Miami Beach Cultural Arts Council (Period 10-1-16 to 9-30-17) 1-28-19MIAMI BEACH INTERNAL AUDIT REPORT
City of Miami Beach, 1700 Convention Center Drive, Miami Beach, Florida 33139, www.miamibeachfl.gov
Office of Internal Audit
Tel: 305-673-7020
TO: Jimmy L. Morales, City Manager
VIA: Mark D. Coolidge, Interim Interna A ditor MhC.-
FROM: Jessica Romero, Auditor V_L
DATE: January 28, 2019
AUDIT: Miami Beach Cultural Arts Council Audit
PERIOD: October 1, 2016 to September 30, 2017
We have completed the regularly scheduled audit of the Miami Beach Cultural Arts Council (CAC)
as required by Section 2-64 of the City Code for the period of October 1, 2016 through September
30, 2017. This audit was performed to determine whether the CAC complied with the provisions
set forth in Chapter 2, Article III, Division 6 of the City Code titled "Cultural Arts Council," and to
determine whether grants were awarded in accordance with the Program Guidelines and Eligibility
Requirements. During the audit period, $850,055.24 in grant monies were awarded to 55 eligible
applicants as approved by City Resolution No. 2016-29579.
INTRODUCTION
The City Commission passed Ordinance No. 97-3075 on March 5, 1997 thereby creating the
Miami Beach Cultural Arts Council (CAC). The CAC consists of 11 members appointed at large
by a majority vote of the Mayor and City Commission. The CAC was created to develop,
coordinate, and promote the performing and visual arts in the City for the enjoyment, education,
cultural enrichment, and benefit of both residents and visitors. Since the program's inception, the
City has awarded approximately $14 million in cultural grants.
Staff from Cultural Affairs, a division of the City's Tourism, Culture and Economic Development
Department, in conjunction with the CAC has the primary responsibility of reviewing applications
received for the Cultural Arts Grant Program on an annual basis, ensuring that applicants meet
the eligibility criteria, and providing award recommendations to City Administration.
To qualify for the grant program, applicants must be non-profit, 501(c)(3) cultural organizations,
or cultural departments within an institution of higher learning (college or university) with tax-
exempt status under other subsections of 501(c)(3), wishing to present or produce cultural and
artistic events in the City of Miami Beach. In addition, they must complete the required application
and provide the documentation (i.e. IRS Form 990, organizational chart, etc.) by the established
grant program deadlines.
The grant program currently offers three (3) different categories including Anchors, Cultural
Presenters and Artistic Disciplines. Awarded amounts may vary up to $35,000 depending on
such factors as the grant program category, the annual organizational budget of the applicant,
etc. A brief description of each of the three categories is as follows:
We are committed to providing excellent public service and safety to all who live, work, and play in our vibrant, tropical, historic community.
Internal Audit Report
Miami Beach Cultural Arts Council Audit
January 28, 2019
1. Anchors: major preeminent and smaller art institutions physically based in the City,
whose primary mission is year-round artistic and cultural programming that
contributes significantly to the cultural life of the City.
a) $25,000 for annual organizational budgets below $750,000
b) $30,000 for annual organizational budgets between $750,000 and $3.5
million
c) $35,000 for annual organizational budgets at or above $3.5 million
2. Cultural Presenters: organizations whose primary mission is to produce and
present cultural and artistic productions.
a) $10,000 for proposed project budgets under $100,000
b) $20,000 for proposed project budgets at or above $100,000
3. Artistic Disciplines: arts and cultural organizations whose primary mission is to
create and present work in dance, music, theater, film and visual arts categories.
a) $10,000 for proposed project budgets under $100,000
b) $20,000 for proposed project budgets at or above $100,000
CAC program grants are fully funded via Resort Tax revenues. In fiscal year 2014/15, the City
Commission accepted the recommendations of the Finance and Citywide Projects Committee to
modify the split of the Resort Tax funds to allocate fifteen percent to funding for arts (i.e. CAC).
This funding is distributed in the year after it is collected as this commitment provided a new
permanent funding source that sustains cultural programming long term. During the twelve-month
audit period, October 1, 2016 through September 30, 2017, a total of $1,679,000 was
appropriated to the CAC. Of these monies, $850,055.24 was awarded to 55 applicants during
the 2016/17 fiscal year through the City Commission's subsequent ratification of Resolution No.
2016-29579.
OVERALL OPINION
This audit was initially started in February 2018, but testing was unable to be completed until
September 2018 due to repeated delays in receiving needed requested documents. The Cultural
Affairs Division apologized for the delays which they stated was caused by the Grants and
Operations Administrator position being vacant for eight months prior to being filled in November
2017 and the need of the newly hired individual to focus primarily on the awarding of 2018/19
fiscal year grants.
Regardless of the cause, the Office of Internal Audit has become increasingly frustrated over the
lack of completeness and accuracy of the grantee files and the increasingly late full grant
payments issued. The Cultural Affairs Division has not been accurately following the guidelines
established by the City as to their purpose. Grantees were awarded monies without fully
complying with the terms of the grant agreement.
Despite the countless hours spent by Cultural Affairs Division and/or Office of Internal Audit staff
to work with the grantees, review all the required documentation and to make determinations as
to its accuracy; any identified deficiencies are merely communicated to the grantees which is
permitted to submit additional documentation to justify receiving full payment of the grant awards.
Unless the terms in the guidelines are strictly enforced and some or all the grant monies are not
paid if the stated requirements are not timely met, then there is little or no repercussions to these
grantees other than delays in receiving that fiscal year's funding. Meanwhile, the audit adds little
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January 28, 2019
value and the workload for all pertinent Cultural Affairs Division personnel has increased
exponentially as the reimbursement process is inefficient and can take two or more fiscal years
to complete.
Based on the results of our audit, we noted that certain procedures and internal controls require
enhancements due to the following deficiencies:
1. Documentation provided by grantees was not in compliance with the requirements of the
Program Guidelines and Application Instructions.
2. Procedures for the reimbursement of grants were not properly applied, resulting in
under/overpayments to grantees.
3. Grant agreements were not fully executed by the City of Miami Beach.
4. Lack of supporting documentation and improper review of grantees' final reports resulted
in a reduction of grant awards.
5. Funds were disbursed to grantees for the 2017/18 fiscal year without validation of
compliance with the 2016/17 fiscal year's grant agreement's terms.
6. The accrual journal entry for unpaid grant awards for the 2016/17 fiscal year was not
recorded in the City's Financial System.
7. An error in the information published in the Environmental Scan 2017 plus the Active
Strategy performance management software has not been updated since the 2014/15
fiscal year.
8. Prior audit follow-up showed that several previously identified findings have still not been
resolved to date.
SCOPE, OBJECTIVES, AND METHODOLOGY
The scope of the audit was to evaluate whether the Miami Beach Cultural Arts Council (CAC)
complied with the provisions set forth in Chapter 2, Article III, Division 6 of the City Code titled
"Cultural Arts Council," and determine whether grants were awarded in accordance with the
Program Guidelines and Eligibility Requirements. The audit covered the period October 1, 2016
through September 30, 2017, and selected transactions prior and subsequent to this period. In
general, the audit focused on the following objectives:
To determine whether the CAC complied with the provisions set forth in Chapter 2, Article
III, Division 6 of the City Code.
• To determine whether the applicants selected satisfied the eligibility requirements of the
grant category for which they applied.
To determine whether the CAC properly reimbursed grantees an amount within the
maximum allowed for their organization type, and not to exceed the City Commission
approved total.
To determine whether the tested grantees complied with the final report requirements set
forth in the grant agreement.
To ensure that awarded grant payments were properly recorded in the City's Financial
System.
To determine whether deficiencies noted in the prior audit have been corrected.
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Internal Audit Report
Miami Beach Cultural Arts Council Audit
January 28, 2019
We conducted this performance audit in accordance with the Standard Operating Procedures of
the City of Miami Beach Office of Internal Audit as well as internal audit best practices. Those
require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a
reasonable basis for our findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and conclusions based on our
audit objectives.
The audit methodology included the following:
• Reviewed applicable provisions within the City Charter and Code of Ordinances, and City
policies and procedures;
• Interviewed and made inquiries of staff to gain an understanding of the internal controls
(relative to the award of CAC grants), assess control risk, and plan audit procedures;
Performed substantive testing consistent with the audit objectives, including but not limited
to examination, on a sample basis, of applicable transactions and records;
• Drew conclusions based on the results of testing, made corresponding recommendations,
and obtained auditee responses and corrective action plans; and,
• Performed other audit procedures as deemed necessary.
FINDINGS, RECOMMENDATIONS AND MANAGEMENT RESPONSES
The names of the grantees in the findings below were intentionally omitted from this audit report;
however, they are available upon request.
1. Findin :Documentation Provided by Grantees was not in Compliance with the Eligibility
Requirements of the Program Guidelines and Application Instructions
The City's Cultural Affairs Division is a component of the Tourism, Culture and Economic
Development Department. Among other duties, their staff is responsible for ensuring that
grantees meet the eligibility requirements of the Cultural Arts Grant Program set forth in
the Program Guidelines and Application Instructions and comply with the terms of the
executed Grant Agreement. As per the City's Cultural Affairs Grant Program Guidelines
and Application Instructions -Eligibility Requirements, only non-profit organizations with a
501(c)(3) tax exempt status, or cultural departments within an institution of higher learning
(college or university) with tax-exempt status under other subsections of 501(c)(3), are
eligible to apply. As part of the application process, applicants must meet all requirements
and deadlines and submit/comply with the following:
a) Organization's 501(c)(3) tax-exempt status letter dated within the past two (2)
years.
b) Most recent IRS Form 990 (Return of Organization Exempt from Income Tax),
signed.
c) Organizational Chart (for Anchors only).
d) Current board membership (with contact information) and staff lists with brief
biographies.
e) All itemized in -kind contributions. In -kind contributions may not exceed 25% of the
total organizational budget and total cash project budget.
f) Minimum $1 to $1 funding match, through cash, in -kind, or a combination of both.
g) Project must be presented in the City during the period of 10/01/16 and 09/30/17.
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January 28, 2019
h) Project must be accessible to the public.
i) City logo must be displayed when project is presented to the public.
j) Submit sample surveys by Survey Monkey (for Anchors only).
Applications are submitted online, through the City's Cultural Affairs Program On -Line
Application Web Site, at which time applicants must attach the required documentation
(i.e. signed IRS Form 990, current board membership, etc.), and complete their financial
information (i.e. organizational budget, itemized project and grant award budget, in -kind
contributions, etc.).
Eighteen (18) of the 55 Miami Beach Cultural Arts Council (CAC) grantees who were
awarded $262,442.42 of the $850,055.24 total (30.87%) during the 2016/17 fiscal year
were reviewed to determine their compliance with the grant program eligibility
requirements. A review of these grantees' files identified the following deficiencies:
a. For sixteen (16) grantees there was no electronic record of the receipt of their
applications and any physical copies retained were not time/date stamped. As a
result, the Office of Internal Audit was unable to determine whether the initial grant
applications were received timely.
b. Two (2) grantees did not submit their application corrections by the required due
date as each were received two (2) days late. Furthermore, for two (2) additional
grantees there was no electronic record of the receipt and the physical copies of
the application corrections were not time/date stamped. As a result, the Office of
Internal Audit was unable to determine whether the corrections were received
timely.
C. Four (4) grantees 501(c)(3) Tax Exempt Statusletters provided were not dated
within the allowed two-year period (dated after October 1, 2014) as they were
dated between September 2006 and December 2012.
d. Eleven (11) grantees did not comply with the Internal Revenue Service (IRS) Form
990 requirements, as follows:
■ Ten (10) grantees provided the form; however, it was not signed.
■ One (1) grantee did not provide their IRS Form 990.
e. Four (4) grantees did not provide the required staff lists with brief biographies. One
(1) grantee provided the required current board membership, however, it was
outdated (2014/15).
f. One (1) grantee did not provide the required organizational chart.
g. Four (4) of the five (5) sampled Anchor grantees (80%) did not provide the required
sample surveys recorded by Survey Monkey.
h. For one (1) grantee, the in -kind contribution was greater than the 25% maximum
as it was 27.52% of the total cash project budget.
i. Five (5) Anchor grantees did not provide the $1 to $1 funding match as required
on the Program Guidelines and Application instructions.
These exceptions occurred due to a lack of proper supervisory oversight over the grant
award review process. Not adhering to the program guidelines could result in an improper
award and disbursement of grant funds. As it relates to the $1 to $1 matching
requirements, per discussion with Cultural Affairs Division staff, such requirement does
not apply to Anchors; however, that is not indicated in the program guidelines.
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January 28, 2019
Recommendation(s):
The City's Cultural Affairs Division should adhere to its established internal controls
procedures. to ensure that applicants comply with all the Program Guidelines and
Application Instructions and the terms of the executed Grant Agreement before any
awarded monies are issued.
In addition, Cultural Affairs Division staff should evaluate the need to require Anchors to
utilize only Survey Monkey to obtain feedback from program participants as other types of
surveys provided by the grantee should be sufficient support to meet the requirements of
the grant agreement.
Furthermore, the "Signed IRS Form 990" requirement under the Staff Consultation portion
of the Grant Program Guidelines and Application Instructions -Eligibility Requirements
should be updated to require the organization's IRS Form 990 be filed within a two-year
period, similar to the requirements of the 501(c)(3) requirement, as indicated in the
Application Checklist portion, since applicants may have only retained unsigned
taxpayer's copies of the IRS Form 990 provided by their accountant. Lastly, it is
recommended that all documents received by grantees are time/date stamped to help
verify their timeliness.
Management's Response (Cultural Affairs Division
• Timestamps were not created via the previous online grants software; however,
the new grants software (beginning in January 2018) creates easily viewable
submission timestamps, which will assist staff in documenting adequate proofs of
grant application submission dates/times.
• As per the required grant attachments for the grant agreements, current Division
staff members were not employed at the time that grant applications were
submitted/reviewed for compliance and are unsure why supplemental
documentations were not completed correctly and/or not submitted altogether;
however, with the newly hired manager and administrator, stricter oversight of the
aforementioned items was implemented beginning in January 2017 to ensure that
these errors were not repeated in the current fiscal year.
• Current Division staff members were not employed at the time that grant
applications were submitted and reviewed for compliance of 1-to-1 matching funds;
however, beginning in Fiscal Year 17/18, all submitted grant agreements were
required to contain an attached proof of 1-to-1 funding match.
• Current Division staff members were not employed at the time that grant
applications were submitted and reviewed for compliance of the 25% in -kind
ceiling.
Implementation Date: December 2018
2. Findin Procedures for the Reimbursement of Grants were not Always Properly Applied
Resulting in Under/Overpayments to Grantees
As per the City's Cultural Affairs Program Guidelines and Application Instructions, the CAC
has established maximum grant award amounts per grant category (i.e. Anchors, Cultural
Presenters, and Artistic Disciplines) as follows:
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January 28, 2019
1. Anchors: major preeminent and smaller art institutions physically based in the City,
whose primary mission is year-round artistic and cultural programming that
contributes significantly to the cultural life of the City.
a) $25,000 for annual organizational budgets below $750,000
b) $30,000 for annual organizational budgets between $750,000 and $3.5
million
c) $35,000 for annual organizational budgets at or above $3.5 million
2. Cultural Presenters: organizations whose primary mission is to produce and
present cultural and artistic productions.
a) $10,000 for proposed project budgets under $100,000
b) $20,000 for proposed project budgets at or above $100,000
3. Artistic Disciplines: arts and cultural organizations whose primary mission is to
create and present work in dance, music, theater, film and visual arts categories.
a) $10,000 for proposed project budgets under $100,000
b) $20,000 for proposed project budgets at or above $100,000
As per City Resolution 2016-29579, a total of $850,055.24 was awarded to 55 grant
applicants. Awards are to be disbursed in two (2) payments as follows:
• First-half payment (50% of the award) is to be issued upon receipt of grantees
signed and completed agreements.
• Second -half payment (additional 50% of the award) is to be issued upon receipt
and approval of their Final Report and the required supporting documentation (i.e.
invoices, cancelled checks). Final Reports are to be submitted by the grantee
within 45 days after the project end date, or November 15th for projects ending on
September 30th. The second -half payment may also include an additional $2,000
Fresh Air Bonus given to grantees that held approved outdoor events in the City
during the designated period.
Although 55 applicants received grant awards, three (3) did not sign the grant agreement
and were therefore ineligible to receive grant monies. It was verified that neither of these
three (3) applicants received any monies. Testing was performed on the 52 remaining
approved grantees to determine whether the reimbursement amounts were within the
maximum allowed per grant category and to verify that they did not exceed the total
approved by the City Commission upon which the following deficiencies were noted:
a. It was determined that the forty (40) payments addressed below were not issued
timely by the Cultural Affairs Division:
■ For one (1) grantee, the first-half payment was not issued timely, said
payment was dated February 2018, 129 days after September 30, 2017
end of the grant year.
■ For 17 grantees, the second -half payments were not issued timely, said
payments were dated between January 2018 and August 2018, which is
123 to 335 days after the September 30, 2017 end of the grant year.
■ As of August 17, 2018, 20 grantees had not been issued the second half
payments totaling $173,948.30.
■ For one (1) grantee, the second -half payment of the 2014/15 fiscal year
was issued on May 9, 2017 or 587 days after closing of the September 30,
2015 grant period. Further research found that the same grantee's 2015/16
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January 28, 2019
fiscal year second -half payment was never issued which means that the
first-half payment of fiscal year 2016/17 should not have been approved
until the grantee had satisfied all the requirements of the prior fiscal years.
■ One (1) grantee received full grant payment in the amount of $17,767.64
for grant year 2015/16 on June 14, 2018 or 622 days after the closing of
the September 30, 2016 grant year. During the prior year audit, it was
confirmed via email on 03/17/17 (almost one year after all first-half
payments had been issued for grant year 2015/16) by the previous Grants
and Operations Administrator that the grant agreement had not been
returned by the grantee and therefore, forfeited. First-half payments (50%
of award) are due immediately upon receipt of signed and completed
contracts. The auditor's review of the grantee's file, email confirmation, and
the fact that no payments had been issued to the grantee a year after the
contracts were due, corroborated that the grantee had never returned the
contract and as a result, was not entitled to receive grant funds. Upon
inquiry during the current audit regarding the payment issued, Cultural
Affairs Division staff provided an executed grant agreement and
documentation indicating that the proposed performances had taken place
and therefore, payment had been issued to grantee. However, it was noted
that the agreement had just been executed by the City on May 17, 2018,
594 days after the closing of the 2015/16 grant year. Based on the
documentation reviewed, grantee should have not received grant payment
for grant year 2015/16.
b. One (1) grantee was awarded $3,312 over the allowable award amount per grant
program guidelines.
C. Two (2) grantees were incorrectly paid resulting in a total overpayment of $95.00.
These exceptions may have occurred due to the new employee transition process as well
as a lack of proper supervisory oversight over the grant payment disbursement process.
Recommendations
It is recommended that Cultural Affairs Division staff issue the first-half payment due to
the grantees as soon as each grant agreement is executed. In addition, staff should
ensure that the Final Reports are reviewed and approved timely so that the second -half
payment can be remitted and recorded within the same fiscal year, or by December 31 St
for those completing the projects by September 30t" whenever possible. Furthermore, to
avoid missing or issuing additional payments to grantees, it is recommended that an
independent staff member be tasked with reconciling the grant payments recorded in the
City's Financial System to the applicable City Resolution to better ensure their
completeness and accuracy.
Management's Response (Cultural Affairs Division):
• Of the 18 audited grantees, 15 were paid their first payment by the previously
employed administrator. The current administrator began employment with the
Division on August 21, 2017. Of the three first -payments classified as "untimely,"
all were paid within 60 days of the new administrator's hire.
• The administrator position was vacant for the majority of FY 16/17, which caused
an unpreventable backlog of Final Report reviews and approvals. Upon entering
the position, the administrator was also responsible for commencing FY 17/18
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January 28, 2019
grant agreements. Closing a nearly 8-month backlog of overdue final payments in
conjunction with opening a new grant program caused the delay in FY 16/17
closeouts.
• As of November 27, 2018, six grantees are pending their second payment. Of the
six, one grantee never submitted their Final Report, and the remaining five
grantees' Final Reports have been reviewed and are missing documentation that
is required to close their files.
• For the aforementioned severely delayed payments, MUNIS shows multiple
payments issued to these grantees, all (with the exception of the most recent
payments) of which were never cleared. Upon correspondence and in -person
meetings with these agencies, it was deemed that these grantees never received
their checks. The current administrator had no record of FY 15/16
correspondences between her predecessor and the aforementioned grantee
expressing that the FY 15/16 contract was forfeited.
• The current manager and administrator were not employed by the City of Miami
Beach during the review of the FY 16/17 grant agreements; therefore, the error in
awarding a grantee more than it was allotted in the grant guidelines was not under
their oversight. However, the current grant application guidelines for Cultural
Presenters does not have award ceilings that are dependent upon annual
operating budgets. Therefore, the likelihood of this error occurring in the future
has been eliminated.
• The current administrator and manager were aware of the duplicate payment to
one of the agencies. Due to close communication with the grantee, the grantee
never cashed the duplicate payment.
Implementation Date: December 2018
3. Finding: Grant Agreements were not Fully Executed by the City of Miami Beach
As per the legal dictionary, an executed contract is a legal document that has been signed
off by the people necessary for it to become effective. Contracts often specify that one
party will provide a service or goods to the other and are not fully effective until all parties
involved have signed. The basics of executing a contract begins with reading and
understanding all the contract's provisions, including any fine print, and portions of the
contract stated to be on another document. If the contract binds the individual or entity to
a significant expense or service, it is often worth the time and expense to have an attorney
review the contract before signing.
The program guidelines and application instructions state that upon final approval of the
grant awards, grantees are required to complete and sign a grant contract. It is also
explained that 50% of grants funds are to be distributed upon receipt of signed and
completed contracts by the stated deadline.
As per discussions with a Deputy City Attorney, it is best practice that an executed
contract/agreement first be reviewed and signed by the City Attorney's Office to ensure
that is correct. Then the Mayor's signature is the one that binds the agreement. Finally,
the City Clerk signs the agreement and registers it on the City's records and uploads it to
Laserfiche (the City's document management system). The agreement must contain all
three (3) of these City signatures to be executed in addition to the grantee's signature.
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It was noted that 51 of the 52 agreements awarded during the 2016/17 fiscal year or 98%
were not executed by the City, although they were signed and returned by the grantees.
As a result, the payments corresponding to all 51 grantees were issued without an
executed contract/agreement.
• One (1) agreement was signed by the grantee, the Mayor and registered by the
City Clerk; however, it was not signed by the City Attorney.
• Three (3) of the agreements were signed by the grantees and the Mayor; however,
they were not signed by the City Attorney or registered by the City Clerk.
• The remaining 47 agreements were signed only by the grantees.
Recommendation(s):
It is recommended that the Cultural Affairs Division adhere to its established internal
control procedures to ensure that applicants comply with the Program Guidelines and
Application Instructions and the process to execute the grant agreements. In addition, it
is recommended that once the grant agreement is signed by all parties and executed, a
copy of the signed document should be sent to the grantees.
Management's Response (Cultural Affairs Division):
• The administrator position was vacant for the majority of FY 16/17. Upon the
current administrator's hire (just over 30-days before FY 16/17 ended), the current
administrator noticed that the majority of first payments were issued for FY 16/17
and some second payments were issued for FY 16/17 without fully executed
grant agreements. It was determined that in reviewing incoming FY 16/17 Final
Reports from agencies that completed their grant -funded, Reso-approved
programming that the most efficient way to close FY 16/17 grant programs was to
proceed with payments. The current grants and operations administrator has
resolved this issue moving forward in FY 2017/18.
• In preparation for FY 17/18, the manager and administrator presented a Mandatory
Grants Workshop to grantee representatives, distributed each the grant
agreements to grantee representatives that morning, gave them two weeks to
return their signed/notarized contracts to the City, and fully executed all
agreements submitted by the deadline within 60 days. This practice continued into
FY 18/ 19 .
• For FY 17/18 and FY 18/19 (during which the current manager and administrator
have been employed by the Division), grant agreements have been fully executed
before any payments are issued to the grantees.
Implementation Date: December 2018
4. Finding: Lack of Supporting Documentation and Improper Review of Grantee's Final
Report Resulted in a Reduction of Grant Awards
Article II of the Cultural Affairs Division's Program Grant Agreement, titled "General
Conditions," states that the grantee may only use the grant for the purposes that are
specifically described in the Project Description. Line item changes to the Project Budget
shall not exceed ten percent (10%) per category, and shall, in no event, exceed the total
amount of grant funds. Amendments to the itemized Grant Award Budget shall not be
permitted without the prior written consent of the Cultural Affairs Program Manager. In
addition, it states that for the grantee to demonstrate that the grant has fulfilled its purpose,
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the grantee must provide the Cultural Affairs Program Manager with a written Final Report,
which shall document the grantee's satisfaction of all requirements (i.e. copies of all
receipts, invoices, cancelled checks and proof of expenditures of grant monies, invoices
and checks must be dated within the fiscal year for which grant was awarded, etc.) The
Final Report must be received by the Cultural Affairs Program Manager within 45 days of
the project's completion. Grantees completing their project by the end of the fiscal year,
or September 30, must submit their Final Reports no later than November 15. Said
reports, and the supporting documents are reviewed and signed off by the Cultural Affairs
Division staff (i.e. Grants and Operations Administrator, Program Manager and the Senior
Administrative Manager) prior to issuing payment to help ensure compliance with all the
grant requirements before monies are disbursed.
Furthermore, as discussed in finding 2 above, grantees receive 50% of the award upfront
(first-half payment) and the remaining 50% (second -half payment) plus the Fresh Air
Bonus (if awarded) at the end of the project, upon submission and approval of the Final
Report. It is possible that a grantee could receive upfront monies for which inadequate
support is later provided, in which case originally budgeted expenses would be
unsupported, consequently disallowed, and thus monies owed to the City.
Eighteen (18) of the 52 grantees' Final Reports (35%) were tested to determine whether
they complied with the requirements set forth in the grant agreement and that reviewed
grant expenses were allowable and appropriately paid whereby the following deficiencies
were identified:
Grantee #
Program
Did grantee
submit final report
in a timely
manner?
Did grantee
spend grant
monies within
the budget
category
indicated in
agreement?
Were expenses
provided by the
grantee allowable
expenses?
Were expenses
provided by the
grantee supported
by invoices,
receipts and proof
of payment?
Were the invoices,
receipts, and
canceled checks
dated within FY
16/17 (10/1/2016
to 9/30/2017)?
Amount
Disallowed by
Internal Audit
1
Anchors
Y
Y
Y
N
Y
$ (27,495.16)
2
Anchors
Y
Y
Y
N
N
$ (8,994.58)
3
Anchors
N
Y
Y
N
Y
$
4
Anchors
Y
Y
Y
Y
Y
$
5
Anchors
Y
Y
Y
N
N
$ 5,560.80)
6
Cultural Presenters
Y
Y
Y
Y
Y
$
7
Cultural Presenters
N
Y
Y
Y
Y
$
8
Cultural Presenters
N
Y
Y
Y
Y
$
9
Cultural Presenters
N
N
Y
Y
N
$ (313.00)
10
Cultural Presenters
Y
Y
Y
N
Y
$ 749.80)
11
Cultural Presenters
N
Y
Y
Y
Y
$ -
12
Artistic Disciplines
Y
N
Y
N
Y
$ (6,124.18)
13ArtisticDisciplines
N
N
Y
N
Y
$ (1,350.88)
14
Artistic Disciplines
N
Y
Y
N
Y
$ 5,590.46)
15
Artistic Disciplines
N
Y
Y
Y
Y
$ -
16
Artistic Disciplines
Y
Y
Y
Y
Y
$
17
Artistic Disciplines
N
Y
N
Y
Y
$ (300.00)
18
Artistic Disciplines
Y
Y
Y
Y
Y
$
9 3 1 8 3 $ 56,478.86
18 18 18 18 18 $ 262,442.42
50% 17% 6% 44% 17% 22%
Page 11 of 16
Internal Audit Report
Miami Beach Cultural Arts Council Audit
January 28, 2019
• Nine (9) grantees (or 50%)submitted their Final Reports late, ranging from 21 days
to 281 days late, for an average of 90 days late.
• Three (3) grantees (or 17%) had changes to the line items of the original grant
budget, which were not approved by CAC, as required.
• One (1) grantee expended money on an unidentified item. The submitted $300
expenditure was labeled Perfect Pitch Strings and there was no additional
supporting documentation provided but, yet the monies were reimbursed.
• Eight (8) grantees (or 44%) did not provide sufficient evidence to support the
expenses (i.e. invoices, receipts and proof of payment).
• Three (3) grantees (or 17%) had instances in which either invoices, receipts or
cancelled checks were dated outside the 2016/17 fiscal year.
• Nine (9) grantees had unsubstantiated expenditures resulting in $56,478.86 (or
22% of the sample) overpaid by the City.
These exceptions occurred due to inadequate scrutiny of grantees' Final Reports and lack
of proper supervisory oversight over the grant payment disbursement process.
Recommendations
The Cultural Affairs Division should adhere to its established internal control procedures
to ensure adequate scrutiny of grantees' Final Reports and disbursement of the grants
payments. As a result of the disallowed expenditures, it is recommended that the Cultural
Affairs Division collect any monies due; and reduce or not issue 2017/18 fiscal year second
half payments to the grantees noted above accordingly, unless additional support (i.e.
invoices, cancelled checks) is submitted to satisfy the requirements of the Final Report.
Management's Response (Cultural Affairs Division
• The current administrator was not employed during 11-months of the 12-month FY
16/17 grant year, and no records of correspondences between the previous
administrator and the funded agencies were shared with the current administrator;
therefore, the current administrator is unaware if deadline reminders were
distributed to the grantees or not. However, because of the inability of a grants
program to operate without an administrator for the majority of a grant's year due
to the position's vacancy, flexibility in Final Report submissions was required to be
exercised by the current administrator in order to effectively close a tremendously
back -logged fiscal year of grants administration.
• The check approved for payment to Perfect Pitch Strings was dated on April 15,
2017 (the same date as the grantee's Mozart on the Move event, which (according
to the Final Report's included marketing materials) occurred at the 1100 Block
Outdoor Stage). The director wrote on the check (in the notes section) that it was
for the 1100 Block Concert: Scott O'Donnell"). The administrator approved this
payment for this viola artist (Scott O'Donnell), because it was paid within the fiscal
year and on the date of the performance that occurred in Miami Beach at an event
open and free to the public.
• Some payments made outside the fiscal year were for performance venue rentals
that required upfront payments to reserve the spaces; these upfront reservations
of Miami Beach venues were at times paid by grantees before the beginning of FY
16/17; however, the Miami Beach venues were used for performances during FY
16/17. Other payments made outside the fiscal year had adjoining invoices and
performance dates for artists/performances that occurred within the fiscal year.
Page 12of16
Internal Audit Report
Miami Beach Cultural Arts Council Audit
January 28, 2019
• Grantee #1 expended their entire $27,495.16 on dancers' salaries, which is an
allowable expense under grant guidelines. The grantee provided ADP Payroll
Registers, which provided dancers' names, gross earnings, and payment dates
(which corresponded to FY 16/17 dates). The administrator and manager accepted
this as proof of payment.
Implementation Date: December 2018
Internal Audit Observation:
The guidelines clearly state that the invoices and the grantees' payments both have to
occur during the fiscal year in which the funding was awarded as it does not address any
exceptions for upfront payments. If these types of invoices and/or payments are to be
approved going forward, then they should be properly vetted and the signed grant
agreement revised to reflect as such.
Although ADP Payroll reports are supporting documentation, they do not provide sufficient
evidence that the actual checks were issued and paid to the designated individuals
associated with the specified Miami Beach performances. Therefore, bank statements
with cancelled checks should always be received to ensure that the 501(c)3 organization
is compliant and should receive the corresponding grant reimbursement from the City.
5. Finding: Funds were Disbursed to Grantees for Fiscal Year 2017118 without Validation of
Compliance with Fiscal Year 2016117 Grant Agreement
As per the Cultural Affairs Division's Program Guidelines and Application Instructions -
Eligibility Requirements, organizations which received prior year grant funding and did not
comply with the grant agreement and/or other requirements pursuant to same are
ineligible to apply. In addition, prior year recipients must submit a complete Final Report
no later than the day indicated in their current grant, to be eligible to receive next year's
award.
To determine whether grantees were eligible to receive grant funds for the 2017/18 fiscal
year, Internal Audit reviewed and compared those grantees who were awarded funds
during the 2016/17 fiscal year. In doing so, it was noted that a total of 37 of the 55 grantees
from the 2016/17 fiscal year were also awarded funds during the 2017/18 fiscal year, as
indicated in Resolution #2017-29966. All 37 grantees payments were reviewed, noting
that 22 grantees received the first-half payment of the 2017/18 fiscal year without the
second -half payment of the 2016/17 fiscal year being issued. Therefore, the CAC did not
have evidence to support that the grantee had complied with the terms of the agreement
during the 2016/17 fiscal year at the time of the award and consequently should have not
awarded any funds to said grantees.
Failure to adhere to the program guidelines could result in improper award and
disbursement of grant funds. It was noted that many of these exceptions occurred due to
a lack of proper supervisory oversight over the grant award review process. In addition, it
was noted that the application deadlines as indicated in the Grant Program Guidelines
and Application Instructions overlap with the running award year. In other words,
performances may have not yet taken place and therefore, final reports were not due yet,
when the application period for the following grant year had already started. Thus, it is
Page 13 of 16
Internal Audit Report
Miami Beach Cultural Arts Council Audit
January 28, 2019
impossible for the CAC to determine the compliance of the grantees with the prior year
award in these instances.
Recommendations
It is recommended that the City's Cultural Affairs Division adhere to its established internal
controls procedures to ensure that applicants comply with the Program Guidelines and
Application Instructions and the terms of the executed grant agreement. In addition, the
application deadlines should be reviewed to help avoid the disbursement of funds prior to
ensuring compliance during the current grant year. Also, Cultural Affairs Division staff
should ensure that no current year grant payments are issued until all prior years' grants
have been satisfied and they should not allow the 501(c)3 organization to be considered
for future funding.
Management's Response (Cultural Affairs Division):
Grantee contracts are administered for one full fiscal year (October 1-September 30). In
order to eliminate the likelihood of late final report submissions, beginning FY 17/18 staff
required submission of final reports by November 15th, or 45 days following the end of the
contract. Staff is continuing to refine the application deadlines and shorten the final report
submission timeline to October 15th, or 15 days following the end of the contract. This was
implemented to ensure that all final reports are reviewed and approved before the next
fiscal year payments are distributed.
Implementation Date: December 2018
6. Findin : The Accrual Journal Entry for Unpaid Grant Awards for the 2016117 Fiscal Year
was not Recorded in the City's. Financials.
The Government Accounting Standards Board (GASB), which is recognized as the official
source of generally accepted accounting principles (GAAP) for state and local
governments, establishes modified accrual accounting standards. A governmental
entity is focused on current -year obligations, and the modified accrual basis focuses
mainly on short-term financial assets and liabilities. Using the modified accrual method,
an accountant adjusts for obligations that are incurred during an accounting period for
which no payments have been made. The accruals must be added via adjusting journal
entries, so that the financial statements report these amounts.
It was noted that during the 2016/17 fiscal year that, $471,785.70 of the total $850,055.24
awarded, was not yet disbursed to grantees. However, after an account inquiry and
confirmation from the City's Finance Department, it was determined that the required
journal entry to record the liability accrual for the unpaid grant monies at the September
30, 2017 year-end was not done. As a result, the reported expenditures were understated,
and they will be overstated as of the September 30, 2018 year-end. However, it was
confirmed that the rollover for FY 2016/17 was requested by TCED and completed by the
Office of Budget and Performance Improvement.
Recommendation(s):
Cultural Affairs Division staff should ensure that the corresponding accrual journal entry is
accurately completed each year.
Page 14 of 16
Internal Audit Report
Miami Beach Cultural Arts Council Audit
January 28, 2019
Management's Response (Cultural Affairs Division
The Office of Tourism, Culture and Economic Development completes an annual
approved budget rollover form which is submitted to the City's Budget Department. Within
this form are pending 2nd half grants due to grantees. Due to the schedule of the grantee's
performances or events, the final report is sometimes submitted to the TCED office in-
between fiscal year. The Office of Tourism, Culture and Economic Development assumed
the rollover form was sufficient for transfer of funds from fiscal years and did not require
an Accrual Year End Journal Entry. After meeting with the Finance Department and
receiving further clarification, the TCED office will, now, submit an Accrual Journal Entry
along with its annual budget rollover list.
Implementation Date: December 2018
7. Finding: An Error in the Information Published on the Environmental Scan 2017 plus the
Active Strategy Performance Measurement Software has not been Updated since the
2014115 Fiscal Year.
The Miami Beach Excellence Model is a strategic, performance -based model for
continuous improvement in the City. It is driven by the City's vision, with priorities
established at the strategic level based on customer input and environmental scan data
including demographics, socio-economic statistics, department workload data,
etc. Through the annual budget process, resources are allocated in support of these
strategic priorities, and performance monitoring is used to track progress and adjust for
further improvement. The Office of Budget and Performance Improvement (OBPI) is the
primary facilitator for the City's Excellence Model.
The Environmental Scan, updated annually since 2004, contains demographic, economic,
and financial conditions within the city as well as departmental work load
data. This information is used as input for updates to the City's Strategic Plan and is used
annually to update the citywide initiatives in the annual City of Miami Beach workplan.
It was noted that the information published on the Environmental Scan 2017 under
International Center for Tourism and Business related to Cultural Grants Awarded during
the 2015/16 fiscal year was incorrect. The information published as number of grants
awarded (55) and Grant Award amounts ($860,000) are related to the 2016/17 fiscal year.
The correct amount for the 2015/16 fiscal year was 47 for the number of grants awarded
and $798,000 for the grant award amounts.
Lastly, the Tourism, Culture and Economic Development (TCED) Scorecard in the Active
Strategy performance measurement software has not been updated since the 2014/15
fiscal year.
Recommendation(s):
The information in the City's published documents should be as accurate as possible. As
no one is infallible, any discovered inaccuracies should be promptly corrected. Finally,
the TCED Scorecard should be promptly updated and going forward it should be timely
entered.
Page 15 of 16
Internal Audit Report
Miami Beach Cultural Arts Council Audit
January 28, 2019
Management's Response (Office of Budget and Performance Improvement):
The management of the Environmental Scan data was transferred to the City Manager's
Office during FY 2018, and this information has been relayed to the relevant manager so
that the corrected data will be published in the next Environmental Scan (or replacement
document) which is expected to be published during FY 2020.
With regard to TCED's outdated scorecard, "We have asked departments to continue to
update in Active Strategy until we launch a new software".
Implementation Date: December 2018
8. Prior Audit Follow -Up of Identified Findings
In addition, as part of our follow-up to determine whether the CAC had corrected the
deficiencies noted during previous years audits, the following was found:
a. The 2014/15 fiscal year audit identified four (4) grantees which did not provide the
required documentation to satisfy disbursement of the grant monies awarded.
Testing indicated that no additional documentation had been received so $3,008
is due to the City from these four (4) grantees.
b. The 2015/16 fiscal year audit regarding:
■ 25 grantees that as of February 2017 were not issued the second -half
payments totaling $240,963 (or 64% of the second -half payments
awarded). As of August 17, 2018, six (6) grantees 2015/16 second -half
payments have not been issued totaling $54,665.75.
■ The total amount accrued at the end of the 2015/16 fiscal year was
understated by $18,571; the journal entry made should have been for a
total of $367,892 rather than the recorded amount of $349,321. This
deficiency has not been corrected as of September 6, 2018.
EXIT CONFERENCE
An exit conference was held with Cultural Affairs Program Manager Brandi Reddick, Grants and
Operations Administrator Catherine Houlihan, Senior Administrative Manager Luis Wong, Deputy
Finance Director Allison Williams, Interim Internal Auditor Mark Coolidge and Auditor Jessica
Romero. Audit findings and recommendations were discussed, as were management responses,
which are included herein. Several other meetings have been held at various times to further
discuss the audit findings and recommendations as well as management responses. For those
occasions were a consensus could not be reached, an Internal Audit Observation was added
further clarifying our position.
F:\OBPI\$AUD\INTERNAL AUDIT FILES\DOC17-18\REPORTS - FINAL\CAC Report FY 2017 1-28-2019.docx
cc: Kathie G. Brooks, Assistant City Manager
Matt Kenny, Tourism and Culture Department Director
Heather Shaw, Tourism and Culture Department Assistant Director
Brandi Reddick, Cultural Affairs Program Manager
John Woodruff, Chief Financial Officer
Page 16 of 16