Cultural Arts Council 9-2010MIA/\~ I BEACH
BUDGET AND PERFORMANCE IMPROVEMENT
Internal Audit Division INTERNAL AUDIT REPORT
TO:
VIA:
FROM:
Jorge M. Gonzalez, City Manager ~
Kathie G. Brooks, Budget and Pre~~ance Improvement Director ;;:::;t:>
James J. Sutter, Internal Audita~~
DATE:
AUDIT:
PERIOD:
January 27, 2011 I
Miami Beach Cultural Arts Council Audit
October 1, 2009 to September 30, 2010
This regularly scheduled audit of the Miami Beach Cultural Arts Council covering the 2009/10 fiscal
year was performed in compliance with the annual audit requirements specified by City Code
Section 2-64.
INTRODUCTION
On March 5, 1997, the City Commission passed City Ordinance No. 97-3075 thereby creating the
Miami Beach Cultural Arts Council (CAC) to develop, coordinate, and promote the performing and
visual arts in Miami Beach for the enjoyment, education, cultural enrichment, and benefit of both
residents and visitors. Since that time, the City has awarded more than $7,200,000 in cultural art
grants, supporting thousands of performances, exhibits and other cultural activities in Miami Beach.
On June 3, 1998 the City Commission approved the Miami Beach Cultural Arts Council Master Plan
through Resolution No. 98-22760. The Master Plan process began in October of 1997 and was the
result of a series of public town meetings held in cultural venues throughout Miami Beach. At these
sessions, council members heard directly from members of the City's cultural community and from
other municipal agencies and boards with a stake in the City's cultural future. The Master Plan
included the program areas of Cultural Grants Program, Joint Marketing, Cultural Facilities,
Advocacy and Planning, and Revenue Development; each with individual objectives.
In fiscal year 2004/05, the City Commission authorized expanding the allocation of the 50% of the
1% resort tax previously equally distributed to North Beach, Middle Beach and South Beach, to
include funding for the arts. This funding is distributed in the year after it is collected. This
commitment of funding for arts and culture provided a new permanent funding source that sustains
cultural programming long term. As a result, the 1% resort tax revenues collected in FY 2008/09
totaling $936,816.27 were appropriated to each of North Beach, Middle Beach, South Beach and
the Arts in FY 2009/10.
In an effort to address the needs of the arts community, City staff in conjunction with the CAC Board
annually reviews each of the grants programs (currently Cultural Anchors; Cultural Presenters; North
Beach Initiative; Arts & Cultural Education; Cultural Heritage; Artistic Disciplines -Dance, Film,
Music, Theater and Visual Arts; and Cultural Tourism) to determine the type of programs which will
benefit the community. A summary of each grant program follows:
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Internal Audit Report
Miami Beach Cultural Arts Council Audit
For the Fiscal Year Ending September 30, 2010
January 27, 2011
• Cultural Anchors provide grants to the major preeminent arts institutions physically based in
Miami Beach, whose primary mission is year round artistic and cultural programming that
contributes significantly to the City's cultural life. Organizations must have minimum
organizational budget levels of $750,000 and the monies received may be used towards
operational expenses in association with the annual cultural programming described in the
application.
In addition, the CAC approved the addition offour Miami Beach based cultural organizations
into this category approximately two years ago. These organizations (Arts at St. John's,
Miami Beach Film Society, Miami Contemporary Dance Company and the Miami Beach
Garden Conservancy) meet all the same criteria as Cultural Anchors except that they have
organizational budget levels below $750,000.
• Cultural Presenters provide grants to organizations whose primary mission is to produce and
present cultural and artistic productions.
• North Beach Initiative earmarks funds for proposed projects at the Byron Carlyle Theatre,
North Beach Band Shell and other North Beach locations (north of 63rd Street) for the
purpose of increasing the amount of cultural activities in Miami Beach's North Beach
community.
• Arts & Cultural Education provides grants to cultural organizations whose primary mission is
to provide support for rich and challenging arts learning opportunities for children and adults
in Miami Beach schools and neighborhoods. Grants may be used for workshops,
lectures/demonstrations, and other projects designed to increase skills and awareness of
the arts.
• Cultural Heritage provides project specific grants for arts programming to not-for-profit
501 c(3) Miami Beach based institutions devoted to promoting and protecting the diverse
heritage, traditions and culture of Miami Beach. Grants may be used for presentation of
visual and performing arts, arts programs and workshops, and other projects which
emphasize the artistic experience and are accessible to a broad audience.
• Artistic Disciplines funding is limited to arts and cultural organizations whose primary mission
is to create and present work in one of the following artistic disciplines; Dance, Film, Music
Theater and Visual Arts. Proposed projects should be for work that is new or has never
before been presented in Miami Beach.
• Cultural Tourism are grant funds jointly provided by the CAC and Miami Beach Visitor and
Convention Authority (VCA) to support major cultural arts performances, festivals, and
events which attract a significant number of tourists to the City. The VCA provided $42,500
and the CAC gave $30,000 to fund this program during the 2009/10 fiscal year.
Suggestions and ideas are received from grantees, grants' panelists, members of the CAC and
other granting organizations through orientation meetings held at the beginning of each grant period,
consultations with grantees, public application and proposal reviews, public meetings held at the
end of the review cycle, the Grants Task Force, and through staff, so that the programs can
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Internal Audit Report
Miami Beach Cultural Arts Council Audit
For the Fiscal Year Ending September 30, 2010
January 27, 2011
continually be improved. Program application periods and relevant deadlines are announced in
January via press releases, electronic mail, on its website and in area newspapers. Program
guidelines, applications and instructions are created in Microsoft Word format and made available
on the website in both English and Spanish.
To be eligible to apply, organizations must be non-profit, 501 c(3) cultural organizations and cultural
departments within an institution of higher learning (college or university) with tax-exempt status
under subsections of 501 c(3) wishing to present or produce cultural and artistic events in the City of
Miami Beach. Furthermore, any applying organization that satisfies one of the following criteria is
not entitled to receive funding:
• applied through a fiscal agent
• received prior CAC grant funding and did not comply with the Grant Agreement and/or other
requirements
• did not include the City of Miami Beach logo and required credit line in all publications
related to the grant
• received funding from the VCA during the same fiscal year.
A total of $1,145,000 was requested in grant monies by sixty organizations for the 2009/10 fiscal
year. Each grant applicant must follow an extensive multi-level public review process which includes
a general orientation for all applicants and required consultations with CAC staff to determine
eligibility and appropriate programs. Applicants must meet all application requirements, including
deadlines, or be disqualified.
Applications were scored by the CAC at a series of publicly noticed panel meetings. Applicants
should attend their panel meeting where they will be permitted to respond to panelists' questions.
The applications were scored using evaluation forms based on criteria listed in the application, then
averaged dropping the highest and lowest scores. An application must have scored a minimum
average of 80% with a maximum possible score of 100 points, to be eligible to receive funding.
Fifty-five organizations exceeded or met the designated minimum score required for funding. As a
result, the City Commission, through the passage of Resolution No. 2009-27214, awarded grants
totaling $630,000.00 to these eligible organizations for the 2009/10 fiscal year. The largest award of
$29,785.14 was given to the New World Symphony, while the lowest amount of $5,048.85 was
given to the Center for Folk & Community Art. All of these authorized grant recipients receive half
their funding upon submittal and approval of the required documents with the remaining half upon
completion from the City.
Resolution No. 2009-27214 also included three programs (141h Brazilian Film Festival of Miami, XV
International Ballet Festival of Miami and 1 ih Annual Miami Gay & Lesbian Film Festival in Miami
Beach) whereby the CAC partnered with the Miami Beach Visitor and Convention Authority or VCA
for Cultural Tourism grants that support cultural events with documented tourism benefits. The
City's agreed upon payment of $30,000 was made to the VCA through check number 2728 dated
12/01/09. These authorized grant recipients receive all their funding from the VCA upon submittal
and approval of the required documents after the project's completion.
The CAC budget did not include a contribution towards the City's Cultural Endowment for the
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Internal Audit Report
Miami Beach Cultural Arts Council Audit
For the Fiscal Year Ending September 30, 2010
January 27, 2011
2009/10 fiscal year due to budget constraints. Yet, the endowment's 09/30/10 balance held in a
restricted cash account increased by $29,442.31 to $1,548,463.96 from the prior fiscal year's ending
balance of $1,519,021.65 due to the interest earned on the invested monies.
Under Resolution No. 99-23228, the City Commission approved the appropriation of $220,000 from
the CAC budget to provide matching funds in the form of a non-interest bearing loan to fund a
portion of the Colony Theatre Improvements. Since the City was able to obtain the maximum grant
award from the State's Cultural Arts Facilities Grant Program, the loan has been reduced to
$165,000. The City will repay the loan to the Cultural Arts Council from the 70% recapture of the
Colony Theatre Cafe revenues.
As of September 2010, the total amount in the Colony Theater Trust account was $143,139.82 with
no payments made during the past five fiscal years. Monies totaling $67,400 were transferred in
January 2011 by the Finance Department to fund the purchase of new sound/audio equipment in
accordance with the 2010/11 approved capital budget. The remaining monies will remain in the trust
account until there is another approved appropriation.
OVERALL OPINION
The Cultural Arts Council has properly followed the guidelines established by the Miami Beach City
Commission as to their purpose in the City. It has established a master plan for the arts, and
developed and established criteria and guidelines for review and funding for qualified not-for-profit
organizations. The active Cultural Arts Council is comprised of eleven Miami Beach residents who
routinely meet once a month to plan the organizations' future. Program files were well organized for
each tested vendor. Documentation was present confirming that funded programs were properly
staged and written final reports were received before grant payments were authorized for
reimbursement. Finally, grantee payments were made timely and were recorded correctly in the
City's Financial System.
However, the following findings were identified which are in need of corrective action:
• Grantees are submitting either incomplete or late documentation (IRS tax exempt letters,
IRS form 990s, certified financial statements and/or completed final reports) but are still
receiving the full second City payment.
• Inaccuracies were noted in the number of grants awarded, the grant award amounts and the
number of grants issued measures reported in the City's Environmental Scan, performance
management software and adopted budget book.
PURPOSE
To determine whether the Cultural Arts Council complied with tested requirements set forth by the
City Commission during the 2009/1 0 fiscal year, which includes the timely distribution of approved
grant funds in the correct amounts to qualified eligible not-for-profit organizations; properly reported
grant payments in the City's Financial System; and accurately reported data in the City's
Environmental Scan, performance management software and adopted budget book.
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Internal Audit Report
Miami Beach Cultural Arts Council Audit
For the Fiscal Year Ending September 30, 2010
January 27, 2011
SCOPE
1. Confirm that the Cultural Arts Council has developed, established and adhered to criteria
and guidelines for review and funding of qualified not-for-profit arts organizations.
2. Confirm that the Cultural Arts Council consists of eleven Miami Beach residents, who are
appointed for three-year terms and no more than six consecutive years.
3. Confirm that Cultural Arts Council meetings are held once a month (excluding August) and
that one public hearing before the City Commission is held annually.
4. Confirm that grant payments were correctly recorded in the City's Financial System.
5. Select a sample of grants awarded, ensuring that all grant categories are represented, and
confirm that funds paid for grants were for approved programs, meeting the criteria set forth
by the Cultural Arts Council.
6. Confirm that selected departmental measurement data reported in the City's Environmental
Scan, performance management software and the adopted budget book are accurately
calculated and properly supported by source documentation.
FINDINGS, RECOMMENDATIONS AND MANAGEMENT RESPONSES
1. Finding-Submitted Supporting Documentation Does Not Fully Satisfy Grant Requirements
Fifty-five grantees were awarded monies totaling $630,000 for the 2009/10 fiscal year by the
City Commission's ratification of Resolution No. 2009-27214. These authorized grant
recipients are to receive half their funding upon submittal and approval of the required
documents with the remaining half upon completion. Prior to receiving any monies, a grant
agreement must be completed and signed by both the City and the participating 501 (c)3
entity.
This standard document requires the submittal of a final report within 45 days of the project's
completion date; proof of the City of Miami Beach logo and credit line must be included in all
project publications and advertisements; proof of performances such as programs,
brochures and flyers; etc. The Grants and Operations Administrator approves the submitted
documentation for sufficiency before a Request for Direct Payment is prepared authorizing
the City's Finance Department to issue a check to the grantee.
Additionally, the Grants and Operations Administrator monitors these nonprofit organizations
maintaining all received required documentation in separate files. Eleven of these fifty-five
grantees' files or 20.00% representing 25.23% of the dollars disbursed were randomly
selected for review with at least one nonprofit corporation chosen from each of the
designated categories (Cultural Anchors, Cultural Presenters, etc.). In doing so, the
following deficiencies were noted:
a. One of the eleven files reviewed or 9.09% did not contain an Internal Revenue
Service letter dated after 01/01/07 granting the grantee 501 (c)3 tax exempt status in
adherence to the grant application's terms. Florida Film Institute's provided letter
was dated 03/22/04 with a notation by the Grants and Operations Administrator
stating that an updated letter had been requested on 02/27/09. However, no
documents were present in the file to indicate that the grantee responded.
Fortunately, Internal Audit's review of the State of Florida Division of Corporation's
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Internal Audit Report
Miami Beach Cultural Arts Council Audit
For the Fiscal Year Ending September 30, 2010
January 27, 2011
website properly found that all eleven grantees were currently active Florida nonprofit
corporations.
b. The Miami Beach Cultural Arts Council or CAC requires each grantee to submit
either their last completed Internal Revenue Service form 990 or certified financial
statements. All tested grantees complied with these terms except for the Miami
Contemporary Dance Company as no applicable financial documentation was found
upon review of the provided file.
c. The signed grant agreements require grantees to postmark or deliver their final
report no later than 45 days after the project end to receive the second half of their
grant award. Although most grantees' programs end before September 30th, this is
the date that is typically used to signify the program's completion. Consequently, the
grantee is then given another 45 days until November 15th to submit their completed
final report. For example, nine of the eleven reviewed grantees contained a
09/30/1 0 program completion date.
Both the CAC and the Miami Beach Visitor and Convention Authority properly
time/date stamped the reviewed documents to accurately record the date received.
Internal Audit compared these two dates (the final report deadline and the actual
date received) to find that two grantees, Florida Film Institute and the 1 ih Annual
Miami Gay & Lesbian Film Festival, were received late. Coincidentally, neither of
these grantees had a September 30th program completion date.
Subsequent inquiries with Cultural Affairs Division staff found that they continually
spend time reminding the grantees that deadlines have passed and work with them
to help ensure that they receive full funding, whenever possible. They have been
flexible on the program completion and due dates in the past but 2010/11 approved
grantees were warned of the need to comply with the listed deadlines.
Recommendation(s)
The implementation of the following recommendations should help alleviate the
aforementioned documentation shortcomings:
a & b. Although Cultural Affairs Division staff is doing better in securing timely
documentation than in previous annual audits, there still is room for improvement.
Internal Audit opines that future grant applications should contain similar wording to
the Internal Revenue Service 501 (c)3 tax exempt status letter requiring the submittal
of Internal Revenue Service form 990 or certified financial statements from within the
past two years. Also, the division's adoption and completion of a checklist for each
grantee would be beneficial in ensuring that all requirements are satisfied before any
grant monies are disbursed.
c. Program completion dates should be the date of the last program so that the final
report deadline date could be moved forward. Also, it should represent the date that
the final report is approved and not just submitted as it is possible that some
grantees could intentionally submit unfinished reports in order to comply.
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Internal Audit Report
Miami Beach Cultural Arts Council Audit
For the Fiscal Year Ending September 30, 2010
January 27, 2011
Finally, future grant application's wording should be changed to include provisions
stating that late submittal of final reports will result in a designated reduction in the
grant monies due. This practice should result in better grantees' compliance thereby
giving Cultural Affairs Division staff additional time to focus on more important duties
and helping ensure that most, if not all, grant monies are disbursed in the fiscal year
appropriated/awarded by the City Commission.
Management's Response
a & b. Staff recognizes and acknowledges that follow-up to ensure updated information was
received did not occur in this instance. The recommendation to include a checklist
of missing or outdated items for each grant has been implemented in the 2011-2012
grant cycle. Going forward, staff will request IRS 990s be dated within the last two
(2) years.
c. Grantees determine their project completion dates. Final Report approval dates
directly correspond to dates noted on the Grant Payment Schedule. Final Report
Form language includes the following paragraph regarding penalty for non-
compliance:
Final reports must be filed no later than 45 days after the project end date or
November 15, 2011, for projects ending on September 3dh, for the applicant to
receive the second half of the grant award. Additionally, once the final report has
been reviewed, grant recipients must submit any additional required
documentation by the deadline provided or the grant recipient will be non-
compliant and ineligible to receive remaining grant funds, and ineligible to receive
next year's grant funds if awarded.
Similar language will be incorporated into Applications and Contracts.
2. Finding -Review of Departmental Measures
The Cultural Affairs Division measures both the number and amounts of grants awarded by
the City Commission, as well as the actual number of grants issued (output measures).
These numbers may differ as the number of grants issued is usually not available until the
end of the year since grantees may withdraw or be denied funding due to not fulfilling grant
requirements.
These tested departmental measures are reported in either the City's Environmental Scan
and/or the performance management software. We reviewed the basis for each measure
and compared the reported amounts to the actual supporting documentation. For the two
measures reported annually in the City's Environmental Scan, the following was noted:
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Internal Audit Report
Miami Beach Cultural Arts Council Audit
For the Fiscal Year Ending September 30, 2010
January 27, 2011
The number of grants awarded reported in last year's Environmental Scan for fiscal years
2003/04 through 2008/09 correctly equaled the audited figures. However, there are now
differences for three of the fiscal years as the previously reported numbers were incorrectly
changed. Furthermore, the May 2010 Environmental Scan was not updated with the
2009/10 figures.
These two measures are now also reported in the City's performance measure software but
a comparison to the figures listed in the Environmental Scan found the following:
• The number of grants awarded measure reported in the City's performance
measurement software is correct as the Environmental Scan contained three
incorrect fiscal year entries.
• Conversely, the grant award amounts measure reported in the City's Environmental
Scan is correct as the performance measurement software contained three incorrect
entries.
Meanwhile, results from the audit of the amount of cultural grants issued (paid out), as
reported solely in the performance management software were as follows:
*
#of grants Issued
Fi~caiveal<,.' : ·cA¢'.: ' ::Audited. '·Difference,
2003/04 51 53 -2
2004/05 49 49 0
2005/06 50 47 3
2006/07 51 50 1
2007/08 36 36 0
2008/09 43 43 0
2009/10 N/A 55* N/A
This figure assumes that the first half grant payment to Culture in the City which was subsequently
returned in full would be included as the monies were initially paid out.
The number of grants issued for the 2009/10 fiscal year had not yet been entered into the
performance measurement software as of the conclusion of this audit. Also, variance
reports were not created to explain the reasons for the differences listed from the designated
targets for the 2007/08 and 2008/09 fiscal years.
After completing our review of the above measures for fiscal year 2009/10, we determined
the following assessment categories suitable as defined in Exhibit 1 attached at the end of
this audit report:
1\, < r '.;. .. ; .. ':.source···· · :r.Narrieof.'Measurer•r~··· 'Asses~m~ri~ ·category::····,
Environmental Scan #of grants Awarded Certified with Qualifications
Environmental Scan Grant Award Amounts Certified
Performance Management #of grants Awarded Certified
Software
Performance Management Grant Award Amounts Certified with Qualifications
Software
Performance Management #of grants Issued Certified with Qualifications
Software
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Internal Audit Report
Miami Beach Cultural Arts Council Audit
For the Fiscal Year Ending September 30, 2010
January 27, 2011
Finally, the 2004/05 fiscal year performance measure entitled"# {number} of cultural grants
issued" was incorrectly listed as 45 in the City's 2010/11 fiscal year adopted budget book
when the correct number is actually 49.
Recommendation(s)
The identified incorrect or missing figures for the measures reviewed above and reported in
the City's Environmental Scan, performance measurement software and/or adopted budget
book should be corrected and included in the next scheduled publication. In addition,
designated City employee(s) should be assigned the responsibility to ensure that the dually
reported figures in the Environmental Scan, performance measurement software and the
adopted budget book are identical and correct going forward.
Management's Response
Staff has identified and corrected the figures noted above in the City's Environmental Scan
and in Active Strategies. Ensuring these figures match throughout all City reporting tools is
a priority of this Department.
EXIT CONFERENCE
An exit conference was held on January 21, 2011 and the participants included Gary Farmer
(Cultural Affair Program Manager), Mary Heaton (Grants & Operations Administrator), James Sutter
(Internal Auditor), and Mark Coolidge (Senior Auditor). All present were in agreement with the
findings and recommendations discussed and management responses were submitted shortly
thereafter for inclusion in this report.
JJS:MC:mc
Audit performed by Senior Auditor Mark Coolidge
F:\obpi\$AUD\INTERNAL AUDIT FILES\DOC10-11\REPORTS-FINAL\CAC 2010.doc
cc Hilda Fernandez, Assistant City Manager
Patricia Walker, Chief Financial Officer
Max Sklar, Cultural Arts and Tourism Development Director
Gary Farmer, Cultural Affairs Program Manager
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Internal Audit Report
Miami Beach Cultural Arts Council Audit
For the Fiscal Year Ending September 30, 2010
January 27, 2011
EXHIBIT: 1 -Assessment Categories for Performance Measures Verification
Certified
Certified with Qualifications
Factors Prevented Certification
Inaccurate
If reported performance is 100% accurate and if it appears that
controls are in place to ensure accuracy for collecting and reporting
performance data. Measurement data is supported by source
documents.
This category is assigned under either one of two conditions:
1. Reported performance is within +/-3%, but the controls over
data collection and reporting are not adequate to ensure
continued accuracy.
2. The department's calculation of actual performance deviates
from the measure definition, but was still within an acceptable
range.
Documentation is unavailable or incomplete and controls are not
adequate to ensure accuracy. This category is also assigned when
there is a deviation from the measure definition and the reviewer
cannot determine the correct measure result.
Actual performance is not within 3% of reported performance, or
there is a reater than 5% error in the sam le of documents tested.
EXHIBIT: 2 -Additional References for Performance Management Software's
Description of Measure
1) Measure Name:
2) Measure Type:
3) Measure Description:
4) Measure Frequency:
5) Data Sources:
6) Calculation Methodology:
Should list the name of the measure for which data is being
collected and reported.
Should recognize whether the measure is an "Input", "Output", or
"Outcome" measure. One must consider whether results are
measured through input (Ex: Customer surveys), output (Ex:
Number of contracts completed without change orders), or outcome
(Ex: %of projects substantially completed or in beneficial use within
120 days).
Should describe the measure. Some measures are self
explanatory and some may not; however, a description should
always be included (Ex: The measure considers the% of change in
the value of the change orders for a specific category divided by the
original project cost).
Describes how often performance data is reported (Ex: Quarterly).
Should list sources used to collect performance data (Ex: System
Software Names, Report Names, Schedules, etc.)
Should explain how data reported was calculated (Ex: change
orders for that quarter divided by the original total projects costs,
projects substantially completed or in beneficial use within 120 days
of the contract milestone date divided by the total number of
projects completed during the same quarter).
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