no pending or threatened action, proceeding, or investigation~ or any other legal or financial condition, that would in any way prohibit, restrain, or diminish Grantee's ability to satisfy its Agreement obligations. Grantee warrants that neither it nor any affiliate is currently on the convicted vendor list maintained pursuant to section 287.133, F.S., or on any similar list maintained by any other state or the federal government. Grantee shall immediately notify DEO in writing if its ability to perform is compromised in any manner during the term of the Agreement. V. Patents, Copyrights, and Royalties: 1. Pursuant to section 286.021, F.S., If any discovery or invention arises or is developed in the course or as a result of work or services performed with funds from this Agreement, Grantee shall refer the discovery or invention to DEO who will refer it to the Department of State to determine whether patent protection will be sought in the name of the State of Florida. Any and all patent rights accruing under or in connection with the performance of the Agreement are hereby reserved to the State of Florida. The rights to any invention resulting from this Agreement that is for the performance of experimental, developmental, or research work are governed by 37 CFR Part 401 and any of its implementing regulations as applicable. 2 . Where activities supported by this Ag~ement produce original writings, sound recordings, pictorial reproductions, drawings or other graphic representations and works of any similar nature, DEO has the right to use, duplicate, and disclose such materials in whole or in part, in any manner, for any purpose whatsoever and to allow others acting on behalf of OEO to do so . In the event that any books, manuals, films, websites, web elements, electronic information, or other copyrightable materials are produced Grantee shall notify DEO. Any and all copyrights accruing under or in connection with the performance funded by this Agreement are hereby reserved to the State of Florida. 3 . In accordance with the provisions of section 1004.23, F.S., a State University Is authorized In its own name to perform all things necessary to secure letters of patent, copyrights, and trademarks on any works it produces. Any action taken by the university in securing or exploiting such trademarks, copyrights, or patents shall, within thirty (30) days, be reported in writing by the president of the university to the Department of State in accordance with section 1004.23(6), F.S. W. Independent Contractor Status: In Grantee's performance of Its duties and responsibilities under this Agreement, it is mutually understood and agreed that Grantee Is at all times acting and performing as an independent Contractor. DEO shall neither have nor exercise any control or direction over the methods by which Grantee shall perform its work and functions other than as provided herein. Nothing in this Agreement Is intended to or shall be deemed to constitute a partnership or joint venture between the Parties. 1. Except where Grantee is a state agency, Grantee, its officers, agents, employees, subcontractors, or assignees, in performance of this Agreement shall act in the capacity of an Independent Contractor and not as an officer, employee, or agent of the State of Florida . Page 16of42 Version date: 04/12/2016 Appendix, Page 171 Nor shall Grantee represent to others that, as Grantee, it has the authority to bind DEO unless specifically authorized to do so. 2. Except where Grantee is a state agency, neither Grantee, nor .its officers, agents, employees, subcontractors, or assignees are entitled to state retirement or state leave benefits, or to any other compensation of state employment as a result of performing the duties and obligations of this Agreement. 3. Grantee agrees to take such actions as may be necessary to ensure that each subcontractor will be deemed to be an independent contractor and will not be considered or permitted to be an agef'!t, servant, joint venturer, or partner of the State of Florida. 4. Unless justified by Grantee, and agreed to by DEO in Attachment 1, Scope of Work, DEO will not furnish services of support (e.g., office space, office supplies, telephone service, secretarial, or clerical support) to Grantee or its subcontractor or assignee. s. DEO shall not be responsible for withholding taxes with respect to Grantee's compensation hereunder. Grantee shall have no claim against DEO for vacation pay, sick leave, retirement benefits, social security, workers' compensation, health or disability benefits, reemployment assistance benefits, or employee benefits of any kind . Grantee shall ensure that its employees, subcontractors, and other agents, receive benefits and necessary insurance (health, workers' compensation, reemployment assistance benefits) from an employer other than the State of Florida . 6. Grantee, at all times during the Agreement, must comply with the reporting and Reemployment Assistance contribution payment requirements of chapter 443, F.S . X. Electronic Funds Transfer: Grantee agrees to enroll in Electronic Funds Transfer (EFT}, offered by the State's Chief Financial Officer within thirty {30) days of the date the last Party has signed this Agreement. Copies of the Authorization form and a sample blank enrollment letter can be found on the vendor instruction page at: http://www.fldfs.com/aadir/direct deposit web/Vendors.htm Questions should be directed to the EFT Section at (850) 413-5517. Once enrolledJ Invoice payments will be made by EFT. II. GRANTEE AND DEO AGREE : A. Renegotiation or Modification: The Parties agree to renegotiate this Agreement if federal and/or state revisions of any applicable laws or regulations make changes to this Agreement necessary . In addition to changes necessitated by law, DEO may at any time, with written notice to Grantee, make changes within the general scope of this Agreement. Such changes may Include modification of the requirements, changes to processing procedures, or other changes as decided by DEO. Any Page 17 of42 Version date: 04/12/2016 Appendix, Page 172 investigation necessary to determine the impact of the change shall be the responsibility of Grantee. Modifications of provisions of this Agreement shall only be valid when they have been reduced to writing and duly signed and dated by all Parties. B. Time is of the Essence : Time Is of the essence regarding the performance obligations set forth in this Agreement. Any additional deadlines for performance for Grantee's obligation to timely provide deliverables under this Agreement including but not limited to timely submittal of reports, are contained in Attachment 1, Scope of Work. C. Termination: 1. Termination Due to the Lack of Funds: In the event funds to finance this Agreement become unavailable or if federal or state funds upon which this Agreement is dependent are withdrawn or redirected, DEO may terminate this Agreement upon no less than twenty-four (24) hour notice in writing to Grantee. DEO shall be the final authority as to the availability of funds and will not reallocate funds earmarked for this Agreement to another program thus causing "lack of funds." In the event of termination of this Agreement under this provision, Grantee will be compensated for any work satisfactorily completed prior to notification of termination. 2. Termination for Cause: DEO may terminate the Agreement if Grantee fails to: (1) deliver the services within the time specified in the Agreement or any extension; (2) maintain adequate progress, thus endangering performance of the Agreement; (3) honor any term of the Agreement; or (4} abide by any statutory, regulatory, or licensing requirement. Rule GOA-1.006(3), F.A.C., governs the procedure and consequences of default. Grantee shall continue to perform any work not terminated. The rights and remedies of DEO in this clause are in addition to any other rights and remed ies provided by law or under the Agreement. Grantee shall not be entitled to recover any cancellation charges or lost profits. 3. Termination for Convenience: DEO, by written notice to Grantee, may terminate this Agreement in whole or in part when DEO determines In its sole discretion that it Is in the State's interest to do so . Grantee shall not furnish any product after it receives the notice of termination, except as necessary to complete the continued portion of the Agreement, if any. Grantee shall not be entitled to recover any cancellation charges or lost profits. D. Dispute Resolution: Unless otherwise stated in Attachment 1, Scope of Work, disputes concerning the performance of the Agreement shall be decided by DEO, who shall reduce the decision to writing and serve a copy on Grantee. The decision shall be final and conclusive unless within twenty-one (21) days from the date of receipt, Grantee files with DEO a petition for administrative hearing. DEO's Page 18 of42 Version date: 04/12/2016 Appendix, Page 173 final order on the petition shall be final, subject to any right of Grantee to judicial review pursuant to chapter 120.68, F.S. Exhaustion of administrative remedies is an absolute condition precedent to Grantee's ability to pursue any other form of dispute resolution; provided however, that the Parties may employ the alternative dispute resolution procedures outlined in chapter 120, F.S . E. lndemniflc:atlon {NOTE: If Grantee Is a state agency or subdivision, as defined in section 768.28(2), F.S., pursuant to section 768.28(19), F.S., neither Party indemnifies nor insures or assumes any liability for the other Party for the other Party's negligence): 1. Grantee shall be fully liable for the actions of its agents, employees, partners, or subcontractors and shall fully indemnify, defend, and hold harmless the State and DEO, and their officers, agents, and employees, from suits, actions, damages, and costs of every name and description, including attorneys' fees, arising from or relating to personal injury and damage to real or personal tangible property alleged to be caused in whole or in part by Grantee, its agents, employees, partners, or subcontractors, provided, however, that Grantee shall not indemnify for that portion of any loss or damages proximately caused by the negligent act or omission of the State or DEO . z. Further, Grantee shall fully indemnify, defend, and hold harmless the State and DEO from any suits, actions, damages, and costs of every name and description, including attorneys' fees, arising from or relating to violation or infringement of a trademark, copyright, patent, trade secret or intellectual property right, provided, however, that the foregoing obligation shall not apply to DEO's misuse or modification of Grantee's products or DEO's operation or use of Grantee's products In a manner not contemplated by the Agreement or the purchase order. tf any product is the subject of an infringement suit, or In Grantee's opinion is likely to become the subject of such a suit, Grantee may at its sole expense procure for DEO the right to continue using the product or to modify it to become non·infringing. If Grantee is not reasonably able to modify or otherwise secure DEO the right to continue using the product, Grantee shall remove the product and refund DEO the amounts paid in excess of a reasonable rental for past use. OEO shall not be liable for any royalties. 3. Grantee's obligations under the preceding two paragraphs with respect to any legal action are contingent upon the State or DEO giving Grantee (1) written notice of any action or threatened action, (2) the opportunity to take over and settle or defend any such action at Grantee's sole expense, and (3} assistance in defending the action at Grantee's sole expense. Grantee shall not be liable for any cost, expense, or compromise incurred or made by the State or OEO in any legal action without Grantee's prior written consent, which shall not be unreasonably withheld. F. limitation of Uability: For all claims against Grantee under this Agreement, and regardless of the basis on which the claim Is made, Grantee's liability under this Agreement for direct damages shall be limited to the greater of $100,000 or the dollar amount of this Agreement . This limitation shall not apply to claims arising under the Indemnity paragraphs contained In this Agreement. Page 19 of42 Version date: 04/12/2016 Appendix, Page 174 Unless otherwise specifically enumerated in the Agreement or in the purchase order, no Party shall be liable to another for special, Indirect, punitive, or consequential damages, Including lost data or records (unless the Agreement or purchase order requires Grantee to back~up data or records), even if the Party has been advised that such damages are possible . No Party shall be liable for lost profits, lost revenue, or lost institutional operating savings. The State and DEO may, in addition to other remedies available to them at law or equity and upon notice to Grantee, retain such monies from amounts due Grantee as may be necessary to satisfy any claim for damages, penalties, costs and the like asserted by or against them. The State may set off any liability or other obligation of Grantee or its affiliates to the State against any payments due Grantee under any Asreement with the State. G. Force Majeure and Notice of Delay from Force Majeure: Neither Party shall be liable to the other for any delay or failure to perform under this Agree!llent if such delay or failure Is neither the fault nor the negligence ot the Party or Its employees or agents and the delay Is due directly to acts of God, wars, acts of public enemies, strikes, fires, floods, or other similar cause wholly beyond the Party's control, or for any of the foregoing that affects subcontractors or suppliers if no alternate source of supply is available. However, in the event of delay from the foregoing causes, the Party shall take all reasonable measures to mitigate any an~ all resulting delay or disruption ln the Party's performance obligation under this Agreement. If the delay Is excusable under this paragraph, the delay will not result In any additional charge or cost under the Agreement to either Party. In the case of any delay Grantee believes Is excusable under this paragraph, Grantee sh~ll notify DEO in writing of the delay or potential delay and describe the cause of the delay either: (1) within ten {10) calendar days after the cause that creates or will create the delay first arose, if Grantee could reasonably foresee that a delay could occur as a result; or (2) within five (5) calendar days after the date Grantee first had reason to believe that a delay could result, if the delay Is not reasonably foreseeable. THE FOREGOING SHALL CONSTITUTE GRANTEE'S SOLE REMEDY OR EXCUSE WITH RESPECT TO DELAY. Providing notice In strict accordance with this paragraph Is a condition precedent to such remedy. DEO, in its sole discretion, will determine if the delay is excus!lble under this paragraph and will notify Grantee of its decision in writing. No claim for damages, other than for an extension of time, shall be asserted against DEO. Grantee shall not be entitled to an increase in the Agreement price or payment of any kind from DEO for direct, indirect, consequential, impact, or other costs, expenses or damages, including but not limited to costs of acceleration or inefficiency arising because of delay, disruption, interference, or hindrance from any cause whatsoever. If performance is suspended or delayed, in whole or In part, due to any of the causes described in this paragraph, after the causes have ceased to exist, Grantee shall perform at no increased cost, unless DEO determines, in its sole discretion, that the delay will significantly impair the value of the Agreement to DEO or the State, In which case, DEO may do any or all of the following: (1) accept allocated performance or deliveries from Grantee, provided that Grantee grants preferential treatment to DEO with respect to products or services subjected to allocation; (2) purchase from other sources (without recourse to and by Grantee for the related costs and expenses) to replace all or part of the products or services that are the subject of the delay, which purchases may be deducted from the Agreement quantity; or (3) terminate the Agreement in whole or in part. H. Severability: Page 20of42 Version date: 04/12/2016 Appendix, Page 175 If any provision, in whole or in part, of this Agreement is held to be void or unenforceable by a court of competent jurisdiction, that provision shall be enforced only to the extent that it is not in violation of law or is not otherwise unenforceable, and all other provisions remain In full force and effect. 1. Aut hority of Grantee's Signatory: Upon execution, Grantee shall return the executed copies of this Agreement in accordance with the instructions provided by DEO along with documentation ensuring that the below signatory has authority to bind Grantee to this Agreement ~s of the date of execution. Documentation may be in the form of a legal opinion from the Grantee's attorney, or other reliable documentation demonstrating such authority, and is hereby incorporated by reference. DEO may, at its discretion, request additional documentation related to the below signatory's authority to bind Grantee to this Agreement. J . Execution in Counterparts: This Agreement may be executed In counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. K. Contact Information for Grantee and DEO Contacts: Grantee's Payee: Economic Incubators, Inc. 3510 Kraft Road, Suite 200 Naples, Florida 34105 863-660-2987 MGoodman.CCatalvst@gmail.com DEO's Agreement Manager: Katie Smith 107 East Madison Street, Caldwell Building, MSC 80 Tallahassee, Florida 32399 850-717-8976 850-410-4no Katie.Smith@deo.mvflorida .com Grantee's Agreement Manager: Dr. Marshall Goodman 3510 Kraft Road, Suite 200 Naples, Florida 34105 863-66Q-2987 MGoodman.CCatalyst@gmail.com In the event that any of the information provided in Section U.K. above changes, including the designation of a new Agreement Manager, after the execution of this Agreement, the Party making such change will notify all other Parties in writing of such change. Such changes shall not require a formal amendment to the Agreement. L Notices: Page 21of42 Version date: 04/12/2016 Appendix, Page 176 The contact information provided in accordance with Section U.K. above shall be used by the Parties for aU communications under this Agreement. Where the term "written noticeN is used to specify a notice requ irement herein, said notice shall be deemed to have been given (i) when personally delivered; (li) when transmitted via facsimile with confirmation of receipt or email with confirmation of receipt if the sender on the same day sends a confirming copy of such notice by a recognized overnight delivery service (charges prepaid); (iii) the day following the day (except if not a business day then the next business day) on which the same has been delivered prepaid to a recognized overnight delivery service; or (iv) the third business day following the day on which the same is sent by certified or registered mail, postage prepaid, with return receipt. M. Attachments and Exhibits: Attached to and made part of this Agreement are the following Attachments and/or Exhibits, each of which is incorporated into, and is an integral part of, this Agreement: • Attathment 1: Scope of Work • Attachment 2 and Exhibit 1 to Attachment 2: Audit Requirements • Attachment 3: Audit Compliance Certification -Remainder of Page lntentlanpl/y Left Blank- Page 22 of42 Version date: 04/12/2016 Appendix, Page 177 N. Execution: I have read the above Agreement and the attachments and exhibits thereto and understand each section and paragraph. IN WITNESS THEREOF, and in consideration of the mutual covenants set forth above and in the attachments hereto, the Parties have caused to be executed this Agreement by their undersigned officials duty authorized. By Title Date NT OF ECONOMIC OPPORTUNITY Dean lzzo Chief of Staff By Title Date Approved as to fonn and leplsuffidency, subject only to full and proper execution by the Parties. OFFICE OF GENERAL COUNSEL DEPARTMENT OF ECONOMIC OPPORTUNITY ECONOMIC INCUBATORS, INC. Signature Dr. Marshall Goodman President and CEO I I • Remainder of Page lntentlonaUy Left Bltlnk - Page 23 of42 Version date: 04/12/2016 Appendix, Page 178 Attachment 1 SCOPE OF WORK 1. Project Description: For State Fiscal Year 2016-2017, in Specific Appropriation line item 2234, the Florida Legislature appropriated two million dollars ($2,000,000) for the SouthWest Florida Collier County Immokalee/Naples Business Accelerator Program, of which two hundred and fifty thousand ($250,000} is dedicated to the Florida Gulf Coast University Institute for Entrepreneurship and Economic Incubators, Inc. The entity designated to receive the funds and complete the activities is Economic Incubators, Inc. (Grantee). This program consists of two parts, The Naples Accelerator-Innovation Center and the Immokalee Culinary Arts & Services Incubator Facility. The Naples Business Accelerator Program was funded through a previous state appropriation. The Innovation Center represents an international platform to foster the convergence of technology, entrepreneurial energy and private capital with the region's existing industry. The project was also appropriated with the intention of providing today's entrepreneur and Innovator with a full suite of 21• Century tools (information technology support; computer modeling software) and the hardware and equipment necessary to build prototype models and designs critical for venture funding acquisition. The purpose of this grant is to establish the Immokalee Culinary Arts & Services Incubator FacilitY. The funding will be used for the development, build-out, and equipment necessary for an applied food sciences laboratory, commercial kitchen, and packaging facilities that will support the creation and commercialization of new food products and delivery mechanisms. The addition of enhanced capacity for food laboratory quality and safety analytical equipment will complement the current progress of the business accelerator network. The collaboration among the local government, educational Institutions and private business in agricultural and technology related business diversification will render long-term economic advances in the Collier County and Southwest Florida economies by advancing innovation in entrepreneurship of food products and related agribusiness industries. 2. Grantee Responsibilities: A. Perform the tasks as defined In the Agreement and this Scope of Work; B. Provide documentation for all work associated with the Project as outlined in this Scope of Work; c. Provide OEO grant manager an estimated timeline and payment plan. o. Provide the OEO grant manager any other information, which OEO may require from Grantee, that OEO deems necessary to verify that the services have been rendered under the Agreement. E. During the term of this Agreement and to the extent required by law, the Grantee shall perform in accordance with the provisions of Chapter 255, F.S. F. The Grantee shall complete the following activities: 1. Naples Soft -Landin& Business Accelerator Expansion The Naples Soft-Landing Business Accelerator (Accelerator) provides entrepreneurs with office space and equipment, as well as assistance with business plan development, formulation of marketing plans and strategies, venture funding, and distribution logistics. The Accelerator is currently looking to expand their office set up in order to provide additional services and Page 24 of42 Version date : 04/12/2016 Appendix, Page 179 features to the local and regional entrepreneurial community. In order to complete this activity, the Grantee shall perform the following tasks: a. Space Setup: The Accelerator's expansion efforts will include a remodel of the Accelerator's 10,000 square foot space and additional offices to house new business clients and accelerator staff. The set up activities will include: i. Negotiation of new lease terms. Grantee shall provide a copy of the executed lease to DEO. ii. Approval of final remodeling plans. Grantee shall provide a copy of the plans to DEO. iii. Acquisition of all necessary state and local permits. Grantee shall provide a copy of the state and local permits to DEO. iv. The purchase of technical equipment such as audio-visual media, printers, copiers and specialty equipment. v. The provision of services such as necessary legal, accounting, marketing, education and information technology services. b. Develop a Visa E8-5 Regional Center: The U.S government created the EB-5 progn~m in 1990 to stimulate the U.S. economy through job creation and capital investment by foreign investors. In 1992, the U.S. government created the Immigrant Investor Program, also known as the Regional Center Program. This sets aside EB-5 visas for participants who Invest in commercial enterprises associated with regional center approved by the U.S. Citizenship and Immigrant Services based on proposals for promoting economic growth. The Grantee shall hire one or more Consultants to: I. Review the requirements of the EB-5 program; ii. Collect the necessary information and prepare the application for the Accelerator to become an EB-5 regional center; iii. Develop partnerships both in Florida and internationally to promote the EB-5 investment opportunities in Southwest Florida; and iv. Market the EB-5 program internationally to investors and firms seeking entree into the U.S. market. c. Develop a French Tech Hub: A French Tech Hub is a designation provided by the French government to locations in the U.S. that help French technology companies efficiently enter and accelerate growth in the U.S . Currently there are 3 French Tech Hubs in the U.S. in New York, Boston, and San Francisco. The Grantee shall hire one or more Consultants that will, in coordination with Florida and French economic development officials, help write a proposal for the Naples Accelerator to serve as a French Tech Hub for the State of Florida. Grantee shall ensure that the Consultants: i. Review all requirements of the French Tech hub program, consult with French officials , Enterprise Florida's France Office located in Paris, and collect data and information required for the application; ii. Write a narrative and compile all Information required for a successful application; iii. Consult with necessary parties, i.e. counties, municipalities, cities, or local governments, in the key metropolitan areas of Florida that would be part of a statewide French Tech Hub initiative; iv. Assist with the marketing and recruitment of innovation companies to be part of a Naples French Tech Hub in France, the European Union, and Florida, as well as facilitate business opportunities for those companies in creating jobs in Florida. Grantee shall provide quarterly reports to DEO of consultant's progress Page25 of42 Version date: 04/12/2016 Appendix, Page 180 z. Recruitment of National and International Partnerships Grantee's staff will meet with potential international and national clients and food companies to recruit them to the Accelerator(s). In order to complete this activity, the Grantee shall perform the following tasks: a. Meet with current clients to facilitate their start-up business needs. b . Begin procurement process for construction and operations for clients. ~. Client recruiting and partnering: i. Recruiting national and international companies into the Southwest Florida marketplace and helping to leverage partnership opportunities with companies across South Florida. II. Attend and partner at trade shows and other events to market Southwest Florida and the Accelerator program. 3. Development of the Immokalee CUlinary Arts & Services Incubator Facility The Incubator will be located in Immokalee, in a leased facility adjacent to the Immokalee Airport. The Immokalee facility will be equipped with commercial kitchen equipment, food and beverage product development, processin~ distillation and testing equipment, and cold food storage equipment. The Grantee shall build the facility to meet all applicable FDA, USDA, and state and local requirements~ in accordance with the Accelerator's approved construction plans. In order to complete this activity, the Grantee shall perform the following tasks: a. Construction and Space Setup: The future leased space for the culinary food accelerator is anticipated to be approximately 5,000-6,000 square feet of both indoor and outdoor spaces, and requires extensive remodeling, and commercial equipment. In addition, a food laboratory will be built and equipped within the facility that will be utilized by the University of Florida, for food science and product testing and safety. The setup subtasks will include: i. Negotiation of lease terms. Grantee shall provide a copy of the executed lease to DEO. ii. Approval of final remodeling plans. Grantee shall provide a copy of the plans to DEO . iii. Acquisition of all necessary state and local permits. Grantee shall provide a copy of the state and local permits to DEO. iv. Construction/remodeling of the space in accordance with the approved final remodeling plans. v. The purchase, lease, and Installation of commercial equipment in accordance with the plan . vi. The provision of services such as necessary legal, accounting, marketing, education, and information technology services. 4. Development of the Florida Gulf Coast University (FGCU) Runway Program. The Runway Program seeks to work with students, faculty, and staff through the FGCU Institute for Entrepreneurship to help accelerate the launch of startup and innovation companies started by FGCU students. During the program, students will be provided with entrepreneurship faculty instruction in business and entrepreneurship, mentorship, and support to facilitate the startup of thefr business. At the end of their program, the students will pitch to an Investment Committee who will review the grant submissions and business plans to determine which team(s) will be eligible for a grant to be used to accelerate their business. Once these students Page 26of42 Version date: 04/12/2016 Appendix, Page 181 complete the program, they sho1,1ld be ready to compete in the Governor's Cup and other competitions across the Florida and the United States. The cost of the program Includes instructors, materials, equipment and supplies. The Grantee shall provide a copy of the approved construction plan, as necessary, to the DEO. In order to complete this activity, the Grantee shall perform the following tasks: a. Incubator Space Setup: The incubator at the Emergent Technology Institute (ETI) will Include appropriate office, conference room, and classroom space and a Student Prototype lab. All spaces are being provided to the project at no cost for the period of the grant. The FGCU Student Prototyping Lab will be outfitted with equipment and soft~re programs to include a 3-D printer, laser cutter, foam cutterJ and Solid Works. The subtasks will include: i . Approval of final remodeling plans. Grantee shall provide a copy of the plans to DEO. ii. Acquisition of all necessary state and local permits. Grantee shall provide a copy of the state and local permits to DEO. iii. The purchase of commercial equipment in accordance with the plan. Grantee shall provide a copy of the invoice to DEO. b. Design FGCU'S Competitive Application Process for the FGCU Runway Program: Marketing and promotion for the new FGCU Runway Program will begin in early August 2016. This process will be used as a mechanism to select a minimum of 20 participants for the student runway program during the 2016-2017 year. These set upprogram activities subt;~sks will include: i. Invoices for the marketing and promotional items. Grantee shall provide a copy of the Invoices to DEO. c. Design and Implement FGCU's 1\unway Program: Student(s) will be required to complete a U week program with a minimum of 10 hours a week working in the Incubator as well as a minimum 3~5 hours per week outside of the Incubator. Students will be provided with entrepreneurship faculty instruction in business and entrepreneurship, mentorship, materials, supplies as well as some fees to facilitate the student's initial startup of their business. The program wiH also require design of the program and Implementation by staff, faculty and administration. These program subtasks will include: i. The purchase of materials and supplies, and fees for the program. Grantee shall provide a copy of the invoices to OEO. ii. Pay stubs for faculty and staff. Grantee shall provide copies of the pay stubs to DEO. d. Design and Implement a Competitive Grant(s) Program for students who have completed the Project Runway Program. The students will pitch to an Investment Committee who will review the grant submissions and business plans to determine which team(s) will be eligible for a grant to be used to accelerate their business. The committee will also select the two teams that will be granted free office space for one year by Naples Accelerator. The program subtasks will include: i. Committee reviewed papers of student submissions for competitive grant. Grantee shall provide copies of submissions to DEO. e. Provide a minimum of 15 student Internships. Students will be provided paid internships from the FGCU Institute for Entrepreneurship to work in the Incubator and the Institute for Entrepreneurship within the College of Business. Types of jobs will Include website design, social media marketing, program administration, updating database, research assistant, development and distribution of materials, lab support, new program initiatives and other community entrepreneurship programs supported by the Institute for Entrepreneurship. The internship subtasks will include: Page 27 of42 Version date: 04/12/2016 Appendix, Page 182 i. Ad placed in the school's career services for the fall and spring semester for these positions. Grantee shall provide copy of the ad to DEO . II. Interns will be required to work a minimum of 150 hours per semester and to submit periodic time sheets and performance reports. Grantee shall provide copies ofthe tlmesheets to DEO . iii. At the completion of the internship, the student Is required to write a paper to demonstrate how the Internship experience will help them In their future career. Grantee will provide a copy of the paper to DEO. f. Naples Accelerator Staff at Incubator: Provide a .5 FTE staff and office for the Naples Accelerator Office who will work in the Incubator at FGCU. i. Timesheets for the staff at the incubator. Grantee will provide Copies of t imesheet to DEO , 5. Retail Outlet for Food and Beverace Products at 3510 Kraft Rd. An outlet for the sale of food and beverage products to the community will require the remodel of approximately 200 square ft. on the first floor of the building at 3510 Kraft Rd. a. Construction and Space Setup: The future leased space for the retail outlet requires remodeling, and purchase of equipment. The setup activities will include: I. Negotiation of leased terms. Grantee shall provide a copy of the executed lease to DEO. ii. Approval of final remodeling plans. Grantee shall provide a copy of the plans to DEO. iii. Acquisition of all necessary local permits. Grantee shall provide a copy of the state and local permits to DEO. iv. The purchase of commercial equipment In accordance with the plan. v. Marketing to publicize the new market facility to the public and potential users. 3. DEO's Responsibilities: A. Monitor the ongoing activities and progress of Grantee, as DEO deems necessary, to verify that all activities are being performed in accordance with the Agreement; B. Perform Agreement management responsibilities as stated herein; c. Reply to reasonable inquiries pursuant to the Agreement; D. Review Grantee's invoices for accuracy and thoroughness, and If accepted, process invoices on a timely basis; and E. Maintain paper or electronic copies of all documents submitted pursuant to Sections 5 and 6 of this Scope of Work. F. Process any request for an advance of funds under this Agreement in accordance with the requirements of section 216.181(16), F.S., Chapter 691-40.120, Florida Administrative Code, and the Florida Department of Finandal Services Reference Guide for State Expenditures. Once any advance request has been approved and provided, additional Agreement disbursements shall only be made on a reimbursement basis. 4. Deliverables: Recipient agrees to provide the following deliverables as specified below: DELIVERABLE 1 Deliverables and Tasks .l Minimum Perfonnance Standards J Financial Consequence Page 28of42 Version date: 04/12/2016 Appendix, Page 183 Naples Soft-Landing At a minimum, Grantee shall Failure to complete the minimum Business Accelerator complete one expansion task at level of service will result in non- Expansion 100% as outlined in Section 2.F.1. payment. and as evidenced by submittal of Grantee shall complete the the following, as applicable: expansion tasks as outlined • Statement from a licensed In Section 2.F.1. of this professional certifying that Scope of Work. the work is complete. • Copy of the executed contractor's agreement. • Copy of Visa EB-5 Regional Center designation application. • Copy of the French Tech HUB designation application. Total Cost of this Deliverable Not to Exceed: $400,000.00 DELIVERABLE 2 Deliverables and Tasks Minimum Performance Standards Financial Consequence Recruitment and Selection At a minimum, Grantee shall enter Failure to complete the minimum of National and into an agreement with one level of service will result in non- International Partnerships national or international business as payment. outlined in Section 2.F.2. and as Grantee shall complete the evidenced by submittal of the recruitment and selection following, as applicable: of businesses as outlined in • Copy of the executed Section 2.F.2. ofthis Scope partner agreement. of Work. Total Cost of this Deliverable Not to Exceed: $50,000.00 DEUVERABLE 3 Oellverables and Tasks Minimum Performance Standards Financial Consequence Development of the At a minimum, the Grantee shall Failure to complete the minimum Immokalee Culinary Arts complete one construction and level of service will result in non- & Services Facility space setup of the facility task as payment. outlined in Section 2.F.3. as Grantee shall complete the evidenced by submittal of the construction and space set following, as applicable: up of the facility as • Copies of all designs, plans, outlined in Section 2.F.3. of and permits obtained or this Scope of Work. required to be obtained for Page 29 of42 Version date: 04/12/2016 Appendix, Page 184 the purpose of accomplishing the project Total Cost of this Deliverable Not to Exceed: $1,200,000.00 DEUVERABLE 4 Dellverables and Tasks Minimum Performance Standards Rnandal Consequence Develop the FGCU Runway At a minimum, Grantee shall Failure to complete the minimum Program complete one development subtask level of service will result in non- at 100% as defined in Section 2.F.4. payment. Grantee shall complete the and as t!videnced by submittal of the FGCU Runway Program following, as applicable: program task as defined in • Copy of final remodeling Section 2.F.4. of this Scope plans. of Work • Copies of all state and local permits. • Copies of all marketing materials and promotional items. • Copies of pay stubs for faculty and staff. . • Committee reviewed papers of student submissions for competitive grant • list of participants for the Runway Program. • list of the Investment Team Members & judging criteria and names of the grantees . • Copy of ad placed in the school's career services for the fall and spring semester for positions. • Copies of timesheets and performance reports of interns. • Copies of papers written by interns on experience and their future career. • Copies of timesheets for the staff at the incubator. Total Cost of this Deliverable Not to Exceed: $250,000.00 Page30of42 Version date : 04/12/2016 Appendix, Page 185 DELIVERABLE 5 Deliverabfes and Tasks Minimum Performance Standards Financial Consequences Retail Outlet for Food and At a minimum, the Grantee shall Failure to complete the minimum Beverage Products at 3510 complete the construction and space level of service will result in non- Kraft Road setup ofthe facility at 100% as payment. outlined in Section 2.F .5. as · Grantee shall complete the evidenced by submittal of the construction and space set following, as applicable: up of the facility as • A copy of the new executed outlined in Section 2.F.S. of lease agreement this Scope of Work. • Copies of all designs, plans, and permits obtained or required to be obtained for the purpose of accomplishing the project • Copies of all marketing materials and promotional items. Total Cost of this Deliverable Not to Exceed: $100,000.00 Tota1 Cost Not to Exceed: $2,000,000.00 Cost Shifting: The deliverable amounts specified within the Oeliverables section above are established based on the Parties' estimation of sufficient delivery of services fulfilling grant purposes under the Agreement in order to designate payment points during the Agreement Period; however, this is not intended to restrict DEO's ability to approve and reimburse allowable costs, incurred by Grantee in providing the deliverables herein. Prior written approval from DEO's Agreement Manager is required for changes to the above Deliverable amounts that do not exceed ten (10) percent of each deliverable total funding amount. Changes that exceed ten (10) percent of each deliverable total funding amount will" require a formal written amendment, as described in Section II.A. of the Agreement. Regardless, in no event shall DEO reimburse costs of more than the total amount of this Agreement. 5. Invoice Submittal and Payment Schedule: DEO agrees to disburse funds under this Agreement In accordance with the following schedule in the amount identified per deliverable in Section 4 above. The deliverable amount specified does not establish the value of the deliverable. In accordance with Section I.F .ll, Funding Requirements of Section 215.971, F.S., of this Agreement, Grantee's entitlement to retain funds paid by DEO is dependent upon the amount of allowable costs incurred and expended by Grantee in carrying out the Project. Grantee's invoices shall include the date, period in which work was performed, amount of reimbursement, and percent of work completed to date. Grantee shall provide one (1) Invoice per Deliverable for all services rendered during the applicable period of time. Page 31 of42 Version date; 04/12/2016 Appendix, Page 186 A. Grantee's invoice package shall be neatly organized with supporting documentation for each Deliverable; and include a cover letter on Grantee's letterhead signed by Grantee's Agreement Manager certifying that all costs: 1. Were incurred after June 30,2016 and on or before July 1, 2017. 2. Are for one or more of the tasks as outlined in this Scope of Work. Documentation of payment shall include: i. An overall summary of the project tasks with specific details of the progress accomplished during the payment period. ii. Proof of payment for related Project costs in the form of a copy of the cancelled check, electronic transfer or, a copy of a check and the bank statement highlighting the cancelled check; iii. Invoices for all work associated with the Deliverable as outlined in this Scope of Work paid by Grantee (see Section 6.8 for contractor invoice requirements); iv. Grantee's invoices shall lncl~de the date, period in which work was performed, amount of reimbursement, and percent of work completed to date; v. Invoices shall include the following statement above the Grantee's signature block: ttl certify, by evidence of my signature below, the Information as presented on this invoice is true and correct; the goods and services have been satisfactorily received and payment is now due. 1 understand the DEO and other state personal have authority to require additional documentation and/or conduct audits or inspections of grant records."' vi. Documentation necessary to support payment request and successful completion of deliverables, as required in Section 4 of this Scope of Work; vii. All travel documentation In accordance with Section 112.061 Florida Statutes; and viii. If applicable, completed Photographer Release Form, and/or Modet Release Form as required In Section 14 of this Scope of Work. ix. Site work photographs of the pre and post construction and remodeiJng. x. A certification by a licensed engineer using AlA forms G702 and G703, or their substantive equivalents, certifying that the project, or a quantifiable portion of the project for reach reimbursement is sought, Is complete. 8. All documentation necessary to support payment requests must be submitted with Grantee's invoice, as described in Section I.G. of the Agreement, for DEO's review. All supporting documents must: 1. be on company letterhead with contractors name and address; 2 . include a date; 3. invoice number; 4. include period of performance; S. description of work performed; 6. include unit cost and quantity; and 7. include a statement certifying that the work for which reimbursement is sought is complete. C. Any other information which DEO may require from Grantee that DEO deems necessary to verify that the services have been rendered under the Agreement. The State may require any other information from Grantee that the State deems necessary to verify that the services have been rendered under the Agreement. 6. Return on Investment: Page 32 of42 Version date: 04/12/2016 Appendix, Page 187 a. Beginning at the end of the first full quarter following execution of this Agreement, Grantee shall provide quarterly update reports directly to EOG/OPB documenting the positive return on investment to the state that results from the Grantee's project and its use of monies provided under this Agreement. b . Quarterly update reports shall be provided to EOG/OPB within 30 days after the end of each quarter thereafter until Grantee is Instructed by EOG/OPB that no further reports are needed. c. All reports shaJI be submitted to Jesslca.Doyle@laspbs.state.fl.us, and a copy shall also be submitted to DEO's Agreement Manager. 7. Financial Consequences for Failure to Timely and Satisfactorily Perform: Failure to complete all deliverables in accordance with the requirements of this Agreement, and in particular, as specified above in Section 4, Deliverables, will result in assessment by DEO of the specified financial consequences. If applicable, should the Parties agree to a corrective action plan, the plan shall specify the applicable financial consequences to be applied after the effective date of the corrective action plan. This provision for financial consequences shall in no manner affect DEO's right to terminate the Agreement as provided elsewhere in DEO's Core Agreement. 8. Not1flc:ation of Instances of Fraud: All instances known or suspected by Grantee of Grantee operational fraud or criminal activities shall be reported to DEO's Agreement Manager in writing within twenty-four {24) chronological hours. 9. Grantee's Responsibilities upon Termination: If DEO issues a Notice of Termination to Grantee, except as otherwise specified by DEO In that notice, the Grantee shall: a. Stop work under this Agreement on the date and to the extent specified in the notice. b. Complete performance of such part of the work as shall not have been terminated by DEO. c. Take such action as may be necessary, or as DEO may specify, to protect and preserve any property which is In the possession of Grantee and in which DEO has or may acquire an interest. d . Upon the effective date of termination of this Agreement, Grantee shall transfer, assign, and make available to the DEO all property and materials belonging to DEO . No extra compensation will be paid to Grantee for its services in connection with such transfer or assignment. 10. Confidentiality and Safeguarding Information: Grantee may have access to confidential information during the course of performing these services. Grantee must Implement procedures to ensure protection and confidentiality of data, files and records Involved with this Agreement. All Grantee personnel assigned to this Project Page 33 of42 Version date: 04/12/2016 Appendix, Page 188 must sign a confidentiality statement which will be provided by DEO. Grantee's confidentiality procedures must be approved by DEO and must comply with aU State and Federal confidentiality requirements, including, but not limited to, section 443,1715{1), F.S., and 20 C.F.R. part 603. All Grantee employees working in performance of this Agreement, will be appropriately screened in a manner comparable to sections 435.03 and 435.04, F .S . 11. Ownership and Intellectual Property Rights: All rights, title, and Interest, including copyright interests and any other intellectual property, in and to the work developed or produced under the Agreement, alone or in combination with DEO and/or its employees, under this Agreement shall be the property of OEO. Grantee agrees that any contribution by the Grantee or its employees to the creation of such works, including all copyright Interest therein, shall be considered works made for hire by the Grantee for DEO and that such works shall, upon their creation, be owned exclusively by OEO. To the extent that any such works may not be considered works made for hire for OEO under applicable law, Grantee agrees to assign and, upon their creation, automatically assigns to DEO the ownership of such works, including copyright interests and any other intellectual property therein, without the necessity of any further consideration. U. Non-Discriminat1on: Grantee shall not discriminate unlawfully against any individual employed i n the performance of this Agreement because of rate1 religion, color, sex, physical handicap unrelated to such person's ability to engage in this work1 national origin, ancestry, or age. Grantee shall provide a harassment~free workplace, with any allegation of harassment to be given priority attention and action. 13. Disposition of Project Property: a. Pursuant to Section I.P.7. of this Agreement, upon termination of the Agreement period, Grantee is authorized to retain ownership of any nonexpendable property purchased under this Agreement; however, Grantee hereby grants to DEO a right of first refusal in all such property prior to disposition of any such property during its depreciable life, in accordance with the depreciation schedule in use by Grantee, Grantee shall provide written notice of any such planned disposition and await OEO's response prior to disposing of the property. "Disposition" as used herein, shall include, but is not limited to, Grantee no longer using the nonexpendable property for the uses authorized herein; the sale, exchange, transfer, trade- in, or disposal of any such nonexpendable property. DEO, in its sole discretion, may require Grantee to refund to DEO the fair market value of the nonexpendable property at the time of disposition rather than taking possession of the nonexpendable property. b. Grantee shall provide advance written notification to DEO, if during the five (5) year period following the termination of the Agreement period, Grantee proposes to take any action that will impact Its ownership of the Project property or modify the use of the Project property from the purposes authorized herein. If either of these situations arise, DEO shall have the right, with its sole discretion, to demand that Grantee reimburse DEO for part or all of the funding provided to Grantee under this Agreement. Page 34of42 Version date: 04/12/2016 Appendix, Page 189 c. Upon termination of the Agreement period, Grantee shall be authorized to retain ownership of the improvements to real property set forth in this Agreement in accordance with the following: i. Grantee is authorized to retain ownership of the improvements to real property so long as: 14. Releases: 1 . Grantee is not sold, merged or acquired; 2. The real property subject to the improvements Is owned by Grantee; and 3. The real property subject to the improvements is used for the purposes provided in this Agreement. 4 . If within five (5) years of the termination of this Agreement, Grantee is unable to satisfy the requirements stated in (i) above, Grantee shall notify DEO in writing of the circumstances that will result in the deficiency upon learning of It, but no later than thirty (30} days prior to the deficienc;:y occurring. In such event, DEO shall have the right, within its sole discretion, to demand reim~ursement of part or all of the funding provided to Grantee under this Agreement. If Grant funds are used for any photographic or video purposes, Grantee will obtain Photographic/Videography Rights Releases, PhQtographer/Videographer Release Form, and Model Release Form, allowing the use by DEO of all photographs and videos funded by this Agreement. These forms can be provided by DEO upon request. 15. Advance P~wment: Grantee is allowed to request an advance amount of Agreement funding to ensure timely payment of costs. This advance shall not exceed the expected cash needs of the Grantee within the initial three months. Approval of an advance may be subject to prior approval by the Department of Financial Services, to the extent required by law. Any advance payment under this Agreement is subject to section 216.181(16), F.S. To ensure compliance with this directive: a. Reconciliation of the advance will ensure an overpayment of the grant is not made and will be conducted when three quarters of the grant has been paid. b. The Grantee's performance and compliance to the advance expenditure requirement during this Agreement will be taken into consideration for any advances requested in future Agreements. c. Grantee must maintain a separate interest-bearing account in a Flori da banking institution for funds provided under this Contract, and remit interest earned on the account to DEO within 30 days of expiration or termination of the Agreement, or apply interest earned against DEC's obligation to pay under this the Agreement. All payments subsequent to the advance payment shall be made upon presentation of an invoice documenting expenditures and completeness. -End of Attachment l (Scope of Work}- Page 35 of42 Version date: 04/12/2016 Appendix, Page 190 Attachment 2 AUDIT REQUIREMENTS The administration of resources awarded by DEO to the recipient may be subject to audits and/or monitoring by DEO as described in this section. MONITORING In addition to reviews of audits conducted in accordance with OMS Circular A-,133 and Section 215.97, F.S., as revised (see "AUDITS" below), monitoring procedures may include, but not be limited to, on-site visits by DEO staff, limited scope audits as defined by OMB Circular A-133, as revised, and/or other procedures. By entering into this agreement, the recipient agrees to comply and cooperate with any monitoring procedures/processes deemed appropriate by DEO. In the event DEO detennines that a limited scope audit of the recipient is appropriate, the recipient agrees to comply with any additional instructions provided by DEO staff to the retipient regarding such audit. The recipient further agrees to comply and cooperate with any inspections, reviews, investigations, or audits deemed necessary by the Chief Financial Officer (CFO) or Auditor General. AUDITS PARTI: FEDERALLY FUNDED This part Is applicable if the recipient is a State or local government or a non-p_rofit organization as defined in OMB Circular A-133, as revised. 1. In the event that the recipient expends $300,000 ($500,000 for fiscal years ending after December 31, 2003) or more in Federal awards in its fiscal year, the recipient must have a single or program-specific audit conducted In accordance with the provisions of OMB Circular A~133, as revised. EXHIBIT 1 to this agreement indicates Federal resources awarded through DEO by this agreement. In determining the Federal awards expended in i~ fiscal year, the recipient shall consider all Sources of Federal awards, including Federal resources received from OEO. The determination of amounts of Federal awards expended should be in accordance with the guidelines established by OMB Circular A-133, as revised. An audit of the recipient conducted by the Auditor General in accordance with the provisions of OMB Circular A-133, as revised, will meet the requirements of this part. 2. In connection with the audit requirements addressed in Part I, paragraph 1, the recipient shall fulfill the requirements relative to auditee responsibilities as provided in Subpart C of OMB Circular A~133, as revised. 3. If the recipient expends less than $300,000 {$500,000 for fiscal years ending after December 31, 2003} in Federal awards in Its fiscal year, an audit tonducted In accordance with the provisions of OMB Circular A-133, as revised, is not required. In the event that the recipient expends less than $300,000 ($500,000 for fiscal years ending after December 31, 2003) in Federal awards In its fiscal year and elects to have an audit conducted in accordance with the provisions of OMB Circular A-133, as revised, the cost of the audit must be paid from non-Federal resources {i.e., Page 36 of42 Version date: 04/12/2016 Appendix, Page 191 the cost of such an audit must be paid from the recipient resources obtained from other than Federal entities). 4. Title 2 CFR Part 200, entitled Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards, also known as the Super Circular, supersedes and consolidates the requirements of OMB Circulars A-21, A-87, A-110, A-122, A-89, A-102 and A-133 and is effective for Federal awards or increments of awards issued on or after December 26, 2014. Please refer to 2 CFR Part 200 for revised definitions, reporting requirements and auditing thresholds referenced in this attachment and agreement accordingly. PART II: STATE FUNDED This part is applicable if the recipient is a non-state entity as defined by Section 215.97(2), Florida Statutes. 1. In the event that the recipient expends a total amount of state financial assistance equal to or In excess of $500,000 in any fiscal year of such recipient (for fiscal years ending September 30, 2004 or thereafter), the recipient must have a State single or project-specific audit for such fiscal year in accordance with Section 215.97, Florida Statutes; applicable rules of the Department of Financial Services; and Chapters 10.550 (local governmental entities) or 10.650 (nonprofit and for-profit organizations), Rules of the Auditor General. EXHIBIT 1 to this agreement indicates state financial assistance awarded through DEO by this agreement. In determining the state financial assistance expended in its fiscal year, the recipient shall consider all sources of state financial as.slstance, Including state financial assistance received from DEO, other state agencies, and other non-state entities. State financial assistance does not include Federal direct or pass- through awards and resources received by a nonstate entity for Federal program matching requirements. 2. In connection with the audit requirements addressed in Part II, paragraph 1, the recipient shall ensure that the audit complies with the requirements of Section 215 .97(8), Florida Statutes. This includes submission of a financial reporting package as defined by Section 215.97{2), Florida Statutes, and Chapters 10.550 (local governmental entities) or 10.650 (nonprofit and for-profit organizations), Rules of the Auditor General. 3. If the recipient expends less than $500,000 in state financial assistance In its fiscal year (for fiscal years ending September 30, 2004 or thereafter), an audit conducted in accordance with the provisions of Section 215.97, Florida Statutes, is not required. In the event that the recipient expends less than $500,000 in state financial assistance in its fiscal year and elects to have an audit conducted in accordance with the provisions of Section 215.97, Florida Statues, the cost of the audit must be paid from the nonstate entity's resources (i.e., the cost of such an audit must be paid from the recipient's resources obtained from other than State entities). 4 . Additional information regarding the Florida Single Audit Act can be found at: http://www.myflorida .com/audgen/pages/flsaa.htm PART Ill: OTHER AUDIT REQUIREMENTS N/A Page 37 of42 Version date: 04/12/2016 Appendix, Page 192 PART IV: REPORT SUBMISSION 1. Copies of reporting packages for audits conducted In accordance with OMB Circular A-133, as revised, and required by Part I of this agreement shall be submitted, when required by Section .320 (d), OMB Circular A-133, as revised, by or on behalf of the recipient directly to each of the following: A. OEO at each of the following addresses: Electronic copies (preferred): Audit@deo.myftorida.com or Paper (hard copy): Department Economic Opportunity MSC # 130, Caldwell Building 107 East Madison Street Tallahassee, Fl32399-4U6 B. The Federal Audit Clearinghouse .designated in OMB Circular A-133, as revised (the number of copies required by Sections .320 (d)(l) and (2), OMB Circular A-133, as revised, should be submitted to the Federal Audit Clearinghouse), at the following address: Federal Audit Clearinghouse Bureau of the Census 1201 East lOth Street Jeffersonville, IN 47132 C. Other Federal agencies and pass-through entities in accordance with Sections .320 (e) and (f), OMB Circular A-133, as revised. 2. Pursuant to Section .320 (f), OMB Circular A-133, as revised, the recipient shall submit a copy of the reporting package described in Section .320 (c), OMB Circular A-133, as revised, and any management letter issued by the auditor, to DEO at each of the following addresses: Electronic copies (preferred): Audit@deo.myflorida.com or Paper (hard copy): Department Economic Opportunity MSC # 130, Caldwell Building 107 East Madison Street Tallahassee, Fl. 32399-4126 Version date: 04/12/2016 Page 38 of42 Appendix, Page 193 3. Copies of financial reporting packages required by PART II of this agreement shall be submitted by or on behalf of the recipient directly to each of the following: A. DEO at each of the following addresses: Electronic copies (preferred}: Audit@deo.myflorida.com or Paper (hard copy): Department Economic Opportunity MSC # 130, Caldwell Building 107 East Madison Street Tallahassee, FL 32399-4126 B. The Auditor General's Office at the following address: Auditor General Local Government Audits/342 Claude Pepper Building, Room 401 111 West Madison Street Tallahassee, Fl32399-1450 Email Address: flaudgen localgovt@aud.state.fl.us 4. Copies of reports or the management letter required by Part Ill of this agreement shall be submitted by or on behalf of the recipient directly to: A. DEO at each of the following addresses: Department Economic Opportunity MSC # 130, Caldwell Building 107 East Madison Street Tallahassee, FL 32399-4126 5. Any reports, management letter, or other Information required to be submitted to DEO pursuant to this agreement shalt be submitted timely in accordance with OMB Circular A-133, Florida Statutes, and Chapters 10.550 (local governmental entitles) or 10.650 (nonprofit and for- profit organizations), Rules of the Auditor General, as applicable. 6. Recipients, when submitting financial reporting packages to DEO for audits done in accordance with OMB Circular A-133 or Chapters 10.550 (local governmental entities) or 10.650 (non-profit and for-profit organizations), Rules of the Auditor General, should Indicate the date that the reporting package was delivered to the recipient in correspondence accompanying the reporting package. PART V: RECORD RETENTION Page 39of42 Version date: 04/12/2016 Appendix, Page 194 1. The recipient shall retain sufficient records demonstrating its compliance with the terms of this agreement for a period of five (5) years from the date the audit report is issued, or five (5) state fiscal years after all reporting requirements are satisfied and final payments have been received, whichever period is longer, and shall allow DEO, or its designee, CFO, or Auditor General access to such records upon request. The recipient shall ensure that audit working papers are made available to DEO, or Its designee, CFO, or Auditor General upon request for a period of five (5) years from the date the audit report is issued, unless extended in writing by DEO. In addition, If any litigation, claim, negotiation, audit, or other action Involving the records has been started prior to the expiration of the controlling period as identified above, the records shall be retained until completion of the action and resolution of all issues which arise from it, or until the end of the controlling period as identified ·above, whichever is longer. -Remainder of Poge Intentionally Left Bionic - Page 40of42 Version date: 04/12/2016 Appendix, Page 195 EXHIBIT 1 to Attachment 2 FEDERAL RESOURCES AWARDED TO THE RECIPIENT PURSUANT TO THIS AGREEMENT CONSIST OF THE FOLLOWING: N/A COMPLIANCE REQUIREMENTS APPLICABLE TO THE FEDERAL RESOURCE$ AWARDED PURSUANT TO THIS AGREEMENT AR£ AS FOLLOWS: N/A STATE RESOURCES AWARDED TO THE RECIPIENT PURSUANT TO THIS AGREEMENT CONSIST OF THE FOLLOWING: MATCHING RESOURCES FOR FEDERAL PROGRAMS: N/A SUBJECT TO SECTION 215.97, FLORIDA STATUTES: State Project: State Awarding Agency: Catalog of State Financial Assistance Number: Florida Department of Economic Opportunity 40.012 Catalog of State Financial Assistance Title: Total State Award Amount: Local Economic Development Initiatives $2,000,000 COMPUAN(:E REQUIREMENTS APPUCABLE TO STATE RESOURCES AWARDED PURSUANT TO THIS AGREEMENT ARE AS FOLLOWS: 1. Activities are limited to those in Attachment 1, Scope of Work, of this Agreement. NOTE: Title 2 CFR § 200.331, as revised, and Section 215.97(5), Florida Statutes, require that the information about Federal Programs and State Projects included in Exhibit 1 be provided to the recipient. -Remainder of Page Intentionally Left Blank - Page 41of42 Version date: 04/12/2016 Appendix, Page 196 Attachment 3 AUDIT COMPLIANCE CERTIFICAnON G~nteeName: ____________________________________________________ ___ FEIN: _______ _ Grantee's Fiscal Year:------------- Contact Person Name and Phone Number:----------------------- Contact Person Email Address:-------------------------------------- 1. Old Grantee expend state financial assistance, during its fiscal year, that it received under any agreement (e.g., agreement, grant, memorandum of agreement, memorandum of understanding, economic incentive award agreement, etc.) between Grantee and the Department of Economic Opportunity (DEO)? __ Yes __ No If the above answer is yes, also answer the fo11owing before proceeding to item 2: Did Grantee expend $500,000 or more of state financial assistance (from DEO and all other sources of state financial assistance combined) during its fiscal year? __ Yes No If yes, Grantee certifies that ij: will timely comply with all applicable state single or project-specific audit requirements of section 215.97, Florida Statutes, and the applicable rules of the Department of Financial Servtces and the Auditor General. 2. Did Grantee expend federal awards, during its fiscal year that it received under any agreement (e.g ., agreement, grant, memorandum of agreement, memorandum of understanding, economic incentive award agreement, etc.) between Grantee and DEO? _Yes __ No If the above answer is yes, also answer the following before proceeding to execution of this certification: Did Grantee expend $750,000 or more in federal awards (from DEO and all other sources of federal awards combined) during its fiscal year? __ Yes No If yes, ~rantee certifies that it will timely comply with all applicable single or program-specific audit requirements of 2 CFR 200, Subpart F, as revised. By signing below, I certify, on behalf of Grantee, that the above representations for items 1 and 2 are true and correct. Signature of Authorized Representative Date Printed Name of Authorized Representative Title of Authorized Representative Page42of42 Version date: 04/12/2016 Appendix, Page 197 MEET THE CFOABOUT THE AGENCYNEWSHOME Main Search FAQ Questions? Contact Us State Agencies Charts & Reports Transparency Florida 0 Grant Disbursement Information Back to Search File not found. Summary Agency Name: DEPARTMENT OF ECONOMIC OPPORTUNITY Agency Contract ID: SL025 Long Title: SouthWest Florida Collier County Immokalee/Naples Business A Vendor Name: ECONOMIC INCUBATORS, INC. Total Contract Amount: $2,000,000.00 Total Budgetary Amount: $2,000,000.00 Total Payment To Date: $1,127,763.00 Date of Execution: 07/22/2016 General Description: "For State Fiscal Year 2016-2017, in Specific Appropriation line item 2234, the Florida Legislature appropriated two million dollars ($2,000,000) for the SouthWest Florida Collier County Immokalee/Naples Business Accelerator Program, of which two hundred and fifty thousand ($250,000) is dedicated to the Florida Gulf Coast University Institute for Entrepreneurship and Economic Incubators, Inc. The purpose of this grant is to establish the Immokalee Culinary Arts & Services Incubator Facility. The collaboration among the local government, educational institutions and private business in agricultural and technology related business diversification will render long-term economic advances in the Collier County and Southwest Florida economies by advancing innovation in entrepreneurship of food products and related agribusiness industries. " Grant Disbursement Documents Click on the pdf icon or Agency Document Link to view the document DOCUMENT TYPE DOCUMENT REFERENCE # EXECUTED DATE DOCUMENT ADD DATE AGENCY DOCUMENT LINK VIEW Original Contract Original Contract - SL025 07/22/2016 7/27/2016 1:50:16 PM Amendment A1 05/23/2017 6/14/2017 8:41:48 AM Details Deliverables Payments Documents Audits BACK TO TOP 2011 © FLORIDA DEPARTMENT OF FINANCIAL SERVICES Page 1 of 1Contract Information 7/9/2017https://facts.fldfs.com/Search/ContractDetail.aspx?AgencyId=400000&ContractId=SL025... Appendix, Page 198 From:James D. Molenaar To:"adam.callaway@deo.myflorida.com" Cc:"rick.scott@EOG.myflorida.com"; "sarah.schlesinger@deo.myflorida.com"; "Anthony Pires"; "Peter.penrod@deo.myflorida.com"; "Cissy.proctor@deo.myflorida.com"; "Damon.steffens@deo.myflorida.com"; Dwight E. Brock; Crystal K. Kinzel; Mark J. Pasek; Gabriela A. Molina; "Greg.Britton@deo.myflorida.com"; "James.Landsberg@deo.myflorida.com"; "peter.penrod@deo.myflorida.com"; "Richard.corcoran@myflorida.gov" Subject:Clerk of Court, Collier Co. Request for Official Written Opinion by Florida Dept. of Economic Opportunity Date:Monday, October 9, 2017 3:01:33 PM Dear Mr. Callaway, Esq.; Please allow this email to memorialize our telephone conversation between the following people on a conference call that occurred on Thursday, October 5, 2017 at 10:30 AM: 1.Hon. Dwight E. Brock, Esq., CPA, MBA, Clerk of the Circuit Court and Comptroller, Collier Co. Florida 2.Leo Ochs, Collier County Administrator 3.Jace Kentner, Director, Business & Economic Development Division of Collier Co. 4.Richard Clark Grant, Esq., Director, Economic Incubators, Inc. 5.Dr. Marshall Goodman, CEO, Economic Incubators, Inc. 6.Jennifer Pellechio, COO, Economic Incubators, Inc. 7.James D. Molenaar, Esq., Deputy Clerk, Clerk of the Cir. Court and Comptroller, Collier County Florida 8.Crystal Kinzel, Chief Deputy Clerk, Clerk of the Cir. Court and Comptroller, Collier County Florida 9.Mark Pasek, Internal Auditor, Clerk of the Cir. Court and Comptroller, Collier County Florida 10. Gabriella Molina, Internal Auditor, Clerk of the Cir. Court and Comptroller, Collier County Florida 11. Greg Britton, Director of Strategic Business Development, Florida Department of Economic Opportunity 12. Katie Smith, Agreement Manager, Florida Department of Economic Opportunity 13. Adam Scott Callaway, Esq., Florida Department of Economic Opportunity The conference call was arranged by the Clerk of the Circuit Court and Comptroller of Collier County, Florida (hereinafter “Clerk”) staff with the Florida Department of Economic Opportunity (hereinafter “DEO”), Economic Incubators, Inc. (hereinafter EII) and Collier County (hereinafter “County”) staff. The purpose of the telephone conference was to discuss invoices submitted by or on behalf of EII to DEO to demonstrate compliance with Florida grant SL 025. Below is a summary of this telephone conversation and not a complete verbatim transcript of this call: 1. Mr. James Molenaar, Esq. initiated the call to Ms. Smith from DEO. 2. Mr. Leo Ochs opened up discussion explaining that the reason for the meeting was to talk about Agreement SL025, and the procurement of the Immokalee Accelerator equipment. 3. It was explained to DEO that EII Inc. participated as the local match to the County USDA Grant for the procurement of the equipment and the purchase order numbers (POs) had been provided by the County. 4. Mr. Leo Ochs asked DEO, if they understood the equipment was not installed by 6/30/17. 5. Ms. Katie Smith stated, “The paper trail is sufficient documentation to meet agreement minimum requirements.” 6. Mrs. Crystal Kinzel asked, “The fact that equipment was not received and ‘invoices’ were not accurate is sufficient?” 7. Mrs. Crystal Kinzel subsequent to the above question brought up for discussion the following parts of the Agreement (SLO25) to DEO staff: 1) Section 2.F.3.a.v-The purchase, lease and installation of equipment in accordance with the plan; 2) Section 5. Grantee’s invoice package…supporting documentation for each Deliverable; and include a cover letter on Grantee’s [EII] letterhead signed by Grantee’s CEO certifying that all costs were incurred after June 30, 2016 and or before July 1, 2017; and Appendix D Appendix, Page 199 3)Section 5.A.2.ii-Proof of Payment for related Project Cost, copy of cancelled check, electronic transfer, a copy of the bank statement highlighting the cancelled check. 8. Mr. Greg Britton then reiterated that DEO “had relied on the invoice submitted by EII and it was sufficient documentation.” 9. Discussion ensued between Hon. Dwight Brock and Mr. Greg Britton about the State’s fiscal year end. Mr. Greg Britton confirmed it was June 30, 2017 and further confirmed the State’s fiscal year ran from July 1, 2016 – June 30, 2017. 10. Hon. Dwight Brock. explained that County’s Purchase Order (hereinafter “PO”) was dated within the states FY 16-17 but goods [culinary equipment] were not received prior to June 30, 2017. 11. Ms. Katie Smith remarked “the State had a certified forward period, which means that it can be paid for the previous year.” (Note: The problem with this statement is that the goods were not received prior to the end of the State’s fiscal year. The majority of goods were not delivered until October 3, 2017.) 12. Hon. Dwight Brock stated, “The EII check [2126] presented was cut and stuck in a drawer for weeks.” (NOTE: The check was not immediately presented for payment, rather it was stored in a desk drawer at EII for a substantial period of time, as noted by EII’s Accountant Noack & Company, Inc. of Florida, Certified Public Accountants This is significant because EII’s untimely matching grant payment pursuant to grant SL025 to the County occurred well after June 30, 2017; and goods or services were not received until after June 30, 2017.) 13. Ms. Katie Smith responded by stating “The document was sufficient to demonstrate minimum level of service per the contract.” 14. (NOTE: Mr. James Molenaar, Esq. has attached the relevant deliverables from page 32 of the Grant contract below:) Appendix, Page 200 15. Discussion ensued as to whether the contractual obligations were met. 16. Mr. Greg Britton replied, “I cannot give you a different answer” when speaking about whether contractual obligations were met. 17. Mrs. Crystal Kinzel asked DEO staff on the call “what does DEO staff deem to be a minimum level of service.” 18. Mr. Greg Britton said “it was in the agreement, . . . and specified design and plans.” 19. Hon. Dwight Brock cited the following example, “I submit plans for a project but never purchase the Appendix, Page 201 goods, I’m good?” 20. DEO staff did not respond to this question. 21. Ms. Katie Smith pointed out page 31[SL025] described the invoice submittal process and requirements. 22. Hon. Dwight Brock inquired if the attorney was of the opinion that the invoice submitted was complete. 23. Mr. Greg Britton remarked, “The attorney has not had the opportunity to review the invoice.” 24. Mr. James Molenaar, Esq. inquired, “When will there be a time when the attorney will review the invoices and grant agreement?” 25. Mr. Greg Britton retorted “It is not under the attorney’s purview and the attorney renders no opinion.” 26. Mr. Ochs asked DEO, “From a programmatic standpoint. Does the equipment have to be installed and delivered in to the facility” and “Is there a requirement beyond the minimum?” 27. Mr. Greg Britton responded “a PO existed and an Invoice listed in detail equipment to be purchased.” (NOTE: An invoice is typically rendered after goods and services are received. Therefore, the expenditure of funds is typically made upon the legal obligation to disburse money or after receipt of goods or services.) 28. Ms. Katie Smith and Greg Britton both stated that they relied on the invoice DEO received on June 28th, 2017 in spite of the fact that the Mr. James Molenaar and Mrs. Crystal Kinzel had previously informed Ms. Katie Smith that TriMark confirmed that this was not their company invoice and it was not an authentic invoice. 29. Hon. Brock asserted “the Invoice cannot be correct because the goods had not yet been received and it was not the company [TRIMARK] who created the invoices.” 30. Mrs. Crystal Kinzel stated again to DEO staff “the company’s billing department did not create the ‘Invoices.’” 31. Mr. Greg Britton indicated that Equipment does not have to be received before the end of the fiscal year. (NOTE: the grant contract required certification of that the goods and services have been satisfactorily received; and a certification by a licensed engineer that the project is complete. There is no evidence that either of these conditions have been met.) 32. Hon. Dwight Brock kindly asked DEO staff/Mr. Greg Britton “Will you put this in writing for me?” 33. Mr. Greg Britton shot back “Why do you need it?” 34. Hon. Dwight Brock explained, “It is useless to me if you cannot put it in writing.” Hon. Brock then explained that he simply needed it in writing to supplement the file and he could not make payment without assurances from DEO that the payment is legal. He further explained that the law requires him to only pay invoices, bills and warrants that comport with the grant application and grant requirements. 35. Hon. Dwight Brock asked once again “Will you put it in writing?” 36. Mr. Greg Britton responded “That is not a decision that can be made by the people in this room.” 37. Despite repeated attempts by Hon. Dwight Brock and Mr. James Molenaar, DEO Staff did not say who could make this decision to put the statements in writing, nor if DEO staff would present this question to anyone with the authority to make this statement in writing. Call ended 10:57 a.m. In summary, I am once again reiterating that the Clerk would like DEO to put in writing its position regarding: 1) EII presenting an invoice that was not a true TriMark’s invoice; 2) EII presenting a check to DEO that had not been tendered to the County in an attempt to lead DEO to believe that the requisite payment had been made; 3)EII’s failure to provide site work photographs of the post construction and remodeling; 4) EII’s failure to provide a certification by a licensed engineer on the proper form certifying that this project is complete; 5)DEO’s position on EII’s failure to provide a final invoice 45 days after June 30, 2017 as required on pg. 8 of 42 of Grant SL 025; and Appendix, Page 202 6) DEO’s assurances that it will not seek to recoup funds that that have been already disbursed to EII by DEO see pg. 18 C(2). Mr. Callaway, if I fail to hear from you by 4:00 PM on Thursday, October 19, 2017 at 4:00 PM, we will have no choice but to conclude that you acquiesce with all of the statements made above. Furthermore, your failure to respond will lead us to conclude that DEO staff is unable provide assurances to the Clerk and the citizens of the state of Florida that EII has legally complied with all of the terms of SL 025. In the meantime, should you wish to discuss this matter further, please feel free to contact me directly at (239) 252-2283. Very truly yours; /S/ James D. Molenaar, Esq., LL.M., MBA, CFE Internal Audit Manager Clerk of the Circuit Court and Comptroller Collier County Government Center 3299 Tamiami Trail East, Suite# 402 Naples, FL 34112-5746 Office: (239)252-2283 Cellular: (239)207-9565 James.Molenaar@collierclerk.com Appendix, Page 203 From:Penrod, Peter To:James D. Molenaar Cc:Britton, Greg; Callaway, Adam; Smith, Katie; Dwight E. Brock Subject:RE: Clerk of Court, Collier Co. Request for Official Written Opinion by Florida Dept. of Economic Opportunity Date:Thursday, October 12, 2017 10:07:33 AM Attachments:image002.png Mr. Molenaar – Please consider this email DEO’s response to your below correspondence purporting to detail a conversation between the Collier County Clerk of Court and DEO. Regarding your summary of the call and its participants, DEO offers no opinion as to its accuracy or relevance. Additionally, DEO is aware of your concerns with the invoices that Economic Incubators, Inc. submitted for remittance of payment. Please note that DEO is reviewing the matter accordingly. I am, however, unaware of any legal requirement for DEO to provide you or your office with its written position on this matter. As such, DEO is not inclined to provide a written position at this time. Similarly, DEO does not “acquiesce” to your statement of events nor does it agree with the premise in your concluding paragraph that DEO is somehow required to provide your office with “assurances” of any kind. Finally, please direct all future correspondences from your office regarding this matter to the DEO Office of General Counsel, attention Adam Callaway. Thank you for your attention. Peter L. Penrod General Counsel Florida Department of Economic Opportunity Office of the General Counsel Office: 850.245.7150 Peter.Penrod@deo.myflorida.com www.floridajobs.org Sign up for DEO news and information here. Follow us on: Facebook, Twitter and LinkedIn. This e-mail, including attachments may contain information that is confidential and may be protected by the attorney work product exemption or may contain attorney client or other privileged information exempted from Florida’s public records laws. This e-mail, including attachments, constitutes information intended to be conveyed only to the designated recipient(s). If you are not an intended recipient, please delete this e-mail, including attachments, and notify me by return mail, e-mail or at (850) 245-7150. The unauthorized use, dissemination, distribution or reproduction of this e-mail, including attachments, may be prohibited and may be unlawful. However, correspondence made or received in connection with the transaction of official business by a state agency, unless exempt or made confidential by law, is considered a public record and copies may be provided upon request.​​ From: James D. Molenaar [mailto:james.molenaar@collierclerk.com] Sent: Monday, October 09, 2017 3:02 PM To: Callaway, Adam <Adam.Callaway@deo.myflorida.com> Appendix E Appendix, Page 204 Cc: 'rick.scott@EOG.myflorida.com' <rick.scott@EOG.myflorida.com>; Schlesinger, Sarah <Sarah.Schlesinger@deo.myflorida.com>; 'Anthony Pires' <APires@wpl-legal.com>; Penrod, Peter <Peter.Penrod@deo.myflorida.com>; Proctor, Theresa (Cissy) <Cissy.Proctor@deo.myflorida.com>; Steffens, Damon <Damon.Steffens@deo.myflorida.com>; Dwight E. Brock <Dwight.Brock@collierclerk.com>; Crystal K. Kinzel <Crystal.Kinzel@collierclerk.com>; Mark J. Pasek <Mark.Pasek@collierclerk.com>; Gabriela A. Molina <Gabriela.Molina@collierclerk.com>; Britton, Greg <Greg.Britton@deo.myflorida.com>; Landsberg, Jim <James.Landsberg@deo.myflorida.com>; Penrod, Peter <Peter.Penrod@deo.myflorida.com>; 'Richard.corcoran@myflorida.gov' <Richard.corcoran@myflorida.gov> Subject: Clerk of Court, Collier Co. Request for Official Written Opinion by Florida Dept. of Economic Opportunity Dear Mr. Callaway, Esq.; Please allow this email to memorialize our telephone conversation between the following people on a conference call that occurred on Thursday, October 5, 2017 at 10:30 AM: 1.Hon. Dwight E. Brock, Esq., CPA, MBA, Clerk of the Circuit Court and Comptroller, Collier Co. Florida 2.Leo Ochs, Collier County Administrator 3.Jace Kentner, Director, Business & Economic Development Division of Collier Co. 4.Richard Clark Grant, Esq., Director, Economic Incubators, Inc. 5.Dr. Marshall Goodman, CEO, Economic Incubators, Inc. 6.Jennifer Pellechio, COO, Economic Incubators, Inc. 7.James D. Molenaar, Esq., Deputy Clerk, Clerk of the Cir. Court and Comptroller, Collier County Florida 8.Crystal Kinzel, Chief Deputy Clerk, Clerk of the Cir. Court and Comptroller, Collier County Florida 9.Mark Pasek, Internal Auditor, Clerk of the Cir. Court and Comptroller, Collier County Florida 10. Gabriella Molina, Internal Auditor, Clerk of the Cir. Court and Comptroller, Collier County Florida 11. Greg Britton, Director of Strategic Business Development, Florida Department of Economic Opportunity 12. Katie Smith, Agreement Manager, Florida Department of Economic Opportunity 13. Adam Scott Callaway, Esq., Florida Department of Economic Opportunity The conference call was arranged by the Clerk of the Circuit Court and Comptroller of Collier County, Florida (hereinafter “Clerk”) staff with the Florida Department of Economic Opportunity (hereinafter “DEO”), Economic Incubators, Inc. (hereinafter EII) and Collier County (hereinafter “County”) staff. The purpose of the telephone conference was to discuss invoices submitted by or on behalf of EII to DEO to demonstrate compliance with Florida grant SL 025. Below is a summary of this telephone conversation and not a complete verbatim transcript of this call: 1.Mr. James Molenaar, Esq. initiated the call to Ms. Smith from DEO. 2.Mr. Leo Ochs opened up discussion explaining that the reason for the meeting was to talk about Agreement SL025, and the procurement of the Immokalee Accelerator equipment. 3.It was explained to DEO that EII Inc. participated as the local match to the County USDA Grant for the procurement of the equipment and the purchase order numbers (POs) had been provided by the County. 4.Mr. Leo Ochs asked DEO, if they understood the equipment was not installed by 6/30/17. 5.Ms. Katie Smith stated, “The paper trail is sufficient documentation to meet agreement minimum requirements.” 6.Mrs. Crystal Kinzel asked, “The fact that equipment was not received and ‘invoices’ were not accurate is sufficient?” 7.Mrs. Crystal Kinzel subsequent to the above question brought up for discussion the following parts of the Agreement (SLO25) to DEO staff: 1) Section 2.F.3.a.v-The purchase, lease and installation of Appendix, Page 205 equipment in accordance with the plan; 2) Section 5. Grantee’s invoice package…supporting documentation for each Deliverable; and include a cover letter on Grantee’s [EII] letterhead signed by Grantee’s CEO certifying that all costs were incurred after June 30, 2016 and or before July 1, 2017; and 3)Section 5.A.2.ii-Proof of Payment for related Project Cost, copy of cancelled check, electronic transfer, a copy of the bank statement highlighting the cancelled check. 8.Mr. Greg Britton then reiterated that DEO “had relied on the invoice submitted by EII and it was sufficient documentation.” 9.Discussion ensued between Hon. Dwight Brock and Mr. Greg Britton about the State’s fiscal year end. Mr. Greg Britton confirmed it was June 30, 2017 and further confirmed the State’s fiscal year ran from July 1, 2016 – June 30, 2017. 10. Hon. Dwight Brock. explained that County’s Purchase Order (hereinafter “PO”) was dated within the states FY 16-17 but goods [culinary equipment] were not received prior to June 30, 2017. 11. Ms. Katie Smith remarked “the State had a certified forward period, which means that it can be paid for the previous year.” (Note: The problem with this statement is that the goods were not received prior to the end of the State’s fiscal year. The majority of goods were not delivered until October 3, 2017.) 12. Hon. Dwight Brock stated, “The EII check [2126] presented was cut and stuck in a drawer for weeks.” (NOTE: The check was not immediately presented for payment, rather it was stored in a desk drawer at EII for a substantial period of time, as noted by EII’s Accountant Noack & Company, Inc. of Florida, Certified Public Accountants This is significant because EII’s untimely matching grant payment pursuant to grant SL025 to the County occurred well after June 30, 2017; and goods or services were not received until after June 30, 2017.) 13. Ms. Katie Smith responded by stating “The document was sufficient to demonstrate minimum level of service per the contract.” 14. (NOTE: Mr. James Molenaar, Esq. has attached the relevant deliverables from page 32 of the Grant contract below:) Appendix, Page 206 15. Discussion ensued as to whether the contractual obligations were met. 16. Mr. Greg Britton replied, “I cannot give you a different answer” when speaking about whether contractual obligations were met. 17. Mrs. Crystal Kinzel asked DEO staff on the call “what does DEO staff deem to be a minimum level of service.” 18. Mr. Greg Britton said “it was in the agreement, . . . and specified design and plans.” 19. Hon. Dwight Brock cited the following example, “I submit plans for a project but never purchase the Appendix, Page 207 goods, I’m good?” 20. DEO staff did not respond to this question. 21. Ms. Katie Smith pointed out page 31[SL025] described the invoice submittal process and requirements. 22. Hon. Dwight Brock inquired if the attorney was of the opinion that the invoice submitted was complete. 23. Mr. Greg Britton remarked, “The attorney has not had the opportunity to review the invoice.” 24. Mr. James Molenaar, Esq. inquired, “When will there be a time when the attorney will review the invoices and grant agreement?” 25. Mr. Greg Britton retorted “It is not under the attorney’s purview and the attorney renders no opinion.” 26. Mr. Ochs asked DEO, “From a programmatic standpoint. Does the equipment have to be installed and delivered in to the facility” and “Is there a requirement beyond the minimum?” 27. Mr. Greg Britton responded “a PO existed and an Invoice listed in detail equipment to be purchased.” (NOTE: An invoice is typically rendered after goods and services are received. Therefore, the expenditure of funds is typically made upon the legal obligation to disburse money or after receipt of goods or services.) 28. Ms. Katie Smith and Greg Britton both stated that they relied on the invoice DEO received on June 28th, 2017 in spite of the fact that the Mr. James Molenaar and Mrs. Crystal Kinzel had previously informed Ms. Katie Smith that TriMark confirmed that this was not their company invoice and it was not an authentic invoice. 29. Hon. Brock asserted “the Invoice cannot be correct because the goods had not yet been received and it was not the company [TRIMARK] who created the invoices.” 30. Mrs. Crystal Kinzel stated again to DEO staff “the company’s billing department did not create the ‘Invoices.’” 31. Mr. Greg Britton indicated that Equipment does not have to be received before the end of the fiscal year. (NOTE: the grant contract required certification of that the goods and services have been satisfactorily received; and a certification by a licensed engineer that the project is complete. There is no evidence that either of these conditions have been met.) 32. Hon. Dwight Brock kindly asked DEO staff/Mr. Greg Britton “Will you put this in writing for me?” 33. Mr. Greg Britton shot back “Why do you need it?” 34. Hon. Dwight Brock explained, “It is useless to me if you cannot put it in writing.” Hon. Brock then explained that he simply needed it in writing to supplement the file and he could not make payment without assurances from DEO that the payment is legal. He further explained that the law requires him to only pay invoices, bills and warrants that comport with the grant application and grant requirements. 35. Hon. Dwight Brock asked once again “Will you put it in writing?” 36. Mr. Greg Britton responded “That is not a decision that can be made by the people in this room.” 37. Despite repeated attempts by Hon. Dwight Brock and Mr. James Molenaar, DEO Staff did not say who could make this decision to put the statements in writing, nor if DEO staff would present this question to anyone with the authority to make this statement in writing. Call ended 10:57 a.m. In summary, I am once again reiterating that the Clerk would like DEO to put in writing its position regarding: 1) EII presenting an invoice that was not a true TriMark’s invoice; 2) EII presenting a check to DEO that had not been tendered to the County in an attempt to lead DEO to believe that the requisite payment had been made; 3) EII’s failure to provide site work photographs of the post construction and remodeling; 4)EII’s failure to provide a certification by a licensed engineer on the proper form certifying that this project is complete; 5) DEO’s position on EII’s failure to provide a final invoice 45 days after June 30, 2017 as required on pg. 8 of 42 of Grant SL 025; and Appendix, Page 208 6) DEO’s assurances that it will not seek to recoup funds that that have been already disbursed to EII by DEO see pg. 18 C(2). Mr. Callaway, if I fail to hear from you by 4:00 PM on Thursday, October 19, 2017 at 4:00 PM, we will have no choice but to conclude that you acquiesce with all of the statements made above. Furthermore, your failure to respond will lead us to conclude that DEO staff is unable provide assurances to the Clerk and the citizens of the state of Florida that EII has legally complied with all of the terms of SL 025. In the meantime, should you wish to discuss this matter further, please feel free to contact me directly at (239) 252-2283. Very truly yours; /S/ James D. Molenaar, Esq., LL.M., MBA, CFE Internal Audit Manager Clerk of the Circuit Court and Comptroller Collier County Government Center 3299 Tamiami Trail East, Suite# 402 Naples, FL 34112-5746 Office: (239)252-2283 Cellular: (239)207-9565 James.Molenaar@collierclerk.com Please visit us on the web at www.collierclerk.com This electronic communication is confidential and may contain privileged information intended solely for the named addressee(s). It may not be used or disclosed except for the purpose for which it has been sent. If you are not the intended recipient, you must not copy, distribute or take any action induced by or in reliance on information contained in this message. Unless expressly stated, opinions in this message are those of the individual sender and not of the Office of the Clerk of the Circuit Court of CollierCounty. If you have received this communication in error, please notify the Clerk's Office by emailing helpdesk@collierclerk.com quoting the senderand delete the message and any attached documents. The Collier County Clerk's Office accepts no liability or responsibility for any onwardtransmission or use of emails and attachments having left the CollierClerk.com domain. 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. This email communication may contain confidential information protected from disclosure by privacy laws and is intended for the use of the individual namedabove. If the reader of this message is not the intended recipient, this is notice to you that any dissemination, distribution or copying of this communication or any attachment to it may be a violation of federal and state privacy laws. If you have received this email in error, please notify the sender immediately by return email and delete this message. Please note that Florida has a broad public records law, and that all correspondence to me via email may be subject to disclosure.Under Florida law email addresses are public records. Appendix, Page 209 From:Jennifer Pellechio To:KentnerJace Cc:Naples Business Accelerator; Fred Krieger; Fred Pezeshkan; Richard Grant; Crystal K. Kinzel; James D. Molenaar; Mark J. Pasek; KraftHendrickPhyllis Subject:Executed Forms SL025 Date:Thursday, March 29, 2018 11:27:38 AM Attachments:Immokalee Culinary Arts and Services - CO # 2_fullyexecuted.pdf Immokalee Culinary Arts and Services - Payment Application #6.pdf Good Morning Jace, During the EII Single Audit, Tuscan & Company brought to our attention that the AIA document and Final pay app 6 were not executed. Attached are the executed documents for your records. EII is not sending this to the State DEO unless requested, as the grant has been closed out. However we have in our files for the records. Regards, Jennifer Jennifer Pellechio, MBA, CEcD, InBIA Chief Operating Officer Economic Incubators, Inc. Naples Accelerator 3510 Kraft Road, Suite #200 Naples, FL 34105 1.239.249.5911 x 701 (office) 1.239.707.3788 (cell) Email | Website The Florida Culinary Accelerator @ Immokalee 170 Airpark Blvd. #103 Immokalee, Florida 34142 1.239.249.5911 x 1 Website Appendix F Appendix, Page 210 Marshall Goodman, Pres/CEOJune 28, 2017Appendix, Page 211 Appendix, Page 212 Appendix, Page 213 Appendix GAppendix, Page 214 Appendix, Page 215 Appendix, Page 216 Appendix, Page 217 Appendix, Page 218 Appendix, Page 219 Appendix, Page 220 Appendix, Page 221 Appendix, Page 222 Appendix, Page 223 Revised and Final 10.12.17 Appendix H Appendix, Page 224 Economic Incubators, Inc. Revenue Reuse Report Quarter 4 FY17 Budget FY 17 Business Income 115,200 Private Donations 50,000 Total 165,200 Quarter 1 Budget Q1 Actual Q1 % of budget Business Income 71,010 Business Expense 50,685 Net Business Income 28,800 20,325 70.57% Private Donation Income 0 Private In Kind Donations 23,020 Private Donation Expense 0 Net Private Donation Income 12,500 23,020 1.8416 Combined Business/Private Donation Net Income 41,300 43,345 104.95% Quarter 2 Budget Q2 Actual Q2 % of budget Business Income 64,452 Business Expense 46,817 Net Business Income 28,800 17,635 61.23% Private Donation Income 32,023 Private In Kind Donations 14,145 Private Donation Expense 7,405 Net Private Donation Income 12,500 38,763 3.10104 Combined Business/Private Donation Net Income 41,300 56,398 136.56% Add Q1 41,300 43,345 104.95% Year to Date (Q1 & Q2)82,600 99,742 120.75% Quarter 3 Budget Q3 Actual Q3 % of budget Business Income 68,652 Business Expense 93,326 Net Business Income 28,800 ‐24,674 ‐85.67% Private Donation Income 5,500 Private In Kind Donations 19,145 Private Donation Expense 9,862 Net Private Donation Income 12,500 14,783 1.18264 Combined Business/Private Donation Net Income 41,300 ‐9,891 ‐23.95% Add YTD Q1 & Q2 82,600 99,742 120.75% Year to Date (Q1, Q2 & Q3)123,900 89,851 72.52% Revised and Final 10.12.17 Appendix, Page 225 Quarter 4 Budget Q4 Actual Q4 % of budget Business Income 62,953 Business Expense 52,675 Net Business Income 28,800 10,278 35.69% Private Donation Income 0 Private In Kind Donations 36,645 Private Donation Expense 0 Net Private Donation Income 12,500 36,645 2.9316 Combined Business/Private Donation Net Income 41,300 46,923 113.62% Add YTD Q1/Q2/Q3 123,900 89,851 72.52% Year to Date (Q1, Q2 & Q3 & Q4)165,200 136,774 82.79% Revised and Final 10.12.17 Appendix, Page 226 3510 Kraft Road, Suite 200|Naples, Florida | 34105 Local: 239-249-5911 |Toll Free: 855-949-5911 www.naplesaccelerator.om Economic Incubators, Inc. Naples Accelerator To: Jace Kentner, Business & Economic Development Division Director From: Economic Incubators, Inc. Date: March 1, 2018 Subject: Letter of Transmittal – EII Fundraising Plan Enclosed is Fundraising Plan as required according to the contract. If you have any questions, please let us know. Sincerely, Marshall Goodman President/CEO Economic Incubators Inc. Appendix I Appendix, Page 227 EII Fundraising Plan FY2018 Appendix, Page 228 Page 2 TABLE OF CONTENTS Per Contract: Article XXXI – Fundraising Plan EII shall provide the County with its FY 2018 fundraising plan, March 1, 2018, which contemplates achievement of the budgeted annual private contributions delineated in Exhibit B1. The Fund Raising Plan Page 3 Economic Incubators Inc | February 2018 | Fundraising Plan Page 7Fundraising Strategy Page 8Marketing The Goal Page 3 Page 9The Timeline Page 5Mission and History The Nonprofit Page 4 Appendix Examples Page 11 Page 10Budget Appendix, Page 229 Page 3 The Fundraising Plan Economic Incubators Inc | February 2018 | Fundraising Plan The Plan Annual fund (unrestricted dollars)—support the ongoing operations for teaching, training, mentoring and counseling to achieve our goals. Scholarships (restricted dollars)—for those individuals with the entrepreneurial passion without resources for culinary expansion. Events (unrestricted dollars)—support annual events at both Naples and Immokalee locations. For example, the “Culinary Connection Day” is an annual event hosted in Immokalee. The Goal $80,000 in funds need to be raised for fiscal year 2018 (10-1-17 to 9-30-18) The overall fundraising goal for the following years according to the Business Plan: FY 2019: $130,000 FY 2020: $165,000 FY 2021: $200,000 2018 2019 2020 2021 Appendix, Page 230 Page 4 The Nonprofit Economic Incubators Inc | February 2018 | Fundraising Plan Economic Incubators Inc—Business Structure Economic Incubators Inc Operating DivisionsHeadquarters Woodstock’s Naples Florida Culinary Accelerator @ Immokalee Naples Accelerator Appendix, Page 231 Page 5 Mission & History Economic Incubators Inc | February 2018 | Fundraising Plan Economic Incubator Inc Mission Statement To help entrepreneurs with business or culinary backgrounds to succeed and achieve new heights by providing co-working space, kitchen access, mentoring, innovation, and state of art facilities. Vision The appropriate support and resources will be made available to Southwest Florida for anyone expanding, creating or building a business. About the Naples Accelerator Founded in 2014 as a Public—Private initiative with Collier County, the Naples Accelerator is a business accelerator focused on providing a soft landing for local, national and international companies looking to grow and fund new businesses and ideas in Southwest Florida. About the Florida Culinary Accelerator @ Immokalee Founded in 2017, “The Florida Culinary Accelerator @ Immokalee” (FCA@I) provides the community with a licensed, 5,274-square-foot kitchen space, state-of-the-art commercial-grade equipment, a University of Florida food lab and business-support services at affordable rates. We enable food entrepreneurs to launch and grow small businesses that often wouldn’t succeed without these shared resources. FCA@I is designed to nurture and grow food businesses by transforming a product vision into a reality. About Woodstock’s Market Founded in 2016, Woodstock’s Market is a self-serve micro market chain in Southwest Florida. The market provides locally sourced food products in a self-serve fashion for quick, easy, healthy choices on the go. Future products produced in the Culinary Accelerator @ Immokalee will be marketed and sold in all Woodstock’s Market locations. In 2018 a fundraising committee was created by the Board of Directors to energize and mentor the fund raising effort. Appendix, Page 232 Page 6 Mission & History (cont.) Economic Incubators Inc | February 2018 | Fundraising Plan The current members of the Committee are: •Steve Wheeler (Chair) •Fred Pezeshkan •Paul Thein •Holly Parks •Cathy Haworth •Marshall Goodman •Jennifer Pellechio •Fred Krieger Appendix, Page 233 Raise $50,000 through the annual fund, $30,000 through events and $10,000 through Scholarships Raise $60,000 through the annual fund, $40,000 through events and $30,000 through Scholarships Raise $85,000 through the annual fund, $40,000 through events and $40,000 through Scholarships Raise $100,000 through the annual fund, $50,000 through events and $50,000 through Scholarships Years Amount 2018 2019 2020 2021 $130,000 $165,000 $200,000 Page 7 Fundraising Strategy Economic Incubators Inc | February 2018 | Fundraising Plan Fundraising Strategy Goals $80,000 In addition, the fundraising committee will continue to research other funding options including: • Individual Giving—Asking major donors to make gifts to your organization • Major Donor Groups—May include board giving, a finance or development committee, etc • Events—Both large and small • Online and E-Giving • Grants—Foundations, Corporate, Government • Corporate Giving Programs • Participatory Fundraising—Like walk-a-thons and chili cook-offs • Annual Giving and Multi-Year Giving Campaign Appendix, Page 234 Page 8 Marketing Economic Incubators Inc | February 2018 | Fundraising Plan Marketing Outline for EII marketing efforts as defined by marketing committee: • Create collateral materials that will explain mission, vision and values • Create donating opportunities and add to materials and website • Outreach—Promote visibility and awareness throughout the community —staff time limited—establish outreach/ambassador committee • Individual “ask” event—one on one meetings with board members to individuals they are comfortable asking for assistance. Prepare the appropriate “needs” for this group • House party event—annual event that will be hosted by a board member that help raise funds allocated to the annual fund • One annual event that will be specifically aimed to support an EII need Other fundraising opportunities: • Vendor support program for Culinary Accelerator • Naming Rights for any program, room product, etc • French Chef events • Endowment/sustainability • Explore other opportunities as they surface Appendix, Page 235 Page 9 The Timeline Economic Incubators Inc | February 2018 | Fundraising Plan Timeline Each year this might vary, but the timeline of fundraising events will start off each year as such: January—Fundraising Committee identify events and roadmap for the year Update the master database list of EII friends (contact list) February—Begin Fundraising Efforts March—April—Annual Event May—August—Scholarship Campaign September—December—Follow up with donors from prior year SETUP PROMOTE ASK INSPIRE THANK & REMIND January February March-April May-August Sept-Dec Appendix, Page 236 Printed 2/18/18 12:29 PM Page 1/1 EII FY 2018 Budget 2017 11 01 Final.xlsx Budget County Format Economic Incubators Inc. 2018 Budget & Revenue Reuse Plan Including Use of Private Contributions Fiscal Year Ending September 30, 2018 Description Funding Category (Source) Naples Accelerator Florida Culinary Accelerator @ Immokalee Woodstock Headquarters Total FY 2018 Sources Membership/Business Income BI/PI/OTH 250,000$ 50,000$ 20,000$ -$ 320,000$ Private Investment BI/PI/OTH 62,486 17,514 - - 80,000 Interest/Misc.BI/PI/OTH - - - 200 200 Allowance for Doubtful Accounts - 3%BI/PI/OTH (7,500) (1,500) - - (9,000) Rent Promotions - 40%BI/PI/OTH (100,000) - - - (100,000) Sub-total Net Business Income/Private Contributions/ Other Sources 204,986$ 66,014$ 20,000$ 200$ 291,200$ Collier County Resources County Contract Reimbursement CC - 191,000 - 381,100 572,100 County Direct Pay (Rent) CC 197,900 - - - 197,900 Other Operating/Facility Costs (Collier County)CC - 30,000 - - 30,000 Sub-total County Contract Amount 197,900$ 221,000$ -$ 381,100$ 800,000$ Total Sources 402,886$ 287,014$ 20,000$ 381,300$ 1,091,200$ Operating Expenses Compensation, PR Taxes, Benefits, W/C, PR servicing/processing fees CC -$ 189,500$ -$ 379,900$ 569,400$ Compensation Cell Phone ($50/per employee/month, 2 employees 12 months, 3 employee 10 months CC - 1,500 - 1,200 2,700 Rent Expense (3510 Kraft Road)CC 197,900 - - - 197,900 Facilities/Equipment Expense CC - 30,000 - - 30,000 Subtotal - County Contract Paid Expenses 197,900$ 221,000$ -$ 381,100$ 800,000$ Product Cost of Goods Sold (Woodstock's)BI/PI/OTH - - 14,000 - 14,000 Rent Expense (FL Culinary Accelerator and Woodstock)BI/PI/OTH - 32,200 4,000 - 36,200 Professional Services BI/PI/OTH - - - 58,000 58,000 Utilities (Telephone/Internet/Garb/Misc.)BI/PI/OTH 6,000 19,000 - - 25,000 Contractual Services (IT, Custodial, contract labor)BI/PI/OTH 20,000 20,000 - - 40,000 Computer/Software Related BI/PI/OTH 10,000 2,000 - - 12,000 Events Sponsorships BI/PI/OTH 10,000 10,000 - - 20,000 USDA Grant Set Aside for Equipment Maintenance (8% estimated)BI/PI/OTH - 4,000 - - 4,000 Office Supplies BI/PI/OTH 5,000 3,000 - - 8,000 Insurance Expense BI/PI/OTH 2,000 5,500 - - 7,500 Copier/Printing Expenses BI/PI/OTH 5,200 1,500 - - 6,700 Travel Allowance: Includes car allowance, additional business related expense allowances and phone allowance for CEO. Also provided is a car allowance for the COO.BI/PI/OTH - - - 12,600 12,600 Participant Amenities BI/PI/OTH 12,000 2,500 - - 14,500 Marketing/Advertising BI/PI/OTH 7,000 3,000 - - 10,000 Facilities/Equipment Expense (Naples Accelerator)BI/PI/OTH 5,000 - - - 5,000 Building R&M BI/PI/OTH 2,400 2,400 - - 4,800 Licenses and Permits BI/PI/OTH 1,000 3,000 - - 4,000 Dues - Subscriptions BI/PI/OTH - - - 3,000 3,000 Bank Service Charges BI/PI/OTH - - - 500 500 Square Fees (Credit Card Processing Fees) BI/PI/OTH - - - 500 500 Interest/Misc. BI/PI/OTH - - - 200 200 Additional Compensation (Non-County)BI/PI/OTH - - - - - Sub-total -Business Income/Private Contributions Funded Expenses 85,600$ 108,100$ 18,000$ 74,800$ 286,500$ Total Operating Expenses 283,500$ 329,100$ 18,000$ 455,900$ 1,086,500$ Sub-total Surplus/Deficit)119,386$ (42,086)$ 2,000$ (74,600)$ Headquarters Allocation of Net Surplus/(Deficit): Percent 62.5%35.0%2.5%100.0% Amount (46,625) (26,110) (1,865) 74,600 - Adjusted Operating Margin/Reserves 72,761$ (68,196)$ 135$ -$ 4,700$ Notes: BI/PI/OTH -Funding Source = Business Income/Private Investment/Contributions and Other Sources CC -Funding Source = Collier County Contract Exhibit B EII FY 2018 Budget Page 10 The Budget Economic Incubators Inc | February 2018 | Fundraising Plan Appendix, Page 237 Page 11 Appendix Economic Incubators Inc | February 2018 | Fundraising Plan Florida Culinary Accelerator @ Immokalee Collateral Piece Page 12 Page 17Auction Item Request Non Profit Letterhead Page 14 Page 16General Donation Letter Annual Fund Letter Page 15 Page 18Special Event Attendance Page 19Sponsorship Appreciation Appendix, Page 238 Page 12 Collateral Piece Economic Incubators Inc | February 2018 | Fundraising Plan Florida Culinary Accelerator @ Immokalee Collateral Piece Danny Gonzalez, the current president of the 60-member Immokalee Chamber of Commerce and life-long resident of Immokalee has high hopes this Culinary Accelerator is a success. Gonzalez intends to bottle the Lozano’s family secret salsa recipe. Danny manages Immokalee’s popular Lozano’s Mexican Restaurant with his wife, Sandy, plans to expand the restaurant and salsa business. “I’m excited. Anything that pops up that’s convenient and good for us, we’re going to jump on it,” Gonzalez said. “We want to push our sales when the snowbird season gets here. We get tons of customers. They buy salsa by the gallon and want to take it home. We just run out. We have to turn people away.” •In the 2010 census Immokalee size is 24,154,233 SQ miles including 44 local farms •Median income is $24,315 and 34.6% of the families below poverty line •There is no municipal government. It is governed by Collier County •In 2016 Immokalee was designated by the federal government as Florida’s first “Promise Zone”. It is 1 of only 4 rural promise zones in the country. There will be more federal money or jobs and education and will be at the front of the line for awarding federal grants A discovery by the University of Florida research scientists before WWII was key to the farming boom. They found that applying lime to the useless swampland soil would increase the pH level, drastically improving it and making it sustainable for farming. Immokalee now grows 90% of the national winter tomato crop sold around the US. Strawberries are a huge winter crop as well as sugar cane, cucumbers, peppers and citrus. They have the perfect winter weather, in the whole US to grow produce. The Florida Culinary Accelerator in Immokalee wants to be an asset to the Immokalee community to help start plant-based businesses. We are close enough to Naples, Ft Myers to be a destination for new food businesses. There is an abundance of crops available to manufacture produce-based products for retail. The Blue Zones Project is a southwest Florida project sponsored by NCH Hospital promoting a “Power Nine” plan to help people live longer. One of the components is a plant-based diet. Hundreds of restaurants, businesses, schools and churches are participating in the project and supporting plant-based eating. They are ready to purchase these products. Being a Locavore is supporting a “hundred-mile diet”, eating locally grown and raised products. Appendix, Page 239 Page 13 Collateral Piece (cont.) Economic Incubators Inc | February 2018 | Fundraising Plan The Florida Culinary Accelerator at Immokalee FCA, provides the community with a licensed, 5,274 square foot kitchen space, state of the art equipment, a University of Florida food lab and business support services at affordable rates to enable food entrepreneurs to launch and grow small business lifted up by these resources. FCA is the inspiration of Economic Incubators Inc and the Collier County office of Business and Economic Development who will direct and support ongoing activities at this facility. Prepared by Holly Park – Fundraising Committee Volunteer Appendix, Page 240 Page 14 Non Profit Letterhead Economic Incubators Inc | February 2018 | Fundraising Plan Date Your Name Your Organization’s Name Street City, State ZIP Dear (Donor’s Name), (Begin with an emotional appeal. A success story or a narrative that tugs on your donors’ heart- strings hooks your readers. Keep it short, though!) Our community/nation/world is facing (problem(s) your organization is trying to fix) While we are actively (insert current solutions your organization is attempting), we need your help to make our efforts go even further! You can help us (solve the problem you’re trying to fix). Your support is crucial to our efforts to (solve the problem). If you’re able, we’d love it if you could make a donation of (amount) to help us achieve our mission and (solve the problem). Thank you in advance for your contribution. Your donation will go toward (insert effort, accomplishment or project). Here are the way you can make a donation: • Make a donation online at (URL) • Call us at (phone number) • Send a check in the pre-stamped envelope we’ve include (no cash, please!) • Text (keyword) to (text-to-give-phone number) Thank you again! Sincerely, (Signature of an organizational leader) (Typed name of organizational leader) P.S. (End with an update about an upcoming event, volunteer opportunity or other information) Appendix, Page 241 Page 15 Annual Fund Letter Economic Incubators Inc | February 2018 | Fundraising Plan Annual Fund Letter This letter is an example of an annual fund solicitation request. Month Day, Year First Name Last Name Street Address City, State ZIP Courtesy Title (Mr/Ms/Mrs) Last Name, XYZ Organization can only achieve its goals with the assistance of generous donations from members of our community. Without these donations, serving those in our are would not be possible. Since our organization relies on the generosity of individuals like you, we write to ask you to consider a donation to our cause. A donor envelope is enclosed for your convenience. We hope that you will help support our efforts. Thank you in advance for your generosity. Insert Your Signature Typed Name of Signature Appendix, Page 242 Page 16 General Donation Letter Economic Incubators Inc | February 2018 | Fundraising Plan General Donation This general donation letter can be customized for use any time you need to reach out to potential donors to request financial assistance. Month Day, Year First Name Last Name Street Address City, State ZIP Courtesy Title (Mr/Ms/Mrs) Last Name, XYZ Organization can only achieve its goals with the assistance of generous donations from members of our community. Without these donations, serving those in our are would not be possible. Since our organization relies on the generosity of individuals like you, we write to ask you to consider a donation to our cause. A donor envelope is enclosed for your convenience. We hope that you will help support our efforts. Thank you in advance for your generosity. Insert Your Signature Typed Name of Signature Appendix, Page 243 Page 17 Auction Item Request Economic Incubators Inc | February 2018 | Fundraising Plan Auction Item Request The following letter can be used to request item donations for a charity auction fundraiser event. Dear Insert Name Here, Our annual fundraiser, (fill in name of event), will be held this year on (fill in date) at (fill in location). As you know, financial support is extremely important to (fill in organization name), as we rely on donation to provide services in the community that are greatly needed. The (fill in name of event) attracts more attendees each year, but we depend on the added support of our friends in the business community who supply us with exciting auction items. Would you be willing to donate either a gift certificate or merchandise from your business? Someone from our committee will be contacting you to discuss your contribution and to share information about individual and group tickets. It is a win/win situation when we benefit from your donation and you receive the goodwill which comes as a result of your generosity. Our organization’ ability to continue to operate is due in large part to the generous support of individual donors who believe in our mission, as well as gifts from businesses and corporations. Thank you for your considering our request. Sincerely, (Print Your Name Here, Insert Title) Appendix, Page 244 Page 18 Special Event Attendance Economic Incubators Inc | February 2018 | Fundraising Plan Special Event Attendance This sample letter is designed to help promote ticket sales for special event fundraiser events. Month Day, Year First Name Last Name Street Address City, State ZIP Courtesy Title (Mr/Ms/Mrs) Last Name, This year, you’re invited to join us for our annual black tie event! The event will be filled with dinner, dancing and both live and silent auctions. It is a great opportunity to met others in the community who want to make a difference. Location: Date: Time: You may purchase tickets by calling __________ or by emailing __________. Tickets are priced at $__________ and the deadline for reservations is __________. We truly hope to see you there Thanks in advance for your support. Sincerely, Insert Your Signature Typed Name of Signature Appendix, Page 245 Page 19 Sponsorship Appreciation Economic Incubators Inc | February 2018 | Fundraising Plan Sponsorship Appreciation Be sure to thank sponsors for their generosity. If they know how much their efforts are appreciat- ed, they’ll be much more likely to continue to donate to your organization! Month Day, Year First Name Last Name Street Address City, State ZIP Courtesy Title (Mr/Ms/Mrs) Last Name, Thank you for agreeing to be a sponsor of this year’s XYZ Benefit to be held on __________ date__________ at__________ location__________. Securing sponsors for this important fundraiser is especially important this year, as we face the daunting challenges of this econom- ic crisis. Your support of $__________ is a great vote of confidence in our mission. As a spon- sor, you will receive thanks and recognition in the event program and will also be entitled to two tickets for the event. We look forward to seeing you there! Please accept our most sincere thanks for your support. Best Regards, Insert Your Signature Typed Name of Signature Appendix, Page 246 •Perfect for established or up-and-coming local restaurants •Showcase your signature dish in one of our cook- ing competition categories •6’ Vendor / Display Table at Event •Encouraged and welcome to give samples of your dish or specialty items •Restaurant / Business logo on 6’ banner on site •Restaurant / Chef / Dish Listed on Event Pro- gram & Social Media •Handouts / Freebies included in Event attendee gift bags (must be provided prior to event) •Restaurant / Business listed with Link of Culinary Website Event Page IMMOKALEE CULINARY CONNECTION DAY EVENT SPONSORSHIP OPPORTUNITIES MARCH 28, 2018 Florida Culinary Accelerator @ Immokalee 170 Airpark Blvd. #103 • Immokalee, FL •Standard 6’ table for display at the event •Food or items for sale only. Those looking to cook and do samples, must enter as a Guest Chef sponsorship. •Listed as Sponsor / Vendor on Event Program and Social Media •Handouts / Freebies included in Event attendee gift bags (must be provided prior to event) •Listed with Link on Culinary Website Event Page Table / Vendor Sponsors $350 Guest Chef / Competition Entry $750 New Culinary Accelerator members that join before March 20th are automatically granted a FREE competition entry & display space! ($750 Value!) Business & Economic Development This institution is an equal opportunity provider. For more information: Call 239.249.5911 ext 1 or visit www.TheCulinaryAccelerator.com Appendix J Appendix, Page 247 Demonstration Sponsorship $3,500 Media Sponsor - In Kind $10,000 Scholarship Fund Donation $1,000+ Cooking Competition Sponsor $10,000 This year, we are turning up the heat on our Culinary Connection Day with a Premiere Cooking Competition. Entries will be placed in one of five categories. As sponsor, you have the premiere opportunity to pitch your business throughout the day. •Naming rights to the Inaugural Culinary Connection Day Cooking Competition •Option to choose employees, friends, family as judges (up to 5) •Banner, display and promotion place in the entire competition tent throughout the event •Separate vendor or display space •Hourly announcements of your business during the event •Multiple banners with your business name / logo as the name sponsor inside the tent and event •Listed with Link on Culinary Website Event Page •Handouts / Freebies included in Event attendee gift bags (must be provided prior to event) •Yearlong recognition at the Culinary Accelerator as the 2018 Competition Sponsor Sponsor one of our three demonstration / teaching spots in the brand new culinary kitchen. As a demonstration sponsor, your company will have naming rights to a 30-minute demonstration taught by a culinary master during the event. •Business name and logo listed as “Your Business” Culinary Demonstration Sponsor. •8’ Banner on display as a backdrop during the spon- sored demonstration •Listed in event program as Official Demonstration Sponsor. •6’ table outdoor and indoor display space during the demonstration •Option to speak prior to your sponsored demonstra- tion •Handouts / Freebies included in Event attendee gift bags (must be provided prior to event) •Listed with Link on Culinary Website Event Page •Business will be mentioned hourly during our sponsor recognition over the event loudspeaker For more information: Call 239.249.5911 ext 1 or visit www.TheCulinaryAccelerator.com max. 3 available max. 1 available In-kind sponsorship starting 6 weeks prior to event date. •Name and logo listed as official media sponsor on all event materials. •Event or vendor space at event. •Option to choose employees, friends, family as cook- ing competition judges (up to 2) •8’ Banner on display on event property •Hourly announcements of your sponsorship during the event •Handouts / Freebies included in Event attendee gift bags (must be provided prior to event) •Listed with Link as Official Media Sponsor on Culinary Website Event Page Many of our members and potential members at the Culinary Accelerator are in need of a financial-based scholarship to begin or grow their food-based business. Donating directly to our Scholarship Fund will provide them financial assistance to offset their membership costs and allow them access to our facility and services. Please consider a donation to our scholarship fund. All donors will be recognized at the event and on our website. Appendix, Page 248 MEDIA SPONSOR ($10,000 in kind) IN KIND DONATION OF SERVICES (Printing, Event Rentals, Transportation, Food & Beverage) SCHOLARSHIP FUND DONATION Amount $__________ Cooking Competition Sponsor max. 1 available SPONSORSHIP COMMITMENT FORM I am choosing to sponsor the Immokalee Culinary Connection Day at the following level: TABLE OR VENDOR ($350) GUEST CHEF / COMPETITOR ($750) DEMONSTRATION SPONSOR ($3,500 COMPETITION SPONSOR ($10,000) SPONSOR INFORMATION NAME COMPANY ADDRESS PHONE EMAIL SIGNATURE COMPANY WEBSITE (for link): I understand that all art, materials and advertising content must be submitted before March 15 to be included at the time of the event. For relevant sponsorship types, pleas send a high resolution (PDF, EPS, PNG, JPG) file to info@theculinaryaccelerator.com for use on official materials. PAYMENT INFORMATION I WOULD LIKE TO PAY BY: Check Cash Credit Please contact us at 239.249.5911 ext.1 to make a secure payment. Appendix, Page 249 Economic Incubators, Inc. Naples Accelerator To: From: Date: Subject: Jace Kentner, Business & Economic Development Division Director Economic Incubators, Inc. January 3, 201 7 Letter of Transmittal - Deliverable 5 Enclosed is Final Deliverable 5 due by no later than one week before the Boards second meeting as required according to the contract. eliverable 5: repare and submit an updated draft business plan for the Accelerator Project. A draft for review and c mmcnt will be provided to Fiscal Agent by Dec mber 31, 2017, with the final updated bu ine plan to be submitted no later than one week before Lhe Boan.l's second meeting of January, 2018. If you have any questions, please let us know. Sincerely, �� Marshall Goodman President/CEO Economic Incubators Inc. 3510 Kraft Road, Suite 200INaples, Florida I 34105 Local: 239-249-5911 !Toll Free: 855-949-5911 www.naplesaccelerator.om Appendix K Appendix, Page 250 ECONOMIC Incubators, Inc. A Business Plan for Collier County Innovation Accelerators Update JANUARY 3, 2017 Deliverable 5 - Final Appendix, Page 251 Economic Incubators, Inc. | January 2017 | Business Plan 2 Table of Contents Executive Summary .......................................... 03 Mission Statement ................................................ 04 Vision ................................................................... 04 Goals and Objectives ........................................... 04 Description of Business ................................ 05 Company Ownership/Legal Entity ....................... 05 Overview & Operations ........................................ 05 Organization & Management ....................... 06 Organization & Structure ...................................... 06 Board of Directors ............................................... 07 Management Team & Volunteers ........................ 08 Assisting Organizations ........................................ 08 Market Analysis ................................................. 09 Environmental Scan ............................................ 09 Target Market ...................................................... 10 Competitors ........................................................ 11 Challenges ........................................................... 12 Opportunities ....................................................... 13 Marketing ............................................................. 17 Milestones & Implementation ................... 18 Financial Plan .................................................... 19 Appendix .............................................................. 21 Appendix, Page 252 Economic Incubators, Inc. | January 2017 | Business Plan 3 Executive Summary The journey began through a white paper, business plan, and the 2014 Collier County Economic Development Plan, to embrace the concept of launching two Accelerators - one in the western part of Collier County (The Naples Accelerator) and one in the eastern part of the county (The Florida Culinary Accelerator @ Immokalee). Both accelerator concepts receiving broad acceptance and support from the community, including many local editorial pages. In addition, Collier County administrative officials, County Commissioners, and a wide variety of discussions with area university officials, business organizations, interested citizens and community based groups all supported these efforts. Collier County has played an instrumental role in the creation, support and development of EII and its economic model. Through business model development, EII was original hosted by CareerSource of Southwest Florida. This provided supportive operational funding and integrated a joint partnership by increasing exposure to state and federal grant opportunities. In September 2014, Economic Incubators Inc., (EII) a private non-profit 501(c)(3) was formed focused on supporting business entrepreneurship in Collier County with a public purpose. The EII current Board is composed of local business leaders supported by three professional staff, and a host of committed volunteers. EII has sought to fill a gap in the Collier County economic development landscape by creating “soft-landing” business accelerators that recruit, support, and develop both local and non-local innovation entrepreneurs, offering work space, and a range of business services. In doing so, the goal is to play a key role in diversifying the Collier County economic landscape by creating innovative 21st business opportunities and support services for our citizens and their children. Toward that end, EII has received in partnership with Collier County, state and federal grant dollars to build two business Accelerators: one in Naples that focuses on companies Innovating in technology related business services and products, and one in Immokalee devoted to culinary products and services, as well as a local micro-market in Naples called Woodstock’s, that enables entrepreneurs direct access to a dynamic Southwest Florida food market-place. The market supports that both Accelerators are uniquely positioned in the Southwest Florida market with opportunities for continual growth over the next several years. Picture below depicts Naples Accelerator. Appendix, Page 253 Economic Incubators, Inc. | January 2017 | Business Plan 4 Mission Statement To help entrepreneurs with business or culinary backgrounds to succeed and achieve new heights by providing co-working space, kitchen access, mentoring, innovation, and state of art facilities. Vision To provide Southwest Florida people the tools, inspiration and networking necessary to Accelerate and expand their businesses. Goals and Objectives The goal is to recruit and grow the next generation of business enterprises in the region that will ultimately become the economic engine that will assist the Collier County economy and bring innovation, talent, and 21st century job opportunities to our citizens. The Florida Culinary Accelerator @ Immokalee builds successful innovative food businesses. The objectives include hiring qualified staff and developing partnerships assisting the Participants with essential support to launch their ideas and businesses. This can be accomplished through such connections to legal, administrative, marketing and funding support. Executive Summary (cont.) Appendix, Page 254 Economic Incubators, Inc. | January 2017 | Business Plan 5 Company Ownership/Legal Entity Economic Incubators, Inc. is a non-profit 501 ( c) 3 registered with the State of Florida. Overview & Operations The Naples Accelerator has several components: it is a business accelerator, provides space and knowledge for international soft-landing companies, and supports companies looking for technology and creative co-working spaces. It operates in 10,000 sq. ft. at 3510 Kraft Road Suite #200, off Pine Ridge Road, Naples, Florida 34105 under an agreement with Collier County. It currently provides office space for 37 companies for a monthly fee, with companies tailoring their use of the accelerator space from simple co-working space, half office, full office, and access to a double suite for those with larger operations and staff. Fee paying members of the Accelerator can select from plans that provide business support based on membership level. The Naples Accelerator offers access to basic legal, marketing, finance, and administrative support, and mentored guidance, assistance, and recommendations. In addition, the Accelerator hosts a wide range of meetings and activities that allow members to enjoy networking, venture funding and mentoring opportunities from the exceptional wealth of knowledge and experience from Collier County residents. The Florida Culinary Accelerator @ Immokalee builds successful innovative food businesses. Its goal is to provide a one-stop opportunity for culinary entrepreneurs looking to develop or grow their culinary product or service. The leased area is a former warehouse/manufacturing space totaling 5,274 square feet, with a 3,600-square-foot exterior storage cage located at Collier County’s Immokalee Regional Airport, 170 Airpark Blvd. #103, Immokalee, Florida 34142. The Woodstock’s micro market serves as a retail outlet for member companies of the Naples Accelerator and The Florida Culinary Accelerator @ Immokalee. It will provide culinary entrepreneurs direct access to innovative retail spaces, allowing them to gather experience and consumer data and feedback so critical to gaining access to a wider retail market. At the same time, it deploys state of the art technology, and provides for a test location for future retail shopping innovations. The Woodstock’s micro market snack shop is 223 square feet of space located below the Naples Accelerator at 3510 Kraft Rd. #103 Naples, Florida 34105. Description of Business Appendix, Page 255 Economic Incubators, Inc. | January 2017 | Business Plan 6 Organization & Structure Economic Incubators, Inc., is the headquarters that oversees the operations of the Naples Accelerator, Culinary Accelerator and Woodstock’s micro market. Staff consists of three (3) FTE positions including the President/CEO, Chief Operating Officer (COO) and Business Specialist. The Florida Culinary Accelerator @ Immokalee will employ three (3) FTE to manage day to day operations, ensure regulatory compliance and safety, maintenance and cleanliness of equipment and stations, outreach, recruitment, and support of distribution, catering, and Woodstock’s order fulfillment (please see job descriptions in the appendix). They will be assisted in the business support operations through staff from the Naples Accelerator and a cadre of volunteer professionals. Economic Incubators, Inc. - Business Structure Organization & Management Appendix, Page 256 Economic Incubators, Inc. | January 2017 | Business Plan 7 Board of Directors The Economic Incubators, Inc. (EII) Board of Directors (Board) serve the critical management oversight and control role for the organization. The Board shall be comprised of no more than fifteen directors. The Board meets quarterly, with an Executive Committee composed of a Chair, Vice-Chair, Treasurer, and Secretary. The Board has created three committees for the FY17-18 year: Finance; Fund-Raising; Planning. To see a list of the current board members, visit the website link at: http://naplesaccelerator.com/about/team/ Management Team & Volunteers Organization & Management (cont). Appendix, Page 257 Economic Incubators, Inc. | January 2017 | Business Plan 8 Management Team & Volunteers (cont.) EII is currently supplemented with a core group of volunteers with extensive industry experience. Organization & Management (cont). Assisting Organizations • Collier County Office of Business and Economic Development • University of Florida: Institute of Food and Agricultural Sciences • Florida Gulf Coast University • Immokalee Chamber of Commerce • Naples Chamber of Commerce • Southwest Florida Regional Alliance • SCORE • Small Business Development Center • Southwest Florida Regional Planning Council Appendix, Page 258 Economic Incubators, Inc. | January 2017 | Business Plan 9 Environmental Scan Population growth has traditionally driven economic growth in Southwest Florida which is a favorite destination for retirees as full-time or seasonal residents. The area’s competitive advantage has been its beaches, natural resources, recreational opportunities, and mild winter weather making tourism an important industry that provides employment and jobs to a large percentage of the workforce. Additionally, agriculture continues to be an important component of the overall regional economy. For these reasons, the regional economy is very seasonal creating more employment in the busier winter season. Southwest Florida has a variety of different cultures, habitats and identities. The western coastal communities and interior agricultural lands are patchwork of vibrant coastal cities; suburban communities, and rural farm towns linked together by a central urban corridor. Indeed, the eastern part of Collier County, along with Hendry and Glades County was designated by the U.S. Federal government as one of only four (4) “Promise Zones” in the U.S. in dramatic recognition of the lack of resources and infrastructure in these areas. The recognition of the need for greater culinary assets to support the agriculture and tourism sectors are key rationales for the support shown in recent years by the State of Florida, the United States Department of Agriculture, and the United States Department of Economic Development Administration in grant proposals initiated through a partnership between Collier County government and EII. The trend self serve micro markets were developing rapidly, therefore Woodstock’s micro market was established. This is unique to the area, and was awarded the first license of its kind in the State of Florida (according to Carl Holzworth, Division of Food Safety, Florida Department of Agriculture and Consumer Services). Market Analysis Appendix, Page 259 Economic Incubators, Inc. | January 2017 | Business Plan 10 Market Analysis (cont.) Target Market Appendix, Page 260 Economic Incubators, Inc. | January 2017 | Business Plan 11 Market Analysis (cont.) Competitors A review of the Southwest Florida region depicts that the Naples Accelerator and The Florida Culinary Accelerator @ Immokalee are uniquely well positioned. With a range of business support services not offered by others in the area. The competition focus on Class A office space rental and not business start-up or acceleration services. Workspace similar to the Naples Accelerator in Naples and surrounding area: • Venture X - Naples https://www.venturex.com/locations/florida/naples/ • Premier Executive Center - Naples and Ft. Myers http://www.premiercenter.net/ • Regus – Naples https://www.regus.com • Enerspace – Naples http://www.enerspacecoworking.com/ • Endeaver Innovative Workspace – Ft Myers http://endeavorworkspaces.com/ • The Rocket Lounge http://therocketlounge.com/ • Coconut Point Executive Center – Estero http://coconutpointexecutivecenter.com/ Commercial kitchens similar to The Florida Culinary Accelerator @ Immokalee: • Your Pro Kitchen - CLOSED https://www.yourprokitchen.com/ • Commercial Kitchen Fort Myers LLC – Ft. Myers http://commercialkitchenfortmyers.com/ Appendix, Page 261 Economic Incubators, Inc. | January 2017 | Business Plan 12 Market Analysis (cont.) Challenges There are other accelerators, incubators, and co-working spaces located in the region. The Naples Accelerator comparative local businesses that were found in the review, are private for profit shared office space or business incubators. Thus, they are an entirely different business model with their primary goal being profit and capital gain for their owners and investors. While the Naples Accelerator embraces publicly held goals of serving the residents of the region, through education, training, mentoring by diversifying the Collier County economy. The pricing at the Naples Accelerator for participant office space is comparable across all models, with low rates starting at $99 per month and ranging progressively higher based on the size of space and a la carte provision of renting space (e.g., conference room) or use of equipment such as printers, laptops, computers, or display/projectors/video walls. None of the above models provide such an array of business support services as The Naples Accelerator, none provide as broad-based connection to soft-landing services, and none bring the depth of business and local experience as does the EII board members and volunteers, and none are recognized for bringing an array of international companies and global business organizations. It is clear that there is a scarcity of competitors in the Southwest Florida region to the Florida Culinary Accelerator @ Immokalee model, especially in the eastern region of Collier County where there are currently none in existence. For the Woodstock’s micro market, the concept of buying meals within a facility other than a traditional restaurant or fast food facility has been evolving for many years. Progressive convenience stores have partnered with franchise fast feeders for many years. Even more progressive c-store companies have created their own private branding, with sit-down eating facilities to accompany their made to order or grab and go offerings. Walmart shoppers are used to seeing McDonalds or Burger Kings within those big box stores. The convenience factor continues to drive the food retail space. Grab and go food service has become very accomplished in the convenience industry, especially paired with mobile technology applications, as has home delivery of custom ordered meals. As BlueZone, Healthcare Network of Southwest Florida, and local school districts draw greater linkages between health, nutrition and the food we eat, the growth in this emerging market can be great especially given the wide range of fruits and vegetables grown by the Collier agricultural sector. Appendix, Page 262 Economic Incubators, Inc. | January 2017 | Business Plan 13 Market Analysis (cont.) Opportunities In addition to a modern business services office where member companies get access to the full-line of services offered at The Naples Accelerator, the Florida Culinary Accelerator @ Immoaklee generates fee revenue through the provision of both culinary space and services. This includes the following: Culinary Production & Manufacturing State-of-the art culinary equipment and work spaces divided into different stations and areas, all of which can be rented through an on-line reservation system by the hour, day, week, or month: 1. The “cold-process” station is designated for the preparation and processing of produce which is widely grown in the surrounding Immokalee area which includes post harvesting preparation, cleaning, peeling, batch drying, and size reduction. 2. A “cold assembly” station allows for limited packaging of refrigerated, frozen or ambient products, with sealing, labeling and shrink wrapping equipment. 3. A “hot process” station that provides for a range of capabilities including blanching, steaming, cooking, roasting, baking, and smoking. 4. A “dry process or bakery” station that allows for the production of fruit pies, breads, cookies, and other baked goods, as well as seasoning blends, vegetables, and herbs. 5. A rentable cold storage space is also provided through a large walk-in and divided refrigerator, and walk-in freezer which provides flexibility in handling raw and finished product. 6. A fee based food sciences laboratory staffed by the University of Florida (UF), Institute of Food and Agricultural Sciences (IFAS), that will provide food testing, FDA labeling, and consulting. The engineering of the facility into a variety of stations with separate temperature controls allows for great flexibility in terms of “plug and play” of equipment and uses. Expecta- tions are to enhance initial capabilities, by acquiring addi- tional manufacturing and processing equipment as budget and demand allow. Appendix, Page 263 Economic Incubators, Inc. | January 2017 | Business Plan 14 Market Analysis (cont.) Opportunities (cont.) Technology Advancements EII remains highly interested in providing high pressure processing (HPP) technology to the Immokalee and Southwest Florida region. HPP technology has proven to be a successful and attractive alternative to food producers seeking to enhance the quality of the product, especially in area fruit and vegetable product categories where Florida has numerous growing advantages. EII staff will continue to explore state, federal, and private grant opportunities for acquiring the finances necessary to acquire and house this technology. In addition, staff will explore the potential for rental of this equipment so demand can be further measured. Culinary Product Distribution Distribution support is a key service required by start-up entrepreneurs as they seek to enter or build their marketshare and brand recognition. By providing a fee based coordination of distribution activities from post-production to fulfillment, we will be able to provide compa- nies with streamlined efficiencies in the distribution process, allowing companies to focus on what they do best - create profitable culinary products. The UF Food laboratory will also be utilized to provide extensive specialized analysis of culinary products and packaging, as shelf-life studies are critical to a successful distribution experience. Appendix, Page 264 Economic Incubators, Inc. | January 2017 | Business Plan 15 Market Analysis (cont.) Opportunities (cont.) Catering, Prepared Meals, Food Trucks The Florida Culinary Accelerator @ Immokalee will assist for a fee, member companies with catering, prepared meals and mobile food truck opportunities throughout the region, by providing them with important resources to start and grow these equipment and technology intensive businesses. The concept of utilizing a unified online reservation system and interface, assistance with information technology, equipment rental, and assistance in negotiating agreements with local organizations, This can reduce the barriers for entry for entrepreneurs into these stable and profitable business sectors. Workforce & Continuing Education Workforce and continuing education is a key aspect of the rapidly changing culinary field, from new discoveries in innovations in food and health sciences, the introduction of new technologies and techniques in both processing, packaging, marketing, and delivery of food, to an ever-changing regulatory environment at the local, state, and federal levels. EII will provide partnerships with our local and regional educational institutions, as well as a core group of experienced volunteer professionals and community organizations. Fee based seminars, culinary master classes, and cooking and vendor demonstrations will be hosted at The Florida Culinary Accelerator @ Immokalee. These educational tools will become a focal point for food innovation and provide the needed resources for food entrepreneurs to achieve success. Additionally, numerous state and federal grants in the workforce and continuing education area currently exist especially in terms of meeting the increasing demands and needs of Florida’s food-service industry. EII will work along with CareerSource SWFL and established educational providers to apply for these awards. Appendix, Page 265 Economic Incubators, Inc. | January 2017 | Business Plan 16 Market Analysis (cont.) Opportunities (cont.) Woodstock’s Micro Market Naples is deservedly noted for fine restaurants with many ethnic choices. However, the emerging micro market self help/grab and go sector in the area is weak to nonexistent. Through a planned “Made in Immokalee” campaign that will provide a branding label on food products both at the market and those developed and manufactured at The Florida Culinary Accelerator @ Immokalee, these efforts will support a strong brand presence around locally grown and crafted products. WoodstocksMarket.com @woodstocksmarket (239) 249-5911 3510 Kraft Rd. #103 | Naples FL, 34105 Join the self-serve, local-sourced revolution. Appendix, Page 266 Economic Incubators, Inc. | January 2017 | Business Plan 17 Marketing The Naples Accelerator has successfully utilized a wide range of marketing tools and approaches over the past several years. This includes the development of web pages, the heavy use of social media and related online advertising tools, widely distributed printed materials, participation in local and national business events and conferences, word-of-mouth from EII Board members, and supportive coverage from regional and local news agencies. Data support and analysis from communication professionals from Collier County government has been superb. All of the previously utilized strategies will be continued, with greater synergy across audiences achieved with the opening of The Florida Culinary Accelerator @ Immokalee. The success the Naples Accelerator has had in recruiting companies will be continued and expanded with The Florida Culinary Accelerator @ Immokalee. Given staff size, all EII staff members are expected to play a daily role in the marketing of the facilities as brand ambassadors. This includes playing a role in the development of web pages, social media, traditional marketing materials, and participation in regional and local networking events. Utilization of the broad based and institutionalized agricultural industry located in the eastern sector of Collier County, along with the prestige and visibility of the University of Florida faculty and staff will also greatly benefit marketing efforts. In addition to marketing itself as premium convenience alternative to fast food restaurants or time-consuming sit-downs, Woodstock’s Market will have the added advantage of being the prime supplier of locally crafted quality food items from The Florida Culinary Accelerator @ Immokalee. In an age where community involvement by local businesses has become almost a requirement to attract younger shoppers and those who are actively community-aware with their purchasing power, Woodstock’s support of local entrepreneurs from Immokalee will be an important marketing tool, in addition to supplying quality food service items that will not be available at other quick-serve alternatives. A key marketing strategy of a Woodstock’s Market will be reaching out to those in surrounding offices and businesses. Appendix, Page 267 Economic Incubators, Inc. | January 2017 | Business Plan 18 Milestones & Implementation Scope of Services per County Contract • Deliverable 1 - Payroll reports • Deliverable 2 - Monthly Financials • Deliverable 3 - Accelerators program support • Deliverable 4 - Budget to Actual • Deliverable 5 - Business Plan • Deliverable 6 - 990 Return • Deliverable 7 - Quarterly Job & Investment Report Tentative Dates (subject to change) • December 11, 2017– Immokalee Business office opens • December/January - Staffing interviews and on board for Immokalee • January - Immokalee opens • FY 2018 - recruit participants to both accelerators Critical Path for Operations • Staffing Selection • Staff Hire and Orientation • Testing Equipment Critical Path Item to Open the Culinary Accelerator • HAACP Plan completed • Certificate of Occupancy (CO) on the building • Food Handling Permits (such as state licensing/FDA) Appendix, Page 268 Economic Incubators, Inc. | January 2017 | Business Plan 19 Financial Plan The financial drivers for EII derives from the following: 1. Fee income generated by The Naples Accelerator, and the various services of The Florida Culinary Accelerator @ Immokalee. Since inception, the Naples Accelerator has served 68 companies, 37 which are currently active members (number varies). This can be found online at: http://naplesaccelerator.com/about/our-members/ Fee Income Revenue Drivers: • Demand for co-working and private office space continues to be strong in the SWFL market. The demand for co-working space especially from the millennial generation is very high and a preferred work environment. • Interest in business plan development, venture fund coaching, technology support is especially high. • As more innovation companies move into the area, interest in venture/angel funding continues to grow. 2. Collier County financial support as detailed in the FY17-18 Collier County - EII contract. The FY17-18 Collier County contract supports an increase in County funding from $505,000 to $800,000 to support the first-year initial opening and operation of The Florida Culinary Accelerator @ Immokalee. In future years, it is expected that a reduction of $200,000 in financial support will occur in FY 18-19, with reductions in future years also expected as the both Accelerators gain self-sufficiency. 3. Private fund-raising, corporate gifts, and in-kind donations. The EII Board and staff are attuned to the need to replace governmental funds in the next several years through both increases in business income and greater private fund-raising activities (private hosted dinners; naming gifts; scholarship funds). The EII Board has charged both its Planning Committee chaired by Mr. Richard Grant and its Fund-Raising Committee chaired by Mr. Steven Wheeler with further development of a program plan for enhancing income, and for a major fund-raising campaign in the coming year. Important roles in the campaign will also be played by Executive Board members Mr. Fred Pezeshkan and JP Garnier. Appendix, Page 269 Economic Incubators, Inc. | January 2017 | Business Plan 20 Financial Plan (cont.) The financial analysis has been prepared by EII volunteer Mr. Fred Krieger, CPA and articulates a 4-year revenue plan. Revenue assumptions are based on 3 years of experience within the Collier County and SWFL business community for the Naples Accelerator, and informational meetings, briefings, and discussions with local companies, distributors, and universities, as well as review of similar Accelerators across the county. In addition, a volunteer committee (composed of individuals from The University of Florida IFAS, the University of Florida, staff members of the Collier County Division of Business & Economic Development, and local and regional experienced professionals in the food manufacturer, processing, safety, and distribution industries) has worked over the past year evaluating potential pricing, occupancy rates, processes, marketing and related services for the Florida Culinary Accelerator @ Immokalee. Financial Plan FY 2018-FY 2021 $ in thousands Appendix, Page 270 Economic Incubators, Inc. | January 2017 | Business Plan 21 Appendix Business Plan Financials 2018-2021................ 22 Business Plan Financials 2018.......................... 23 Business Plan Financials 2019........................ 24 Business Plan Financials 2020........................ 25 Business Plan Financials 2021........................ 26 Timeline............................................................ 27 Technology ...................................................... 28 Immokalee Job Descriptions ........................... 29 Appendix, Page 271 Economic Incubators, Inc. | January 2017 | Business Plan 22 Appendix Business Plan Financials 2018-2021 Appendix, Page 272 Economic Incubators, Inc. | January 2017 | Business Plan 23 Appendix Business Plan Financials - Fiscal Year 2018 Appendix, Page 273 Economic Incubators, Inc. | January 2017 | Business Plan 24 Appendix Business Plan Financials - Fiscal Year 2019 Appendix, Page 274 Economic Incubators, Inc. | January 2017 | Business Plan 25 Appendix Business Plan Financials - Fiscal Year 2020 Appendix, Page 275 Economic Incubators, Inc. | January 2017 | Business Plan 26 Appendix Business Plan Financials - Fiscal Year 2021 Appendix, Page 276 Economic Incubators, Inc. | January 2017 | Business Plan 27 AppendixAppendixAppendixAppendixAppendixAppendix Appendix Timeline Appendix, Page 277 Economic Incubators, Inc. | January 2017 | Business Plan 28 Appendix Technology At the Economic Incubators Inc., Technology begins with its headquarters. • Quickbooks Online for bookkeeping and all accounting needs minus payroll • Trinet HR Solutions for payroll, benefits https://www.trinet.com • Grasshopper - cloud based solution to run the business using cell phones. http://grasshopper.com • Nexudus Spaces - Customer relationship management (CRM) currently configured for Immokalee, • Event Brite - manage events - RSVPs • Constant Contact - email blasts and lunch and learn invitations • Hootsuite - social media (Facebook, Twitter, Instagram, Linken, and Google Plus) • Microsoft Sharepoint - All locations, shared files and Board Members portal • Google docs - Master company spreadsheet for the Naples Accelerator • CenturyLink - Fiber and Internet connections Woodstock’s Micro Market • Yoke - mobile application to place orders • Vend - management system, stock control • Heartland - banking system • Cisco Meraki - camera system Appendix, Page 278 Economic Incubators, Inc. | January 2017 | Business Plan 29 Appendix Immokalee Job Descriptions Appendix, Page 279 Economic Incubators, Inc. | January 2017 | Business Plan 30 Appendix Immokalee Job Descriptions Appendix, Page 280 Economic Incubators, Inc. | January 2017 | Business Plan 31 Appendix Immokalee Job Descriptions Appendix, Page 281 Economic Incubators, Inc. | January 2017 | Business Plan 32 Appendix, Page 282 1 From:Jennifer Pellechio <jpellechio@naplesaccelerator.com> Sent:Thursday, March 8, 2018 3:47 PM To:James D. Molenaar; Mark J. Pasek Cc:Dwight E. Brock; Commissioner Burt Saunders; Crystal K. Kinzel; Fred Pezeshkan; Richard Grant; Naples Business Accelerator (mgoodman.ccatalyst@gmail.com); Fred Krieger; KentnerJace; KraftHendrickPhyllis; Ochs, Leo; Christopher Wegner Subject:5 Day notice Public Records - Tom Grady Attachments:Re: Tom Grady Bio; Re: Tom Grady Bio; Tom Grady Bio; Re: Board Portal; Board Portal; Request by County and Tom Grady ; Re: Marketing (and financial projections and obligations); Re: Marketing (and financial projections and obligations); P - Welcome & Financials; Re: ElI Board of Directors Agenda Packet Jim & Mark,  I might have figured out a way. Let me know if you can open these.   Regards,  Jen   Jennifer Pellechio, MBA, CEcD, InBIA  Chief Operating Officer  Economic Incubators, Inc.  Naples Accelerator  3510 Kraft Road, Suite #200  Naples, FL 34105  1.239.249.5911 x 701 (office)  1.239.707.3788 (cell)  Email | Website   The Florida Culinary Accelerator @ Immokalee  170 Airpark Blvd. #103   Immokalee, Florida 34142  1.239.249.5911 x 1   Website  Appendix L Appendix, Page 283 1 From:Nikki Kreuzer <nkreuzer.ccatalyst@gmail.com> Sent:Tuesday, January 17, 2017 3:01 PM To:Jennifer Pellechio Subject:Board Portal All board members have been uploaded in the portal. When you go to demonstrate and open their individual profile, try not to use Garrett Richter or Tom Grady because I don't have all of their info such as address, title within their company, etc. -- Nikki Kreuzer | Associate The Naples Accelerator | 3510 Kraft Road, Suite 200 | Naples, FL Mobile: (239) 440-8884 E-mail: nkreuzer.ccatalyst@gmail.com Appendix, Page 284 1 From:catalyst <jpellechio.ccatalyst@gmail.com> Sent:Thursday, October 20, 2016 5:16 PM To:Lisa Lotocke Subject:P - Welcome & Financials Priority   This was all raised by our Board Member. This is important.   We will most likely need a meeting with him.   Thanks,  Jen  From: Jennifer Pellechio   Date: Wednesday, October 12, 2016 at 10:03 PM  To: "Thomas R. Grady"   Cc: Naples Business Accelerator , Shawn , Naples Business Accelerator   Subject: Re: Welcome & Financials  Good Evening Tom,  Our CPA firm Noack & Company, LLC who Shawn Kroohn is our lead contact has the responsibilities of providing all  financial statements and all accounting records. As you might be aware I have only been with the Naples Accelerator since June 13th and also have been trying to  understand our financials since inception. Below in red text I have tried to address any of your questions that I am  familiar with. Most of these will be responded by our CPA firm.  There are a few facts that I found were critical to understanding the operations of EII.  The first State award was provided directly to the County (I believe 2014) 2015 State money was Vetoed 2016 State funds were awarded to EII The County has an annual contract with EII that requires specific financial reporting per their requirements The County in FY16 contract funded staff and operating costs plus rent and insurance for the Naples Accelerator The County FY17 contract funds staff plus rent and insurance for the Naples Accelerator (no operating costs) I will be glad to sit with you and our CPA at our earliest convenience and discuss this in detail. Do you have availability  next week? Regards, Jennifer  Appendix, Page 285 2 From: "Thomas R. Grady"   Date: Wednesday, October 12, 2016 at 5:27 PM  To: Jennifer Pellechio   Cc: Naples Business Accelerator , Shawn   Subject: Re: Welcome & Financials Thanks, Jennifer, but I must not have been clear on what I was looking for. I see that you have copied Shawn, I believe he is our accountant, so he may be able to better respond. Shawn, Jennifer attached financials there were only two weeks different then those accompanying the last board report. As a new board member, I am trying to get up to speed regarding financials from inception to date. To do that, I need copies of all financial statements from inception to date. Shawn will provide this Similarly, I want to compare our actual financial performance with our budgeted performance. I'm sure you have already done that and I don't want to reinvent the wheel. If you haven’t, then I will, but I will need copies of all of our budgets to date from inception. I suspect that these have changed a lot, that is common in new organizations, but I want to know what we have represented to the county, the state and others, and how our actual performance relates to the expectations we have created. Shawn will provide this Do you have these materials that you could share with me? Shawn will provide this Also, the format of these financial statements is unusual. I'm quite familiar with financial statements and these take a bit of deciphering to understand. They do not compare performance with prior years or with budgeted performance. I suspect that you could print those reports fairly easily since you have that data, would you please do so? The first year of operation the agency financials were handled by Workforce Development Board, therefore I believe that when Noack & Company, LLC took over then started with those beginning balances. I’m not sure of the  exact date. Shawn will provide more on this. One other question I have is the inclusion of in-kind contributions. Why did we do that? Are we obtaining the treasury, state and county required documentation, if any? Do those contributions in any way affect the moneys we receive from third parties? Why are they considered revenue? What is an in-kind expenditure? Is this barter? I see the in-kind donations equal the in-kind expenditures, I have never seen this in nonprofit financials before. In-Kind is required by the County Contract. I’m not exactly sure why this is shown on our financials other than the County has requested this. Shawn will provide more on this. The Barter is different from the in-kind. When I started I was informed that a few members had a bartering agreement. This is not encouraged or supported by the county. EII is transiting away from this. Shawn will provide more on this. The revenue does not make sense to me. I understand rent and payment for services and nothing else. Discounts given appears to be uncollected rent or payment for services? Is this intended to be an accrual basis statement? Cash basis? Some combination? What percent of payment for rent and services are we receiving as opposed to what we are entitled for by contract? At the last board meeting, we were advised that many companies could not afford to pay what they had agreed to pay. As a trustee and boardmember, I want to be sure that we are good stewards of the moneys we receive from donors and want to know what to expect when we rent space and Appendix, Page 286 3 provide services. If this is realization of bad debt, we should say so, rather than describing in a way that sounds like a negotiated discount. Shawn will provide more on this. EII informs new clients for the first 6 months the rent is subsidized by the county at a 50% discount. However, we do not and will not ever receive this money from the County. I know we have been working on collecting A/R from clients and have been pretty successful. Have we filed tax returns? Might I get copies? Will we at some point prepare our financial statements in accordance with GAAP? Do we intend to audit these statements? Are we required by state, county or other to audit? Shawn will provide more on this. When all is printed, I would appreciate the opportunity to sit down with you and walk through these, including the most recent budget. I have many more questions and it would probably be much easier to sit down and walk through them. Thank you for your attention and patience. I have much to learn! Tom P.S. Jennifer, would you please send the agenda for the next board meeting? And is the first hour for the executive committee only? Shawn, will you be attending? Thanks. The agenda will be sent out on October 18th, we are still working on the attachments. The Executive meeting is held 30 minutes prior. Shawn can you attend? On Sep 16, 2016, at 1:21 PM, Jennifer Pellechio <jpellechio.ccatalyst@gmail.com> wrote: Hello Tom, We have attached information provided by our accountant and what we just sent to the county for reimbursement approval. I believe this is a good start to your request. I do know that I haven't had time to work with the accountant yet regarding the budget that was presented to the board at the last meeting. We understand that a few line items need to be changed. Let us know what else you might need. Have a wonderful weekend. Regards, Jennifer On Mon, Sep 12, 2016 at 10:07 PM, Jennifer Pellechio <jpellechio.ccatalyst@gmail.com> wrote: Appendix, Page 287 4 Hello Tom, I will work with our CPA and gather all the requested information. I hope to have this for you by the end of this week. Have a wonderful evening. Regards, Jennifer On Sat, Sep 10, 2016 at 7:59 PM, Thomas R. Grady > wrote: Pretty simple, really. I’d just like to see all financials and budgets from inception to date. I would like financials to compare actual with budget (also ITD) so we can see how we have performed relative to budget and pro forma. I’m also interested in receiving all materials describing our program and our goals, including job creation predictions and actual results. I’m sure all board members would like to see, if they haven’t yet. Thanks for following up. Tom On Sep 9, 2016, at 3:34 PM, Jennifer Pellechio <jpellechio.ccatalyst@gmail.com> wrote: Good Afternoon Mr. Tom Grady, I want to welcome you again to the Economic Incubators, Inc. Board of Directors. We are pleased to have your knowledge and experience serving on the board. As we discussed briefly after the meeting, you requested documentation to assist with the financial presentation to the board. I want to make sure and provide you everything you need, therefore can you please send me a detailed list of your requested information. Also I would like to schedule a meeting including our accountant to finalize the upcoming FY Budget. As you pointed out we have a few categories not properly depicted. Any assistance is greatly appreciated. Regards, Jennifer Jennifer Pellechio, MBA, CEcD Appendix, Page 288 5 Naples Accelerator 3510 Kraft Road, Suite 200 Naples, FL 34105 239.707.3788 email: jpellechio.ccatalyst@gmail.com Naplesaccelerator.com Appendix, Page 289 1 From:Jennifer Pellechio <jpellechio.ccatalyst@gmail.com> Sent:Tuesday, January 17, 2017 3:01 PM To:Nikki Kreuzer Subject:Re: Board Portal Ok – thanks! I’m probably going to take the next few months to get everything correct with them.  From: Nikki Kreuzer   Date: Tuesday, January 17, 2017 at 3:00 PM  To: Jennifer Pellechio   Subject: Board Portal  All board members have been uploaded in the portal. When you go to demonstrate and open their individual profile, try not to use Garrett Richter or Tom Grady because I don't have all of their info such as address, title within their company, etc. -- Nikki Kreuzer | Associate The Naples Accelerator | 3510 Kraft Road, Suite 200 | Naples, FL Mobile: (239) 440-8884 E-mail: nkreuzer.ccatalyst@gmail.com Appendix, Page 290 1 From:Jennifer Pellechio <jpellechio.ccatalyst@gmail.com> Sent:Wednesday, October 19, 2016 10:02 PM To:Marshall Goodman Subject:Re: ElI Board of Directors Agenda Packet Thanks –talk tomorrow.   From: Marshall Goodman   Date: Wednesday, October 19, 2016 at 9:10 PM  To: Jennifer Pellechio   Subject: Fwd: ElI Board of Directors Agenda Packet  FYI   Sent from my iPhone  Begin forwarded message:  From: Richard Grant  Date: October 19, 2016 at 8:07:12 PM EDT  To: Goodman Marshall <raygood32@gmail.com>  Subject: Re: ElI Board of Directors Agenda Packet  Marshall  Comments. Not criticism   1. 30 minutes is not adequate for the EC to address the items on its agenda. Others will also arrive early for 10 am meeting. It's too crowded. Suggest starting it at 9 am or 8:45  2. We need to see financials before meeting full board. Tom Grady was critical of this the last time. He will rip it apart if not sent in advance. I know him   3 Woodstock. I've expressed my views on this to you. I don't care about a 200 SF lease. I do care  about creating a business venture with modiv and what it entails and having a business plan. If  we have one get it sent.   4. In my opinion the EC and board should not be asked to vote on and approve things without getting written materials that explain it in advance   5. If doing all this by next Tuesday is not realistic I suggest you call Dolph and consider postponing the full board meeting and just have the EC meet next Tuesday. The EC can approve  anything needed timely.   My two cents. Your call. Not trying to be a pain. Trying to help.   Happy to talk by phone tomorrow.   Sent from my iPhone   Appendix, Page 291 2 On Oct 19, 2016, at 7:06 PM, Jennifer Pellechio <jpellechio@naplesaccelerator.com> wrote:  Executive Board Members,  The Executive Board Agenda is attached, I included the full board packet with the earlier message.  Sorry for the confusion.   Have a wonderful evening.  Regards,  Jennifer  Jennifer Pellechio, MBA, CEcD, InBIA  Economic Incubators, Inc.   Naples Accelerator  3510 Kraft Road, Suite #200  Naples, FL 34105  1.239.707.3788  Email | Website From: Jennifer Pellechio <jpellechio@naplesaccelerator.com>  Date: Wednesday, October 19, 2016 at 7:01 PM  To: Dolph Von Arx , Fred Pezeshkan ,  Richard Grant , Garrett Richter  Cc: Naples Business Accelerator <mgoodman.ccatalyst@gmail.com>, Nikki Kreuzer  <nkreuzer.ccatalyst@gmail.com>, "P. Christopher Wegner"  Subject: ElI Board of Directors Agenda Packet   Good Evening Executive Board,  Enclosed is the Agenda packet for the upcoming Executive Board of Directors Meeting. This meeting will  be held next Tuesday, October 25th at 9:30am at the Naples Accelerator location.   If you have any questions, please let us know.  Regards,  Jennifer  Jennifer Pellechio, MBA, CEcD, InBIA  Economic Incubators, Inc.   Naples Accelerator  3510 Kraft Road, Suite #200  Naples, FL 34105  1.239.707.3788  Email | Website Appendix, Page 292 1 From:Thomas R. Grady <trgrady@gradylaw.com> Sent:Wednesday, November 16, 2016 10:07 AM To:Marshall Goodman Cc:Dolph vonArx; Fred Pezeshkan; ; Garrett Richter; GARNIER; Dudley Goodlette; Paterno, Joe; Carolyn Rambosk; Stephen Wheeler; ; Jennifer Pellechio Subject:Re: Marketing (and financial projections and obligations) That’s great, Marshall, congratulations! In addition to meeting our occupancy goal, have we met all financial projections provided to the county, state, DEO, governor, and such? I think that’s key to meeting our financial commitments, including making sure the County is not called on to honor its $2.5 million money-back guarantee, honoring our pledge to be self-sustaining and, of course, creating jobs in Collier County. Thanks! Tom THOMAS R. GRADY  720 FIFTH AVENUE S., STE. 200 NAPLES, FLORIDA 34102 On Nov 16, 2016, at 9:52 AM, Marshall Goodman <raygood32@gmail.com> wrote: Board Members, As part of our State grant, we have finally been able to put funds into marketing materials. Amazingly, we have filled a 10,000 sq. ft. Accelerator space which we had initially projected would take 3 years to fully fill out, in 1.5 years, and did it with next to zero marketing. That success was due to all of you and just good old fashion word of mouth thanks to the wonderful organizations that we partner with. Now we plan to let the WORLD know what we are up to. Towards that end, please see the following powerpoint deck as well as 2 minute animated film that has been created. Feel free to pass it electronically to family and friends! ** Please note because of the size of this file, you will need to download it first to your drive before it will open. As always, we are always open to your comments, and ways in which it can be improved. We are constantly evolving, so look forward to your insights. Appendix, Page 293 2 In addition, by December we will be ready to fully roll out our new web page look. We currently have an under construction version up and running so please feel free to take a look: naplesaccelerator.com GeneralPresentation.key The linked image cannot be displayed. The file may hav e been mov ed, renamed, or deleted. Verify that the link points to the correct file and location. Appendix, Page 294 1 From:Marshall Goodman <raygood32@gmail.com> Sent:Wednesday, November 16, 2016 11:11 AM To:Thomas R. Grady Cc:Dolph vonArx; Fred Pezeshkan; rgrant@gfpac.com; Garrett Richter; GARNIER; Dudley Goodlette; Paterno, Joe; Carolyn Rambosk; Stephen Wheeler; louis.traina@fsw.com; geogroupllc@aol.com; Jennifer Pellechio Subject:Re: Marketing (and financial projections and obligations) Tom, We have in fact met the financial obligation. For the record, it is not $2.5 million. That amount was appropriated but never received. Unfortunately, the Governor vetoed our request for an extension of those funds which were delayed that year as DEO worked through new accountability requirements, so only about $780,000 was actually received, for which a claw-back applied. Collier County several months ago submitted all of the paperwork to DEO to release them from that obligation. Please note we had 5 years to meet the claw-back requirements. The County felt we fulfilled those obligations by year 2 of the program. While EII is a party to this, as you noted it is a Collier County obligation since they received those funds. The packet they sent to DEO is a County document not EII. If you are interested in reviewing the material they supplied to DEO, I can certainly see if I can I can share it with you and the Board. Thank you. Marshall On Wed, Nov 16, 2016 at 10:06 AM, Thomas R. Grady > wrote: That’s great, Marshall, congratulations! In addition to meeting our occupancy goal, have we met all financial projections provided to the county, state, DEO, governor, and such? I think that’s key to meeting our financial commitments, including making sure the County is not called on to honor its $2.5 million money-back guarantee, honoring our pledge to be self-sustaining and, of course, creating jobs in Collier County. Thanks! Tom THOMAS R. GRADY  720 FIFTH AVENUE S., STE. 200 NAPLES, FLORIDA 34102 Appendix, Page 295 2 On Nov 16, 2016, at 9:52 AM, Marshall Goodman <raygood32@gmail.com> wrote: Board Members, As part of our State grant, we have finally been able to put funds into marketing materials. Amazingly, we have filled a 10,000 sq. ft. Accelerator space which we had initially projected would take 3 years to fully fill out, in 1.5 years, and did it with next to zero marketing. That success was due to all of you and just good old fashion word of mouth thanks to the wonderful organizations that we partner with. Now we plan to let the WORLD know what we are up to. Towards that end, please see the following powerpoint deck as well as 2 minute animated film that has been created. Feel free to pass it electronically to family and friends! ** Please note because of the size of this file, you will need to download it first to your drive before it will open. As always, we are always open to your comments, and ways in which it can be improved. We are constantly evolving, so look forward to your insights. In addition, by December we will be ready to fully roll out our new web page look. We currently have an under construction version up and running so please feel free to take a look: naplesaccelerator.com GeneralPresentation.key Appendix, Page 296 1 From:Jennifer Pellechio <jpellechio.ccatalyst@gmail.com> Sent:Monday, January 23, 2017 1:18 PM To:Nikki Kreuzer Subject:Re: Tom Grady Bio I attached Tom Grady – can you include that one and then send to Kat so she can update.  Thanks,  Jen   From: Nikki Kreuzer   Date: Monday, January 23, 2017 at 12:51 PM  To: Jennifer Pellechio   Cc: "kdanks@fgcu.edu"   Subject: Re: Tom Grady Bio  I do have one but it needs to be updated. It's missing Tom Grady and Garret Richter. On Mon, Jan 23, 2017 at 12:34 PM, Jennifer Pellechio <jpellechio.ccatalyst@gmail.com> wrote: Do you have a master word document of all the active boards member’s bios? I would like to have Kat help us make  these consistent for the website.  From: Nik K <nkreuzer.ccatalyst@gmail.com>  Date: Tuesday, October 4, 2016 at 4:15 PM  To: Jennifer Pellechio <jpellechio.ccatalyst@gmail.com>  Subject: Tom Grady Bio Here is his Bio, still waiting for Garrett Richters to create a new roster of Board Members. -- Nikki Kreuzer | Associate Appendix, Page 297 2 The Naples Accelerator | 3510 Kraft Road, Suite 200 | Naples, FL Mobile: (239) 440-8884 E-mail: nkreuzer.ccatalyst@gmail.com -- Nikki Kreuzer | Business Specialist The Naples Accelerator | 3510 Kraft Road, Suite 200 | Naples, FL Mobile: (239) 440-8884 Website | Facebook | Twitter | Instagram | LinkedIn Appendix, Page 298 1 From:Nikki Kreuzer <nkreuzer.ccatalyst@gmail.com> Sent:Monday, January 23, 2017 12:51 PM To:Jennifer Pellechio Cc:kdanks@fgcu.edu Subject:Re: Tom Grady Bio Attachments:Bios2.docx I do have one but it needs to be updated. It's missing Tom Grady and Garret Richter. On Mon, Jan 23, 2017 at 12:34 PM, Jennifer Pellechio <jpellechio.ccatalyst@gmail.com> wrote: Do you have a master word document of all the active boards member’s bios? I would like to have Kat help us make  these consistent for the website.  From: Nik K <nkreuzer.ccatalyst@gmail.com>  Date: Tuesday, October 4, 2016 at 4:15 PM  To: Jennifer Pellechio <jpellechio.ccatalyst@gmail.com>  Subject: Tom Grady Bio Here is his Bio, still waiting for Garrett Richters to create a new roster of Board Members. -- Nikki Kreuzer | Associate The Naples Accelerator | 3510 Kraft Road, Suite 200 | Naples, FL Mobile: (239) 440-8884 E-mail: nkreuzer.ccatalyst@gmail.com -- Nikki Kreuzer | Business Specialist The Naples Accelerator | 3510 Kraft Road, Suite 200 | Naples, FL Mobile: (239) 440-8884 Website | Facebook | Twitter | Instagram | LinkedIn Appendix, Page 299 1 From:Jennifer Pellechio <jpellechio.ccatalyst@gmail.com> Sent:Tuesday, December 20, 2016 5:07 PM To:Lisa Lotocke; Janet Noack Cc:Naples Business Accelerator Subject:Request by County and Tom Grady Attachments:FY16_EII_Report .docx Hello Lisa,  Here is an example of what we need to provide to the county. Last year the only budget that EII operated from was the  County budget.   Help us complete this document for submittal.   Regards,  Jen  Appendix, Page 300 1 From:Jennifer Pellechio <jpellechio.ccatalyst@gmail.com> Sent:Monday, January 23, 2017 12:35 PM To:Nikki Kreuzer Cc:kdanks@fgcu.edu Subject:Tom Grady Bio Attachments:Tom Grady Bio.docx Do you have a master word document of all the active boards member’s bios? I would like to have Kat help us make  these consistent for the website.   From: Nik K   Date: Tuesday, October 4, 2016 at 4:15 PM  To: Jennifer Pellechio   Subject: Tom Grady Bio  Here is his Bio, still waiting for Garrett Richters to create a new roster of Board Members. -- Nikki Kreuzer | Associate The Naples Accelerator | 3510 Kraft Road, Suite 200 | Naples, FL Mobile: (239) 440-8884 E-mail: nkreuzer.ccatalyst@gmail.com Appendix, Page 301 From:James D. Molenaar To:"DurhamTim" Cc:Crystal K. Kinzel; Mark J. Pasek; Richard Grant; "Jennifer Pellechio" Subject:RE: Review of Audit 2018-2 [BED Response] Date:Tuesday, April 3, 2018 12:04:18 PM Tim, Thanks for making the time to meet with us today. I also appreciate your attempt to have Jace Kentner meet with us as well. At 11:36 AM Jace telephone me and told me he was under the impression that we finished and said “I thought we were done because EII should have covered everything.” I encouraged him meet with us, but declined because he had to be in three different places. I told him I could make time this afternoon, but was not interested. Therefore, we are left with no choice but to rely on the statements and comments provided up to yesterday evening. If you would like to discuss further, please telephone me at 252-2283. Jim From: DurhamTim <Tim.Durham@colliercountyfl.gov>  Sent: Tuesday, April 3, 2018 11:02 AM To: James D. Molenaar <james.molenaar@collierclerk.com> Cc: OchsLeo <Leo.Ochs@colliercountyfl.gov>; KentnerJace <Jace.Kentner@colliercountyfl.gov>; Crystal K. Kinzel <Crystal.Kinzel@collierclerk.com>; Mark J. Pasek <Mark.Pasek@collierclerk.com> Subject: RE: Review of Audit 2018-2 Jim,I appreciate the opportunity to state my global concerns.Here is a recap of the same:a)I think it is problematic to impute motive in the internal audit. The document, for credibility’ssake, should be as objective as possible.b)Where internal controls have been improved or corrected, that should be duly noted.c)The efficacy of policy decisions (BCC) and the business model, in general, are outside the scopeof an examination of internal controls.d)Reasonable people will likely view the installation of a code compliant fire suppression system atthe Immokalee facility as an “improvement.”Thanks again,Tim From: James D. Molenaar [mailto:james.molenaar@collierclerk.com]  Sent: Tuesday, April 03, 2018 8:20 AM To: KentnerJace <Jace.Kentner@colliercountyfl.gov> Cc: DurhamTim <Tim.Durham@colliercountyfl.gov>; Crystal K. Kinzel <Crystal.Kinzel@collierclerk.com>; OchsLeo <Leo.Ochs@colliercountyfl.gov>; Mark J. Pasek <Mark.Pasek@collierclerk.com>; 'Jennifer Pellechio' <jpellechio@naplesaccelerator.com> Subject: Review of Audit 2018-2 Appendix M Appendix, Page 302 Good Morning Jace,   I left a telephone voice mail for you this am. It is my understanding that you were planning coming to meet with me first thing this morning. I have been here ready to spend time with you completing the review of audit 2018-2. If I misunderstood your intentions, please let me know. I really need to have all of your comments no later than 11:30 AM today. I need time to make any required adjustment to this report.   Thanks, Jim   James D. Molenaar, Esq., LL.M., MBA, CFE Internal Audit Manager Clerk of the Circuit Court and Comptroller Collier County Government Center 3299 Tamiami Trail East, Suite# 402 Naples, FL 34112-5746   Office: (239)252-2283 Cellular: (239)207-9565 James.Molenaar@collierclerk.com   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. Appendix, Page 303