Miami Beach Police Athletic LeagueBUDGET AND PERFORMANCE IMPROVEMENT
Internal Audit Division INTERNAL AUDIT REPORT
TO:
VIA:
FROM:
DATE:
AUDIT:
PERIOD:
Jorge M. Gonzalez, City Manager
Kathie G. Brooks, Budget and Performance Improvement Director
James J. Sutter, lntemal Audit~-
February 25, 2010 ·
Miami Beach Police Athletic League Operational Audit
October 1, 2006 to May 31, 2009
This report is the result of a regularly scheduled operational audit of the Miami Beach Police Athletic
League between October 1, 2006 and May 31, 2009.
INTRODUCTION
The Miami Beach Police Athletic League (PAL) was founded in 1958 and is the oldest in the state of
Florida. This non-profit 501 c3 organization offers the community's youth an array of recreational,
athletic and educational activities. However, its primary focus is educational due to the shortage of
nearby available outdoor field space.
Resolution No. 73-13924 authorized a five year lease agreement between PAL and the City on
02/21/73 for the use of a parcel of land on Flamingo Park for the benefit of the youth of the
community and to enable our youth to participate in healthful sport and recreational activity. This
lease agreement's terms were extended with the adoption of Resolution No. 77-15471A and then
again until 06/30/96 with the passage of Resolution No. 93-20868.
Next, it was extended for a five year period ending 06/30/01 through the passage of Resolution No.
96-21987. However, PAL raised monies in 1997 through donations, grants, etc. with the City's
assistance to construct a new facility in Flamingo Park. Accordingly, Resolution No. 98-227 41 was
passed granting PAL a twenty-five year lease to operate on the premises through June 30, 2023.
Compliance with the stated lease terms is monitored by the City's Office of Asset Management.
PAL is presently located at 999 11 1h Street in Flamingo Park where it is visited by hundreds of
children and adults daily Monday through Saturday. The 13,000 square foot facility opened in
January 2001 and contains a computer lab; classrooms; fitness center; meeting, conference,
library/reading room; offices; and wrestling, martial arts and workout rooms. Its programs are
designed to create better relations between law enforcement officers and youth, as well as to
prevent juvenile delinquency. Examples of offered programs include Cheerleading, Adult ESOL
(English for Speakers of Other Languages), Youth Leadership, Miami Beach Explorers, PAL Seniors
Art Program and Yoga In The Park.
PAL operates under the leadership of an Executive Director, who is a full-time Miami Beach police
officer in accordance with City Resolution No. 11022. Additional assistance is received from an
Outside Consultant, who also heads fundraising efforts. Per PAL's by-laws, monthly Executive
Board meetings are to be held while the larger regular Board of Directors is to meet six times a year.
The Executive Board and the Board of Directors are composed primarily of volunteer citizens and
law enforcement officers, who together help plan PAL's future. In addition the agency's bi-laws
specify the responsibilities of the officers including the Executive Director as to spending authority,
We ore commitled to providing excellent public se1vice and sofety to o/1 who live, work, ond ploy in our vibront, tropicol, historic community.
Internal Audit Report
Miami Beach Police Athletic League Operational Audit
February 25, 2010
oversight of operations, fund raising, public relations and check signing authorities. Also Executive
Board of Directors shall plan for expenditures and present a yearly budget.
Although PAL and the City are separate entities, they are closely intertwined and benefit from each
other's existence. For example, the City pays the Executive Director's salary, provides $1 for every
hour of police off-duty details worked, allows food concessions to be operated on City land during
the Miami International Boat Show, transports children from nearby schools to PAL, permits PAL to
operate on City owned land, etc. In return, the City utilizes the PAL building for City programs
whereby local children are supervised in a structured learning environment and several Recreation
Department employees' offices are located on the premises, etc.
The following audit period data is shown for comparative purposes only and should not be relied
upon as the 2008 and 2009 listed figures are unaudited:
*
01/06-12/06 01/07-12/07 01/08-12/08 * 01/09-05/09*
Net Assets as of 01/01 $614,733 $510,163 $736,641 $825,641
PAL Generated Income $358,115 $656,698 $418,985 $141,459
Law Enforcement Trust Fund $33,000 $37,000 $12,500 $0
Off-Duty Surcharge $0 $78,793 $94,512 $40,823
One-time Utility Reimbursement $0 $50,000 $0 $0
Total City Contributions** $33,000 $115,793 $107,012 $40,822
Total Income $391,115 $772,491 $525,997 $182,281
Total Expenditures ($495,685) ($546,013) ($436,997) ($179,365)
Change in Net Assets ($104,570) $226,478 $89,000 $2,916
Net Assets as of 12/31 $510,163 $736,641 $825,641 $828,557
The independent accounting firm of Kantor, Geisler & Associates, LLC completed financial statement audits of
PAL for the 2006 and 2007 calendar years as summarized above. Meanwhile, the reported figures for 2008 and
through May 2009 are based solely on the PAL provided Profit & Loss Statements.
** These figures exclude the salary of the full-time police officer acting as PAL's Executive Director which was
$88,975 in 2006, $90,361 in 2007, $90,505 in 2008 and $50,301.74 for 01/01/09 through 06/07/09. The listed
payroll figures are based on the City's payroll year which differs slightly from the calendar year.
A similar internal audit was performed of PAL for the period of 01/01/02 through 12/31/04 during the
2005 fiscal year. The corresponding findings were forwarded to PAL for review. An exit conference
was scheduled and held on 08/29/05 with PAL staff to discuss the audit's contents. Management
responses were requested from PAL on three different occasions but were not received. Shortly
thereafter, Hurricanes Katrina and Wilma impacted the Miami Beach and internal Audit's focus
shifted to the collection and submittal of data for subsequent reimbursement of approximately $10
million from FEMA and FWHA. As a result, the PAL audit was not followed up on and was not
issued. We have reviewed these prior findings as part of our audit and included the status of these
findings in Exhibit A, which is located at the end of this audit report.
OVERALL OPINION
The Miami Beach Police Athletic League (PAL) while remaining viable and providing a wide array of
services for needy children and adults, has experienced several shortcomings in their operational
Page 2 of 31
Internal Audit Report
Miami Beach Police Athletic League Operational Audit
February 25, 2010
controls within their agency which are detailed below. Adherence to existing controls and
improvement in communication with and closer oversight by the Executive Board of Directors will
better enhance the internal controls necessary to operate and meet the agency's objectives. In
addition, the City should revise the existing Memorandum of Understanding to further clarifying the
lease agreement terms including the space usage and operations of the facility and require an annual
management agreement specifying how City funds are to be spent. Consideration should be given to
enhance the agency's bi-laws to strengthen internal controls as to limit expenditures to those directly
relating to the agency's mission, require competitive bidding and signed contracts before purchases
exceeding a designated threshold occur. Also, the City's involvement with PAL should be assessed
and a decision reached on its level of commitment and interaction.
The following shortcomings were noted during the audit period and are in need of improvement:
1. PAL made tax-exempt purchases on behalf of two independent taxable organizations, Neostar
Sports & Entertainment and the Miami Beach Fraternal Order of Police William Nichols Lodge
No. 8, during the audit period.
2. PAL's lease agreement contains contradictory language regarding responsibility for paying the
building's utilities. A Memorandum of Understanding was signed on 11/05/07 to provide future
clarification and its terms followed but it was not approved by the City Commission.
Additionally, the City has continued to pay for the building's water and sewer charges which
should be paid by PAL.
3. The PAL building has several maintenance issues that should be repaired. In addition,
$31,143 of janitorial services for twelve months were paid by Police internal service charges
rather than allocated to the building's occupants.
4. Internal controls were not sufficiently implemented and followed concerning gym membership
payments to help prevent the misappropriation of monies by a recently terminate gym
manager.
5. An unannounced cash count on 06/17/09 found that a new gym employee did not follow stated
verbal procedures in the receipt and reimbursement of deposits for temporary access cards.
Also, cash was not properly safeguarded or timely deposited at City National Bank to help
reduce PAL's risk exposure.
6. Deficiencies in the non-profit's accounting records are identified that hinder the audit trail.
7. Deviations from PAL's by-laws and sound business practices for the Thanksgiving Day Food
Drive and DNA LifePrint Kit Programs are listed.
8. PAL did not fully comply with all the terms listed in Florida Statute 561.422 regarding the
attainment of temporary alcohol permits for not-for-profit organizations.
9. PAL made purchases on behalf of the City for the Parks & Recreation Department's Biggest
Loser Contest, the Police Department's Citizen's Police Academy and for the Citywide Take
Your Child To Work Day that were either partially or fully reimbursed. PAL has a close working
relationship with these departments that should be re-evaluated.
10. American Express corporate credit cards were also used personally by PAL's Outside
Consultant thereby creating additional work for their bookkeeper, increasing the possibility of
mistakes, etc.
11. PAL funds were used to pay registration fees for an employee's spouse; flowers and food for
funerals; wedding gifts; etc. that do not appear to adhere with the organization's mission
statement.
12. Two Miami Beach Police Department employees missed work to attend out-of-town PAL
sponsored events but were charged administrative leave time and were paid in full by the City.
13. One City employee who worked part-time at PAL did not prepare and submit the required
"Outside Employment Statement" for the 2006 and 2007 calendar years.
Page 3 of 31
Internal Audit Report
Miami Beach Police Athletic League Operational Audit
February 25, 2010
PURPOSE
The purpose of this audit was to determine whether the Miami Beach Police Athletic League
complied with tested requirements listed in the signed lease agreement; whether maintained
accounting records and supporting documentation are organized, complete and sufficient; whether
internal controls are soundly developed and functioning and a proper segregation of duties exists;
whether monies received from various sources were appropriately safeguarded and deposited
intact; whether eligible sampled expenditures were properly approved, paid timely and for legitimate
business purposes; and whether sampled permits, business tax receipts and utility payments were
current.
SCOPE
1. Confirm that policies and procedures exist, are known and are followed by staff.
2. Confirm that maintained accounting records and supporting documentation are organized,
complete and sufficient.
3. Confirm that the internal control process is adequate and that a proper segregation of duties
exists.
4. Confirm that tested monies collected from various revenue sources were deposited intact
and correctly recorded.
5. Confirm that sampled expenditures were properly approved, paid timely and for legitimate
business purposes.
6. Confirm that City personnel are not working for the Miami Beach Police Athletic League
concurrently.
7. Confirm that the Miami Beach Police Athletic League maintains the appropriate insurance
coverage.
8. Confirm that the Miami Beach Police Athletic League is current with its business taxes,
permits, utilities, etc.
FINDINGS, RECOMMENDATIONS AND MANAGEMENT RESPONSES
1. Finding -Tax Exempt Purchases for Taxable Entities
Internal Audit performed cursory scans of the Miami Beach Police Athletic League or PAL's
expenditures looking for anything that seemed out of place or unusual and warranted further
review. In doing so, four occasions were noted whereby PAL would pay for an expense on
behalf of two outside organizations using their tax exempt number, only to receive a
donation or reimbursement payment shortly thereafter by these organizations. As a result,
these taxable entities avoided paying state sales and/or resort taxes.
The first occasion was when Neostar Sports & Entertainment produced a series of events at
Page 4 of 31
Internal Audit Report
Miami Beach Police Athletic League Operational Audit
February 25, 2010
Nikki Beach Club and Pearl (both are located at 1 Ocean Drive inside the Penrods building)
during Super Bowl weekend from 02/01/07 through 02/04/07. PAL allowed this for profit
corporation to use their certificate of exemption to avoid paying taxes on their $400,000
function (net of $78,000 in service charges). In return for not paying $36,000 ($400,000 x
(7% state sales tax+ 2% resort tax) due in taxes, PAL was to receive a minimum donation of
$25,000 from the proceeds. However, Neostar Sports & Entertainment filed for bankruptcy
after the event's conclusion and only remitted $195,800 and $12,500 to date to Penrods and
PAL respectively.
The remaining three occasions involved the 2007, 2008 and 2009 police retirement reunion
luncheons hosted by the Miami Beach Fraternal Order of Police William Nichols Lodge No. 8
(FOP). The FOP is a non-profit organization but is not a 501 c3 and therefore is not exempt
from taxation.
For example, the associated $1,600 cost for the 03/26/091uncheon was initially paid for by
PAL through check number 8524. PAL was subsequently reimbursed $1,000 by the FOP
meaning that PAL donated $600 to the event. In addition, the FOP was not charged and did
not remit any state sales or resort taxes on this event which would have equaled $144.
Recommendation(s)
These practices should be discontinued immediately and the applicable amount of taxes due
should be paid in the future. In addition, the taxing authorities should be made whole for any
past taxes not previously paid.
City's Response
The PAL Board will be asked to adopt a policy that addresses the use of the non-profit and
tax exempt status. If City support for PAL is to continue, a policy not to allow the use of PAL
tax exempt status for the benefit of non-qualified organizations must be adopted and
followed.
Agency's Response
PAL agrees to discontinue practices and continue to pay as it has applicable taxes on
events. PAL will agree to adhere to procedures pertaining to all events. This will be
addressed in policy and procedures and internal controls. All other areas will be noted in the
policy and procedures for PAL.
2. Finding -Utilities Payments
Resolution No. 96-21987 requires PAL to maintain the facility and pay all utilities throughout
the term of the lease agreement. Meanwhile, section 2 of PAL's corresponding lease
agreement states "Lessor {City} agrees to pay for all utilities used within the premises
including, but not limited to, electric, water, gas, telephone and garbage disposal." These two
statements are contradictory resulting in uncertainty as to which organization is responsible for
paying for the building's utilities. The City's Legal Department opined that a scrivener's error
occurred and that PAL has always been responsible for the utilities of the building. In reality,
the City paid the water and sewer charges totaling $18,924 during the audit period while PAL
paid the electric and telephone invoices.
In an attempt to resolve this issue, the City Manager and PAL Board President signed a
Memorandum of Understanding on 11/05/07 which contained a paragraph stating "The Parties
have also discussed the payment of utility bills associated with the operation of the Building.
Page 5 of 31
Internal Audit Report
Miami Beach Police Athletic League Operational Audit
February 25, 201 0
The City of Miami Beach has agreed on a one time payment of $50,000 to assist with previous
utility bills associated with the property. This payment is with the understanding that in the
future the Police Athletic League may utilize an Off-Duty Police Surcharge Fund created to
assist the Police Athletic League for whatever portion of future utility bills the Police Athletic
League determines is necessary. The fund has been created to assist in the eligible
operational expenses of the Police Athletic League by adding one dollar per hour to the off
duty police rate. This amount shall be forwarded to the Police Athletic League upon receipt of a
quarterly request from the Police Athletic League. In the event the surcharge rate is altered in
the future, the parties agree to meet and discuss alternate funding mechanisms as necessary.
The City will have no future responsibility to pay utility bills beyond this one time payment per
terms indicated in the Lease Agreement." The terms above of this Memorandum of
Understanding have been followed despite the fact that it was not brought before the City
Commission for their approval.
The City made the $50,000 payment with the issuance of check number 251711 dated
07/27/07. In addition, the City's Finance Department has made quarterly wire transfers to PAL
totaling $214,128 since December 2007 for the off-duty surcharge. Therefore, Internal Audit
believes that PAL is responsible for paying all utilities associated with the building, which
includes the water and sewer charges currently paid by the City.
Recommendation(s)
The City should decide whether to seek reimbursement from PAL for the $18,924 in water and
sewer charges paid for the two meters numbered 09704056 and 02044852 covering through
06/01/09 and 06/02/09 respectively. Furthermore, the water and sewer bills for these two
meters should be billed to and paid by PAL going forward. In addition, the City should revise
the existing Memorandum of Understanding to further clarifying the lease agreement terms
including the space usage and operations of the facility. Finally, Internal Audit recommends an
annual management agreement be prepared and signed by both PAL and the City specifying
how any City funding received is to be spent.
City's Response
It is agreed that per the lease agreement and subsequent memo of understanding, PAL is
responsible for the payment of utilities. The memo of understanding was drafted to resolve
an existing dispute within the terms of the approved lease agreement and as such did not
require City Commission approval. In order to fairly address utility responsibilities, a
management agreement will be negotiated that apportions the responsibility of utilities and
building maintenance noted in comment number 3, consistent with City and PAL building
utilization and to properly recognize the water use reflected as a result of multiple users on
one meter. The management agreement will also address the utility bill in the amount of
$18,924 that has been paid by the City, inconsistent with current agreements. This
agreement will need the approval of the City Commission and will be submitted upon
completion.
Agency's Response
PAL with the City of Miami Beach and Miami Beach Police Department will prepare a
management agreement in reference to the contradictory language regarding responsibility
for paying the building utilities. A memorandum of understanding was signed on 11/05/07 to
provide future clarification and its terms were followed. PAL is in the process of authoring an
agreement document to address and resolve this issue. The agreement will also include the
Miami Beach Parks and Recreation Department which currently operates out of the facility.
The following is a copy of an email response from the City's Public Works Department in
Page 6 of 31
Internal Audit Report
Miami Beach Police Athletic League Operational Audit
February 25, 2010
reference to the related meters:
"Thank you for advising me as to the Holiday hours for the Boys and Girls Club.
As discussed on site today after our meter feed, we have determined that
#2044852 feeds the 2-new bathrooms at the PAL Building (located in the northeast
section of your building). #09704056 feeds the rest of the PAL building, the Boys
& Girls Club, and the ticket office in the field. At this time, it appears that neither of
these two meters supplies any water to the field sprinklers nor any irrigation
system around the buildings. If you require any additional information, please do
not hesitate to contact me directly. This issue will again be outlined in the new
CMB Parks and Recreation PAL, management agreement when drafted as to how
financial cost will be determined since the Boys and Girls club currently operates
under one ofthe meters as does Parks and Recreation and PAL".
3. Finding -Building Maintenance
Section 3 of PAL's lease agreement states "The Lessee {PAL} accepts the premises in their
present 'as is' condition, and is responsible for all interior modifications and maintenance."
The PAL building has been identified by PAL administration as containing such deficiencies
as water damage in the walls, leaks in the roof, broken treads in stairwells, etc. These items
if not repaired or resolved timely could result in injury or illness to the building's inhabitants.
In addition, the Property Management Division had not been billing PAL for the janitorial
services provided on the premises. As a result, PAL was recently back billed a total of
$31,143 ($2,595.25 per month x 12 months) for janitorial services provided by Diamond
Contract Services, Inc. in compliance with City Resolution No. 2008 -26859. It was
subsequently determined that monies for the janitorial services were budgeted to the Police
Department so this outstanding balance was recently paid out of their internal service
charges.
Recommendation ( s)
Although the facilities are costly to maintain as time progresses and the resident children are
hard on the building, the inhabitants' safety should be a top priority and the listed items
should be repaired as soon as possible. The Property Management Division should ensure
that all janitorial services are billed timely. Finally, Internal Audit recommends that the
janitorial services payments be allocated between PAL and the Parks & Recreation
Department based upon their calculated usage of the building.
Agency's Response
This issue will also be addressed in the management agreement with the City of Miami Beach,
Miami Beach Police Department and the Parks and Recreation Department. It should be
noted that PAL, prior to this, paid for all janitorial services within the facility until informed that
PAL would be covered under the current contact with the city. PAL still pays for building
repairs to some extent and supplies due to the influx of children for summer camp. The
cleaning service does not provide paper supplies or other miscellaneous cleaning supplies
during the summer nor do they clean the gym.
PAL will reach an agreement with the City of Miami Beach to resolve payment of utilities via a
management agreement that apportions the responsibility of utilities and building maintenance.
The agreement will be consistent with building utilization and will properly recognize the water
use reflected as a result of multiple users on one meter. The agreement will require the
Page 7 of 31
Internal Audit Report
Miami Beach Police Athletic League Operational Audit
February 25, 2010
approval of the City Commission and the PAL Board. It will be submitted to both entities for
review and approval upon its completion.
4. Finding -Gym Memberships
PAL's customers typically remit cash, checks or debit/credit cards to any of the four gym
employees in return for their membership. PAL staff stated that a majority of gym members
are employed in the service industry and pay by cash so that it is imperative that they
continue to accept it. However, they do not take any preventive measures (counterfeit pens,
etc.) to ensure that all currency accepted is legitimate or only accept bills of $20 or less to
limit their risk exposure.
Those customers paying on the premises are to receive a pre-numbered sequential receipt
indicating the payment details, as well as having their access card activated allowing them
entry to the gym during the corresponding time period. The monies received are then
safeguarded in a locked cabinet and/or safe until the bank deposit is made by the Executive
Director. A proper segregation of duties existed as the PAL employees receiving the monies
were separate from those responsible for reconciling and preparing the bank deposit.
A tenured PAL employee (full time gym manager) was terminated in April 2009 after
reimbursing PAL $500 for misappropriating cash received for gym memberships. He would
accept the customer's cash payment, prepare a receipt from the back of the book, activate
the customer's access card and then keep the money by throwing away PAL's copy of the
receipt so that there was no record of the transaction.
Given PAL's internal control structure and maintained documentation, it would be extremely
difficult and time consuming to reasonably estimate the amount misappropriated. However,
Internal Audit did arbitrarily select eighteen receipt books with one hundred in each to
determine how many receipts were missing. It was found that an average of seven was
missing from each tested receipt book, ranging from a high of twenty to a low of zero (3 of 18
books sampled or 16.67% were not missing any receipts). Thirteen of the fifteen remaining
receipt books that were missing receipts did not contain the last receipt among others, which
could confirm the employee's aforementioned method of misappropriating cash.
Another plausible explanation posed by PAL's Executive Director is that the gym manager
gave receipts to clients who paid him directly for training. PAL permits this practice with all
monies retained by the employee. Apparently, the gym manager told PAL's Executive
Director that he would typically use the receipts in the back of the book for these training
payments. Yet, Internal Audit noted several instances whereby other receipts in the middle
of the book were used for this training, which were noted as such with no monies listed.
Therefore, Internal Audit focused primarily on improving the collection and recording process
to help prevent similar occurrences. It was determined that the following shortcomings
contributed to the misappropriation and are in need of corrective action:
a. The pre-numbered receipt books were store bought in quantity and were stored in
the Executive Director's office on an unlocked bookshelf accessible to all until
needed. Furthermore, the numbers were not used in sequence and were not
routinely checked to ensure that all were accounted for (including voids).
b. All three copies of voided receipts were typically not present to help confirm that the
customer did not pay monies, receive the white copy as a receipt, dispose of the
Page 8 of 31
Internal Audit Report
Miami Beach Police Athletic League Operational Audit
February 25, 2010
yellow copy and then have the gym employee void the pink copy that remained in the
receipt book. A few examples found were for receipt numbers 353687, 353705 and
730115.
c. The pre-numbered sequential receipts were not routinely reconciled with the
amounts deposited to help determine if any monies collected were not remitted.
Similarly, the monies deposited are not being reconciled with the corresponding
amount of time placed on the members' access cards to confirm that proper
payments were received.
Recommendation(s)
In lieu of not accepting cash payments, PAL should consider implementing the following
recommendations to help prevent gym monies from being misappropriated:
a. Receipt books should be properly safeguarded in a locked area accessible only by the
Executive Director or his designee. These books should be used sequentially with
receipts being issued from only one at a given time. Additionally, the receipt books
used should be distinguished from other Office Depot receipt books to help prevent
someone from buying their own books and issuing receipts accordingly. Finally, the
Executive Director should create and maintain an Excel spreadsheet tracking all
receipt book numbers to help ensure that each is accounted for with any deemed
missing promptly investigated.
b. All three voided copies of the receipt (white, yellow and pink) should be present in
the book and labeled as such.
c. Reconciliation of the monies collected with the pre-numbered receipts listed amounts
and the time placed on the access cards should be performed by the Executive
Director or someone designated who is independent of those collecting the monies
with any variances immediately investigated.
Agency's Response
This issue has been addressed and corrected through the implementation of a new operating
system. It consists of receipt books which contains the PAL logo not common with such
receipts. Also, voided receipts will remain in the receipt book and not discarded. Currently one
receipt has been voided in over 320 transactions. Membership transactions will be randomly
checked on a weekly basis to ensure staff compliance with this policy.
Additionally, a counterfeit marking pen will be used to identify fraudulent bills. PAL is also in
the process of creating a daily financial balance sheet to be utilized by staff along with a drop
box system. The details of this will be addressed in greater detail in PAL's policy and
procedures.
5. Finding -Unannounced Cash Count
Gym membership fees vary primarily depending on whether the customer is a new member
or a renewal; the length of time purchased (daily, weekly, biweekly, monthly, bimonthly or
quarterly); and their employer (high school student, City employee or other). A $140 cash
bank is provided so that change can be supplied as needed. All temporary gym passes
require an additional $20 depositforthe access card, which must be in cash and is retained
until either returned or the monies are confiscated after a designated amount of time has
elapsed.
Page 9 of 31
Internal Audit Report
Miami Beach Police Athletic League Operational Audit
February 25, 2010
An unannounced count of the cash collected for gym memberships and access card
activation deposits was performed on 06/17/09 and found the following:
a. The cash on hand was $40 less than the amount of the cash bank plus the receipts.
It was subsequently determined that this shortage was caused by a new gym
employee who did not follow proper procedures and reimbursed two customers $20
each from the daily proceeds rather than from the separately maintained access card
deposits. Further inquiries found that PAL does not have updated policies and
procedures to reflect its current operations and the responsibilities of its employees,
which would be especially helpful with new employees.
b. One customer's access card payment was made via credit card and was accepted
by the same new gym employee who again did not follow or was not aware of the
proper procedures.
c. A total of $3,270 in cash was safeguarded in a padlocked cabinet inside the gym
office despite the existence of a more secure combination safe inside PAL's main
offices. These monies had been accumulated since 06/1 0/09, the date following the
last deposit.
Recommendation(s)
The implementation of the following recommendations should help ensure that all gym monies
are properly accounted for:
a, b. PAL should draft operating policies and procedures as soon as possible that
descriptively outline current operations. Policies and procedures serve both as a
benchmark to measure individuals' performance and as an instruction manual in the
event employees' change. Once completed, they should be distributed to all
applicable personnel so that they can be read and strictly followed.
c. Bank deposits should be made routinely more frequently (for example on Mondays
and Fridays) to help reduce the amount of cash stored on the premises. In addition,
the monies maintained on site should be moved daily to the more secure safe to help
reduce the likelihood of misappropriation.
Agency's Response
An average deposit of proceeds is usually in the above noted amount of $3,000 from the
gym memberships over a two-three week period. Policy and procedures are currently being
drafted based on the audits findings and more frequent bank deposits will be taken into
account and noted as an area of concern.
It should be noted that in reference to finding A the issue was rectified and reported to
auditor prior to this report and the bank balanced to the normal amount. Monies will be
dropped into drop box with daily balance sheet upon policy being instituted with board
approval with in the next three to six months after review and policy is adopted.
6. Finding -Documentation and Internal Controls
Annual audits performed by an independent accounting firm were completed with PAL
receiving unqualified opinions indicating their compliance with FASB accounting
pronouncements for not-for profit companies reporting on a cash basis (revenue is reported
Page 10 of 31
Internal Audit Report
Miami Beach Police Athletic League Operational Audit
February 25, 2010
only when the cash is received and expenses are recorded only when the cash is paid). The
determination of income on the cash basis rests upon the collection of revenue and the
payment of expenses thereby ignoring the matching principle. Consequently, cash basis
financial statements are not in conformity with generally accepted accounting principles as the
preferred approach is the accrual basis of accounting.
In order to avoid duplication of work Internal Audit did not test PAL's accounting methods.
Instead, the focus shifted to testing their documentation and following of prescribed internal
controls. Although, it was noted that PAL's accounting records have continued to improve
from our past review, the following deficiencies were found that are in need of improvement:
a. Supporting documentation for canceled checks payable to individuals was
occasionally missing from the files as only the check remittance was present.
Examples include but are not limited to check numbers 7126 (dated 04/30/07 for
$1 ,000.00), 7885 (dated 06/03/08 for $250.00), 7969 (dated 07/07/08 for $1 00.00)
and 7976 (dated 07/09/08 for $200.00). Upon request to PAL's Executive Director,
sufficient additional documentation was provided for check number 7126.
b. It was noted that checks payable to restaurants did not always list the business
purpose, who participated, etc. One example was check number 8190 (dated
1 0/21/08) for $2,179.20 payable to Monty's Stone Crab & Seafood House.
c. Checks payable to individuals were used occasionally to fund cash advances given
to individuals prior to trips' commencement. The subsequent review of PAL's
documentation did not find substantiation indicating the results of the settlements,
invoices indicating how the money was spent, the return of any unused monies, etc.
Examples include but are not limited to checks numbered 7070 (dated 03/29/07 for
$500.00), 7935 (dated 06/23/08 for $750.00) and 8459 (dated 03/03/09 for $300.00).
Upon request to PAL's Executive Director, sufficient additional documentation was
provided for check number 8459.
However, the settlement for check number 7935 had not been performed as of
10/27/09 and included in the envelope containing the supporting receipts was $77.00
in currency. Review of the enclosed receipts and summary sheet found that three
receipts were missing and that in total they exceeded the cash withdrawn by
$194.53.
d. PAL by-laws require two signatures on all checks with Executive Board of Directors
approval for all checks in excess of $2,500. The checks are safeguarded in the
bookkeeper's locked desk drawer until used. The City National checking account
contained three signatories but one did not sign any checks during the audit period
(PAL Treasurer) as all the reviewed checks were signed by the Executive Director
and the Outside Consultant.
Of these two signatories, only the Executive Director works full time on the premises
and one or both travel frequently. When travel is imminent, one signatory will pre-
sign checks so that they can be issued in their absence once the other signatory
signs. An unannounced inspection conducted on 06/09/09 found that two blank
checks were pre-signed by both signatories in the locked drawer awaiting completion
despite the fact that both were in town.
Page 11 of 31
Internal Audit Report
Miami Beach Police Athletic League Operational Audit
February 25, 2010
Additionally, review of cancelled checks found that numbers 8300 (dated 12/16/08
for $189.83) and 8302 (dated 12/17/08 for $1 ,619.00) were issued and cashed by
City National Bank despite only containing one authorized signature. These checks
were scrutinized and appeared to represent legitimate PAL expenditures. However,
this scenario circumvents the dual signatures' requirement and minimizes its
effectiveness.
e. The lease agreement for the FOP states "Tenant shall pay to Landlord $12,768.00
{over a two year period} payable in monthly installments of $532 representing $500
rent plus $35.00 for sales tax at 5%." Given the contradictory nature of this statement,
testing showed that the FOP typically paid $523.00 per month in rent and was not
questioned until recently. The Executive Director notified the FOP President in June
2009 and he correctly remitted $535 for the July 2009 rent.
f. There was no lease agreement for the Miami Beach Policeman's Relief and Pension
fund (commonly known as the 1% fund). They currently remit $300 in rent per month
and are responsible for all expenses related to telephone connections, usage, and
charges.
g. Until2008, voided checks were disposed of and were not entered into QuickBooks as
such. Therefore, Internal Audit had to review the bank statements and reconciliations
to ensure that ten sampled missing checks were actually voided. No variances were
found.
h. The independent audit of the 2008 calendar year financial statements by an external
accounting firm has not been completed to date.
Recommendation(s)
PAL should convert to the accrual basis of accounting to further comply with generally
accepted accounting principles thereby recognizing revenue when it is earned and recognizing
expenses in the period incurred, without regard to the time of receipt or payment of cash.
Additionally, the implementation of the following recommendations should help ensure the
existence and completeness of PAL's documentation and help provide a proper audit trail:
a. Checks should not be prepared unless all supporting documentation has been
submitted and attached to the remittance so that their legitimacy can be verified by
independent sources.
b. Invoices should clearly indicate the expenditures' business purpose, the names of
attendees, etc., especially for less obvious purchases like food, lodging, etc.
c. Whenever individuals receive advances for trips, there should be a settlement sheet
prepared upon their return. Attached should be invoices for any expenditures made
with the individual either returning any overages or issued another check for any
shortages. This settlement sheet should be signed by both the individual who received
the monies and the person performing the reconcilement.
d. A new signatory should be added to the checking account with the Executive Board of
Director's approval. In addition, checks should not be pre-signed and they should
always be signed by two signatories after verifying the legitimacy of the payment.
Page 12 of 31
Internal Audit Report
Miami Beach Police Athletic League Operational Audit
February 25, 2010
e. The FOP should remit monthly rental payments of $535.00 with PAL deciding whether
to back bill the FOP for any shortages previously incurred.
f. All building tenants should sign lease agreements specifying the terms for which each
party is responsible for to help avoid potential future confusion. In addition, the rent
seems especially low and may want to be increased in the future.
g. Voided checks should be maintained in the files and should be entered into
QuickBooks as such.
h. Annual calendar year audits should be completed within a reasonable time after the
close of the year (180 days around June 30th) and submitted to the Executive Board
upon completion.
Agency's Response
a. Expenses are now tracked on both the credit card statement and on PAL vouchers
detailing the expenses and placed in a monthly file along with supporting receipts.
b. The check referenced was issued to pay for food held during PAL fundraiser at
Monty's during event participants attending were requested to sign in at the event.
c. The Pal voucher system being implemented will now provide for a better accounting
of expenses it should be noted that check #8459 was cashed from a bank. (Funds
for fund raising event i.e. change) and reimbursed upon conclusion of event as noted
on the deposit slip.
d. PAL currently has three authorized signers on accounts. Two of their signatures
must appear on each check written. PAL during the audit period wrote 2000 total
checks for payment and operations. PAL has changed procedures to a bi-weekly for
issuing checks for payment.
e. This issue has been resolved as the FOP has paid all monies past due to PAL and is
currently paying the proper amount.
f. PAL currently has a new lease with the Pension Fund for 2010 and 2011 and has a
current lease with the FOP until 2011 which was provided to the auditor both are on
file for review if needed.
g. Voided checks will now be entered into "Quick Books".
h. The PAL will seek an opinion from the accounting firm we utilize but in that regard,
we will look to change our year end tax period to 9/30 which would coincide more
with the cities fiscal year. The issue at hand is that PAL currently does a January to
December calendar year and when all information on taxes is obtained it is then
turned over to the accounting firm which usually puts PAL in the middle of the busy
tax period by making the above noted change it bring us into the fall which is a less
busy period for the accounting firm. We will research this issue further to determine if
it will be an issue with the IRS. This change will be presented at our next executive
board meeting and then the membership for formal approval. Thus rectifying this
finding and as always be available to the board for review on a yearly basis.
Page 13 of 31
Internal Audit Report
Miami Beach Police Athletic League Operational Audit
February 25, 2010
7. Finding-Larger Programs Reviewed
Each year PAL performs a variety of community projects to benefit its members. Two of the
larger projects during the audit period were the annual Thanksgiving Day Food Drive and the
DNA LifePrint purchase in March/April 2009. These two projects were reviewed and are
reported on separately below.
1) Thanksgiving Day Food Drive
Annually PAL conducts a Thanksgiving Day Food Drive which consists of requesting
donation of food and monies to cover cost of food to be given out to needy families. This
is a community event which involves residents and non residents, area businesses and
students in providing donations and volunteering time to prepare and deliver baskets of
food. PAL receives a listing from the Miami Beach elementary and middle schools of all
children receiving either a free or reduced lunch. To assist these needy families, a
Thanksgiving basket is prepared consisting of an eight to ten pound turkey, fresh
vegetables, fresh bread, fresh fruit, canned goods, etc. Additionally, PAL gives these
food baskets to other identified needy Miami Beach families, as well as to charitable
organizations like the Log Cabin and Douglas Gardens. This program typically costs
PAL in excess of $15,000 annually to stage (excluding labor). Donations are garnered
with any monetary shortages covered by PAL based on approval from the Executive
Board of Directors. Internal Audit concluded the following after reviewing the provided
documentation:
a. Vendor invoices were maintained to provide supporting documentation for all tested
purchases. However, documentation was lacking to show who received the food
baskets, how many were given to each school, etc.
b. PAL purchased twenty-four turkeys weighing 16/18 pounds, four weighing 22/24
pounds and six 8/1 0 pound turkey breasts in 2008. Although documentation was not
maintained, PAL contends that these turkeys and any other remaining Thanksgiving
baskets were distributed to the fifteen Parks & Recreation and nine Municipal
Service Workers' employees who work in the building, three to PAL's administrative
staff, four to PAL's gym employees, five to MBPD Police Evidence Unit staff and to
others who help throughout the year. Yet, proper supporting documentation was not
maintained again to confirm these food distributions.
2) DNA LifePrint Kits
DNA LifePrint kits include ten digit FBI certified biometric fingerprints, a DNA
identification kit, a high quality color digital photograph and a Comprehensive Child
Safety Journal. This information is stored in the privacy of one's own home and is to be
used to help identify any children deemed missing. Donated monies were raised to
offset the $23,416.09 purchase and disbursement of DNA LifePrint kits to kindergarten,
first and second grade school children in March/April2009. Internal Audit has reviewed
the documents provided and concluded the following:
a. Although review of the PAL provided Board of Directors minutes showed that the
purchase had been discussed and $7,500 in restricted monies had been received,
they did not specifically approve the $23,416.09 purchase which is required for all
amounts in excess of $2,500 by Article Ill Section 10 of the by-laws.
b. PAL's mission statement reads "To provide a safe environment for juveniles, offer
programs that emphasize education, promote self-esteem, deal with those
underlying conditions that threaten the future of our youth and continue our dual
Page 14 of 31
Internal Audit Report
Miami Beach Police Athletic League Operational Audit
February 25, 2010
mission of 'Filling Playgrounds, Not Prisons-Success Through Education' through
involvement of parents, police officers and citizens of our community." Although a
worthwhile and positive endeavor, this purchase of DNA LifePrint kits does not
appear to be in compliance with this mission statement as it is not a preventive
measure and is primarily beneficial when a child is missing.
c. Donated monies were restricted for this purpose in accordance with the donor's
wishes per notations documented on the deposit slips and were spent accordingly.
However, no documentation was provided (letters from the donor restricting the
purchase, a copy of the donor's check with a description in the memo field, etc.)
confirming the donor's intentions.
d. PAL staff did not obtain any other quoted prices to determine if the purchase of DNA
kits could have been made for less money through another company.
e. A proposal was the binding document provided governing the DNA LifePrint kits
purchase as a contract was not formulated listing the terms, prices, etc. of the
transaction.
f. The $14.95 price per kit listed on the Internet at the company's website does not
appear to equate to the product that PAL received for $20. Additional items received
with the purchase of each kit included bio-metric fingerprint analysis, a journal, etc.
that Internal Audit was unable to determine a price for.
Recommendation(s)
The implementation of the following recommendations should help improve the audit trail
and ensure that designated purchases are within specified guidelines:
1) Thanksgiving Day Food Drive
a. A list of the needy families receiving food distributions should be maintained and
attached to the supporting documentation. Also, the school's principal or designee
should sign a form attesting to the receipt of the stated number of Thanksgiving
baskets.
b. All members of the Executive Board of Directors should be fully informed and
approve of any intentions to purchase and give away turkeys to non-school
children's' families. Furthermore, better records should be maintained to support the
final distribution of all turkeys purchased with PAL donated monies.
2) DNA LifePrint Kit
a. All purchases exceeding $2,500 should be approved in advance by PAL's Executive
Board of Directors and should be documented in the minutes.
b. PAL purchases should be in support of their mission statement unless approved by
the Executive Board of Directors.
c. In the future, supporting documentation should be maintained confirming the donor's
intention to restrict the monies to a particular purchase, program, etc. The Executive
Board of Directors should discuss at their next scheduled meeting after receipt of the
monies whether to accept the funds with the attached restriction or return them
promptly to the donor. Finally, PAL should decide on an appropriate course of action
as to what to do with the remaining approximately $8,000 currently restricted for the
purchase of additional DNA kits for third, fourth and fifth grade children.
d. PAL's by-laws should be amended to require competitive bidding by obtaining quotes
from at least three different vendors for purchases exceeding a designated
threshold.
e. PAL's by-laws should be amended to require signed contracts before purchases
exceeding a designated threshold occur.
Page 15 of 31
Internal Audit Report
Miami Beach Police Athletic League Operational Audit
February 25, 2010
f. The comparison by PAL Board of Directors' members to the current Internet $14.95
price appears unfounded as additional products were received thereby increasing
the value of the kits received. The comparison of the prices paid should be for
identical products to be fair.
Agency's Response
The Turkey Giveaway is a long standing annual event approved by the PAL board. As to
how PAL will account for Turkey distribution will be addressed in the policy and procedures.
This year all schools were requested to provide documentation on the families that received
Thanksgiving Baskets. It should be noted that documentation was missing from the files. It
should also be noted that PAL has done the Turkey giveaway for over 30 years without
issue. The turkeys are given to needy families as identified by local schools. PAL does not
seek formal bids for turkeys but we do price shop with several vendors for the best pricing
and this event was approved by the board.
The DNA program has been ongoing by PAL for several years, prior to audit, on a smaller
scale to local schools in the Miami Beach feeder program. PAL received the DNA kits, bio
metric finger prints which are COOlS compatible, child safety journal and child photo on a
disk at a reduced cost. PAL did not retain any records nor did the company or police
department for the validity of the program. The PAL executive board will also look into
formal biding for future events and programs as noted above. The PAL board has approved
this event for the 2010 school year.
8. Finding -Alcohol Permits for Nonprofit Civic Organizations
Florida Statute 561.422 states" ... the director of the division may issue a permit authorizing
a bona fide nonprofit civic organization to sell alcoholic beverages for consumption on the
premises only, for a period not to exceed 3 days, subject to any state law or municipal or
county ordinance regulating the time for selling such beverages. All net profits from sales of
alcoholic beverages collected during the permit period must be retained by the nonprofit
civic organization ... " PAL obtained alcohol permits for Volleypalooza 2007, Miami Beach
World Cup Polo 2007 and Miami Beach World Cup Polo 2009 during the audit period.
In return for a negotiated fee, they allowed such independent vendors as Boucher Brothers
and Playwright Pub to operate the alcohol concessions. The concessionaire would then be
responsible for providing PAL with the necessary information and monies to pay the
applicable taxes. However, this arrangement contradicts Florida Statute 561.422 as the
events were held on the beach and not at 999 11 1h Street and PAL only receives the fixed
negotiated amount rather than retaining all the net profits. Additional problems could exist if
the concessionaire is subsequently audited, fails to pay, incurs late charges, etc.
Recommendation(s)
PAL should fully comply with Florida Statute 561.422 as the receipt of alcohol permits is an
effective fundraiser. Available options include operating the concession with PAL
personnel/volunteers, paying independent vendors a fixed fee in exchange for operating the
concession while PAL retains any profits generated, etc.
City's Response
If the City's support for PAL is to continue, a policy not to allow the use of PAL tax exempt
status for the benefit of for-profit organizations must be adopted and followed.
Page 16 of 31
Internal Audit Report
Miami Beach Police Athletic League Operational Audit
February 25, 2010
Agency's Response
In the future PAL will not deviate and will adhere strictly to state guidelines and policy. The
PAL board will be asked to adopt a policy that addresses the authorized uses of the
agency's tax exempt status.
9. Finding -City Purchases
PAL and the City's Parks & Recreation Department share the building located at 999 11 1h
Street and much of the costs to operate the facility. As a result, compromises are reached as
to the availability of space, the staging of programs, the maintenance of the building, etc.
Similarly, the Police Chiefs Office and PAL are closely intertwined as they each perform
services for one another. For example, the Police Chiefs Office assigns one full-time police
officer to be PAL's Executive Director and pays his salary, supplied Law Enforcement Trust
Fund monies with the City Commission's approval, the Police Chief sits on PAL's Board of
Directors, the Executive Director reports directly to the Police Chiefs Office, assists in
fundraising efforts, etc. Meanwhile PAL houses the FOP union and the Miami Beach
Policeman's Relief and Pension Fund in exchange for low monthly rents and programs
whereby local children are supervised in a structured learning environment where they
realize that police officers are not the enemy.
PAL was found to make payments on behalf of the City and then be reimbursed none, some
or all of the monies depending on their arrangement. The following examples represent
some of the different types of purchases made during the audit period of October 1, 2006
through May 31, 2009:
a. The recent edition of the Miami Beach Employee Newsletter's front page discusses a
Biggest Loser contest recently held by the City's Parks & Recreation Department.
The winner of this contest received a three night cruise for two costing $600 that was
paid completely by PAL check number 8485 (dated 03/13/09) with no monies being
reimbursed.
b. PAL staged a Police Appreciation barbeque on 05/25/09 for the Citizen's Police
Academy. Food expenses totaling $599.16 were incurred by PAL that was fully
reimbursed by the agency. In addition, PAL provided the labor and equipment
necessary to prepare the food at no charge.
c. PAL paid $1 ,566.00 to K Sport Inc. for the purchase oft-shirts in assorted sizes and
$702.37 to Costco for food for Take Your Child To Work Day in April 2009. A total of
$2,250.00 was reimbursed by the City's five labor unions thereby resulting in PAL
paying the immaterial difference of $18.37 for this City sponsored event.
d. PAL made a donation to the Miami Beach Police Department by remitting $420.00
through check number 7871 to purchase shirts for Memorial Day 2008 staff.
e. A $2,500 advance was made to a Miami Beach Police Department employee via
check number 7112 on 04/25/07 so that her child could participate in a school
program abroad called the People to People Ambassador Program. This child
participated in several PAL programs including the Youth Director's Council. The
employee agreed to and timely made four $250 reimbursement payments to PAL
with the remaining $1,500 balance being paid by the City through the issuance of
check number 242185. The source of the City funds was Resolution No. 2007-
26462 which authorized the conversion of $8,500 from unclaimed evidence into the
police special revenue fund. The previous Police Chief authorized this payment to
PAL as a promotional activity.
Page 17 of 31
Internal Audit Report
Miami Beach Police Athletic League Operational Audit
February 25, 2010
f. PAL remitted $3,000 (check number 7713 dated 02/27/08) to purchase a table at the
Law Enforcement Officers Awards on behalf of the Miami Beach Police Department.
Tuxedos were also rented at PAL's expense by the Executive Director and Outside
Consultant at a price of $198.00 on 03/03/08 so that they could attend the event.
g. The Keep A Clear Mind program is a take-home drug education program designed
to influence known risk factors for substance use among upper elementary school
students ages 8 to 12. This Miami Beach Police Department sponsored program
was funded completely by PAL during the audit period with total costs exceeding
$10,000.
Recommendation( s)
Although PAL is presently a financially sound organization and receives assistance from the
City, they should not be expected to initially purchase items for City sponsored events that
may or may not be fully reimbursed in the future. This practice should be discontinued going
forward.
Furthermore, the City Administration should closer scrutinize the relationship between the
Parks & Recreation Department, Police Chiefs Office and PAL to determine the optimal
working environment. Currently, the possibility exists that they could exert considerable
influence over PAL's operations.
City's Response
The PAL Board will be asked to adopt a policy that directly links expenditures to the adopted
mission of PAL. The Police Chief's Office, Parks and Recreation and other City
Departments will be advised not to procure items through PAL and to undertake any
necessary financial transactions within the confines of established City policy.
Agency's Response
If reference to Finding 9(a) this event was utilized to promote health and weight loss to
participants held by CMB Parks and Recreation as Pal sponsored event with the thought in
mind that children might observe parents taking the initiative and follow suit as recent studies
indicate child obesity is on the rise.
PAL will, based on this report, no longer sponsor or assist in "Take Your child to Work." PAL
will discontinue providing any shirts for the Memorial Day event. This practice was stopped
in 2008.
In reference to Finding 9(e)-All funds advanced by PAL were reimbursed. In reference to
Finding 9(f) -This practice will no longer be done and it should be noted that while attending
said event fund raising was conducted by PAL to raise monies for PAL programs. A refund
has been requested to settle this issue. These issues as others will be covered in policy and
procedure or with board approval as in the past.
PAL will also look to adopt and utilize a "Program Assessment" form which will be submitted
to the Executive Director and provided to the Executive Board for approval. This form will
more clearly identify and record the Board approval of the link between expenditures and the
adopted mission of PAL.
10. Finding-American Express Corporate Credit Cards
PAL provided American Express corporate credit cards for its Executive Director, Outside
Consultant and Bookkeeper during the audit period. These corporate cards were recently
Page 18 of 31
Internal Audit Report
Miami Beach Police Athletic League Operational Audit
February 25, 2010
recalled at the 06/09/09 PAL regular Board meeting and are no longer used unless
approved.
It was noted that the American Express corporate credit card lists a monthly AOL charge of
$25.90 during the audit period that was paid by PAL. Inquiries learned that this charge was
created around 2000 when one needed to purchase an AOL membership to have AOL e-
mail addresses for staff and the upstairs computer labs. As time progressed, AOL
membership became no longer needed but no one at PAL questioned this monthly invoice
and it was continually paid. Per PAL staff, this monthly $25.90 automatic charge was
recently stopped in October 2009 when they became aware of its purpose.
Furthermore, testing during the audit period discovered that these credit cards were
occasionally used to pay for the Outside Consultant's personal expenses. The standard
procedure is for the cardholder to review the monthly statement's listed charges and
separate business-related from personal. Next, the applicable individuals are to timely
reimburse PAL in full for all those identified as personal. This process creates additional
work for PAL's bookkeeper, increases the complexity and the possibility of mistakes, and
indirectly receives non-interest bearing short term loans from the 501 c3 organization.
It was determined that a total of $2,402.90 for such personal items as air fare for family and
friends; meals while both local and out-of-town; assorted items at Home Depot and Costco;
etc. were procured during the audit period. Of this amount, a total of $2,327.06 was
reimbursed by the Outside Consultant leaving a current balance outstanding of $75.84 from
the 2007 and 2008 calendar years. This outstanding balance does not include Delta Sky
Miles earned by PAL's corporate credit cards that were used in June 2007 and January 2008
to garner reduced air fare for personal travel.
PAL also paid for the purchase of a $124.01 wireless earphone and $487.47 for two new cell
phones, plus the monthly cell phone payment for the Outside Consultant, Executive Director
and Bookkeeper. In fact, the total cellular phone charges were approximately $4,500
annually granting these three users 6,000 minutes per month. Although these services and
products can be used for both business and personal reasons by all parties, the Outside
Consultant's signed employment contract states that no benefits are included as PAL is only
responsible for the agreed upon compensation and to pay for all reasonable expenses
associated with attending State and National PAL conferences.
Finally, it was noted that there were meals purchased with the business purpose noted in the
margin on the credit card statements. It was calculated that a total of fifty-nine meals were
purchased at restaurants (including alcoholic beverages) during the audit period at an
average price of $71.59 per purchase. Internal Audit has no known means to confirm or
disprove the business purpose of these meals but they do not appear to be excessive and
amount to approximately one to two per month.
Recommendation(s)
If the Executive Board of Directors opts to reissue the corporate credit cards, then going
forward they should only be used for business-related expenditures. The outstanding
personal expenditures balance of $75.84 should be repaid immediately by the Outside
Consultant. Also, any sky miles earned should only be used for business purposes for the
PAL organization.
PAL staff should review all automatic invoices and long term contracts (cell phones, copiers,
Page 19 of 31
Internal Audit Report
Miami Beach Police Athletic League Operational Audit
February 25, 2010
etc.) to ensure that they are receiving the best price for the service rendered, especially
given today's economic climate. If not, the desired services should be competitively
shopped so that more optimal prices can be secured.
The Executive Board of Directors should be notified of any changes made to the plans and
should be kept abreast as to who is receiving the benefit. For example, the Executive Board
of Directors should decide whether they choose to pay any costs associated with the
Outside Consultant's cell phone. If so, they should amend the Outside Consultant's
employment contract accordingly.
Finally, Internal Audit realizes that sometimes monies have to be expended on meals, gifts,
etc. in an effort to build relationships with people to help secure donations. Since the
Outside Consultant's employment contract is silent on this issue, the Executive Board of
Directors may want to authorize designated amounts in the budget limiting the amount of
meals and gifts that can be reimbursed. PAL's policy on the consumption of alcohol during
this process should be also reviewed and decided upon by the Executive Board of Directors.
Agency's Response
The primary mission of the consultant at PAL was to generate funds for the organization.
The issue of potential misspending has recently been brought to light by a former Board
member. The auditors stated that they cannot "confirm or disprove the business purposes of
these meals but they do not appear to be excessive and amount to approximately one to two
per month," Board policy will make clear the approved uses of PAL funds for these
purposes.
As noted AOL account has been discontinued as was needed for computer labs (2) which
allow access to internet for after school programs prior to my arrival.
The phone bill for cellular phones has also been adjusted based on the long term plan PAL
originally had. The total yearly bill should be half or less of the previous yearly bills.
PAL will now only utilize credit cards for business related expenses. The PAL will look to
adopt a modified version of the City of Miami Beach "P" card policy. PAL will address these
issues in policy and procedures and will present any contracts as stated in current by-laws to
board and president, or his designee, for review.
11. Finding -Non-Business Expenditures
PAL's mission statement reads 'To provide a safe environment for juveniles, offer programs
that emphasize education, promote self-esteem, deal with those underlying conditions that
threaten the future of our youth and continue our dual mission of 'Filling Playgrounds, Not
Prisons-Success Through Education' through involvement of parents, police officers and
citizens of our community." The following expenditures do not appear satisfy PAL's mission
statement and therefore may have been better suited to have been paid by the benefiting
individuals rather that the organization.
a. A total of $3,721.28 in purchases that did not appear to satisfy their mission
statement was questioned upon reviewing the check register and supporting
documentation during the audit period. Examples noted include conference
registrations for a spouse; PAL's Costco membership also included family members;
food and/or flowers for family and friends' funerals; donations to Cooper City athletic
organizations; wedding gifts; etc.
Page 20 of 31
Internal Audit Report
Miami Beach Police Athletic League Operational Audit
February 25, 2010
b. One donor gave $25,000 deposited on 04/22/08 to pay for a PAL sponsored rafting
trip to Hell's Canyon in Idaho. Documentation was provided indicating that the donor
approved the Outside Consultant's grandson participation although he lived in
Missouri and to cover all associated expenses. The total calculated cost for the trip
was $28,704.79, which exceeded the donor's contribution by $3,704.79 and was
paid for with PAL monies. Additionally, there was no evidence in the provided
Executive Board of Directors' meeting minutes that this rafting trip was approved in
advance as it well exceeded the designated $2,500 threshold in the PAL by-laws.
The only mention found was in the July 9, 2008 minutes where it read "White Water
rafting: Winer, Freed line, Morgan {adult chaperones} and 9 kids participated. It was
a great team building experience; food was great." Similarly, Internal Audit could not
determine if the Executive Board of Directors authorized the payment of the
aforementioned $3,704.79 shortage.
c. On 12/04/08 an invoice from Restaurant Depot for $577.95 shows expensive cuts of
meat and seafood (7 racks of lamb, 14 pounds of skirt steaks, 15 pounds of flank
steaks, 9 pounds of angus ground chuck, 2 packages of smoked salmon with
cracked pepper, meatballs, 22 pork tenderloin, 6 boxes of shrimp and breaded
shrimp) being purchased with check #8253. Inquiries revealed that these meats
were all given to three needy individuals but documentation was not provided to
support this distribution nor was the Executive Board of Directors apparently notified.
Internal Audit could not verify the accuracy of these statements but is questioning as
to why PAL would purchase more expensive cuts rather than bulk.
d. Additional payments were noted to such charitable organizations as the Boy Scouts,
Girl Scouts, American Cancer Society, March of Dimes, etc. These payments
benefit a good cause but do not adhere to PAL's mission statement.
Recommendation(s)
Although the individuals making these expenditures may volunteer time and work diligently
on PAL's behalf, Internal Audit believes that these expenses are not attributed to the
operations of PAL and would be better paid by the individuals or with approval from the
Executive Board of Directors. Closer scrutiny should be placed on future expenditures
submitted for reimbursement to ensure their business purpose before a check is prepared.
Any expenditure made exceeding the $2,500 limit should be approved by the Executive
Board of Directors and documented as such in the approved minutes. Finally, any payments
to any organization, individual, etc. that does not satisfy PAL's mission statement should be
first approved by the Executive Board of Directors, regardless of the amount. A revision to
the agency's bi-laws should be considered to limit expenditures to those which directly relate
to the mission of the agency.
Agency's Response
PAL will address these recommendations in policies and procedures when utilizing the
Costco cards. The By-laws are currently under review and pending approval of the
executive board and general membership board. PAL will revise its mission statement to
reflect this, to cover donations, and community donations to schools.
Boy Scouts and Girl Scouts are PAL troop sponsored programs. In addition, the Explorer
program operates under Learning for Life which is a Boy Scout program. PAL's Executive
Board will continue to be advised of and approve expenditures as noted by audit to other
groups such as March of Dimes and American Cancer Society.
Page 21 of 31
Internal Audit Report
Miami Beach Police Athletic League Operational Audit
February 25, 2010
White Water rafting documentation has been provided to the Internal Auditor from the donor.
The shortfall of monies will be brought before the PAL Executive Board for approval of
expenses.
PAL will ensure future trips, programs, and events are board approved and consistent with
PAL mission statement.
12. Finding -City Employees' Leave Time
Two MBPD employees traveled on PAL sponsored overnight trips (Hell's Canyon White Water
Rafting Trip, Explorers competitions, Youth Director Council events, etc.) and their City
paychecks were not adjusted to reflect this time spent away from their job. These individuals
were charged approved administrative time. For example, employee identification number
10925 was charged 64 hours administrative time to attend the Hell's Canyon White Water
Rafting Trip.
Recommendation(s)
City employees should only be paid by the City for hours worked on behalf of the City.
Otherwise, they should use accrued leave time or be charged Leave Without Pay to
compensate for the hourly void.
City's Response
With the exception of the Director, City employees should not be routinely used as trip
chaperones. Volunteer chaperones should be selected and in the event an employee
volunteers, appropriate leave time should be taken. In the event a trip is sponsored by the
City and no volunteers are available, only with the explicit advance written approval of the
Chief or other Department Director should an employee be used and specific
acknowledgement of the authorized leave or paid time provided for the event
Agency's Response
Individuals chaperoned children on a PAL trip as both male and females attended. In some
instances administrative time was or has been used. For example, Friday, Saturday and
Sunday even though an employee is off Saturday and Sunday for PAL functions.
Internal Audit Observation
While the agency recognizes their previous use of City employees as chaperones, this practice
should be limited to days were the employees are off of work. Otherwise appropriate leave
(other than Administrative leave) should be taken as approved by the Police Chiefs office.
13. Finding -Outside Employment Statement
All full-time City employees are required to file a form entitled "Outside Employment
Statement" with the City Clerk's Office if they engage in any outside employment. This form
is due annually on July 1st for any work performed during the preceding calendar year.
Upon reviewing the City Clerk's records, it was discovered that a Recreation Program
Supervisor who also worked part-time at PAL did not submit the required forms for 2006 and
2007.
Recommendation(s)
City employees should submit "Outside Employment Statements" timely to the City Clerk's
Office as necessary.
Page 22 of 31
Internal Audit Report
Miami Beach Police Athletic League Operational Audit
February 25, 2010
Agency's Response
Subsequent to the audit, the outside employment form was submitted and approved by the City
Manager.
EXIT CONFERENCE
An initial meeting to discuss Internal Audit's preliminary findings was held on August 19, 2009 and
the participants included Police Chief Carlos Noriega, Assistant Chief of Police Raymond Martinez,
Police Captain James Hyde, PAL Executive Director Harry Morgan, James Sutter (Internal Auditor)
and Mark Coolidge (Senior Auditor). A former Executive Board of Directors member subsequently
prepared a list of concerns that were investigated by Internal Audit with any additional findings
incorporated into the above audit report. Several meetings were held afterwards with the applicable
parties to discuss and finalize the contents of this report. Management responses were solicited on
December 2, 2009 and were received February 24, 2010 and are included in this issued audit
report.
JJS:MC:mc
Audit performed by Senior Auditor Mark Coolidge
F:\obpi\$AUD\INTERNAL AUDIT FILES\DOCOB-09\REPORTS-FINAL\POLICE ATHLETHIC LEAGUE.doc
cc Carlos Noriega, Chief of Police
Robert Middaugh, Assistant City Manager
Harry Morgan, PAL Executive Director
Fred Beckmann, Public Works Director
Page 23 of 31
Internal Audit Report
Miami Beach Police Athletic League Operational Audit
February 25, 2010
EXHIBIT A
SUMMARY OF FINDINGS AND RECOMMENDATIONS DATED AUGUST 29, 2005
Note: The findings and recommendations below were reviewed by Internal Audit and the Miami
Beach Police Athletic League or PAL. They were not previously presented to the Miami
Beach Police Department or Parks & Recreation Department and therefore have not been
able to be refuted and may contain some inaccuracies; some outstanding monies may have
been reimbursed; some recommendations may not be practical or feasible; etc. However,
these findings were used as the basis for planning the current audit. The status of each of
the prior findings for the current audit period of 1 0/01/06 -05/31/09 is summarized after
each finding under the subheading entitled "Current Status".
1. Finding -Accounting Records
Although Miami Beach Police Athletic League's (PAL's) accounting records have continued
to improve and are audited annually by an independent accounting firm, the following
deficiencies were noted and are in need of improvement:
a. Invoices were strewn about in the audit period's monthly files making them difficult to
locate.
b. Invoices supporting canceled checks were occasionally missing from the files
(including checks payable to cash) and could not be located.
c. The reimbursement of expenditures from National PAL and Florida PAL were not
monitored to ensure that full payment was received.
d. Checks payable to cash were used primarily to fund cash advances given to
individuals prior to trips commencement (Explorers, Cheerleading competition, etc.)
and to provide change for the Boat Show concessions. The subsequent review of
PAL's documentation did not find substantiation indicating the results of the
settlements and the return of any unused monies.
e. Current procedure requires two signatures on all checks with Board of Directors
approval for all checks in excess of $500. The checking account contains three
signatories but only one works on the premises full-time and all frequently travel.
Inquiries discovered that checks are occasionally pre-signed to expedite issuance.
Meanwhile, review of canceled checks also found instances whereby only one
signature was present or someone else apparently signed a signatories' name.
These instances were scrutinized and appeared to represent legitimate PAL
expenditures. However, the aforementioned scenarios circumvent the dual
signatures' requirement and minimize its effectiveness.
f. Weekly Time Sheets detailing the hours worked daily by PAL employees were not
always signed by the corresponding employees and/or supervisors attesting to the
number of hours worked.
g. PAL's 2002 calendar year invoices were requested verbally by Internal Audit on four
separate occasions but were not provided prior to the conclusion of this audit. This
scope limitation was lessened by using PAL generated QuickBooks reports for that
year.
Recommendation(s)
The implementation of the following recommendations will help ensure the existence and
completeness of the supporting documentation and audit trail:
Page 24 of 31
Internal Audit Report
Miami Beach Police Athletic League Operational Audit
February 25, 2010
EXHIBIT A
SUMMARY OF FINDINGS AND RECOMMENDATIONS DATED AUGUST 29, 2005
a. The procedure currently followed for 2005 calendar year receipts should continue as it
involves the stapling of all the supporting invoices to the applicable payment
record/check remittance.
b. Checks should not be prepared unless all supporting documentation has been properly
submitted and its legitimacy can be verified.
c. PAL's bookkeeper is in the process of creating QuickBooks subsidiary ledgers to track
all National and Florida PAL reimbursable expenditures and net them against all
received reimbursement checks.
d. Different scenarios are currently being investigated (corporate debit cards protected by
a PIN number, checks payable to individuals supported by settlement sheets, etc.) to
possibly replace giving individuals' cash advances. Whichever method is selected,
proper supporting documentation should be maintained.
e. A new signatory should be added to the checking account with the Board of Director's
approval. A possible candidate is PAL's bookkeeper who is typically on the premises
during the work week and prepares the checks. In addition, the American Express
corporate credit card should be used at off-site locations to alleviate the difficulties
associated with the check's dual signature requirement.
f. All Weekly Time Sheets should be signed by the corresponding employee and their
supervisor attesting to the number of hours worked.
g. Access to all requested records should be timely granted by PAL administration.
Current Status
This finding is similar to number 6 in the current audit report.
a. This finding is no longer relevant as PAL's check remittances and supporting
invoices are now fastened and stored in sequential order inside a monthly folder.
b. This finding holds true in the fact that supporting invoices were not always attached
to the check remittance. However, one improvement implemented is that checks are
no longer written payable to cash.
c. Expenditures relating to National PAL and Florida PAL such as memberships, travel,
etc. are now paid by the local PAL and are not submitted for reimbursement.
Furthermore, the Outside Consultant's signed employment agreement states that
PAL is to pay for all reasonable expenses associated with attending State and
National PAL conferences.
d. Checks are no longer issued payable to cash. Instead, cash advances are made
through checks payable to the individual. Settlements are to occur at the conclusion
of the trip.
e. All PAL checks are required to contain two signatures before being presented to City
National Bank for payment. All checks reviewed except for two, numbered 8300 and
8302, satisfied this requirement. These two checks were closely analyzed and
seemed to represent legitimate PAL expenditures. The permitted PAL check
signatories are currently being re-evaluated by the Executive Board of Directors as
the Outside Consultant is no longer authorized.
f. Weekly Time Sheets are presently being maintained for the gym employees.
g. All requested records were provided for review.
Page 25 of 31
Internal Audit Report
Miami Beach Police Athletic League Operational Audit
February 25, 2010
EXHIBIT A
SUMMARY OF FINDINGS AND RECOMMENDATIONS DATED AUGUST 29, 2005
2. Finding -Monies Collected
PAL's customers typically remit either cash or checks in return for quarterly gym
memberships. Those paying on the premises receive a pre-numbered receipt indicating the
payment details. The monies received are then safeguarded in a locked cabinet until the
bank deposit is made. A proper segregation of duties existed as the PAL employees
receiving the monies were separate from those responsible for preparing the bank deposit.
However, testing showed the following internal control deficiencies over the collection and
depositing of funds did exist:
a. Bank deposits were frequently commingled between different revenue sources
thereby complicating the reconciliation process. For example, reviewed bank
deposits were found to contain monies received from vending machine companies,
facilities rentals, donations, etc.
b. The sources of the currency amounts comprising the bank deposit was not present
hindering reconciliation with the cash receipt books data.
c. A monthly reconciliation of the pre-numbered receipts with the amounts deposited
was not performed to help determine if any monies collected were not deposited into
the bank.
Recommendation(s)
PAL should consider implementing the following recommendations to help ensure that all
monies are accounted for:
a. Separate bank deposits should be made for each money source (gym memberships,
facilities rentals, donations, grants, vending machines, etc.).
b. A listing of the currency sources and amounts comprising the bank deposit should
be maintained to facilitate the reconciliation process.
c. A monthly reconciliation of the pre-numbered receipts with the amounts deposited
should be performed monthly by individuals independent of those collecting the
monies.
Current Status
This finding is similar to number 4 in the current audit report.
a. This recommendation is currently being followed as gym membership monies are
deposited together with each members' name listed on the deposit slip. Also,
donations are grouped together with their purpose noted on the margin (restricted or
unrestricted).
b. The currency sources and amounts are now listed on the bank deposits.
c. This reconciliation process continued not to be performed during the audit period.
3. Finding -Alcohol Permits for Nonprofit Civic Organizations
Florida Statute 561.422 states" ... the director of the division may issue a permit authorizing
a bona fide nonprofit civic organization to sell alcoholic beverages for consumption on the
premises only, for a period not to exceed 3 days, subject to any state law or municipal or
county ordinance regulating the time for selling such beverages. All net profits from sales of
alcoholic beverages collected during the permit period must be retained by the nonprofit civic
Page 26 of 31
Internal Audit Report
Miami Beach Police Athletic League Operational Audit
February 25, 201 0
EXHIBIT A
SUMMARY OF FINDINGS AND RECOMMENDATIONS DATED AUGUST 29, 2005
civic organization ... " PAL obtained alcohol permits for Volleypalooza, the Fourth of July,
Ocean Drive Magazine, etc. during the audit period.
In return for a fixed negotiated fee, they allowed such independent vendors as Penrods and
Boucher Brothers operate the alcohol concessions. The concessionaire would then be
responsible for providing PAL with the necessary information and monies to pay the
applicable taxes. However, this arrangement contradicts Florida Statute 561.422 as PAL
only receives the fixed negotiated amount rather than retaining all the net profits. Additional
problems could exist if the concessionaire is subsequently audited, fails to pay, incurs late
charges, etc.
Recommendation(s)
PAL should fully comply with Florida Statute 561.422 as the receipt of alcohol permits is an
effective fundraiser. Available options include operating the concession with PAL
personnel/volunteers, paying independent vendors a fixed fee in exchange for operating the
concession while PAL retains any profits generated, etc.
Current Status
This finding is similar to number 8 in the current audit report and continues to be an issue as
PAL is not fully complying with Florida Statute 561.422.
4. Finding -Tax Exempt Purchases for Others
The check register identified eleven transactions which totaled over $12,000 called "check
exchanges" whereby PAL would pay for an expense on behalf of an outside organization or
individuals using their tax exempt number, only to be reimbursed shortly thereafter in full by
these organizations or individuals. As a result, these entities avoided paying state sales
and/or resort taxes. PAL did not receive any additional compensation as their primary
objective was to thank those who have volunteered time in their different programs.
One example found involved the staging of the Fraternal Order of Police's 04/02/04 awards
banquet at the Shelborne Beach Resort. PAL initially paid the entire event's cost of
$5,310.00 via check number 4823 saving the union $477.90 in taxes. PAL was
subsequently reimbursed in full through check number 2419 approximately one month later.
Recommendation(s)
These questionable check exchanges should be ceased immediately and the applicable
amount of taxes should be paid in the future.
Current Status
This finding is similar to number 1 in the current audit report and continues to be an issue
although it was not as prevalent.
5. Finding -American Express Corporate Credit Cards
PAL currently provides American Express corporate credit cards for three of its employees.
Testing discovered that these tax-exempt credit cards are also routinely used for personal
expenses. The standard procedure is for the cardholder to review the monthly statement's
listed charges and separate business-related from personal. Next, the applicable individuals
Page 27 of 31
Internal Audit Report
Miami Beach Police Athletic League Operational Audit
February 25, 2010
EXHIBIT A
SUMMARY OF FINDINGS AND RECOMMENDATIONS DATED AUGUST 29, 2005
are to timely reimburse PAL in full for all those identified as personal. This process creates
additional work for PAL's bookkeeper, increases the complexity and the possibility of
mistakes, allows individuals to make tax exempt personal purchases and indirectly receive
non-interest bearing short term loans from the 501 c3 organization. Reconciliation of the
personal expenditures with the amounts reimbursed shows that $394.62 for the 2004
calendar year apparently has not been repaid as of yet.
Recommendation(s)
PAL's corporate credit cards should only be used for business-related expenditures. Any
previous outstanding personal expenditures should be repaid immediately.
Current Status
This finding is similar to number 1 0 in the current audit report but it was expanded to include
a review of the Outside Consultant's business expenses currently paid by PAL.
6. Finding -Apparent Personal Expenditures
A total of $4,457.11 in apparent personal purchases was discovered upon reviewing the
check register and supporting documentation during the audit period. Examples noted
include the purchase of meals, registration fees and airline tickets for spouses; food for
family and friends' funerals; parking tickets received by PAL volunteers; etc. These
purchases were not previously designated as personal expenditures and do not appear to
have been repaid as of the conclusion of this audit.
Recommendation(s)
Although the individuals making these expenditures may volunteer time and work diligently
on PAL's behalf, Internal Audit believes that these expenses are not attributed to the
operations of PAL and should be paid by the individuals. Closer scrutiny should be placed
on future expenditures submitted for reimbursement to ensure their business purpose before
a check is prepared.
Current Status
This finding is similar to number 11 in the current audit period and was expanded to also
include payments to charitable organizations which although beneficial do not appear to
satisfy PAL's mission statement and apparently did not receive approval from the Executive
Board of Directors.
7. Finding -Association with the Police Chief's Office
The Police Chief's Office and PAL are closely intertwined as they each perform services for
one another. For example, the Police Chief's Office assigns one full-time police officer to be
PAL's Executive Director and pays his salary, supplies Law Enforcement Trust Fund monies
with the City Commission's approval, the Police Chief reviews the budget and sits on PAL's
Board of Directors, the Executive Director reports to the Head of Internal Affairs, allows PAL to
use their standing orders with Corporate Express and Iron Mountain to purchase program
supplies and store documents, assists in fundraising efforts, etc. In return, PAL houses the
Fraternal Order of Police (FOP) Union and the FOP Health Trust in exchange for low monthly
rents, local children are supervised in a structured learning environment where they realize
that police officers are not the enemies, etc.
Page 28 of 31
Internal Audit Report
Miami Beach Police Athletic League Operational Audit
February 25, 2010
EXHIBIT A
SUMMARY OF FINDINGS AND RECOMMENDATIONS DATED AUGUST 29, 2005
Upon review of PAL's records, it was determined that twelve identified expenditures totaling
$13,933.60 were made at the request of and for the direct benefit of the Police Chiefs Office.
Items purchased or supplied include shirts, mugs and duffle bags; emergency aid for destitute
individuals; prizes for contest winners; monies for Take Your Child to Work Day; holiday
presents for police officers; food/beverages for meetings; etc.
PAL expended an additional $11,076.77 for Miami Beach Police Department sponsored and
operated programs like DARE, Junior Police Academy and Goodwill Ambassadors during the
audit period. These identified expenditures purchased trophies, supplies, food, clothing, etc.
for the participating individuals.
Recommendation(s)
The City Administration should closer scrutinize the relationship between the Police Chiefs
Office and PAL to determine the optimal working environment. Currently, the possibility exists
that the Police Chiefs Office could exert considerable influence over PAL's operations. PAL's
monies should not be used as a supplement to the Police Chiefs Office budget as they should
only be used to pay for legitimate PAL expenditures.
Current Status
This finding is similar to number 9 in the current audit report and was expended to include
payments on behalf of the City's Parks & Recreation Department.
8. Finding -Outside Employment Statement
All full-time City employees are required to file a form entitled "Outside Employment
Statement" with the City Clerk's Office if they engage in any outside employment. This form
is due annually on July 1 for any work performed during the preceding calendar year. Upon
reviewing the City Clerk's records, it was discovered that a Recreation Program Supervisor
who also worked part-time at PAL did not submit the required forms for 2002 and 2003.
Recommendation(s)
City employees should submit "Outside Employment Statements" timely to the City Clerk's
Office as necessary.
Current Status
This finding is similar to number 13 in the current audit report.
9. Finding -Building Maintenance
Section 3 of PAL's lease agreement states "The Lessee (PAL) accepts the premises in their
present 'as is' condition, and is responsible for all interior modifications and maintenance."
The PAL building has been identified as containing such deficiencies as water damage in
the walls, broken treads in stairwells, stacked items due to the shortage of available storage
space, etc. These items if not repaired or resolved timely could result in injury or illness to
the building's inhabitants.
Recommendation(s)
Although the facilities are costly to maintain as time progresses and the resident children are
Page 29 of 31
Internal Audit Report
Miami Beach Police Athletic League Operational Audit
February 25, 2010
EXHIBIT A
SUMMARY OF FINDINGS AND RECOMMENDATIONS DATED AUGUST 29, 2005
hard on the building, the inhabitants' safety should be a top priority and the listed items
should be repaired as soon as possible.
Current Status
This finding is similar to number 3 in the current audit report. This continues to be an on-going
issue as the building ages and the children attending PAL are hard on the facility. In addition,
the finding was expanded to include the $31,143 outstanding balance originating from the
cleaning of the building by Diamond Contract Services, Inc.
10. Finding -Insurance
Section 31 of PAL's lease agreement discusses their insurance requirements and is monitored
by the City's Asset Manager. Review of PAL's actual insurance coverage with the City's Risk
Manager found that workers' compensation coverage was not maintained despite the apparent
need as they have in excess of four employees. PAL management was notified of the
omission whereby they claimed that it is not needed as these employees are contracted
laborers but the City's Risk Manager disagreed. Therefore, they requested additional time to
research the matter and will provide the City with either proof of workers' compensation
coverage or supported rationale as to why it is not necessary.
In addition, the City's Redevelopment Specialist (Asset Management) received the
organization's certificates of insurance. However, the certificate was apparently reviewed
and approved internally without being furnished to the City's Risk Manager. Other
completed internal audits over the last several years have discovered similar findings.
Recommendation(s)
PAL should comply timely with all the terms listed in the lease agreement's section 31. In
addition the certificate should be forwarded to the City's Risk Management Department its
review and approval.
Current Status
This finding is no longer applicable based on recent inquiries with the City's Risk Manager. He
claims that the City could not be held liable in the event that one of PAL's workers is
inadvertently injured.
11. Finding -Utilities Payments
Resolution No. 96-21987 requires PAL to maintain the facility and pay all utilities throughout
the term of the Lease Agreement. Meanwhile, section 2 of PAL's corresponding lease
agreement states "Lessor {City} agrees to pay for all utilities used within the premises
including, but not limited to, electric, water, gas, telephone and garbage disposal." In reality,
the City has paid the water and sewer charges while PAL paid the electric, and telephone
invoices.
Recommendation(s)
The City's Legal Department should investigate further and determine who is responsible for
making the utilities payments.
Page 30 of 31
Internal Audit Report
Miami Beach Police Athletic League Operational Audit
February 25, 2010
EXHIBIT A
SUMMARY OF FINDINGS AND RECOMMENDATIONS DATED AUGUST 29, 2005
Current Status
This finding is similar to number 2 in the current audit report. The City's Legal Department has
opined on the contradictory terms claiming that it was a scrivener's error and PAL is therefore
responsible for paying the building's utilities. Additionally, a Memorandum of Understanding
was recently signed by the City Manager and the PAL Board President agreeing to terms
whereby the City would contribute a one time $50,000 payment plus an off-duty quarterly
surcharge to be used to pay future utilities expenses.
12. Finding -Leave Time
Two Recreation Department employees traveled on PAL sponsored overnight trips and their
City paychecks were not adjusted to reflect this time spent away from their job. Payroll entries
were not found that either reduced their salary or accrued leave time.
Recommendation(s)
City employees should only be paid by the City for hours worked on behalf of the City.
Otherwise, they should use accrued leave time or be charged Leave Without Pay to
compensate for the hourly void.
Current Status
This finding is similar to number 12 in the current audit report, except that MBPD employees
were noted participating rather than Parks & Recreation Department employees.
Page 31 of 31