HIGHLIGHTS AUDIT OF BLUEPRINT 2000 REVENUE AND EXPENDITURE CONTROLS

Transcription

1 T. Bert Fletcher, CPA, CGMA City Auditr HIGHLIGHTS Highlights f City Auditr Reprt #1514 WHY THIS AUDIT WAS CONDUCTED This audit was cnducted in respnse t a request by the Directr f Planning, Land Management, and Cmmunity Enhancement. The Directr cited the Agency s rerganizatin in 2011 and wanted t knw the implicatins f the rerganizatin n the Agency s internal cntrls ver revenues and expenditures. The bjective f ur audit was t determine the extent t which the Agency s internal cntrls reasnably ensured that Agency cllectins were safeguarded frm lss and revenue and expenditure transactins were authrized, accurately and cmpletely recrded, and dcumented. The scpe f the audit included the Agency s internal cntrls in effect during the perid Octber 1, 2012, thrugh December 31, WHAT WE CONCLUDED Overall, we fund that, with respect t the prcessing f revenue and expenditure transactins, the Agency s internal cntrls were adequate, cnsidering the nature f the Agency s rganizatin and the cmplexity f its peratins. Our audit identified bth cntrl strengths and pprtunities fr imprvements. Cntrl strengths were evident in many areas including: The Agency has adpted a statement f missin and visin, plicies and prcedures fr several majr areas f peratin, and a plan f rganizatin. Management and staff fllw the City s plicies and prcedures gverning ethical behavir. Apprpriate accunting and human resurce system prvisins are made available thrugh the City. An annual audit f the Agency s financial statements is cnducted. Cmpetitive prcurement prcesses have been established. Cntrls ver the authrizatin f and the payment fr gds and services have been established. In additin t the strengths summarized abve, ur audit identified pprtunities fr imprvement in the Agency s cntrls. Thse imprvements are related in many instances t the need t (1) update r establish plicies and prcedures and guidelines, (2) better safeguard and accunt fr the revenues and dnatins cllected and prcessed by the Agency, r (3) enhance the Agency s administratin f certain cst-cntrl related aspects f its cntract with the general engineering cnsultant (GEC). T view the full reprt, g t: Fr mre infrmatin, cntact us by at auditrs@talgv.cm r by telephne at 850/ August 7, 2015 AUDIT OF BLUEPRINT 2000 REVENUE AND EXPENDITURE CONTROLS Overall, we fund that with respect t the prcessing f revenues and expenditure transactins, the internal cntrls f the Blueprint 2000 Intergvernmental Agency (Agency) were adequate. Bth cntrl strengths and pprtunities fr imprvements were identified. WHAT WE RECOMMENDED T facilitate imprvements in the Agency s internal cntrls, we made the fllwing recmmendatins: The Agency shuld adpt an internal cntrl plicy. Existing agency plicies and prcedures shuld be clarified and updated. Agency, general engineering cnsultant, and subcnsultant staff and Citizens Advisry Cmmittee members shuld be prvided a cpy f the Blueprint 2000 Ethics Plicy and with related training. Written plicies, prcedures, r guidelines shuld be adpted in the areas f infrmatin security, revenue prcessing, and invice pre-audit. The Agency shuld adpt prcedures requiring peridic recnciliatins f the financial infrmatin in its cnstructin management applicatin with related PepleSft Financials accunts. Cntrls ver revenues shuld be strengthened. The Agency shuld adpt plicies and prcedures t guide the review, negtiatin, and apprval f annual letters f authrizatin (LOAs). The LOAs gvern the scpe f wrk perfrmed by the GEC, as well as the amunt f cmpensatin paid t the GEC. The Agency Directr shuld review and apprve in advance the rates f cmpensatin paid t all subcnsultants. The amunts paid by the Agency t the GEC are t be based in part upn the actual csts incurred by the GEC and subcnsultants. T verify that the inviced csts represent actual csts, the Agency shuld cnsider btaining an independent audit f applicable GEC cst recrds. The Agency shuld resume the cmpletin f semi-annual perfrmance evaluatins f the GEC. Frmal gals, bjectives, and perfrmance measures shuld be adpted. Cnsideratin shuld be given t resuming perfrmance audits. Prpsed lease agreements shuld be submitted fr management apprval. Annual reviews f the Agency s real estate shuld be perfrmed t identify the existence f surplus prperty. We wuld like t thank Agency staff and staff in City departments, including the City Treasurer-Clerk s Office, Department f Management and Administratin (DMA) Prcurement Services, DMA Accunting Services, and Human Resurces, fr their assistance during this audit. Office f the City Auditr

2 Audit f Blueprint 2000 Revenue and Expenditure Cntrls Reprt #1514 August 7, 2015

3 Cpies f this audit reprt #1514 may be btained frm the City Auditr s website ( by telephne (850 / ), by FAX (850 / ), by mail r in persn (City Auditr, 300 S. Adams Street, Mail Bx A-22, Tallahassee, FL ), r by (auditrs@talgv.cm). Audit cnducted by: Dn Hancck, CPA, Senir Audit Manager T. Bert Fletcher, CPA, CGMA, City Auditr

4 Blueprint 2000 Reprt #1514 Table f Cntents Executive Summary... 1 Scpe, Objectives, and Methdlgy... 9 Backgrund Internal Cntrl - Revenues and Expenditures Other Matters Cnclusin Directr's Respnse APPENDICES i

5 Reprt #1514 Blueprint 2000 This page intentinally left blank. ii

6 Audit f Blueprint 2000 Revenue and Expenditure Cntrls T. Bert Fletcher, CPA, CGMA City Auditr Reprt #1514 August 7, 2015 Executive Summary The bjective f ur audit was t determine the extent t which the Agency s internal cntrls reasnably ensured that Agency cllectins were safeguarded frm lss and revenue and expenditure transactins were authrized, accurately and cmpletely recrded, and dcumented. On Octber 27, 2000, the Cunty and the City executed an Interlcal Agreement creating the Blueprint 2000 Intergvernmental Agency. The Agency is headed by a Bard cnsisting f the respective members f the Bard f Cunty Cmmissiners and the City Cmmissin. Overall, we fund that with respect t the prcessing f revenue and expenditure transactins, the internal cntrls f the Blueprint 2000 Intergvernmental Agency (Agency) were adequate, cnsidering the nature f the Agency s rganizatin and the cmplexity f its peratins. Opprtunities fr imprvements were identified and have been prvided fr management cnsideratin. The bjective f ur audit was t determine the extent t which the Agency s internal cntrls reasnably ensured that revenue and expenditure transactins were: (1) prperly authrized and executed in accrdance with gverning laws, rules, plicies, and prcedures; (2) timely prcessed and accurately and cmpletely recrded in the Agency s accunting recrds in the crrect accunts; and (3) supprted by apprpriate dcumentatin. As a part f evaluating the Agency s internal cntrls, we cnsidered the extent t which the Agency safeguarded frm lss the amunts cllected at the Agency (Blueprint-prcessed cllectins). On Octber 27, 2000, the Len Cunty Cmmissin and the City f Tallahassee Cmmissin executed an Interlcal Agreement creating the Blueprint 2000 Intergvernmental Agency (Agency). The Agreement prvides that the Intergvernmental Agency is frmed t undertake the acquisitin, financing, planning, cnstructing, managing, perating, servicing, utilizing, wning, and exchanging f Blueprint 2000 prjects identified in the Agreement and t receive and expend the Dedicated Sales Surtax. The Dedicated Sales Surtax is defined as 80 percent f the ne percent lcal gvernment infrastructure sales surtax. Organizatinally, the Agency is headed by a Bard cnsisting f the respective members f the Len Cunty Bard f Cunty Cmmissiners 1

7 Reprt #1514 Blueprint 2000 and the City f Tallahassee Cmmissin. Pursuant t the Agreement, the Intergvernmental Management Cmmittee (IMC), cnsisting f the City Manager and Cunty Administratr, is respnsible fr the verall management f the Agency. Further, the Agreement prvides that a Staff Directr is t be appinted jintly by the Cunty Administratr and the City Manager. The Agreement als creates the Citizens Advisry Cmmittee (CAC), whse respnsibilities include the review f wrk plans, financial audits, and perfrmance audits and making recmmendatins t the Blueprint 2000 Intergvernmental Agency. The effrts f the Agency s 11 emplyees were leveraged thrugh City and Cunty supprt and thrugh the emplyment f a general engineering cnsultant. An August 2011 rerganizatin resulted in the Directr f P.L.A.C.E. assuming the respnsibilities f Agency Staff Directr and the establishment f the psitin f Blueprint Manager. This audit was cnducted in respnse t a request by the Directr f P.L.A.C.E. The Agency utilizes an unusual rganizatinal structure. It, as an rganizatin, emplys nly 11 permanent emplyees. Hwever, the effrts f thse emplyees are leveraged thrugh the utilizatin f City and Cunty supprt, and thrugh the emplyment f a general engineering cnsulting (GEC) firm (Michael Baker, Jr., Inc.), which, tgether with a team f subcnsultants, was respnsible fr prviding general engineering and prject planning and management services. An Agency rerganizatin was brught abut by an Interlcal Agreement in August The August 2011 Agreement creates the psitin f the Directr f Planning, Land Management, and Cmmunity Enhancement (P.L.A.C.E.) and prvides that the Directr f P.L.A.C.E. is respnsible fr the duties f the Directr f the Blueprint Agency, as well as fr the peratins f the Tallahassee-Len Cunty Planning Department. Other cntempraneus Agency rganizatinal changes included the establishment f the psitin f Blueprint Manager and the eliminatin f the psitins f Blueprint Staff Directr and Capital Prgrams/Finance Manager. This audit was cnducted in respnse t a request by the Directr f P.L.A.C.E. The Directr cited the Agency s rerganizatin in 2011 and wanted t knw the implicatins f the rerganizatin n the Agency s internal cntrls ver revenues and expenditures. Fr fiscal years 2012 thrugh 2014, Agency revenues ttaled apprximately $136 millin. While all revenue amunts received were ultimately t be depsited in City-maintained bank accunts and accunted fr in recrds maintained by the City, tw primary appraches 2

8 Blueprint 2000 Reprt #1514 Fr the fiscal years 2012 thrugh 2014, Agency revenues ttaled apprximately $136 millin. Apprximately $96 millin represented City-prcessed cllectins, and apprximately $40 millin represented Blueprintprcessed revenues. Expenditures during the three-year perid ended September 30, 2014, ttaled $116 millin, mst relating directly t Agency prjects. were used t prcess Agency revenues. Fr purpses f discussin in this audit reprt, we have referred t these prcesses as City-prcessed revenues (e.g., the ne percent infrastructure sales surtax cllectins which were prcessed entirely by the City), and Blueprint-prcessed cllectins (e.g., federal and state grant prceeds which were prcessed, at least in part, by Agency staff). Of the $136 millin in revenues reprted during the audit perid, apprximately $96 millin represented City-prcessed cllectins, and apprximately $40 millin represented Blueprint-prcessed revenues. In additin t thse revenues, the Agency als cllected, in trust, dnatins (cash and checks) fr Friends f Our Parks (FOOP), a nt-fr-prfit rganizatin established t benefit the parks and recreatinal facilities f the City. Agency expenditures fr fiscal years 2012 thrugh 2014, as shwn in the City s PepleSft Financials accunting recrds, ttaled apprximately $116 millin, excluding amunts paid fr debt service. Mst f the expenditures related directly t Agency cnstructin and engineeringrelated activities. Overall, we fund that, with respect t the prcessing f revenue and expenditure transactins, the Agency s internal cntrls were adequate. Overall, we fund that, with respect t the prcessing f revenue and expenditure transactins, the Agency s internal cntrls were adequate, cnsidering the nature f the Agency s rganizatin and the cmplexity f its peratins. Our audit identified bth cntrl strengths and pprtunities fr imprvements, summarized as fllws: Cntrl Strengths Cntrl strengths relating t Agency revenues and expenditures were evident in many areas. The Agency has adpted a statement f missin and visin, plicies and prcedures fr several majr areas f peratin, and a plan f rganizatin. Cntrl strengths f nte included: The Agency has adpted a statement f missin and visin, plicies and prcedures defining management and staff respnsibilities fr several majr peratinal areas, and a plan f rganizatin, including psitin descriptins. Management and staff fllw the City s plicies and prcedures gverning ethical behavir. 3

9 Reprt #1514 Blueprint 2000 The Agency has adpted and effectively implemented written plicies t gvern the administratin f grants, including grant authrizatin and grantr invicing. Apprpriate accunting and human resurce system prvisins were made available thrugh the City. Apprpriate accunting, prcurement, and human resurce system prvisins were made available thrugh the City. Thse respnsible fr cding and recrding transactins were sufficiently knwledgeable f the Agency s peratins. An annual audit f the Agency s financial statements is cnducted. An annual audit f the Agency s financial statements and the Agency s cmpliance with federal and state award requirements is cnducted. Cmpetitive prcurement prcesses had been established. Apprpriate cmpetitive prcurement prcesses had been established and were supprted by City staff and systems. Written cntracts, with legal review theref prir t signature, were required. The cntracts made prvisin fr cntractr mnitring, where applicable. Cntrls ver the authrizatin f and the payment fr gds and services had been established. Duties relating t purchase requisitins, purchase rders, and invice payment were apprpriately segregated and supprted by City staff. Claims fr payment were t be supprted by detailed invices and related dcumentatin. The respnsibility fr authrizing and apprving capital-related expenditures had been assigned t apprpriate and knwledgeable fficials. Cmplete dcumentatin f the expenditures was a requirement. Opprtunities fr Imprvement Opprtunities fr imprvement in the Agency s cntrls were identified. In additin t the strengths summarized abve, ur audit identified pprtunities fr imprvement in the Agency s cntrls. Thse 4

10 Blueprint 2000 Reprt #1514 imprvements are related in many instances t the need t (1) update r establish plicies and prcedures and guidelines, (2) better safeguard and accunt fr the revenues and dnatins cllected and prcessed by the Agency, r (3) enhance the Agency s administratin f certain cstcntrl related aspects f its cntract with the GEC. Recmmendatins fr imprvements include: Plicies, Prcedures, and Guidelines: The Agency shuld adpt an internal cntrl plicy. Agency plicies and prcedures shuld be clarified and updated. Agency, GEC, and subcnsultant staff and CAC members shuld be prvided a cpy f the Blueprint 2000 Ethics Plicy and with related training. Written plicies, prcedures, r guidelines shuld be adpted in the areas f infrmatin security, revenue prcessing, and invice pre-audit. The Agency shuld cnsider develping its wn internal cntrl plicy, r frmally adpt the City s internal cntrl plicy. The Agency shuld determine thse City r Cunty plicies and prcedures which are t apply t the Agency s peratins and cmmunicate that infrmatin t all emplyees and cnsultant and subcnsultant staff. Sme f the Agency s plicies and prcedures, adpted in the early 2000 s, are nw ut-f-date and shuld be updated. Althugh current Agency management and staff have participated in the City s ethics training, they had nt been prvided a cpy f the Blueprint 2000 Ethics Plicy r received related training. The Blueprint 2000 Ethics Plicy shuld be prvided t all management and staff and psted n the Agency s website. Als, staff f the Agency, applicable persnnel f the GEC and the subcnsultants, and members f the CAC shuld receive training in the applicatin f the plicy. The Agency shuld adpt written infrmatin technlgy security plicies and prcedures. Written plicies and prcedures relating t the handling f Blueprintprcessed cllectins shuld be develped and cmmunicated t applicable managers and staff. Written invice pre-audit prcedures r guidelines shuld be develped and implemented t address, amng ther matters, rles and respnsibilities fr verifying that the receipt f cnfrming gds and services is dcumented, the charges are allwable and authrized, the accunt cdes are apprpriate, and the invice ftings, 5

11 Reprt #1514 Blueprint 2000 extensins, and discunts are mathematically crrect. As described further n pages 26 thrugh 28 f this reprt, ur audit identified invice prcessing errrs indicating that additinal guidance wuld be helpful. The Agency shuld adpt prcedures requiring peridic recnciliatins f Primavera Expeditin data and related PepleSft Financials accunts. T ensure the accuracy and cmpleteness f its recrds, the Agency shuld adpt prcedures requiring peridic recnciliatins f Primavera Expeditin data and related PepleSft Financials accunts. The Agency-maintained Primavera Expeditin applicatin was used by the Agency, GEC, and cntractr staff fr prject management and cntractr invicing. The City-maintained Peplesft Financials applicatin was used by the Agency fr financial accunting purpses. Cntrl Activities - Blueprint-Prcessed Cllectins: A listing f mail cllectins shuld be prepared daily. Checks shuld be restrictively endrsed. Prenumbered receipts shuld be cnsistently used and accunted fr. Transfer receipts shuld be used. Cllectins shuld be better secured. The Agency shuld cnsider authrizing electrnic transfer f state grant payments. Dnatins shuld be transferred t FOOP n at least a weekly basis. Agency recrds shuld be recnciled t the infrmatin shwn in the recrds f state grantrs. A listing f the amunts received thrugh the mail shuld be prepared daily by the persn pening the mail. That list shuld then be cmpared t the day s depsit details by a persn nt invlved in the cllectin and depsit f cllectins. Checks shuld be restrictively endrsed immediately upn receipt. Prenumbered receipts shuld be cnsistently used and peridically accunted fr. Receipts shuld be executed when cllectins are transferred amng emplyees and when dnatins are transferred between the Agency and FOOP. Cllectins shuld be secured in a lcked cabinet r ther secured lcatin and access theret shuld be restricted t authrized staff. Fr grant reimbursements, the Agency shuld cnsider authrizing the state t make electrnic payments. Dnatins shuld be transferred t FOOP n less frequently than n a weekly basis. The relatively small number f administrative staff cntributed t an inability t apprpriately segregate incmpatible duties. As a cmpensating cntrl, the Agency shuld place increased emphasis 6

12 Blueprint 2000 Reprt #1514 n management s mnitring f fiscal cntrls and peridically recncile the infrmatin shwn in Agency recrds t the infrmatin shwn in the recrds f state grantrs. Peridically, management shuld trace thrugh the applicable cntrl pints, the amunts cllected. Peridically, t assess the effectiveness f cntrls, management shuld trace thrugh the applicable cntrl pints, the amunts cllected and depsited (that is, trace selected cllectins shwn n listings f mail cllectins and prenumbered receipts t transfer receipts, CORE receipts, and, as applicable, depsit recrds). GEC Cntract Administratin: The scpe f the wrk perfrmed by the GEC fr planned and inprgress prjects and the cmpensatin paid t the GEC are cntrlled thrugh annual letters f authrizatin (LOAs) apprved by the Agency s Directr. The Agency shuld adpt plicies and prcedures t guide the review, negtiatin, and apprval f the LOAs. Thse plicies and prcedures shuld facilitate a demnstratin f the Agency s determinatin that the prpsed wrk is necessary and that the prpsed pricing is reasnable and cmpetitive. Opprtunities t better ensure and demnstrate the ecnmy and effectiveness f the GEC cntractual relatinship were identified. Upn apprval by the Agency, the GEC may utilize the services f subcnsultants t accmplish specific tasks within LOAs. The Agency Directr shuld review and apprve in advance the rates paid t all subcnsultants. The review and apprval shuld be dcumented and include the evidence relied upn that demnstrates that the rates apprved are reasnable and cmpetitive. The amunts paid by the Agency t the GEC, as cmpensatin fr GEC services and as reimbursements f subcnsultant charges, are t be based in part upn the actual csts incurred by the GEC. T verify that the inviced csts represent actual csts, the Agency shuld cnsider btaining an independent audit f applicable GEC cst recrds. The Agency shuld resume the cmpletin f semi-annual perfrmance evaluatins f the GEC. 7

13 Reprt #1514 Blueprint 2000 Other Matters: As a part f ur tests f the Agency s revenue and expenditure cntrls and related transactins, we became aware f the fllwing ther matters which are presented belw fr management cnsideratin and actin: Frmal gals, bjectives, and perfrmance measures shuld be adpted. The cnduct f perfrmance audits shuld be resumed and the audits shuld fcus n high risk areas identified by the IMC. Prpsed lease agreements shuld be submitted fr management apprval. Annual reviews f the Agency s real estate shuld be perfrmed t identify the existence f surplus prperty. The Agency shuld adpt frmal gals, bjectives, and perfrmance measures and related reprting requirements. The Interlcal Agreement empwers the IMC t require an annual financial statement audit and an annual perfrmance audit f the Agency. While annual audits f the Agency's financial statements have been cmpleted, perfrmance audits were discntinued beginning with fiscal year The IMC shuld cnsider resuming the cnduct f peridic perfrmance audits. T assist in identifying areas t be audited, the IMC shuld als cnsider cnducting risk assessments f the Agency t identify high risk areas. Agency management shuld submit fr apprval f the IMC all prpsed lease agreements. The Agency s Real Estate Manager indicated that t his knwledge an annual review f real estate had nt been recently perfrmed. The purpse f the review is t determine whether any Agency-wned parcels may be surplus t the needs f the Blueprint prgram. We recmmend that the annual reviews f real estate be perfrmed as required by Blueprint Plicy N We wuld like t thank Agency staff and staff in City departments, including the City Treasurer-Clerk s Office, Department f Management and Administratin (DMA) Prcurement Services, DMA Accunting Services, and Human Resurces, fr their assistance during this audit. 8

14 Audit f Blueprint 2000 Revenue and Expenditure Cntrls T. Bert Fletcher, CPA, CGMA City Auditr Reprt #1514 August 7, 2015 Scpe, Objectives, and Methdlgy The bjective f ur audit was t determine the extent t which the Agency s internal cntrls reasnably ensured that Agency cllectins were safeguarded frm lss and revenue and expenditure transactins were authrized, accurately and cmpletely recrded, and dcumented. The scpe f ur audit fcused n the cntrls emplyed at the Agency by Agency emplyees. This audit was cnducted in respnse t a request by the Directr f P.L.A.C.E. The Directr cited the Agency s rerganizatin in 2011 and wanted t knw the implicatins f the rerganizatin n the Agency s internal cntrls ver revenues and expenditures. The bjective f ur audit was t determine the extent t which the Agency s internal cntrls reasnably ensured that revenue and expenditure transactins were: (1) prperly authrized and executed in accrdance with gverning laws, rules, plicies, and prcedures; (2) timely prcessed and accurately and cmpletely recrded in the Agency s accunting recrds in the crrect accunts; and (3) supprted by apprpriate dcumentatin. As a part f evaluating the Agency s internal cntrls, we cnsidered the extent t which the Agency safeguarded frm lss the amunts cllected at the Agency (Blueprintprcessed cllectins). In cnducting ur audit, we applied the definitin and apprach t internal cntrl described in Internal Cntrl-Integrated Framewrk, published by the Cmmittee f Spnsring Organizatins f the Treadway Cmmissin (COSO). The scpe f ur audit included the Agency s internal cntrls in effect during the perid Octber 1, 2012, thrugh December 31, 2014, and included tests f revenue, expenditure, and disbursement transactins selected frm fiscal years 2011, 2012, 2013, and The scpe f ur audit fcused n the cntrls emplyed at the Agency by Agency emplyees and did nt include an evaluatin f the cntrls f supprting rganizatins, such as the City f Tallahassee (As explained further belw, the City prvided t the Agency legal, treasury, accunting, prcurement, and human resurces services supprt.) r the Agency s cntracted general engineering cnsultant, Michael Baker, Jr., 9

15 Reprt #1514 Blueprint 2000 Inc. (subsequently referred t in this reprt as the General Engineering Cnsultant r GEC). We btained an understanding f the laws, rules, Interlcal Agreement, and bylaws gverning the resurces and peratins f the Agency. We als btained an understanding f the Agency s cntrl envirnment and an understanding f the cntrl-related plicies and prcedures relevant t the scpe f the audit. We cnducted this audit in accrdance with the Internatinal Standards fr the Prfessinal Practice f Internal Auditing and Generally Accepted Gvernment Auditing Standards. T address ur audit bjectives, we btained an understanding f the laws, rules, Interlcal Agreement, and bylaws gverning the resurces and peratins f the Agency. We als read the Prject and Definitins Reprt, Blueprint 2000 and Beynd (Definitins Reprt), prepared by the Ecnmic and Envirnmental Cnsensus Cmmittee f Tallahassee-Len Cunty Flrida. That reprt, dated February 7, 2000, prmtes the hlistic planning apprach subsequently adpted by the Agency and identifies recmmended prjects. As a part f ur audit, we als btained an understanding f the Agency s rganizatinal structure and cntrl envirnment and an understanding f the cntrl-related plicies and prcedures relevant t the prcessing f the majr Agency revenues and the disbursement f Agency resurces. In additin t btaining that understanding, we als tested selected transactins t measure the effectiveness f the cntrls, as implemented. We cnducted this audit in accrdance with the Internatinal Standards fr the Prfessinal Practice f Internal Auditing and Generally Accepted Gvernment Auditing Standards. Thse standards require that we plan and perfrm the audit t btain sufficient, apprpriate evidence t prvide a reasnable basis fr ur findings and cnclusins based n ur audit bjectives. We believe that the evidence btained prvides a reasnable basis fr ur findings and cnclusins based n ur audit bjectives. Backgrund On Octber 27, 2000, the Len Cunty and City f Tallahassee Cmmissins executed an Interlcal Agreement creating the Blueprint 2000 Intergvernmental Agency (Agency). The Agreement, in Part 1, Sectin 1, prvides that the Intergvernmental Agency is frmed t undertake the acquisitin, financing, planning, cnstructing, managing, perating, servicing, utilizing, wning, and exchanging f the Blueprint 2000 prjects identified in the Agreement and t receive and expend the Dedicated Sales Surtax. The Dedicated Sales Surtax is defined as 80 10

16 Blueprint 2000 Reprt #1514 On Octber 27, 2000, the Cunty and the City executed an Interlcal Agreement creating the Blueprint 2000 Intergvernmental Agency (Agency). percent f the ne percent lcal gvernment infrastructure sales surtax, riginally scheduled t expire n Nvember 30, 2004, but cntinued until December 31, 2019, by virtue f the referendum f the Len Cunty electrate n Nvember 7, (Nte: Pursuant t vte n Nvember 4, 2014, f the Len Cunty electrate, the ne percent lcal gvernment infrastructure sales surtax was extended t December 31, 2039.) Organizatin The Agency is headed by a Bard cnsisting f the respective members f the Bard f Cunty Cmmissiners and City Cmmissin and functins under the directin f an Intergvernmental Management Cmmittee cnsisting f the City Manager and Cunty Administratr. The Agency s Bard cnsists f the respective members f the Len Cunty Bard f Cunty Cmmissiners and the City f Tallahassee Cmmissin. The Agency functins under the directin f the Intergvernmental Management Cmmittee (IMC), cnsisting f the City Manager and Cunty Administratr. Pursuant t Part V f the Agreement, the pwers f the IMC include the authrity t: Mnitr Agency peratins. Prvide fr an annual financial audit cnducted by an independent certified public accunting (CPA) firm, and an annual perfrmance audit cnducted by a firm qualified t perfrm such audits. Recmmend the apprval f an perating budget. Recmmend apprval f lng-term and shrt-term wrk plans. Recmmend the issuance f Requests fr Prpsals. Apprve purchases, cntracts, and change rders in accrdance with the apprved Agency Prcurement Plicy. A Staff Directr appinted jintly by the Cunty Administratr and the City Manager is t develp plicies and prcedures fr review and apprval by the Cunty Administratr and the City Manager. The Agreement, in Part V, Sectin 2, prvides that a Staff Directr (Directr) is t be appinted jintly by the Cunty Administratr and the City Manager. The Directr is t develp plicies and prcedures which shall be reviewed and apprved by the Cunty Administratr and the City Manager. The Agreement further prvides that the Directr 11

17 Reprt #1514 Blueprint 2000 and staff shall have the ptin f being either City r Cunty emplyees fr the purpses f emplyee benefit administratin. Agency persnnel and payrll recrds are maintained by the City. A Citizens Advisry Cmmittee is established by the Interlcal Agreement. An August 2011 rerganizatin resulted in the Directr f P.L.A.C.E. assuming the respnsibilities f Agency Staff Directr and the establishment f the psitin f Blueprint Manager. T supplement a small staff, the Agency relies n City supprt and emplys a general engineering cnsultant and subcnsultants. Part V f the Agreement als creates the Citizens Advisry Cmmittee (CAC), whse respnsibilities include the review f wrk plans, financial audits, and perfrmance audits and making recmmendatins t the Blueprint 2000 Intergvernmental Agency. Agency rerganizatin was brught abut by an Interlcal Agreement in August The August 2011 Agreement creates the psitin f Directr f Planning, Land Management, and Cmmunity Enhancement (P.L.A.C.E.) and prvides that the Directr f P.L.A.C.E. is respnsible fr the duties f the Directr f the Blueprint Agency, as well as fr the peratins f the Tallahassee-Len Cunty Planning Department. Other cntempraneus Agency rganizatinal changes included the establishment f the psitin f Blueprint Manager and the eliminatin f the psitins f Blueprint Staff Directr and Capital Prgrams/Finance Manager. An rganizatinal chart fr the Agency is included in this reprt as Appendix B. As shwn by the chart, the Agency utilizes an unusual rganizatinal structure. It, as an rganizatin, emplys nly 11 permanent emplyees. Hwever, the effrts f thse emplyees were leveraged thrugh the utilizatin f City resurces fr legal, treasury, accunting, prcurement, and human resurces services supprt, and thrugh the emplyment f a general engineering cnsulting firm (Michael Baker, Jr., Inc.), which is respnsible fr prviding general engineering and prject planning and management services. General Engineering Cnsultant On September 23, 2002, the Agency s Bard authrized the cmmencement f the hiring prcess fr the GEC. On September 23, 2002, the Agency s Bard authrized the cmmencement f the hiring prcess fr the General Engineering Cnsultant (GEC). Accrding t the descriptin in the related Bard meeting agenda item, the GEC was t augment the technical expertise f the Agency s small staff. The cited advantages fr this type f apprach were that it: 12

18 Blueprint 2000 Reprt #1514 Allws maximum flexibility t quickly develp scpes f services fr multiple prjects. Affrds the Agency the resurces f several engineering disciplines n an as-needed basis. Allws fr the quick expansin f resurces when needed t address increases in the level f activity within the Blueprint prgram. Allws the Agency t cmmence wrk n multiple prjects cncurrently and thus quickly cmplete designs. By quickly cmpleting the designs, the Agency can mre quickly identify and purchase right-f-way, thereby aviding the increases in right-fway csts that ccur when prperty values increase ver time. LPA Grup (nw knwn as Michael Baker, Jr., Inc.) functins as the Agency s GEC. The GEC was paid a ttal f apprximately $7.4 millin during the perid Octber 1, 2011, thrugh September 30, Fllwing the use f a cmpetitive selectin prcess, LPA Grup (nw knwn as Michael Baker, Jr., Inc.) was selected as the Agency s GEC, and n May 19, 2003, the Agency authrized the IMC t negtiate and award a cntract t the selected GEC. The resulting five-year cnsulting cntract was executed n December 30, 2003 (Cntract N. 597). The cntract has subsequently been renewed fr a five-year term and then tw ne-year terms, with the mst recent ne-year term ending in February (The cntract may nw be renewed annually thrugh the duratin f the sales tax extensin ending in 2019.) The Agency s GEC was paid a ttal f apprximately $7.2 millin during the perid Octber 1, 2011, thrugh September 30, Key prvisins f the cntract include: The GEC is t prvide the Agency such services as may be set frth in ne r mre letters f authrizatin (LOAs). The GEC is t prvide t and perfrm fr the Agency such services as may be set frth in ne r mre letters f authrizatin (LOA). The Agency and the GEC are t negtiate and establish cmpensatin fr each LOA. The LOAs functin in a manner similar t a purchase rder in that they specify the wrk (tasks and subtasks) authrized fr particular prjects, estimates f the direct salary csts assciated with that wrk, the multipliers t be used t 13

19 Reprt #1514 Blueprint 2000 A ttal f 14 LOAs had been executed in amunts ttaling $32.7 millin. calculate the amunt f cmpensatin paid (the multipliers are described further in a succeeding bullet), and the maximum amunt f cmpensatin authrized fr the LOA. A ttal f 14 LOAs had been executed under the cntract since inceptin in 2003 thrugh FY 2014, with the amunts ttaling $32,736,521. Services assigned t subcnsultants must be apprved in advance by the Agency and delineated in the applicable LOA. In the event that services f a subcnsultant are authrized, the GEC is t btain a schedule f rates, and the Agency is t review and must apprve any rates, including verhead, t be paid t the subcnsultant by the GEC. Each LOA is t als specify any prpsed subcnsultants. As an example, subcnsultants wh were apprved fr wrk under amended LOA N. 1 during FY 2014 were: Jacbs Engineering, Inc. (Prime Subcnsultant). Each LOA is t specify any prpsed subcnsultants. In the event that services are authrized, the Agency is t review and must apprve any subcnsultant rates. Mre Bass Cnsulting (Strmwater and Landscaping). Ppe Envirnmental, Inc. (Envirnmental). Beck Cnsulting Services, Inc. (Gvernment Relatins). Quest Crpratin f America (Public Invlvement). THC Right f Way Services, Inc. (Right-f-Way). Uzzell Advertising (Public Relatins and Web Services). Greenman Pedersn, Inc. (Survey and Mapping). Allen Nbles & Assciates (Survey and Mapping). Fr wrk perfrmed under apprved LOAs, the cntract prvides that GEC cmpensatin will include: (1) reimbursement fr direct salary and wages n the basis f actual hurs wrked and actual 14

20 Blueprint 2000 Reprt #1514 The Agency is t reimburse the GEC fr all reasnable, allcable, and allwable csts. Mre specifically, the GEC is t be cmpensated fr direct salary and wages n the basis f actual hurly rates. Cmpensatin is t als include the applicatin f an administrative verhead and fringe benefits rate, a facilities capital cst f mney rate, and an perating margin rate. direct salaries paid; (2) reimbursement f the administrative verhead and fringe benefits paid, cmputed using the apprved verhead and fringe benefits multiplier (percentage) applied t actual chargeable salaries and wages; (3) an amunt t cver the GEC s cst f capital, cmputed using the apprved capital cst f mney multiplier applied t chargeable salaries and wages; (4) an amunt t prvide a prfit calculated by applying the apprved perating margin multiplier t the sum f actual salaries and wages and administrative verhead and fringe benefits; and (5) reimbursement f the actual allwable ut-f-pcket csts incurred, including thse amunts paid t subcnsultants. T be allwable the ut-f-pcket csts must be supprted by invices, cancelled checks, r ther such evidence f the payment and prpriety f the expenses. Semi-annually the GEC is t receive a written evaluatin f its perfrmance. Semi-annually the GEC is t receive a written evaluatin f its perfrmance. The evaluatin is t be cnducted by a cmmittee cnsisting f the Directr f Blueprint 2000 and nt less than tw Agency persnnel designated by the Directr. The Cmmittee s reprt is t g t the IMC fr review and apprval. Alternatively, the IMC may prepare its wn reprt. Based n actin taken by IMC, the GEC may either receive a perfrmance bnus r be required t pay liquidated csts t the Agency. All recrds f the GEC and the subcnsultants required fr a prper audit f prject csts are t be maintained and made available upn request f the Agency. Under the cntract, the GEC, its emplyees, and the subcnsultants are t be bund by specified standards f cnduct. Recrds f csts incurred in relatin t the prvisin f services under the cntract, including withut limitatin all prject recrds, all supprting dcuments and recrds f the GEC and all subcnsultants, and all ther recrds f the GEC and subcnsultants cnsidered necessary by the Agency fr a prper audit f prject csts, are t be maintained and made available upn request f the Agency at all times during the perid f the cntract. Cpies f these dcuments and recrds are t be furnished t the Agency upn request. The GEC agreed that it and its emplyees shall be bund by standards f cnduct prvided in applicable Flrida Statutes and 15

21 Reprt #1514 Blueprint 2000 administrative rules f the Department f Business and Prfessinal Regulatin, the City f Tallahassee Ethics Plicy, and the Blueprint 2000 Ethics Plicy. The cntract als requires that the GEC include similar prvisins in any subcntract executed in cnnectin with wrk perfrmed pursuant t the cntract. Agency Revenues and Expenditures Agency revenues included the Agency s share f the ne percent infrastructure sales surtax, federal and state grants, investment earnings, lcal gvernment grants and cntributins, rental revenues, and dnatins received thrugh Friends f Our Parks. Tw primary appraches were used t prcess Agency revenues. Fr purpses f discussin in this audit reprt, we have referred t these prcesses as City-prcessed revenues and Blueprint-prcessed cllectins. Agency revenues included the Agency share f the ne percent infrastructure sales surtax, federal and state grants, investment earnings, lcal gvernment grants and cntributins, rental revenues, and dnatins received thrugh Friends f Our Parks (FOOP), a nt-frprfit rganizatin established fr the benefit f the City s parks and recreatinal facilities. All revenues received are t be depsited in bank accunts maintained by the City and are t be recrded in accunting recrds maintained fr the Agency by the City. While all revenue amunts received were ultimately t be depsited in City-maintained bank accunts and accunted fr in recrds maintained by the City, tw primary appraches were used t prcess Agency cllectins. Fr purpses f discussin in this audit reprt, we have referred t these prcesses as City-prcessed revenues and Blueprintprcessed cllectins. Table 1 prvides a summary f revenues received during fiscal years 2012, 2013, and The table als indicates fr each revenue accunt the particular apprach used t prcess the amunts received. Succeeding paragraphs prvide additinal descriptins f each f the revenue prcessing appraches. 16

22 Blueprint 2000 Reprt #1514 Table 1 Summary f Revenues Fiscal Years 2012, 2013, and 2014 Accunt Descriptin FY 2012 FY 2013 FY 2014 Ttal Percentage f Ttal Revenues City-Prcessed Revenues: Sales Tax $28,233,375 $29,523,405 $30,736,031 $88,492, City - Transprtatin Prjects 261, , ,812 1,280, Cntributin frm Other Gvernment 220, , , , Administrative Fees 54, , , Investment Earnings 2,359,823 1,261, ,212 4,528, Ttal City-Prcessed Revenues $31,075,190 $31,986,535 $32,452,518 $95,514, Blueprint-Prcessed Revenues: CDBG Disaster Recvery Grant $3,664,631 $1,655,374 $ $5,320, Federal Highway Administratin - ARRA Grant 5,995, ,493 40,669 6,353, Flrida Department f Envirnmental Prtectin Grant 206, ,580 23, , NFWMD Grant 247,746 52, , Flrida Department f Transprtatin Grant 421,447 16,981,622 6,834,245 24,237, Len Cunty Transprtatin Prjects 500, , Turist Develpment Cuncil Cntributins 443, , ,038 1,526, Rental f Land and Buildings 46,357 6,823 53, Dnatins 200, , , , Ttal Blueprint-Prcessed Revenues $11,180,387 $20,946,782 $7,376,178 $39,503, Other Miscellaneus Revenue 817, ,464 56,868 1,196, Ttal Revenues $43,073,425 $53,254,781 $39,885,564 $136,213, Surce: City f Tallahassee accunting recrds. City-Prcessed Revenues: City-prcessed revenues included the Agency s share f the ne percent infrastructure sales surtax which exceeded $28 millin annually. The surtax amunts were electrnically remitted direct t the applicable City-maintained accunt. As shwn by Table 1, the Agency s primary surce f revenue has been the Agency s share f the ne percent infrastructure sales surtax, and related revenues have exceeded $28 millin during each f the last three fiscal years. The surtax, authrized by Sectin , Flrida Statutes, and apprved by lcal referendum, is cllected by businesses and remitted alng with ther sales taxes t the Flrida Department f Revenue, which is respnsible fr remitting the tax t the applicable gvernmental entity. The tax amunts remitted t the Agency were electrnically remitted direct t the applicable City f Tallahassee pled bank accunt, and thrugh the prcesses emplyed by the City s Revenue Office, recrded in CORE (the City s autmated revenue and receipts prcessing system) and then thrugh autmated prcesses recrded int the applicable Agency general ledger revenue accunt. 17

23 Reprt #1514 Blueprint 2000 Thrugh the use f the electrnic remittance ptin prvided by the state, the Agency ensured the timely depsit f the surtax revenues. Under the City s cash management and investment prgrams, the Agency s investment earnings have ranged frm apprximately $2.3 millin during fiscal year 2012 t $900,000 in fiscal year Thrugh the use f the direct depsit remittance ptin prvided by the State f Flrida, Blueprint was able t ensure the timely depsit f the surtax revenues and avid the additinal prcessing steps and related csts and risks f errr assciated with the receipt f paper warrants, as described further belw under the heading Blueprint-Prcessed Cllectins. The ther significant City-prcessed revenue f the Agency was investment earnings. The Agency participated in the City s cash management and investment prgrams, and as shwn by Table 1, investment earnings during the last three fiscal years have ranged frm apprximately $2.3 millin during fiscal year 2012 t apprximately $900,000 in fiscal year Transactins related t the Agency s investments and the earnings theren were subject t the City s related prcesses and internal cntrls, which were nt included within the scpe f ur audit f the Agency. Blueprint-Prcessed Cllectins: Blueprint-prcessed revenues ranged frm apprximately $7.3 millin in fiscal year 2014 t $20.9 millin in fiscal year The Agency als cllected, in trust, dnatins that were t be transferred t Friends f Our Parks (FOOP), a nt-fr-prfit rganizatin established t benefit the parks and recreatinal facilities f the City. As shwn by Table 1, Blueprint-prcessed revenues ranged frm apprximately $7.3 millin in fiscal year 2014 t $20.9 millin in fiscal year The majr revenue types cnsisted f grants and cntributins prvided by the state and ther lcal gvernments. In additin t revenues, the Agency als cllected, in trust, dnatins (cash and checks) fr Friends f Our Parks (FOOP), a nt-fr-prfit rganizatin established t benefit the parks and recreatinal facilities f the City. The cash and checks cllected by the Agency fr FOOP were designated by each dnr fr use in the purchase f specific Cascades Park (an Agency prject) amenities, such as funtains, trees, brick pavers, and benches. Subsequent t the installatin f the amenities by the Agency, the Agency inviced FOOP in an amunt equal t the ttal f the amunts dnated fr the installed amenities. These FOOP payments t the Agency are reprted as Agency revenues. FOOP payments t the Agency (revenues), as reprted t us by FOOP fr the perid May 2012 thrugh April 2014, ttaled apprximately $223,

24 Blueprint 2000 Reprt #1514 Expenditures and Disbursements: Expenditures fr the fiscal years 2012, 2013, and 2014, as shwn in the Agency s accunting recrds (maintained by the City) and as adjusted t exclude amunts paid fr debt service, are summarized belw in Table 2. As shwn by the table, mst f the expenditures related directly t Agency cnstructin and engineering related activities. Table 2 Summary f Expenditures Fiscal Years 2012, 2013, and 2014 Accunt Descriptin FY 2012 FY 2013 FY 2014 Ttals Percentage f Expenditures Cnstructin Services $8,538,761 $26,290,517 $24,905,031 $59,734, Unclassified Cntractual Services 8,172,117 6,368,487 4,076,751 18,617, Engineering Services 2,015,301 3,589,597 2,306,818 7,911, Cntract Engineering Services 6,720, , ,059 7,762, Right-f-Way (ROW) Acquisitin 1,702,633 5,472, ,282 7,502, Unclassified Charges 4,750,453 1,826, ,184 7,430, Salaries and Benefits 861,489 1,102,075 1,081,914 3,045, Unclassified Cntractual Services - ROW 687,157 99, ,113 1,029, Unclassified Supplies 188, , , , Rent Expense- Building & Office 103, , , , Unclassified Prfessinal Fees 27, ,021 51, , Other 308, , ,010 1,197, Ttals $34,077,243 $46,403,268 $35,187,744 $115,668, Surce: City f Tallahassee Accunting Recrds. Internal Cntrl Revenues and Expenditures As indicated under the Scpe, Objectives, and Methdlgy heading f this reprt, in evaluating the Agency s internal cntrls fr revenues and expenditures, we applied the definitin and apprach t internal cntrl described in Internal Cntrl-Integrated Framewrk, published by COSO. COSO defines internal cntrl as a prcess - effected by an entity s bard f directrs, management, and ther persnnel - designed t prvide reasnable assurance regarding the achievement f bjectives in the fllwing categries: (a) reliability f financial reprting, (b) effectiveness and efficiency f peratins (incrprates the safeguarding f assets against lss), and (c) 19

25 Reprt #1514 Blueprint 2000 cmpliance with applicable laws and regulatins. The COSO internal cntrl framewrk cnsists f five interrelated cmpnents, described as fllws: In evaluating the Agency s internal cntrls fr revenues and expenditures, we applied the definitin and apprach t internal cntrl described in the COSO publicatin, Internal Cntrl-Integrated Framewrk. Cntrl envirnment sets the tne f an rganizatin, influencing the cntrl cnsciusness f its peple. It is the fundatin fr all ther cmpnents f internal cntrl, prviding discipline and structure. Risk assessment is the entity s identificatin and analysis f relevant risks t achievement f its bjectives, frming a basis fr determining hw risks shuld be managed. Cntrl activities are the plicies and prcedures that help ensure that management directives are carried ut. Infrmatin and cmmunicatin systems supprt the identificatin, capture, and exchange f infrmatin in a frm and time frame that enable peple t carry ut their respnsibilities. Mnitring is a prcess that assesses the quality f internal cntrl perfrmance ver time. Mnitring invlves management btaining infrmatin cncerning hw well cntrls are being executed and hw well they are wrking. Overall, we fund that, with respect t the prcessing f revenue and expenditure transactins, the Agency s internal cntrls were adequate. Bth cntrl strengths and pprtunities fr imprvements were identified. We utilized the abve-described internal cntrl definitin and framewrk t structure ur audit f the Agency s internal cntrls. The results f ur review are described in detail belw. Overall, we fund that, with respect t the prcessing f revenue and expenditure transactins, the Agency s internal cntrls were adequate, cnsidering the nature f the Agency s rganizatin and the cmplexity f its peratins. 20

26 Blueprint 2000 Reprt #1514 Cntrl Strengths Cntrl strengths f nte included: The Agency has adpted a statement f missin and visin, which is shwn n the Agency s website. The Agency has adpted a statement f missin and visin, plicies and prcedures defining management and staff respnsibilities fr several majr peratinal areas, and a plan f rganizatin, including psitin descriptins. Plicies and prcedures fr several majr areas f peratin define the lines f authrity and respnsibility fr many Agency activities, including prcurement, budgeting, and leveraging. The plicies and prcedures establish Agency, IMC, management, and staff respnsibilities, and require r facilitate additinal levels f versight and Agency invlvement in high-dllar r high-risk transactins. Psitin descriptins, which include minimum qualificatins and specified assigned duties, have been established. Based n ur audit tests, there have been regular written evaluatins f emplyee jb perfrmance. Management and staff fllw the City s plicies and prcedures gverning ethical behavir. The Blueprint Manager indicated that Agency management and staff fllw the City s plicies and prcedures gverning ethical behavir and that management and staff had participated in the ethics training curses prvided t City emplyees. The Agency has adpted and effectively implemented written plicies t gvern the administratin f grants, including grant authrizatin and grantr invicing. The Agency has adpted and effectively implemented written plicies t gvern the authrizatin f grants. Prcedures prvided fr the preparatin f grantr invices by persns familiar with the terms and cnditins f grants and cntracts. The accunting system and human resurces system are administered by the City and related reprts are made available t the Agency. 21