Agenda 12/12/2017 Item #16J512/12/2017
EXECUTIVE SUMMARY
To provide the Board of County Commissioners the Clerk of the Circuit Court’s Internal Audit
Report 2017-12 Advanced Broadband Infrastructure Investment Program: Arthrex, Inc. and
Arthrex Manufacturing, Inc., issued on, December 5, 2017.
OBJECTIVE: To provide the Board of County Commissioners (Board) the issued Audit Report 2017 -12
Advanced Broadband Infrastructure Investment Program: Arthrex, Inc. and Arthrex Manufacturing, Inc.
Internal Audit delivered the Audit Report to the Board on Tuesday, December 5, 2017. It is available
electronically on the Clerk of Courts website.
The Clerk’s website for published Internal Audit Reports, once they are no longer confidential:
https://www.collierclerk.com/finance/internal-audit/published-reports
Internal Audits do not become public record until the Clerk’s office issues them to the Board.
GROWTH MANAGEMENT IMPACT: None
FISCAL IMPACT: None
RECOMMENDATION: That the Clerk’s Audit Report 2017-12 Advanced Broadband Infrastructure
Investment Program: Arthrex, Inc. and Arthrex Manufacturing, Inc., be entered into the record.
Prepared by: Michael Harder, Senior Internal Auditor
Office of the Clerk of the Circuit Court
ATTACHMENT(S)
1. 2017-12 Advanced Broadband Infrastructure Investment Program Arthrex, Inc. and Arthrex
Manufacturing, Inc. (PDF)
12/12/2017
COLLIER COUNTY
Board of County Commissioners
Item Number: 16.J.5
Doc ID: 4331
Item Summary: To provide the Board of County Commissioners the Clerk of the Circuit Court’s
Internal Audit Report 2017-12 Advanced Broadband Infrastructure Investment Program: Arthrex, Inc.
and Arthrex Manufacturing, Inc., issued on, December 5, 2017.
Meeting Date: 12/12/2017
Prepared by:
Title: Senior Internal Auditor – Clerk of the Circuit Court
Name: Michael Harder
12/05/2017 8:06 AM
Submitted by:
Title: Senior Staff Assistant – Clerk of the Circuit Court
Name: Jennifer Milum
12/05/2017 8:06 AM
Approved By:
Review:
Clerk of the Circuit Court Derek Johnssen Additional Reviewer Completed 12/05/2017 8:23 AM
Office of Management and Budget Valerie Fleming Level 3 OMB Gatekeeper Review Completed 12/05/2017 8:57 AM
Budget and Management Office Mark Isackson Additional Reviewer Completed 12/05/2017 10:38 AM
County Attorney's Office Jeffrey A. Klatzkow Level 3 County Attorney's Office Review Completed 12/06/2017 7:25 AM
County Manager's Office Leo E. Ochs Level 4 County Manager Review Completed 12/06/2017 8:35 AM
Board of County Commissioners MaryJo Brock Meeting Pending 12/12/2017 9:00 AM
Internal Audit Department
Audit Report 2017-12
Advanced Broadband Infrastructure
Investment Program
Arthrex, Inc., and Arthrex
Manufacturing, Inc.
Dwight E. Brock
Clerk of the Circuit Court
3299 Tamiami Trail East
Suite #402
Naples, FL 34112-5746
www.collierclerk.com
Issued: December 5, 2017
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Prepared by: Timothy Lo, Internal Auditor
Michael Harder, Senior Internal Auditor
Report Distribution: Board of County Commissioners
Leo Ochs, Jr., County Manager
Jeff Klatzkow, County Attorney
Nick Casalanguida, Deputy County Manager
Mark Isackson, Director, Corporate Financial & Management Services
Jace Kentner, Director, Business and Economic Development
Amy Patterson, Director, Capital Project Planning, Impact Fees and Program Mgt
Cc: Dwight E. Brock, Clerk of the Circuit Court and Comptroller
Crystal K. Kinzel, Director of Finance & Accounting
James D. Molenaar, Internal Audit Manager
TABLE OF CONTENTS
SUMMARY ..................................................................................................................................2
OBJECTIVES ...............................................................................................................................2
SCOPE ..........................................................................................................................................2
BACKGROUND ..........................................................................................................................2
OBSERVATION ..........................................................................................................................3
MANAGEMENT RESPONSE .....................................................................................................4
The files and draft versions of audit reports are confidential and exempt from public records requests during an active
audit under Nicolai v. Baldwin (Aug. 28, 1998 DCA of FL, 5th District) and §119.0713, Florida Statutes. Workpapers
supporting the observations noted within this report become public record and will be made available upon request
once the final audit report has been issued.
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Internal Audit provided a draft of this report to the Office of Business and Economic Development for
management response on October 27, 2017. County management provided that response on November 22,
2017.
Summary
This audit engagement generated the following observations:
Internal Audit reviewed the Advanced Broadband Infrastructure Investment Program application of
Arthrex, Inc. and Arthrex Manufacturing, Inc. (Arthrex), for completeness. The legal description of
the broadband installation’s Collier County location was obtained, and timely payment of property
taxes for that location was verified.
A site visit was previously conducted to validate the number of new full-time jobs created, and the
average wages of those new jobs.
Internal Audit examined the invoice for the Advanced Broadband Infrastructure installation. Copies
of Arthrex’s payment of that invoice was also inspected. The total of the invoice and payment was
$ 1,010,844.31 thereby qualifying for the maximum payment allowed per the ordinance.
As a result of Arthrex’s compliance with the requirements of the Advanced Broadband Infrastructure
Investment Program, they qualify for the $ 25,000 maximum amount of reimbursement allowed under the
contract.
Objectives
The objectives of the audit engagement were to validate program eligibility and to confirm the payment
amount for which Arthrex has qualified.
Scope
The audit engagement consisted of, but was not limited to, the following tasks:
Reviewing applicable Florida Statutes;
Reviewing applicable Collier County Ordinances;
Reviewing applicable Board of County Commissioners (BCC) agenda items and related meeting
minutes;
Reviewing the BCC’s Advanced Broadband Infrastructure Investment Program Agreement with
Arthrex;
Examining Arthrex, Inc.’s application to verify program eligibility;
Confirming that Arthrex paid its property taxes in full and on time;
Vouching Arthrex, Inc.’s jobs created and average wages to Job Creation workpapers; and
Validating broadband infrastructure invoice and tracing that amount to proof of payment.
Background
The Advanced Broadband Infrastructure Investment Program was a performance-based initiative authorized
in Collier County Ordinance 2003-59, as fully amended by Ordinance 2005-56. The program provided for
payments to local businesses “. . . to offset the costs associated with the installation or upgrade of advanced
broadband infrastructure in commercial and industrial buildings to encourage the relocation and/or
expansion of high-wage targeted industries.” The Ordinance describes the program’s purpose to be, in part,
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as “. . . enhancing Collier County’s economic diversification efforts .” Besides the installation or upgrade
of advanced broadband infrastructure, the criteria for program eligibility also include minimum numbers of
new jobs at specific wage levels, which vary by location in Collier County, and the full and timely payment
annually of its ad valorem tax bill. Ordinance 2005-56 originally terminated this program on October 1,
2008, but on September 9, 2008, the BCC enacted Ordinance 2008-46, which extended the Advanced
Broadband Infrastructure Investment Program to October 1, 2013.
The BCC approved an Advanced Broadband Infrastructure Investment program agreement with Arthrex on
January 12, 2012, that would reimburse Arthrex the broadband installation or upgrade costs, up to a
maximum of $ 25,000. The payments would “. . . be paid in equal installments over a three year period, at
the beginning of each fiscal year, beginning in the fiscal year after the infrastructure improvements have
been verified as complete by the County Manager or his designee.” Arthrex agreed to pay its tax bill in full
to the Tax Collector’s office annually on or before its due date, and, since they chose to install the broadband
infrastructure at their Ave Maria site, to create and maintain 10 new full-time jobs for three years at an
average annual wage of not less than $ 45,793.
Staff from the Office of Business and Economic Development and Internal Audit verified the broadband
equipment installation at Arthrex’s Ave Maria location on August 17, 2017. Testing validated that Arthrex
completed this project in late 2013 at a total cost of $ 1,010,844.31. Previous site visits validated the creation
and maintenance of the required 10 new full-time jobs and that those jobs met or exceeded the required
average annual wage. Testing also validated that Arthrex paid its ad valorem tax bill timely and in full
during the three year period starting in 2014.
By meeting the terms of its Advanced Broadband Infrastructure Investment program agreement, Arthrex
has met its obligation and qualifies to receive the maximum amount under the agreement of $ 25,000.
Observation
1) Lack of monitoring of the contract resulted in delayed payment.
The terms of payment under this agreement are clear: Arthrex would receive three equal installments “. . .
after the infrastructure improvements have been verified as complete by the County Manager or his
designee.” Therefore, until the Office of Business and Economic Development (OBED) verified the
broadband infrastructure was completed, nothing could be done. No validation of jobs created, no validation
of ad valorem taxes paid, and no validation of the total cost of the project. According to documentation
supplied by Arthrex, this project was completed in late 2013, yet OBED staff did not verify the project as
complete until August of 2017. This lack of monitoring means that instead of Arthrex receiving their first
installment payment in 2014, they have been forced to wait until now. The delay in verification also meant
that the determination of compliance with the terms of the contract was made all the more difficult. The
Clerk, not wanting to further delay payment, went back to the original completion date and determined that
all terms of the contract were met from that point forward. By validating the contract in this manner, the
payment for the total amount of the agreement can now be made instead of starting with the first installment.
The OBED staff must be vigilant in monitoring contracts so as to not jeopardize the positive relationships
that the BCC and other County staff have worked so hard to foster.
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Recommendations:
Designated responsible staff should be assigned to monitor all contract terms for completion thereby
eliminating payment submission delays.
Management Response
“I have reviewed the submitted Audit Report #2017- 12 regarding Arthrex Inc. and Arthrex Manufacturing
Inc.’s compliance with incentive criteria established by the Advanced Broadband Infrastructure Investment
Program with Collier County, approved January 12, 2012. I concur with the audit Summary and consider
Arthrex Inc. and Arthrex Manufacturing Inc. in compliance with the obligations within the Advanced
Broadband Infrastructure Investment Program.
The County appreciates the input from internal audit staff in the Observation. The Office of Business &
Economic Development has hired a part-time employee whose focus is on coordinating the County’s
incentive agreements. Staff appreciates the cooperation in moving this incentive forward to this important
Collier County employer.”
Internal Audit gratefully acknowledges the cooperation of both Arthrex and the Office of Business and
Economic Development’s management and staff for their support in the audit process.