LTC 102a-2003 CITY OF MIAMI BEACH
Office of the City Manager
Letter to Commission No.
To:
From:
Subject:
Mayor David Dermer and
Members of the City Commission
Jorge M. Gonzalez
City Manager
TRANSMITTAL OF I~TERNAL AUDIT ON NORTH BEACH
DEVELOPMENT CORPORATION
Date: April 22, 2003
Attached is the City's Internal Audit Report on the North Beach Development Corporation
(NBDC). This performance audit focused on the activities of the NBDC as they relate to
projects funded primarily from Community Development Block Grants (CDBG) and Quality
of Life (QOL) funds. NBDC was found to have successfully met their corporate objectives
for the programs. All of the funds received from the City were found to have been properly
spent and adequately supported. However, two recommendations for improvement were
addressed to the QOL Monitor. One was for the QOL Monitor to exercise increased
oversight over NBDC administrative expenses funded with QOL monies, and the other
called for the preparation of written procedures by the QOL Monitor. The Neighborhood
Services Department has responded by implementing these recommendations.
To ensure compliance for monitoring sub-recipients of CDBG funding, the Community
Development Division follows U.S. Department of Housing and Urban Development (HUD)
guidelines. As an example, Community Development verifies that NBDC is carrying out
their community development program as described in their application, in a timely manner,
and with reasonable costs. This is accomplished through periodic monitoring visits to
NBDC, as well as review of their monthly reimbursement request packages. For QOL
funding, the City monitors recipients' spending through the Neighborhood Services
Department. More specifically, the QOL Monitor verifies that adequate supporting
documentation is present for each NBDC reimbursement request, that the request is not a
duplicate, and that funds have been used in compliance with the original award.
If you have any further questions, please feel free to contact me.
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F:\b udg~$AU D~)OC02-03'~,udcom\LTC N B DCAudit.doc
CITY OF MIAMI BEACH
INTERNAL AUDIT REPORT
DATE:
TO:
VIA:
FROM:
SUBJECT:
PERIOD:
April 10, 2003
Jorge M. Gonzalez, City Manager
Mayra Diaz Buttacavoli, Assistant Cit/~Manager ~/~:x.~J~
James J. Sutter, Internal Auditor ,~/f.,/
!~'
North Beach Development Corpol'ation Performance Audit
October 1, 1999 through September 30, 2002
This is the report of a performance audit of the North Beach Development Corporation (NBDC)
that was conducted at the request of the Miami Beach Commission. A performance audit is
an objective and systematic examination of evidence for the purpose of providing an
independent assessment of the performance of a specified activity; it does not duplicate the
annual financial audit of NBDC that is performed by a certified public accounting firm. We
wish to thank the staff of NBDC as well as the staff of the Community Development Division
and the Quality of Life Projects Monitor for their help and cooperation during this audit.
INTRODUCTION
The North Beach Development Corporation, a not-for-profit entity, was organized under the
laws of the State of Florida on April 5, 1988 as the North Shore Development Corporation; the
name was changed to North Beach Development Corporation on August 24, 1990. According
to the Amended and Restated By-Laws adopted on October 16, 2001, the purpose of the
NBDC is to support and assist in the vitalization of the commercial districts, the promotion of
tourism and the quality of life of the residents of the community. The specific geographical
location of the community is described as being bounded by 63rd Street on the south, 87th
Terrace on the north, the Atlantic Ocean on the east, and Biscayne Bay on the west.
The NBDC is governed by a Board of Directors, with the Executive Director serving as an ex-
officio member, with no voting rights. Membership is open to all persons 18 years of age and
older who support the purposes of the NBDC and pay the Dues required. There shall be an
annual meeting of members to elect directors and conduct any other business as might come
before the meeting. Board meetings shall be held at least four times each year.
In the past, N BDC received funding from three main sources, the Federal Government,
through a City-administered Community Development Block Grant (CDBG,) the City of Miami
Beach, through Quality of Life (QOL) Funding from a portion of Resort Tax proceeds, and from
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INTERNAL AUDIT DEPARTMENT
NORTH BEACH DEVELOPMENT CORPORATION
PERFORMANCE AUDIT
April 10, 2003
membership dues. Currently, NBDC is also receiving funding from Miami Dade County, and is
actively seeking additional sources of funding.
CDBG funds are used to provide matching monies for the Fa(;ade Renovation Program as well
as to reimburse a portion of NBDC's administrative budget. QOL funds are utilized for projects
and events that will enhance the community's quality of life as well as promote tourism, plus
administrative expenses. The Community Development Division monitors the Fa(;ade
Renovation Program, while the QOL Monitor oversees the expenditure of QOL funds.
The QOL funds allocated to NBDC from the increase in Resort Taxes on room revenues are
distributed subsequent to their collection by Finance's Resort Tax Division. They are identified
by the fiscal year in which the tax was collected, and may be spent in any of the ensuing fiscal
years.
The funds allocated to NBDC from the CDBG program for fa(;ade renovation over the past
several years are as follows:
FY Source Award for Spent on Admin. in Spent on Projects in Unspent
Projects and year of award year of award and Balance
Admin. subsequent years
99/00 $ 400,403 $127,170 $379,977 $20,426
00/01 $ 325~000 $124,369 $274,369 $50,631
01/02 ~; 325~000 $122,869 $272,869 $52,131
Totals $1,050~403 $374,408 $927,215 $123,188
The current unspent balance of $123,188 consists of $105,850, which has been allocated to
various projects, both completed and in process. (Final payments to completed projects are
sometimes delayed due to incomplete submission of required documents by the grant
recipient.) The balance of $17,338 is unallocated, due primarily to the cancellation of a
project; it will be used for future fa(;ade renovation projects.
The Resort Tax funds allocated to NBDC for QOL projects and administrative expenses over
the past several years are as follows:
FY Source Award for Projects Spent on Spent on Reprogrammed to Remaining for
and Admin. Admin. Projects a subsequent year later completion
97198, 98/99 $1 ~015,000 $26,000 $566,921 $323,346 $98,733
99 / 00 $ 815,141 $32~626 $613,580 $ 65,465 $103,470
00 / 01 $ 974,144 $17,500 $162,416 -0- $794,228
Total* $2,804,285 $76,126 $1,342,917 $388,811 $996,431
* Allocations for QOL projects from 01 / 02 Resort Tax funds are to be determined early in 2003.
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INTERNAL AUDIT DEPARTMENT
NORTH BEA CH DEVELOPMENT CORPORA TION
PERFORMANCE AUDIT
April 10, 2O03
The $996,431 remaining in unspent QOL funds at this time, from Fiscal Years 97/98 through
00/01, may be broken down as follows:
Amount Description
$453,458 Funds allocated back to the City for such
projects as the Normandy Isle Pool and
the Byron Carlyle Theater.
$542,973 The bulk of these funds were received by
NBDC in March of 2002 and are being
utilized to fund scheduled events.
SUMMARY OF WORK PERFORMED
· Met with the Executive Director of the NBDC on several occasions in order to learn how
the organization functions.
· Reviewed NBDC By-Laws and Articles of Incorporation as well as NBDC Management
and Financial Standards.
· Reviewed minutes of various NBDC Board of Directors meetings.
· Reviewed CDBG agreements between the City and NBDC for planned fa(;ade
renovations and compared them to monthly progress reports to determine the number
of projects completed.
· Reviewed project files for six CDBG fa(;ade renovation projects and toured four of the
sites as well as obtained completed survey questionnaires from three of the grantees.
· Reviewed schedules and supporting documentation for QOL funds disbursed for
various projects and events over the past several years and compared planned projects
and events with projects and events actually accomplished.
· Reviewed externally prepared financial statements for fiscal years 98/99, 99/00 and
00/01 and confirmed agreement to the books and records of NBDC, Community
Development and QOL. In addition, percentages for total administrative expenses as a
proportion of total grant income for each year were reviewed.
OVERALL OPINION
NBDC was successful in achieving its stated purposes of supporting and assisting in the
vitalization of the commercial districts, promoting tourism and enhancing the quality of life of
the residents in the North Beach area. Further, for total projects and events completed, all
funds were noted to have been properly spent and adequately supported. The related
administrative expenditures, averaging 33% of total grant income for the last three fiscal years,
as recorded in the CPA statements for the period, appeared reasonable for an organization of
its size and in light of the projects and events completed. These expenditures were noted to
have been duly authorized by the City Commission. The data regarding the projects, events
and administrative expenditures were found to be valid, reliable, and accurately reflected in the
City's financial system. However, two situations were noted where changes in procedures
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INTERNAL AUDIT DEPARTMENT
NORTH BEAOH DEVELOPMENT CORPORA TION
PERFORMANCE AUDIT
April 10, 2003
would improve the functioning of the Quality of Life Section:
· QOL has not required NBDC to formally account for the expenditure of administrative
monies received from QOL funds. Absence of this control may lead to the lessening of
economical and efficient functioning.
· There are no formally documented policies and procedures for the Quality of Life
Monitor function.
PURPOSE
The purpose of this review was to determine, through the objective and systematic
examination of evidence, consultation with NBDC staff and City staff, and observation of
operations, whether the North Beach Development Corporation is achieving its objectives,
recording, maintaining and disclosing valid and reliable data, complying with laws and
regulations, and acquiring, protecting and using its resources economically and efficiently.
SCOPE
Confirm that the NBDC, and the Community Development Division and Quality of Life
Section have detailed, formally documented policies and procedures covering all
aspects of their operations.
Confirm that there are management controls in place sufficient to ensure that programs
meet their objectives, data regarding the programs are valid and reliable, NBDC is in
compliance with all laws, regulations and contractual provisions, and that resources are
properly safeguarded.
Examine a representative sample of both CDBG and QOL transactions in order to
assess whether or not they are in compliance with their respective program
requirements.
4. Confirm that transactions are accurately reflected in the City's financial system.
5. Review the annual external audit report and confirm agreement to books and records of
NBDC, Community Development and Quality of Life.
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INTERNAL AUDIT DEPARTMENT
NORTH BEACH DEVELOPMENT CORPORA TION
PERFORMANCE AUDIT
April 10, 2003
FINDINGS, RECOMMENDATIONS, AND MANAGEMENT RESPONSE
Quality of Life Monitor
Finding: QOL monitor has not required NBDC to formally account for expenditure of
QOL administrative funds
Up until now, NBDC has not had to report on how QOL administrative funds were
spent; $50,126 was spent during the audit period. As a result of the absence of this
control mechanism, NBDC expenditures might not be as economical or efficient as they
should be.
Recommendation(s):
The QOL monitor should require NBDC to account for all QOL administrative funds so
that a ny questionable expenditure may be disallowed, and future funding may be
adjusted accordingly if any undesirable trends are noted, thereby increasing economy
and efficiency.
Mana.qement Response:
This recommendation will
expenditures.
immediately be put into practice to account for all
Findinq: Lack of formally documented policies and procedures
There are no formally documented policies and procedures to describe the functioning
of the City's Quality of Life Monitor.
Recommendation(s):
Detailed policies and procedures should be formulated in order to serve as both an
authoritative guide a nd a I earning tool for future occupants of t he position and/or
additional staff.
Manaqement Response:
Policies and procedures for the North Beach Development Quality of Life Program have
been forwarded to Internal Audit for review and comment.
CLOSING CONFERERENCES
Separate meetings were held with representatives from NBDC and City of Miami Beach staff
to discuss our report. Management responses were obtained from those areas responsible for
comment. All were in agreement with the reported findings and recommendations.
Page 5 of 6
INTERNAL AUDIT DEPARTMENT
NORTH BEA CH DEVELOPMENT CORPORA TION
PERFORMANCE AUDIT
April 10, 20O3
F:~budg~$AUD\Doc01-02\REPORT~NBRPT.doc
CC: Neil Fritz, Executive Director, North Beach Development Corp.
Barry Klein, President, North Beach Development Corp.
Robert C. Middaugh, Assistant City Manager
Patricia Walker, Chief Financial Officer
Vivian Guzman, Neighborhood Services Director
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