MEMORANDUM. DATE: April 3, TO: Mayor and Board of County Commi ners. FROM: Bertha W. Henry, County Admini ra ~

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1 FLORIDA BERTHA W. HENRY, County Administrator 11 5 S. Andrews Avenue, Room 409 Fort Lauderdale, Florida FAX DATE: April 3, MEMORANDUM TO: Mayor and Board of County Commi ners FROM: Bertha W. Henry, County Admini ra ~ SUBJECT: Response to Review of the Man gement Services Agreement for the Greater Fort Lauderdale/Broward County Convention Center, Report No County Administration has reviewed the recommendations contained in the audit report entitled "Review of the Management Services Agreement for the Greater Fort Lauderdale/Broward County Convention Center", dated November 26, Some of the recommendations have been implemented such as development of a consolidated financial statement. Other recommendations such as ending advance payments for operations have not been implemented as the practice is standard in the industry for privately run governmental facilities (Miami Beach, Palm Beach, Pensacola, Osceola County and Savannah, GA have similar agreements); and, to do so, would be in conflict with the terms and conditions of the management services agreement. While not a specific recommendation, the audit states "procurement of certain capital improvements through SMG violated the County's procurement policy and may have conflicted with state statutes. Article 12 of the agreement contemplates that the operator will perform capital projects at the direction of the contract administrator. The agreement speaks to routine repair, maintenance or replacement items. It also suggests if the operator is to be responsible for repairs, such repairs, maintenance and replacements, interior and exterior, ordinary as well as extraordinary, and structural as wells as non-structural, shall be made promptly... and shall be of equal quality and class at least equal to the original work. In this case, the operator replaced the 19 year old chillers among other projects while pursuing LEED certification at the direction of the contract administrator and, though not through the County's process, the work was guided by the County's policy and competitively procured. Arguably, some of the language in the original agreement from 1989, today, could be clearer but there are a variety of sound business reasons why it is in the County's best interest to operate in this fashion for capital projects, including that SMG serves Broward County Board of County Commissioners Sue Gunzburger Dale V.C. Holness Kristin Jacobs Martin David Kiar Chip LaMarca Stacy Ritter Tim Ryan Barbara Sharief Lois Wexler

2 , Page2of5 as the single point of responsibility for all facility needs. The arrangement protects the County from third party claims related to construction impacts on event activities or vice versa as well as ensuring consistent level of service is provided during the construction. In the future, there will be greater transparency in delineating responsibility for capital projects between the operator and county. Notwithstanding the concerns outlined above, the following responses are offered to each of the recommendations contained in the review and Administration: County Auditor Recommendations 1. County Auditor Recommendation: Establishing control over county funds by taking necessary steps to end advance payments to SMG and ensure that SMG submits all collected revenues to the County each month. County Administration Response: Partially Agree - The advancing of funds for operational expenses to the operator (SMG) is contractually required as per Article 7.2 of the management agreement. This type of funding arrangement, where operating expenses are "advanced", is not atypical for privately operated convention centers as confirmed by our review of the convention center operating agreements for: Miami Beach, Palm Beach, Pensacola, Osceola County, and Savannah, GA. Prospectively, the next solicitation document for this service can be developed to assess the impact of going to a reimbursement program. As for advanced funding for capital projects, to eliminate any discretion in interpreting whether a capital project procurement item is a repair, maintenance or replacement item, a change has been made to the former practice. Capital expenditures, as defined in the Operating Agreement, are currently being disbursed in arrears. As required by contract, the operator (SMG) currently wires all collected revenues to the County on a monthly basis. It should be noted that the operator uses a special escrow account to hold deposits and pay for event related expenses. Upon conclusion of the event and reconciliation of accounts, net revenues are deposited in a separate account for disbursement to the County. 2. County Auditor Recommendation: Establishing effective contract administration over the SMG contract to include review and approval of all

3 Page3of5 expenditures paid for with County funds and retention of documentation supporting financial transactions. County Administration Response: - While staff agrees that effective contract administration is required, staff does not believe that it is deficient. Contract administration for Convention Center operations exists and is provided by the CVB through the Deputy Director's office, which is located in the Convention Center. While the Deputy Director does not review every invoice that is paid by the Operator, there is a clear understanding of the financial parameters of the Center and any major deviations are discussed with the operator. As a normal course of business, the CVB is involved in reviewing and approving all aspects of the center's operations including; operating and capital budgets, contracts and proposals, etc. In addition, all capital planning and implementation requires approval of the county through the Contract Administrator. Per the operating agreement, documents supporting the operations of the Convention Center are maintained by the operator, on site, and are subject to county review at any time and for any purpose. While staff has never requested retrieval of a document that was not available, periodically, going forward, the Deputy Director will perform spot checks of random invoices, etc., and document same. 3. County Auditor Recommendation: Identifying and properly recording amounts due to and from SMG at year end and reconciling recorded amounts within the County's financial system to the SMG Audited Financial Statements. County Administration Response: Agree. As a result of audit discussions, the "amount due" year-end figure is being provided by the operator (SMG) to the county by the requested October 15th date, annually. This financial figure is provided on a "qualified" basis awaiting confirmation by the year-end audit. 4. County Auditor Recommendation: Ensuring the annual adopted budget clearly reflects the full cost of the Center operations. County Administration Response: Agree. While all of the information in question is captured in the adopted budget, in an effort to be fully transparent, the Office of Management and Budget has revised the FY13 Adopted Convention Center Operating Budget page to summarize and clearly differentiate the costs paid by the operator (SMG) and those paid directly by the county.

4 Page4of5 5. County Auditor Recommendation: Presenting to the Board, an annual report of Center financial operations to include the full costs of operations incurred by the County with expenditure detail. County Administration Response: Agree. To ensure clear and concise financial information is provided directly to the Board, staff will develop and issue a year-end financial report which will provide a financial recap of Convention Center operations, beginning with the period ending September 30, This will be provided to the Board as part of the Budget Workshop for the CVB. 6. County Auditor Recommendation: Ensuring the Accounting Division independently reviews all payment requests to ensure compliance with contractual provisions, county policies, procedures, and state law. County Administration Response: Agree. The Accounting Division has implemented controls regarding the review of payments to SMG by having an additional layer of review performed by the Accounts Payable Contracts Section, above that which already exists by the Deputy Director of the Convention Center. 7. County Auditor Recommendation: Requiring supporting documentation for all expenditures of public funds be retained under County control. County Administration Response: Agree - All supporting documentation and records for Convention Center operations are retained on site at the Convention Center and are under shared control. Staff will work with the accounting division to determine which documents should be kept outside of the shared environment. 8. County Auditor Recommendation: Establishing effective procedures for the identification and proper accounting of County transactions including advances (receivables) and capital improvements. County Administration Response: Agree. The Accounting Division is in the process of implementing procedures to reconcile monthly revenues, expenditures and receivables recorded in the Convention Center Fund to documents submitted by SMG. To accomplish this, the Accounting Division will be requesting that the Deputy Director of the Convention Center require SMG to provide a monthly and year to date reconciliation of net funding from the County which details all funding, expenses paid, and a schedule of amounts due to the County as of the end of the reporting period. The Accounting Division has also required the Deputy Director of the Convention Center to request from SMG, on

5 April 3, 2013 Page5of5 a monthly basis, a detail of all capital assets acquired including equipment, improvements, etc. This detail will assist the Accounting Division in properly tracking and accounting for all assets acquired by the CVB. If you have questions or wish to discuss this further, please do not hesitate to contact me. cc: Evan Lukic, County Auditor Joni Armstrong Coffey, County Attorney Pamela Madison, Deputy County Administrator Monica Cepero, Assistant to the County Administrator Scott Miller, CFO, Director of Finance & Administrative Services Carlos Puentes, Deputy Director, Broward County Convention Center

Broward County Commission Public Hearing 5. Meeting Date: 10/09/2012 Department: County Attorney

Print Agenda Item http://205.166.161.204/print_ag_memo.cfm?seq=11970&rev=0&mode=e... 1 of 2 10/5/2012 9:05 PM Broward County Commission Public Hearing 5. Meeting Date: 10/09/2012 Department: County Attorney