Loading...
HomeMy WebLinkAboutOIG No. 24-27 FY 2023 Annual Follow-Up on OIG RecommendationsJoseph M. Centorino, Inspector General TO: Honorable Mayor and Members of the City Commission FROM: Joseph M. Centorino , Inspector General DATE: November 25, 2024 RE: City Administration Follow-up on OIG Recommendations on OIG No. 23-01 Miami Beach Watersport Center, Inc., OIG No. 23-06 Procurement Card Program Audit, OIG No. 23-22 The Ballet Valet Parking Company LTD Lease Agreements, OIG No. 23-24 Lincoln Place Ground Lease Agreement, OIG No. 23-26 Insurance Certificate Tracking System Review. OIG No. 24-27 PERIOD: January 1, 2023 , through December 31, 2023 It is an internal audit best practice to conduct a follow-up analysis of completed engagements, typically within a year from their issue date , to determine whether the auditees have taken any corrective actions to resolve the identified deficiencies. Consequently, the City of Miami Beach Office of the Inspector General (OIG) examined its issued audit reports related to the 2023 calendar year in connection with OIG reports to identify City departments or divisions that received recommendations to implement corrective actions. Due to the limited internal audit staff at the OIG, a test-based follow-up analysis could not be conducted for every implemented corrective action . Instead, the OIG requested that each relevant City department or division carry out a self-assessment of their implementation of OIG recommendations. Some recommendations from issued reports may be excluded because they pertain to independent entities rather than City departments or divisions, involve non-audit activities, or have already undergone follow-up work by the OIG. If time allows, OIG staff may conduct future testing to evaluate the effectiveness of the reported corrective actions. Management is solely responsible for its internal controls. City departments or divisions have various options to achieve desired outcomes, including accepting the risk without changing current practices, implementing OIG recommendations, or adopting other compensating controls. Pages 3 through 7 of this report contain schedules showing the recommendation status of all self­ assessments received from each department. Page 1 of 7 Proposed Definitions for Implementation Status: • Not implemented: management has not taken action to implement the recommendation to decrease the likelihood that the noted deficiency may continue to occur. • Partially implemented: management has taken some steps to remedy the shortcomings, but additional ones are necessary to reduce the associated risk to more acceptable levels. • Fully implemented: management has taken the necessary actions to provide reasonable assurance that the listed deficiency will not continue to occur. • Will not implement management is willing to accept the associated risks and will not implement corrective action. • No longer applicable: the circumstances have changed since the completion of the original engagement (e.g ., new technology implemented, new agreements reached, new vendors providing the service), thereby making the listed recommendation inapplicable to existing circumstances. According to the self-assessment performed, 21 of the 27 recommendations referenced in this were fully implemented and six were partially implemented. t;66%2oa,Y ate 7/4 Y/uJL't Date cc: Eric Carpenter, City Manager OFFICE OF THE INSPECTOR GENERAL, City of Miami Beach 1130 Washington Avenue, 6th Floor, Miami Beach, FL 33139 Tel: 305.673.7020 • Hotline: 786.897.1111 Email: CityofMiamiBeachOIG@miamibeachfl.gov Website: www.mbinspectorqeneral.com Page 2 of 7 Audit# OIG No. 23·01 Audit Name Miami Beach Watersports Center, Inc. lease Agreement Audit/Contract Oversight Audit Pe riod February 1, 2021-January 31, 2022 Follow-Up Report Date 2/8/2023 Implementation Status per Auditee Auditee Comments The insurance parameters for the Watersport Center entered into Exigis should be revised by City staff to Asset Management Division did take it mirror the requirements listed in Section 9.2 of the upon themselves to secure the correct THE WATERSPORTS CENTER WAS NOT lease Agreement. Asset Management Division staff Certificates of Insurance or COis, which Risk Management Division FULLY COMPLIANT WITH THE STATED should notify the Watersports Center of the were received November 2022, bringing Fully ImplementedINSURANCE REQUIREMENTS IN SECTION Commercial Liability insurance deficiency and the the COi to $4M of Commercial LiabilityAsset Management Division missing policies related to the required Automobile coverage (on two policies) and $1 Min9.2 OF THE LEASE AGREEMENT. Liability insurance or Liquor Liability insurance auto. They do not se ll liquor, so liquor coverage. If not timely resolved, the available coverage is not necessary.disciplinary actions in the lease Agreement may be enforced by the City. All hazardous materials stored on the premises should always be properly secured. Furthermore, the lessee should timely furnish the required hazardous materials report to the Asset Management Division pursuant to Section 9.7. Although Section 9. 7 does not specify whether the lessee was notified of the required annual hazardous material report needs to be filed hazardous material notification each year. THE WATERSPORTS CENTER WAS NOT if no hazardous materials were stored on the The Asset Management Division and COMPLIANT WITH THE HAZARDOUS premises during the stated period, it is Facilities Managers conduct regular site Asset Management Division Fully ImplementedMATERIALS REQUIREMENTS IN SECTIONS recommended that the report be filed each January visits each year. Identified deficiencies are 9.SAND 9. 7 OF THE LEASE AGREEMENT. 1• and the Lease Agreement be clarified. Asset communicated with lessee by the Management Division staff should periodically Facilities Department as necessary.perform unannounced site visits of leased properties to verify compliance with stated requirements. The corresponding results should be documented and maintained in the lessee's file, and any identified deficiencies should be forwarded to the lessee for prompt resolution. The Watersports Center should not enter into Sublease Agreements unless prior written consent is received indicating City Manager approval pursuant to Section 13.l. The OIG Auditor The Lessee was notified and educated on SUBLEASES WERE EXECUTED BY THE LESSEE the proper timing of providing the Asset WITHO UT APPROVAL OF THE CITY recommends that the existing Sublease Agreement Management Division with notification onbetween the Watersports Center and Hydrow Inc. Asset Management Division Fully Implemented a new sub-lease, even if they are short OF THE LEASE AGREEMENT. MANAGER, AS REQUIRED BY SECTION 13.1 be reviewed by the City, and be revised as deemed term, so that the City Manager has time to approved Sublease Agreements should include necessary. Also, the OIG recommends any City review and provide approval. insurance requirements reviewed/approved by the Risk Management Division to minimize the City's risk exposure. Page 3 of 7 Audit# DIG No. 23-06 Audit N ■me Procurement Card Program Audit Audit Period October 1, 201S. September 30, 2021 Follow-Up Report Date 4/19/2023 Finance Department Fi nance Department Finance De partment Finance Department The Fina nce Department should establish and follow a documented prncedure to reduce the risk of duplicate payments. tt should THE CITY MADE NINE DUPLICATE PAYMENTS contain, at a minimum, the following recommended provisions: 111 a TO VENDORS RESULTING IN SS,984.92 process to recover duplicate payments; (2) identific.ation of the OVERPAYMENT. THE SEGREGATION OF DLITIES PRINCIPLE, S7S,374.31. employee responsible for the recovery proce ss; (3) when attempted recovery should begin; 14) how vendors should be notified; and IS) how to document the recovery efforts. Department or Division Directors requesting changes to the established Munis system P Card approval queue should ensure that a proper SOD is maintained after the changes arc implemented. The card holder should never be able to approve his/her own P-Card examination regarding the 208 identified P-Card transactions, totaling $75,374.71, to determine the legitimacy of each purchase. Appropriate action should be taken regarding any verified unpermitted purchases. The City Administration should decide whether any action should be taken pursuant to SOP Fl.16.0l to obtain reimbursement for incorrectl y paid sales taxes in P•Card purchases. All individuals involved in the processing of P-Cards, including the c.ardholders, TAX WAS IMPROPERLYPAID SY THE CITY ON assigned reviewers, approvers, Department or Division Directors, 94SAMPLED P-CARO TRANSACTIONS designated Finance Department staff should be instructed to TOTALING $1,356.28. NO SUPPORTING DOCUMENTATION, AS REQUIRED BY THE PROCEDURES MANUAL, WAS FOUND IN THE MUNIS SYSTEM RElATED TOTWO SAMPLED TRANSACTIONS, TOTALING $8,317.23. P-CARD EXPEND!TURES, TOTA LING scrutinile future P-Card purchases to help prevent similar errors from occurring. Any noted future deficiencil?S should be documented and provided periodically to the Chief Financial Officer and City Administration. Repeat offenders should be required to attend refresher trainings. As part of the review/approval process, designated City employees should verify that sufficient supporting documentation is attached to the P-Card Statement, which may include a completed "Missing Receipt Documentation Form." If not provided, the transaction should not be approved and should be returned to the card holder for corrective action. Repeated noncompliant cardholders should be required to attend additional refresher trai nings, and P-cards may be revoked if the behavior is not altered. The City may consider reimbursement in cases involving unsupportable expenditures. Furthermore, the Finance Department should record all non­ compliant P-Card behavior to provide an audit trail in support of any disciplinary actions taken. P-Card purchases should comply with the approved related Citywide Procedures and/or Procedures Manual. Alternatively, the City Administration may consider revising either of these documents to include a provision allowing the stated terms to be overridden by documented approval of the City Manager prior to the purchase. Predetermined Department or Division P-Card approvers and $236,643.91, WERE PAID BY THE CllY designees should closely review all transactions to determine Fi nance Departml?nt DESPITE BEING SPECIFICALLYDISALLOWED whether they are related to City business and serve a direct, official, Finance De partment Finance Department !N SECTION l .16.1 OF THE PROCEDURES and lawful purpose for reasonable and necessary expenses of MANUAL THEPROCEDURES MANUAL CONTAINS VAGUE, INCOMPLETE, AND UNDEFINED GENERAL TERMS, WHICH MAY CAUSE CON FUSION REGARDING THEVALIDITY OF SOME P-CAROTRANSACTIONS. EXPEND!TURES TOTALING $23,581.99, ALTHOUGH NOT EXPRESSLY conducting City business. !f the required criteria are not satisfie d, the cardholder and the P-Card Administrator should be immediately notified. In addition, the City Administration should determine whether a card holder should be subject to cancellation of his/her P· Card and/or other disciplinary action, pursuant to Citywide Procedures and/or Procedures Manual. The pertinent Citywide Procedures, as well as the Procedures Manual, should be revised to define terms, reduce ambiguities, address the usage of P-Cards to donate monies to other organizations or charities, buy event tickets, and the amount of allowabl e tips or gratuities. Also, the Human Resou rces Department should update its SOP concerning timely notification of the Finance Department of the termination of any employee so that P-Cards can be promptly deactivated. Cardholders, reviewers, approvers, or their designees should scrutinize all transactions to validate whether they are eligible and serve a direct, official, and lawful purpose as the reasonable and necessary expenses of conducting business. If any transaction is PROHIBITED IN THE P-CARO PROCEDURES related to a non-eligible expenditure, the P-Card reviewer or MANUAL, APPEAR QUESTIONABLE approver should follow the established guidelines for timely DUE TO THE NATURE OF THE TRANSACTIONS. notific.ation of all relevant parties of the identified deficiency. Once the deficiency is verified, the available disciplinary actions in the Citywide Procedures as well as the Procedures Manual may be utilized. The Finance Department should request the City contracted bank to 39 P-CARD PURCHASES, TOTALING decline or block all P-Card purchases of businesses containing $12,387.24, WERE MADE FROM disapproved MCCs listed in Section 1.3 of the Procedures Manual. As Finance Department DISAPPROVED MERCHANT CATEGORY a compensating internal control, P-Card reviewers and approvers CODES THAT WERE NOT BLOCKED IN THE should validate that all purchases submitted for reimbursement CllY BANKING SYSTEM. comply with all requirements, including those in Section 1.3 of the Procedures Manual. 10 11 12 18 19 20 Implementation Status per Auditee Partially Implemented Fully Implemented Partially Implemented Partially Implemented Partially Implemented Partially Implemented Partially Implemented Auditee Comments Finance Department is in the process of updating the Purchasing Card procedures guidelines. The Finance Department is recommending that departments periodically review their actual expenses and compare to budget to ensure that no duplic.ates are made and that corrective actions are taken by the individual departments in the unlikely event of such an occurrence. Updated procedures will emphasize this item in both the Purchasing Card Procedures and to cardholders and approvers during their respective training and other communications. Also, reconcile rs were recommended to start adding invoice numbers to the Munis P•card Module when addin the required support and G/L allocation. The Munis workflow is laid out to avoid duplicate approvals and for segregation of duties. However, the Munis workflow does not prohibit the forwarding of transactions to another individual whi ch has, historically, resulted in approval of the c.ardholders own p-card purchases. The Finance Department will emphasize this item in both the updated Purchasing Card Procedures (Section SB) and to cardholders and approvers during training and other communications. The transactions that were identified in this finding were reviewed by the approvers and physical signatures were obtained for each statement. These signed statements were uploaded into the Munis record. Also, as a detective control, the finance department reviews a report quarterly to identify and mitigate any situations where the cardholder may inadvertently approve their respective card transactions. Corrective actions, if needed are communicated to Department personnel. The Finance Department will emphasile this item in both the updated Purchasing Card Procedures (Section 20) and to cardholders and approvers during training and other communications. To assist the cardholders, the new JP Morgan Chase P-cards includes the City's State of Florida tax exemption I Don the front of the card to avoid not having the number available at the time of purchases. An explanation of why sales tax was paid will be required to be included in the supporting documents for purchases with taxes. In today's methods of procuring good and services, espe cially with e-commerce, it is not always conducive to presenting a tax exemption certification. It is also important to note that most Electronic points-of-sale have no provisions for providing tax e"emption information and eliminating Florida sales tax payment. Certain transactions noted in this finding, were sufficiently described and were for a legitimate purpose at the time of purchase and approval. To clarify for cardholders and approvers what is considered "sufficient, adequate, and relevant" supporting documentation, the Finance Department has prepared a checklist for supporting documentation and added (Exhibit D) to the updated Purchasing Card Procedures (Section 4A and SA) . Sufficient, adequate, and relevant supporting documentation are the responsibility of the cardholder and approver. The Finance Department will emphasize this item in both the Purchasing Card Procedures and to cardholders and approvers during training and other communications. The Finance Department is in the process of revising the Purchasing Card Procedure guidelines including instructions on Procedures, Guidelines along with Exhibits outlining updates to the permitted utilization of the City's Purchasing Card. In addition, there are provisions allowing the cardholder to document and request approval from the City Manager prior to the purchase. The Purchasing Card Procedures guidelines are administered by City Administration and are applicable to all those under the authority of the City Manager and the City Manager's administrative team. The Finance Department is in the proce ss of revising the Purchasing Card Procedures guidelines. There will be instructions on Procedures, Guidelines including Exhi bits. All the underlying factors for the findings herein will be addressed in the revised document. The Finance Department Accounts Payable Team was added to the Access Termination email distribution list to inform Finance of the need to remove inactive p­ card holders on a timely basis. The items in this finding are not expressly prohibited, however, sufficient, adequate, and re levant supporting documentation would avoid the questionable nature of the item and allow for transparency. As noted in the response to finding No. 4, the Finance Department will provide a checklist of what is deemed sufficient, including pre-approval from the City Manager where applicable. (Section 4A, SA) The Finance Department will emphasize this item in both updated Purchasing Card Procedures and to cardholders and approvers during training and other communications. Similar to the City's previous financial institution, the JP Morgan Chase Purchasing Card program has implemented MCC blocks resulting in Fully Implemented declines of purchases w ith the re stricted MCC codes noted in this finding. Exceptions were and are made for the MCC codes outlined in the procedures guidelines for specific cards due to the nature of the cardholder's business. Page 4 of 7 Audit# OIG No. 23-22 Audit Nan The Ballet Valet Parking Company, LTD. Parking and Lease Agreements Oversight Audit Audit Pe ri August 1, 2018 -July 31, 2023 Report Da November 20, 2023 Asset Management Division Parking Department RE -CALCULATION OF THE MONTHLY RENTAL The Asset Management Division should re­ PAYMENTS REQUIRED UNDER THE LEASE calculate and cred it Ballet Valet for the AGREEMENT DETERMINED THAT BALLIT $20,581.13 overpaid plus Florida Sales Ta>C. VALET OVERPAID THE Cl"TY BY A TOTAL OF In addition, a journal entry should be $21,924.75, CONSISTING OF $20,581.13 IN created to reduce the City Sales Tax liability BASE RENT AND $1,343.62 IN FLORIDA general ledger account due to the identified SALES TAX. $1,343.62 overpayment. RE-CALCULATION OF THE MONTHLY FEE The Parking Department should validate the PAYMENTS TO BE PAID TO THE CllY UNDER figures using the methodology approved by THE PARKING AGREEMENT RESULTED IN A the OIG and CAO. Once fi nished, Ballet Valet NET UNDERPAYMENT OF $17,349.38, should be invoiced accordingly. In addition, EXCLUDING FLORIDA SALES TAX. the Parking Department should ensure that all future monthly rentals are billed in accordance with the Agreement terms. Implementation Status er Auditee Fully Implemented Fully Implemented Auditee Comments This finding was reviewed, corrected and paid back to Ballet Valet on September 21, 2023. The DIG finding was revieWt'd and validated. The Parking Department invoiced Ballet Valet for the underpayment of $17,349.38 on November 7, 2023 Invoice No. 46571 (Attachment A), and payment was received on November 29. 2023. In response to this OIG audit fol l ow-up, the Pa rking Department met with the Finance Depa rtment to review the monthly billings fro m August 1, 2023 to date. A discrepancy was identified resulting in a net underbilling of $8,430.48 for the period from August 1, 2023 to August 1, 2024, and $189.42 for the firsttwo months of the period from August 1, 2024 to August 1, 2025. The Parking Department invoiced Ballet Valet for the total underbilling amount of $8,619.90. Invoice No. 52298 (Attahchment B) dated September 11. 2024, attached, includes a detailed breakdown of the costs. Payment was recieved on October 2, 2024. Going forward, the Parking Department will invoice Bal I et Valet at the current monthly rate of $114.58 per access card and adjust the monthly access card rate for the period from August 1, 2025 to August 1, 2026 per the agreement. Parking Department THE PARKING DEPARTMENT DID NOT The Parking Department should review the COLLECT AND REMIT FLORIDA SALES TAX OJG's calculations, and if agreed, invoice DUE TO THE STATE FOR THE USE OF Ballet Valet for the $12,879.72 ($1,419.25 + LICENSED PARKING RENTAL FEES, RES UL $11,460.47) due in Florida Sales Tax. Once TING IN AN UNDERBILLING OF $12,879.72. the City receives payment, it should be promptly remitted to the State. In addition, the Parking Department should, at least anually, obtain documentation indicating the number of parking spaces sub­ leased/rented, any used by Ballet Valet/Goldman Properties, and any used to provide free parking. It is important to note that if any are used to provide free parking, the entire considerati on paid becomes ta>Cable pursuant to Rule 12A-1.073 (3). Applicable Florida Sales Tax should be assessed on the corresponding license rental fee for those spaces not sub-leased/rented and used by Ballet Valet or any authorized parties. Furthermore, the Parking Department should retain copies of all Resale Certificate forms to document e>Cempted license rental fees in the event of a Florida Sales Tax audit. 10 Fully Implemented The DIG finding was reviewed and validated. Ballet Valet was invoiced for a total of $12,879.72 on November 7, 2023 . The Parking Depatrment issued invoice No. 46564 (Attachement C) . Payment was received on November 29, 2023; and, per the attached email. the Finance Department remitted the amount to the State (Attahcment D). Pursuant to theOIG's recommendation, the Parking Department will obtain documentation from Bal let Valet beginning October 1, 2024 (Attahcment E), and annually thereafter, detailing the number of parking spaces sub- I eased or rented by Bal l et Valet, used by Ballet Valet or any authorized parties, as well as any spaces used to provide free parking. Page 5 of 7 Audit# OIG No. 23-24 Audit Nan Lincoln Plilce Ground Lease Agreement Compliance Audi! Audit Peri Janu•1y I, 2019. through December J1, 2022 Report Da November JO, 2023 Implementation Status er Audftee Auditee Comments Asset Managemen1 Oivision staff should perform its own calculations THE CITY WAS UNOERPAIO 59,922_96I N BASE RENl, and determine whether it ag1ces wilh theOIG Auditor's calculations of Facilities and fleei: Management Department INCtuDING S'1BB.20 IN FLORlOASALES TAX, OUE TO S9,922.96 i~ bne,~t du:to the Cily for the audit periQd. Once INCORRECT CALCULATIONS INVOLVI NG THECUMUlATlVE CPI completed, It should 1n1101ce the Tenant accordingly. As the base rent, S ADJUSTMENTS PURSUANT TO SECTION J Of THE GROUND including Florida Sales tax, is based on the prior years ' CilculatiQns, LEASE AGREEMENl. the monthly charges invoiced for lutu1e lease years starling with 11/30/2023 FULLY IMPLEMENTED The Asset Management Division acknowledged the miscalculation from 2013, recalculated and property adjusted the historical billings from 2013 through 2022. January I, 2023, th1ough Decembe1 31, 2023, should be rl'lliewed and adjus1ed,i1sneeded. TheA.ssetMilnilgernentDlvislonshouldexaminetheOIG'scalculations and determine whether they agiee with them. Once completed, it The Asset Management Division collaborated with the Fiicilities and Fleet Management Department shouldpromptlyinvoicetheTenantaccordingly. The difference FLORIDA SALES TAX ON COMMERCIAL RENT WAS NOT between the Flor Ida S.tlcs la x p.tld .tnd the corresponding l iX due CORRECTLY flPPUED TO THE PERCENTAGE RENT PAYMENT S should be included in the City's nextpaymenttotheState of florid.t RECEIVED RESUlTING lN AS4 S,692.1 4 UNDERBlll/NG Dep.t1tment of Rl'llenue. Fu1 thermore, Asset M.tnagement DfvisiQn staff INCLUDING S2,048.112 DUE TO THE STATE. should revi ew its general ledger accounldislfibutions rel ated lo the 12/1/20].J FULLY IMPLEMENTED Finance Department to indude the difference for Sales Tax in the amount of $2,0\8.42 to the State of Florid.t Department of Revenue. The Asset Management Division identified and had corrected percentage1entpaymentsoutsldethcdcsignatcdauditperiod,and this issue with the 2022 percentage rent payment. promptly makeany neededcorrec1lons. The current Asset Management Division staff had no history of the previous management company (LNR) to confirm if those late fees were waived by the City. Since LNR is no longer managing this property, the Asset rv\anagement Division did not agree with back billing these late fees. On August 25, 2022, the Asset Management Division billed and collected the late fee TheAsse1ManagernentOi11isionshouldensu1ethatfuturepacentage for the 2021 period where the Tenant was 175 days rent payments ue remitted limely pursuant to the Ground lease late in the amount of $7,65119. However, in reviewing Agreement. II not, the specified laIecha1ges should be promptly and the late fee ch arged, it was not calculated correctly. Facilities and Fleet Management Depariment accur.ttely billed. The Asset Management DiviSiQn should r,:-Ji f!W thePERCENTAGE RENT PAYMENTS WERE REMITTED TO THE CITY OIGcalculations,i1ndil it ilg1ees,creditIhecurrent Tenant in the AFTER THE DUE DA TES SPECIFIED IN THE GROUND LEASE amountof Sl,41 3.83 (S7,6Sl .19 billed -SS,8S6.68due • Sl80.68 AGREEMENT, BUTLATE FEES WERE NOT ACCURATElY Florida Sales ta~due)relatedtoits 2021 ca!enda, year payment and CHARGED, RESUlTING IN S2,729.19 OUE, WHIG! INCLUDES remitSJ80.68tothe Staterelaled tothepeicentagerent late fee56112.89 IN FLORIDA SALES TAX. collectedduringtheauditperiod.lnaddillon,theA.ssetManagement 10 12/2/2023 IMPLEMENTED The Asset Management Division reviewed the OIG's calculation, and after consulting with the City FUtlY Attorney's Office as welt as the Finance Department, it was determined the OIG based the prime interest rate calculation solely on the rate in effect on the first day Oi11isionshould !n11o!cethe forme, tenant, 16"Strect Partners.lLC.for the payment was late. However, in accordance to the identiliedlatcchargcs plus Florida S.tl cs taxo1S2,34S.2S for 2018 section 4.1 "Late Charges", " ... the late payment shall andS 1,797.76 for2019. bear interest from the date due until the date paid at a rate (the " late Charge Rate ") equal to the lesser of (a) Four Pe rcent ( 4%) per annum in excess of the prime rate in effect from time to time..." Since the prim e rate changed four ( 4) times over the 175 days the Tenant was late, the amount due by Tenant would be $6,629.88 plus sales tax of $430.94, for a total of $7,060.82. TheTenantshouldtimelysubmit all,equlredreportstotheCityA.sset. The Asset rv\anagement Division did not believe the Management Division pu1suant to the Ground lNseAgreement. All reports mentioned above were delivered late to the Facilities and Fleet Management Department reportsshouldbetime/dates1ampeduponreceiptbytheCi1ytoTHETENANT DID NOT SUBMIT ALL THE REQUIRED REPORTS FOR THE PERCENTAGE RENT PAYMENTS BY THE DESI GNATED DUE OATES SPECIFIED IN me GROUND LEASE AGREEMENT. 11/30/2023 FULLY IMPLEMENTEO City. The current Asset Management team has been maintaining time/date stamps on received doruments, despite it not being a lease requirement. The team follows up with tenants for their enforcement actions available In the Ground Lease.Agreement, whe1e applicable. deliverables and implements the appropriate enforcement per the lease. The Ten ant should timely submit all required financial statements and back-up documentation to the Asset M.toagernent Division unda the ececuted Ground tease Agreement. In addilion. the Asset Managemen1 Facilities and Fleet Management Department Oi11isionshouldvalidatetheco1,cspondingligures as per thePERCENTAGE RENT PAYMENTS COULD NOT BE VERIFIED DUE supporting documentation to 1hose1eported fn the annual pe1centage lSTO INSUFFICIENT SUPPORTING DOCUMENTATION AS rent calculations provided by the Tenant. If the documentation stillREQUIRED PER THE GROUND LEASE AGREEMENT. needs 10 be,eceived as part of submitting the pacentage1ent 11/30/2023 FUllY IMPLEMENTED These processes and procedures have been in effect since 2022, which is prior to the commencement of this audit. Unfortunately, we cannot comment on anything prior. payments, the Asset Management Division Sh Quid promptly notify the Tenantofthedeficiencyinwlitingandimplementanydisciplina,y actions available in the Ground lease Agreement. The Asset Management Division verifies the receive d certificates of insurance in accordance with the lease TheresponslbleCity staffshouldrevisetheh1gissoftwareparameters relatedtoUncolnPlacetomirro, theinsu1ancerequirementslistcdin requirements. This recommendation comes up on all Facilitie;and FlectManagemen1 Department RisltManagementDivision FINDING: TENANT WAS NOT COMPUANT WITH ALL Article 7, lnsur~n_c~, of the Ground Lease Ag1eement. Asset INSURANCE REQUIREMENTS PURSUANT TO ARTICLE 7 OF THE Managem~nt D1 v,s1on st~lf sh~uld ensure that the Certificate of GROUND LEASE AGREEMENT FOR MOST OF THE AUDIT Insurance 1s fully compliant w1\h the Ground lease Agreement and 17 PERIOD. ;;;:,~itn:i:~s:irsakn~:;:!:~:~~~'.~~s:::~t~:f~'t:::;: ~:::~:~~s 11/30/2023 FUllY l MPl.EMENTEO audits during the same period. Prior to the first finding of this discrepancy (for the current Asset Staff), the Asset Management staff had no knowledge that Exigis parameters would not necessarily mirror the lease Division should periodicallyrl'lliewExigis soltwa1e Iovalidate1ha1the requirements. This has been corrected and continues Tenant complies with the related insurance,equirements . to be reviewed regularly. Risk Management confirmed that tenant is in compliance with Insurance re uirements. Page 6 of 7 Audit# OIG No. 23-26 Audit Name Insurance Certificate Tracking System Process Review Audit Pe ri od N/A Report Date 12/21/2023 lemented or o Longe Implementation Status -, ....... , ,..:;..-' -;:_ _ erAuditee ----'" ---'----'---- Auditee Comments The above deficiencies rela ted to the profile of the 20 sampled Exigis vendors with noncom pliant insurance parameters should be revised by City staff to mirror the insurance requirements of the All departments have been associated contracts/agreements. Given the high percentage of informed to contact Ris k sampled contracts/agreements containing deficiencies (20/21 = Management for insurance MISALIGNMENT BETWEEN EXIGIS 95.24%), theOIG strongly recommends that Risk Management requirements. We conduct SYSTEM PARAMETERS ANO Division staff review all other City contracts/agreements, including periodic checks of various Risk Management fully implemented ven dors and provide feedback to of 21 DIG SAMPLED insurance parameters are sufficient. If deficient, the necessary INSURANCE REQUIREMENTS IN 20 those executed prospectively, to determine whether the listed EXIGIS. Please note that CONTRACTS/AGREEMENTS. corrections should be promptly made. It is also recommended that customization within EXIGIS is not the Risk Management Division develop an alternate procedure for possible without additiona I cost any contract/agreement with an insurance requirement not and this can cause to variance or verified by Exigis (e.g., Business Interruption insurance) to exception from time to time. determine whether pertinent vendors are compliant through an Umbrella Package or another policy. The Risk Management Minimum Insurance Requirements, the insurance provisions in the executed contracts/agreements, and Al l departments have been made the pa rameters in the Exigis system should be aligned. aware to reach out to Risk Furthermore, the vendor-maintained insurance coverage should, at Management for insurance requirements prior to entering the I Ml NIMUM INSURANCE COVERAGE : 0:~~~;:;•g:::~n:~~ ~;a~~-r~:ui~~:.:n~el~~;~n~i::e ::'p:::rfet~; evaluation into EXIGIS. Please Risk Management fully implemented:~u~~E~S~~: : ~:~~N~~=E increased. Risk Management Division staff should be required to note that customization within CONTRACTS/AGREEMENTS. :::~:::1 :hueeuf:rb:fo:: t~l~irf:~::ti~onn:~a::~~r;:m:~;n~:ni':~ I I EXIGIS is not possible without additional cost and this can causethe stated terms with the required insurance coverage. Also, the to variance or exception from time City should contact associated vendors to try to amend any to time. existing contracts/agreements containing materially deficient insurance coverage provisions. Risk Management Division staff should document a methodology Exigis completes this upon or process to determine whether each approved vendor insurance notification from the vendor or theNO DOCUMENTED METHODOLOGY policy continues to satisfy the designated requirements during the expiration date on the certificate OR PROCESS HAS BEEN FOLLOWED remaining term of the contract/agreement. At a minimum, Risk of insurance. A notification emailTO CONFIRM THAT VENDORS Management Division staff should periodically exa mine the fu lly impl emented is sent to the vendor 30 days andRisk Management MAINTAIN THE REQUIRED 12 INSURANCE COVERAGE vendor's insurance coverage and document the results. Vendors 14 days prior to expiration THROUGHOUTTHETERMOFTHEIR should be promptly notified of any identified deficiencies, and requesting an updated certificate CONTRACTS/AGREEMENTS. available disciplinary actions should be enforced against of insurance coverage from each repetitive non complia nt vendors or those entities that do not vendor . time! correct the identified deficienc . The DIG Auditor sent an email to the current City Risk Manager recommending deactivati on of all active access related to terminated employees and to determine whether the two unknown users need system access. lf not already completed, any active accounts belonging to former employees should be promptly At this time EXIGIS will send a OUTDATED EXIGIS USER LIST WITH deactivated. report quarterly for Risk UNREVOKED SYSTEM ACCESS FOR • A documented process should be created to determine which Management to review and fully implemented Risk Ma na gement 13 recon ci le. This wi ll control the NOVEMBER 3, 2022. any individuals separated from employment are timely 81 TERMINATED EMPLOYEES M, OF employees need access to Exigis and to ensure th at the accounts of number of associate who have deactivated. access to the database. • Risk Management Division staff should also examine, at least annually, the Exigis system User Roles assigned to individuals to determine if any changes are needed based on the current position and job duties. The City Manager or her designee shoul d create and adopt a Risk Management monitors THE LACK OF A CENTRALIZED Citywide procedure requiring departments and divisions to monthly all agreements that LISTI NG OF ALL CITY AGREEMENTS provide copies of all contracts/agreements to the Procurement cannot be entered into EXIGIS for Risk Management HINDERS THE DETERMINATION OF Department, including those that did not go through the 14 fully implemented compliance, see the attached THOSEREQUIRING INSURANCE established procurement process. Once received, each spreadsheet used to comply with COVERAGE. contract/agreement should be uploaded to the City website to this finding. centralize the related information and to facilitate identification. The City Manager or her designee should implement an oversight UNCERTAINTY EXISTS IN process to monitor the data withi n the Insurance Certificate Risk Management team conducts IDENTIFYING CITY STAFF Tracking System, including determining the corresponding data monthly reviews of EXIGIS RESPONSIBLE FOR THE EXIGIS owner and the duties of each involved department/division, to help Risk Management fully implemented informa tion to reduce deficiencies 15RISKWORKS SOFlWARE establish accountabil ity and prevent the deficiencies noted in this and maximize the effectivenss of ADMINISTRATION, INCLUDING report from reoccurring. Otherwise, all the anticipated benefits of the vendor. OWNERSHIP OF THE DATA. contrac ting wi th Exigis may not be realized and the associated City funds may not be well spent. Procurement sends a weekly non­NO EVIDENCE WAS PROVIDED OF A compl i a nee report to everyDOCUMENTED STANDARD department citywide. Each ~~~~~:: ~;:~~~~~~~G VENDOR-~ocument an o:ersight p~ocess to.better ens ure compliance wi th The City Ad ministration or its designee should develop and department is responsible forI fully implemented contacting the vendor and requesting the missing Risk Management 16MAINTAINED INSURANCE insurance requirements included m contracts/agreements and to COVERAGE, SITTING INSURANCE ~::~tt:i'~~:~~;i::~yo:~:~o::.liant vendors or be subject to informa tion. Risk Management PARAMITERS, ANO FOLLOW-UP OF will conduct periodic training to NON-COMPLIANT RES UL TS. our bu siness partners. Pa e 7 of 7