LTC 115-2017 Update Regarding the Theft of Funds from a City Bank AccountMIAMI BEACH
OFFICE OF THE CITY MANAGER
NO. LTC # 115 -2017
LETTER TO COMMISSION
TO: Mayor Philip Levine and Members the Ci ,T ommission
FROM: Jimmy L. Morales, City Manag
DATE: February 28, 2017
SUBJECT: Update regarding the theft of f nds from a City bank account
The purpose of this Letter to Commission is to provide an update regarding actions
taken following the theft of $3.6 million in funds from a City bank account as referenced
in LTC #009 -2017 on January 9, 2017.
Recovery -to -date
The total amount of funds fraudulently removed is $3,686,712.07. As of today, the City
has recovered $1,101,879.12. This leaves an outstanding amount of $2,584,832.95.
Administration continues to work with the U.S. Attorney's office, the FBI, and Miami
Beach Police to aggressively recapture all the funds.
Status of BDO project
The accounting firm of BDO has been retained to conduct a review and risk assessment
of our internal controls and procedures in our Treasury Management, Disbursement, and
Reconciliation functions. BDO has been working for over a month on the project.
Development of a draft report is substantially complete and a final report will be available
in 2 to 4 weeks.
Status of Additional Scope of External Audit
The scope of the City's annual financial statement audit by Crowe Horwath was
expanded to include the effectiveness of internal controls with respect to cash
management. The scope includes items such as expanding testing of bank
reconciliations, expanding testing of ACH and wire transactions, and assessing controls
before and after the Munis project conversion. The results of this additional scope will
be available in April.
SunTrust Bank Review
SunTrust Bank will provide a full review of our Treasury process and provide training at
no cost to the City. System training for Online Treasury Manager, ACH Fraud Control
and Enterprise Spend Platform (Purchase Card) are scheduled for March 13th. The
Treasury process review will take place at the end of March.
This review will assist in the identification of potential enhancements to our Treasury
process for the following areas:
• Accounts Payable Share best practices on automating payments and positive
pay and provide strategies around manual processes.
• Reconciliation - Evaluate the reconciliation of account statements and help to
easily identify incoming items /cash. Provide best practices to the CMB in utilizing
all data available to us from SunTrust in the reconciliation process.
• Fraud Control - Provide best practices on fraud protection and evaluate if we are
utilizing all fraud protection tools. Evaluate standard operating procedures,
payment and approval policies and appropriate administrative rights.
Finance Department Staffing
On February 2nd we hired John Woodruff in the role of Chief Financial Officer (CFO).
John had previously served as the Office of Budget & Performance Improvement
Director, which includes the City's Internal Audit function, from 2013 to 2016. He also
served as Interim CFO for four months in 2015 and 2016. On February 6th we filled the
Treasury Manager vacancy with Vivian Parks who previously served as Finance Director
at the cities of Key Biscayne and Hialeah. I have also approved the addition of two new
positions based on preliminary recommendations from BDO, a Financial Analyst II
position in Treasury Management/Disbursement and a Financial Analyst I for Bank
Reconciliations. We are also in the process of rapidly filling the remaining vacant
positions in the department.
Outside Legal Counsel
Although we are hopeful to fully recover the stolen funds, we are working with the City
Attorney's Office and outside counsel to identify all possible legal remedies in the event
we have any gap. Obviously, the intention would be to resolve any such issues
amicably with the applicable parties, but we will be prepared to take stronger measures,
if necessary.
If you have any questions, please feel free to contact me.
JLM /J