OIG No. 21-11: Building Department ExpendituresJoseph M. Centorino, Inspector General
March 4, 2021
TO: Honorable Mayor and Members of
FROM: Joseph Centorino, Inspector Gene
RE: Building Department Expendi
Responses
OIG No. 21-11
and Follow-up Audit of Management
Executive Summary
The Office of the Inspector General (OIG) conducted an audit of the Building Department's
compliance with selected sections of the Florida Building Code related to their expenditure of
sampled Building Department funds, which was initiated at the request of the current Building
Official. The audit's scope was subsequently extended to include testing some transactions
concerning the Restricted Building Operations Reserves and its reporting in the Notes to Financial
Statements Section of the City's Comprehensive Annual Financial Report (CAFR). Lastly, a
follow-up audit was also conducted on the management responses received, which included OIG
staff's additional testing and analysis, to ensure that all findings have been addressed and that
appropriate corrective action was taken.
Use of Building Department funds is restricted by state law to permissible uses in connection with
the enforcement of the Florida Building Code. Due to the restrictions placed on Building
Department funds under Florida Statutes, proper accounting and reporting of such funds is
important to ensure that they are not used for unauthorized purposes. While it is permissible for
Building Department funds to be included within the City's General Fund for reporting purposes,
they may not be used for the funding of general government activities unrelated to the
enforcement of the Building Code. The reservations of such funds for a designated usage should
be made apparent to any inside or outside auditor.
The Florida Building Code strictly details the allowable expenditures of Building funds by local
governments. It is imperative that the City's Building Official, who is tasked under state law with
overseeing and controlling this function, always comply with Florida Statutes and ensure that the
City Administration not expend funds for impermissible purposes unrelated to the Florida Building
Code.
This audit has noted several occasions where the City has used Building Department funds to
pay an excessive portion of shared expenditures with other City departments rather than
determine a reasonable methodology and allocation process to charge each department based
on its actual usage. Examples include, but are not limited to, the purchase, implementation and
annual maintenance costs associated with the Munis and/or EnerGov systems.
Page 1 of 2
The frequent and long-standing misapplication of Building Department funds noted in this audit,
in apparent violation of the Florida Statutes, has occurred since at least 2003. In the years since,
various Building Directors, Building Officials, Finance Directors/Chief Financial Officers, Budget
Directors, etc. were aware of these improper practices, but did not take appropriate steps to
terminate them.
Based on the results of this audit, it was noted that certain procedures and internal controls require
enhancement due to the following identified deficiencies:
1. At least $5,631,897.76 in restricted Building Department funds were used for unallowable
activities, contrary to the Florida Building Code. In addition, the amounts charged to and
paid by the Building Department for expenditures related to bank fees and E-Check fees
were understated by an undetermined amount.
2. The Notes to Financial Statements on the City's Comprehensive Annual Financial Report
(CAFR) incorrectly reported approximately $6.2 million of the restricted Building
Operations Reserves as Unrestricted Fund Balance.
3. Payroll and fringe benefits related to non-Building Department work performed by City
employees totaling $18,124.87 were incorrectly paid with restricted Building Department
funds and have not been repaid.
4. The Building Department's cost allocation percentage has not been updated and is not
accurate.
OIG staff would like to commend the current Office of Management and Budget, and Building
Department staff for all the hours spent in researching historical transactions and revising the
figures as more information became known. Although these shortcomings continued until being
identified in this audit, most of the current employees, were not present or involved in the decision
making when these unauthorized expenditures occurred. Yet, they were instrumental in its
resolution, and we greatly appreciate their diligence and professionalism as we all strived to make
the Building Department's fund balance accurate for its October 1, 2020 transition from the
General Fund to an Enterprise Fund.
This report contains findings associated with our initial audit, as well as with our corresponding
follow-up audit performed to confirm that appropriate corrective action was implemented.
Typically, the results of both audits would be presented in separately issued reports, but they
were combined into one, because of the complexities associated with these audits and the desire
to make the corresponding adjustments only once. In addition, OIG staff received multiple
proposed solutions from the affected departments to some findings, that were not shared
beforehand and required additional research and analysis.
In the end, an amicable consensus was ultimately reached through the cooperation of all parties
whereby an additional $4,855,485.89 was credited to the Building Department fund balance, with
another $776,411.87 to be credited at fiscal year-end. Lastly, the corrective action implemented
and verified by OIG staff will help prevent possible future unallowed expenditures from occurring.
OFFICE OF THE INSPECTOR GENERAL, City of Miami Beach
1130 Washington Avenue, 6 Floor, Miami Beach, FL 33139
Tel: 305.673.7020 • Fax: 305.587.2401 • Hotline: 786.897.1111
Email: CityofMiamiBeachOIG@miamibeachfl.gov
Website: www.mbinspectorgeneral.com
Page 2 of 2
Joseph M. Centorino, Inspector General
TO:
FROM:
DATE:
PROJECT:
Honorable Mayor and Members of the City Commission
Joseph Centorino, Inspector General
March 4, 2021
Building Department Expenditures Audit and Follow-up Audit of Management
Responses
OIG No. 21-11
The Office of the Inspector General (OIG) conducted an audit of the Building Department's
compliance with selected sections of the Florida Building Code related to their expenditure of
sampled Building Department funds, which was initiated at the request of the current Building
Official. The audit's scope was subsequently extended to include testing some transactions
concerning the Restricted Building Operations Reserves and its reporting in the Notes to Financial
Statements Section of the City's Comprehensive Annual Financial Report (CAFR). Lastly, a
follow-up audit was also conducted on the management responses received, which included OIG
staff's additional testing and analysis, to ensure that all findings have been addressed and that
appropriate corrective action was taken.
INTRODUCTION
The 1998 Legislature adopted the Florida Building Code Study Commission's recommendations
and amended Chapter 553, Florida Statutes, Building Construction Standards, to create a single
minimum standard building code that is enforced by local governments. As of March 1, 2002, the
Florida Building Code, which is developed and maintained by the Florida Building Commission,
supersedes all local building codes. The Florida Building Code is updated every three years and
may be amended annually to incorporate judicial and administrative interpretations and
clarifications.
The Florida Building Code incorporates all building construction related regulations for public and
private buildings in the State of Florida, other than those specifically exempted. In addition to
providing standardization of the design, construction, and compliance processes, it establishes
regulations for the safety, health, and general welfare of building occupants. The purpose and
intent of the Florida Building Code is to provide a mechanism for the uniform adoption, updating,
amendment, interpretation, and enforcement of a single, unified state building code, consisting of
a single set of standards that apply to the design, construction, erection, alteration, modification,
repair, or demolition of public or private buildings, structures, or facilities in this state and to the
enforcement of such requirements; and which will allow effective and reasonable protection for
public safety, health, and general welfare for all the people of Florida at the most reasonable cost
Page 1 of 34
to the consumer.
The City of Miami Beach Building Department currently has as its Director and its chief
administrator a Building Official, who is responsible for direct regulatory administration and
supervision of plan review, enforcement, and inspection of building construction, erection, repair,
addition, remodeling, demolition, and alteration projects that require permitting for compliance
with building, plumbing, mechanical, electrical, gas, fire prevention, energy, accessibility, and
other construction codes, as required by state law or municipal or county ordinance.
OVERALL OPINION
Use of Building Department funds is restricted by state law to permissible uses in connection with
the enforcement of the Florida Building Code. Due to the restrictions placed on Building
Department funds under Florida Statutes, proper accounting and reporting of such funds is
important to ensure that they are not used for unauthorized purposes. While it is permissible for
Building Department funds to be included within the City's General Fund for reporting purposes,
they may not be used for the funding of general government activities unrelated to the
enforcement of the Building Code. The reservations of such funds for a designated usage should
be made apparent to any inside or outside auditor.
The Florida Building Code strictly details the allowable expenditures of Building funds by local
governments. It is imperative that the City's Building Official, who is tasked under state law with
overseeing and controlling this function, always comply with Florida Statutes and ensure that the
City Administration not expend funds for impermissible purposes unrelated to the Florida Building
Code.
This audit has noted several occasions where the City has used Building Department funds to
pay an excessive portion of shared expenditures with other City departments rather than
determine a reasonable methodology and allocation process to charge each department based
on its actual usage. Examples include, but are not limited to, the purchase, implementation and
annual maintenance costs associated with the Munis and/or EnerGov systems.
The frequent and long-standing misapplication of Building Department funds noted in this audit,
in apparent violation of the Florida Statutes, has occurred since at least 2003. In the years since,
various Building Directors, Building Officials, Finance Directors/Chief Financial Officers, Budget
Directors, etc. were aware of these improper practices, but did not take appropriate steps to
terminate them. For example, it was subsequently confirmed through a Microsoft Teams meeting
with the City's prior Building Director during OIG's follow-up audit testing, that he had initially
approved the usage of Building Department funds to pay for the purchase, implementation and
annual maintenance costs associated with the EnerGov system.
On a positive note, the Building Department fund's transition from the General Fund to a stand-
alone Enterprise Fund, effective October 1, 2020, as a result of this audit, is a noteworthy
improvement. Through all parties' assistance, $18,490,000.00 was transferred to general ledger
account number 410-8000-381100-00-313-367-00-00-00, which included $4,855,485.89 in
previously excluded expenditures. An additional $776,411.87 is to be credited to the Building
Department fund balance at fiscal year-end. OIG staff also confirmed that the needed corrective
action has been implemented to address the deficiencies identified in this audit.
Page 2 of 34
However, additional internal controls may be needed to prevent future abuses. One option that
the Inspector General recommends is the creation of a Building Department Ombudsman pilot
position, which is summarized in Exhibit A located at the end of this audit report.
Based on the results of this audit, it was noted that certain procedures and internal controls require
enhancement due to the following identified deficiencies:
1. At least $5,631,897.76 in restricted Building Department funds were used for unallowable
activities, contrary to the Florida Building Code. In addition, the amounts charged to and
paid by the Building Department for expenditures related to bank fees and E-Check fees
were understated by an undetermined amount.
2. The Notes to Financial Statements on the City's Comprehensive Annual Financial Report
(CAFR) incorrectly reported approximately $6.2 million of the restricted Building
Operations Reserves as Unrestricted Fund Balance.
3. Payroll and fringe benefits related to non-Building Department work performed by City
employees totaling $18,124.87 were incorrectly paid with restricted Building Department
funds and have not been repaid.
4. The Building Department's cost allocation percentage has not been updated and is not
accurate.
SCOPE, OBJECTIVES, AND METHODOLOGY
The scope of this audit was to determine whether the City's Building Department complied with
the provisions set forth in Chapter 553 Part IV "Florida Building Code", Section 553.80, Florida
Statutes, and to determine whether the funds collected were used for allowable activities related
to enforcing the Florida Building Code for tested transactions. In general, the audit focused on
the following objectives:
a. To ensure that tested expenditures recorded in the Building Department's general ledger
accounts are allowable pursuant to Florida Statutes.
b. To validate that tested transactions recorded in the Office of Management and Budget's
Excel spreadsheet that tracked the year-end balance of the amounts "Owed by the City"
to the Building Department were accurately reported in the Building Restricted Operations
Reserves.
c. To confirm that the stated corrective actions have been implemented.
d. Other audit procedures as deemed necessary.
The audit methodology included the following:
• Reviewed applicable provisions of the Florida Building Code;
• Interviewed and made inquiries of staff to gain an understanding of internal controls,
assess control risk, and plan audit procedures;
• Performed substantive testing consistent with the audit objectives, including, but not
limited to, examination 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.
Page 3 of 34
FINDINGS, RECOMMENDATIONS AND MANAGEMENT RESPONSES
1. Finding: AT LEAST $5,631,897.76 IN RESTRICTED BUILDING DEPARTMENT
FUNDS WERE USED FOR UNALLOWABLE ACTIVITIES CONTRARY TO THE
FLORIDA BUILDING CODE
Florida Statutes Part IV, "Florida Building Code", Section 553.80 (7)a) states "The
governing bodies of local governments may provide a schedule of reasonable fees, as
authorized by s. 125.56(2) or s. 166.222 and this section, for enforcing this part. These
fees, and any fines or investment earnings related to the fees, shall be used solely for
carrying out the local government's responsibilities in enforcing the Florida Building Code.
When providing a schedule of reasonable fees, the total estimated annual revenue derived
from fees, and the fines and investment earnings related to the fees, may not exceed the
total estimated annual costs of allowable activities. Any unexpended balances shall be
carried forward to future years for allowable activities or shall be refunded at the discretion
of the local government. A local government may not carry forward an amount exceeding
the average of its operating budget for enforcing the Florida Building Code for the previous
4 fiscal years. For purposes of this subsection, the term "operating budget" does not
include reserve amounts. Any amount exceeding this limit must be used as authorized in
subparagraph 2. However, a local government which established, as of January 1, 2019,
a Building Inspections Fund Advisory Board consisting of five members from the
construction stakeholder community and carries an unexpended balance in excess of the
average of its operating budget for the previous 4 fiscal years may continue to carry such
excess funds forward upon the recommendation of the advisory board. The basis for a fee
structure for allowable activities shall relate to the level of service provided by the local
government and shall include consideration for refunding fees due to reduced services
based on services provided as prescribed by s. 553.791, but not provided by the local
government. Fees charged shall be consistently applied.
1. As used in this subsection, the phrase "enforcing the Florida Building Code"
includes the direct costs and reasonable indirect costs associated with review of
building plans, building inspections, re-inspections, and building permit
processing; building code enforcement; and fire inspections associated with new
construction. The phrase may also include training costs associated with the
enforcement of the Florida Building Code and enforcement action pertaining to
unlicensed contractor activity to the extent not funded by other user fees.
2. A local government must use any excess funds that it is prohibited from carrying
forward to rebate and reduce fees.
3. The following activities may not be funded with fees adopted for enforcing the
Florida Building Code:
a. Planning and zoning or other general government activities.
b. Inspections of public buildings for a reduced fee or no fee.
c. Public information requests, community functions, boards, and any
program not directly related to enforcement of the Florida Building Code.
d. Enforcement and implementation of any other local ordinance, excluding
validly adopted local amendments to the Florida Building Code and
excluding any local ordinance directly related to enforcing the Florida
Building Code as defined in subparagraph 1.
4. A local government shall use recognized management, accounting, and oversight
practices to ensure that fees, fines, and investment earnings generated under this
Page 4 of 34
subsection are maintained and allocated or used solely for the purposes described
in subparagraph 1.
5. The local enforcement agency, independent district, or special district may not
require at any time, including at the time of application for a permit, the payment
of any additional fees, charges, or expenses associated with:
a. Providing proof of licensure pursuant to chapter 489;
b. Recording or filing a license issued pursuant to this chapter;
c. Providing, recording, or filing evidence of workers' compensation insurance
coverage as required by chapter 440; or
d. Charging surcharges or other similar fees not directly related to enforcing
the Florida Building Code."
Florida Statute Section 125.56(5) provides as follows: "Any person, firm or corporation
that violates any of the provisions of this section or of the Florida Building Code or the
Florida Fire Prevention Code is guilty of a misdemeanor up to the second degree,
punishable as provided in s. 775. 082 or s. 775. 083."
The OIG identified at least $5,631,897.76 in unallowable expenditures that were
improperly paid with Building Department funds instead of with other City funds. In
addition, the amounts charged to and paid by the Building Department for expenditures
related to bank fees and E-Check fees were understated by an undetermined amount.
The following points provide more detail on each of these identified expenditures:
A. Purchase and implementation of the EnerGov ($1,055,400.50) and Munis
($3,781,090.00) systems= $4,836,490.50 total unallowable expenditures
Resolution #2014-28706 dated July 30, 2014
As shown below, this adopted City Resolution transferred $4,000,000 from the
Building Department Reserve fund and $1,700,000 from the Building Training &
Technology account to Fund 301 Capital Projects Not Financed by Bonds, to pay
the City's costs associated with the purchase and implementation of the Munis and
EnerGov systems. Munis is the City's enterprise resource planning software, while
EnerGov is the City's licensing and permitting software.
Financial information:
Source of Amount Account
Funds: 1 $4,000,000 011- General Fund Balance (Building Department Reserve) to
«@ Fund 301 Capital Proiects Not Financed bv Bonds
2 $1,700,000 601-7000-229253 Building Training & Technology to Fund 301
Capital Projects Not Financed by Bonds
3 $50,000 Fund 307- NB QOL
4 $443,000 365- City Center RDA
OBPI Total $6,193,000
Financial Impact Summary.
City Clerk's Office Legislative Tracking:
Page 5 of 34
Resolution #2014-28707 dated July 30, 2014
This adopted City Resolution authorized the City Manager to finalize negotiations
and execute the contract with Tyler Technologies, Inc. for the replacement of the
City's then existing enterprise resource planning (Eden) and permitting/licensing
(Permits Plus) systems with Munis and EnerGov respectively; and with EMA, Inc.
for a business process review and project management services related to these
replacement systems; for a total project amount not to exceed $7,200,000.
OIG staff found that the Building Funds transferred to Fund 301 Capital Projects
Not Financed by Bonds (Resolution #2014-28706), were used to pay the
implementation costs related to the Munis and EnerGov systems.
Advisor Board Recommendation:
Endorsed b the Finance and Cit -Wide Proiects Committee on June 20, 2014.
Financlal Information:
Source of
Funds:
Amount Account
1 $5,700 000 Fund 301 - Capital Proiects Not Financed B Bonds'
Future fiscal year funding contingent on approved budget
ar ron riations.
• et amendment for FY2013/2014.
kin :
s ext 6829
Assistant
MT
er
The following project organizational chart shows the various City departments that
use these two systems.
Project Organizational Chart
Mayor and City
Commission
City Manager
(Change
Leadership)
Project Leadership
Committee
(Steering)
Project
Management
Tyler
Technologies .. r _ .. 1
Buildin: _ - Code ' Planning ] Cì ~ Human ~ es«re U""""y s " ~---
---y-- -l.:: --y-
EnerGov
Procurement
Munis
Page 6 of 34
A better methodology would have been to allocate the systems' purchase and
implementation costs based on each City department's projected or actual usage.
Consequently, OIG staff requested that the City's former Information Technology
(I.T.) Department Director and current Information Security Manager provide a
detailed analysis of the different departments that used the EnerGov system and
their proportional usage for the 2017/18 fiscal year. He responded via e-mail with
the following maintenance fee distribution (see table below) calculated by tracking
the use of the different modules in the EnerGov system (Permitting, Inspections,
Violations/Code, Plan, Project, Request, and BTR).
FY2017-
2018
Department COUNT PERCENTAGE
8UIL 145,858 45.00%
CODE 47,358 15.00%
FIRE 34,142 11.00%
PAN 31,857 10.00%
WORK 22,315 7.00%
FINA 21,536 7.00%
PING 9,921 3.00%
CLER 3,950 1.00%
SANI 3,905 1.00%
ENVR 1,438 0.00%
COMP 129 0.00%
TRAN 34 0.00%
POU 29 0.00%
INFO 8 0.00%
Total 322,480
Using the 45.00% percentage listed as "BUIL" in the table above (rounded to the
nearest whole number), the amount related to the Building Department for its
implementation was recalculated as shown below:
4%NA Table 3.4. EnerGov Quote
œ::: '- :.,. City of Miami Beach
ERP
Gap Analysis
&
Planning, Permitting,
and Licensing Software
rosovawoo
Software License
EnerGov Software License
Less: Discount
Total EnerGov Software License
Professional Services
EnerGov Professional Services
EnerGov Estimated Travel
Total Professional Services Cost
$ 1,244,955
$ (239,545)
$ 1,005,410
$ 859,100
$ 54,400
$ 913,500
Total Implementation Cost was
$1,918,910.00 EnerGov implementation cost based on Table 3.4 EnerGov Quote
($ 863,509.50) Allowable expense ($1,918,91 Ox 45.00% Building= $863,509.50)
$1,055,400.50 Unallowable EnerGov expenditures paid with Building funds
Page 7 of 34
Applying the same methodology to recalculate the amounts paid with Building
Department funds for the Munis system purchase and implementation, OIG staff
requested that Finance Department and Office of Management and Budget (0MB)
personnel provide the corresponding invoices. In response, they furnished an
Excel spreadsheet containing 284 invoices paid to Tyler Technologies, Inc. totaling
$7,981,477.55, but they were unable to identify those paid specifically with Building
Department funds. OMB's explanation was that the amount paid to Tyler
Technologies, Inc. regarding the EnerGov/Munis system ($7,981,477.55) was
higher than the difference between the total paid with Building Department funds
minus the amount paid for the EnerGov system ($5,700,000.00 -$1,918,910.00 =
$3,781,090.00), so they assumed that the remainder or $3,781,090.00 was used
for the Munis purchase and implementation.
B. Planning Study= $269,000.00 unallowable costs
Account #011-1510-000312-21-401-201-00-00-00 (Professional Services)
A $269,000.00 planning study was prepared by Miller Legg & Associates Inc. of
444 structures in the Flamingo Park Historic District and 86 structures in the Collins
Waterfront Historic District. The study created guidelines for the raising, and
redevelopment of areas within the City of Miami Beach susceptible to the impacts
of sea level rise.
The Building Department was invoiced for all $269,000.00 associated with this
planning study. The Building Department Director objected in an e-mail to the
City's Chief Financial Officer (CFO) based on Section 553.80 (7)b), which
specifically states that planning and zoning or other general government activities
may not be funded with fees adopted for enforcing the Florida Building Code.
The CFO replied in a January 22, 2018 email that "...Since it is very difficult to
identify a different funding source for this amount of cost at this point in time, please
approve the item to be spent up front out of the Building Department budget and
we will net out the $269,000 for the study at year-end. The mechanics will be to
adjust the calculation you can see in the attachment called "FY2017 Building Rev
Exp History Reconciliation." This spreadsheet is used at year-end to determine
how much of the General Fund Reserve is restricted for Building purposes in the
City's annual CAFR (Comprehensive Annual Financial Report). The calculation
takes the Building Department's revenues, backs out expenditures, and adds
indirect costs to determine Building's "net income" on an annual basis. We would
simply provide a "credit" in the expenditures line (BJ of $269,000. The total amount
available at the end of FY 2017 is $11.9 million."
The Building Department Director then responded via email, "Thanks for the quick
reply. Can I have clarification on the item below: General Fund Reserve is
restricted for Building purposes in the City's annual CAFR. I want to understand
the financial question fully. This is not a building issue this is a planning issue can
the general reserve fund items indicate "planning refund to building department".
I am not sure the exact wording, but I know that the contract is signed by planning.
I just want to make sure it's completely clear."
Page 8 of 34
The Building Department Director subsequently approved the transaction in the
Munis system, and the planning study was paid completely with restricted Building
Department funds as shown in the table below. In addition, a note was to be added
to the tracking spreadsheet maintained by 0MB that is further addressed in finding
#2. However, this transaction was not followed up on at the 2018/19 fiscal year-
end, until OIG staff determined during this audit that a journal entry had not been
completed to credit the Building Department's general ledger account for the
$269,000.00 as stated in the CFO's e-mail. Although timely reimbursement to the
Building Department would have improved the optics of this situation, the use of
Building Department funds in the first instance to pay for an unallowed expenditure
was inappropriate.
Date Invoice Amount
10/10/2017 1700055-00001 $16,301.89
12/12/2017 1700055-00002 $97,405.66
02/09/2018 1700055-00003 $55,698.11
03/13/2018 1700055-00004 $43,200.00
03/13/2018 1700055-00005 $14,594.34
04/05/2018 1700055-00006 $13,000.00
09/01/2018 1700055-00007 $28,800.00
Total unallowable payments $269,000.00
C. EnerGov Support Maintenance = $465,421.37 unallowable costs
Account #011-1510-000325-21-401-501-00-00-00 (Contract Maintenance)
Tyler Technologies, Inc. through invoice #045-199362 dated September 1, 2017
billed the City a total of $310,275.33 for EnerGov support related to e-Reviews,
Permitting & Land Management, License & Regulatory Suite, Advanced Server
Extensions, GIS, Citizen Access Portal + MyGovPay, IVR Telephony and IG
Workforce Mobile Module (Unlimited).
The City's Finance Department invoiced the Building Department in the amount of
$310,275.33, which was initially rejected by the Building Official who sent the
following email to the City's Procurement Director in response to a request to
approve or reject the requisition: "This is not an oversight or an avoidance of
payment. I have requested clarification. The invoice presented is to the finance
department not the building department. The state rules (FC 553. 80) that govern
the Building Department and their finances indicate the Building funds cannot be
used for city projects or to pay for other departments." As stated previously, the
City's former I.T. Department Director determined that the Building Department's
EnerGov usage rounded rate is 45.00% as they are not its only users, and
therefore are not responsible for funding 100.00% of the system's annual
maintenance costs.
Once again, the CFO responded via an April 12, 2018 email that it was very difficult
to identify a different funding source and requested approval for the item to be paid
out of the Building Department's budget, stating that Building would receive a
"credit" of $135,367.00. The email also stated as follows: "...there is not much
flexibility once the budget is adopted. To be crystal clear, we don't have any other
Page 9 of 34
way to deal with the impacts to the current year's budget. This is the work around
until next year's budget, which will reflect your requests." The Building Department
Director relented, and the $310,275.33 transaction was paid in full on April 10,
2018 with restricted Building Department funds.
OIG staff verified that journal entry #12-111 for $135,367.00 was processed to
credit the Building Department's funds at the end of the 2017/18 fiscal year.
However, upon recalculation of the credit adjustment, with the Building Department
being responsible for 45.00% of the EnerGov system's annual maintenance costs,
it was concluded that journal entry 12-111 crediting ($135,367.00) to the Building
Department Fund for Tyler Technologies, Inc. invoice #045-199362 dated
September 1, 2017, related to the EnerGov's annual maintenance for October 1,
2017 to September 30, 2018, was overstated by $35,284.33 as shown in the table
below. Applying the same methodology, it was determined that the Building
Department fund was similarly overcharged for invoices numbered 045-158269,
025-160649, 045-169103, 045-168189, 045-235884, 045-141457 and 045-
274564 resulting in a total of $465,421.37 improperly paid with restricted Building
Department funds for the tested period (see the table below).
Amount Paid Building
with Building Responsibility
Invoice No. Date funds 45% Munis Credit Un allowable
045-158269 5/1/2016 $ 42,000.00 $ - $ - $ 42,000.00
025-160649 6/22/2016 $ 3,500.00 $ 1,575.00 $ - $ 1,925.00
045-169103 8/26/2016 $ 29,800.00 $ 13,410.00 $ - $ 16,390.00
045-168189 9/1/2016 $ 274,511.48 $ 123,530.17 $ - $ 150,981.31
045-199362 9/1/2017 $ 310,275.33 $ 139,623.90 $135,367.00 $ 35,284.43
045-235884 9/1/2018 $ 183,654.00 $ 146,605.10 $ - $ 37,048.90
045-141457 9/1/2015 $ 261,439.50 $ 117,647.78 $ - $ 143,791.73
045-274564 9/1/2019 $ 195,000.00 $ 157,000.00 $ - $ 38,000.00
Total unallowable payments $ 465,421.37
D. Matrix Consulting Group, Ltd. Study= $38,474.00 unallowable costs
Account #011-1510-000312-21-401-501-00-00-00 (Professional Services)
Pursuant to Request For Qualifications (RFQ) 2018-07 4-KB, the Matrix Consulting
Group, Ltd. was hired effective November 6, 2018 to provide consulting services
for a review of the City's regulations and processes relating to private development
projects. Although this project involved several City departments other than the
Building Department, Building Department funds were used to pay for the entire
cost of the analysis ($69,950.00) according to the Munis system entries in the table
below.
Page 10 of 34
Invoice Number Invoice Date Amount Paid Check Number Check Date
18-771 11/19/2018 $8,416.00 435914 02/19/2019
18-772 12/11/2018 $9,523.00 435915 02/19/2019
18-773 01/11/2019 $12,958.00 435916 02/19/2019
18-774 02/14/2019 $16,120.00 437813 04/11/2019
18-775 03/05/2019 $8,410.00 437561 04/04/2019
18-776 04/16/2019 $9,948.00 438124 04/23/2019
18-777 07/19/2019 $4,575.00 450631 04/07/2019
Total $69,950.00
A journal entry should have been completed to allocate the $69,950.00 project cost
among the other departments (Planning, Fire, Public Works, Environmental,
Transportation and Parking); however, confusion arose over who was to complete
this journal entry and it was not done. OIG staff became aware of this oversight
and informed the Building Department in January 2021. As a result, the needed
journal entry is currently being processed to charge these other departments and
to credit the Building Department the rounded difference of $38,474.00
($69,950.00 -($69,950.00 X 45.00%)).
E. Temporary Labor= $1,909.60 unallowable costs
Account #011-1510-000311-21-401-501-00-00-00 (Temporary Labor)
A temporary employee's labor costs were charged to the Building Department for
the weeks ending September 16th, 23rd, and 30th of 2018, but the employee in
question was not assigned to Building Department during that period. As a result,
a total of $1,909.60 was incorrectly billed to the Building Department and paid with
restricted funds.
F. Incomplete Documentation= $20,602.29 unallowable costs
Account #011-1510-000367-21-401-501-00-00-00 (Training and Awards)
As per Florida Statute Section 553.721, the unit of government shall retain ten
percent of the surcharge collected to fund the participation of building departments
in the national and state building code adoption processes and to provide
education related to enforcement of the Florida Building Code. Also, per Section
553.80(7)(a)1, the phrase "enforcing the Florida Building Code" may also include
training costs associated with the enforcement of the Florida Building Code.
OIG staff noted that there are charges totaling $6,955.30 for which proper
supporting documentation was not provided (sign-in sheets listing the attendees,
explanation of the topics discussed, etc.) to justify being charged to the Training
and Awards general ledger account. Examples of the trainings noted include
Team Development for the High-Achieving Organization (Team Building), Conflict
Resolution meeting, Zoning and Land Use webinar and an Excel webinar.
It was also determined that $13,646.99 in food and beverage expenses, including
gratuities, were paid with City approved procurement credit cards (P-cards) during
the 2017/18 fiscal year and were charged to the Training and Awards general
ledger account. Examples include food and beverage purchases related to Lunch
& Learn meetings, Lunch and Walk meetings, community meetings and the City of
Wellington-EnerGov presentation.
Page 11 of 34
P-cards allow the cardholder to purchase approved commodities directly from
vendors that accept the Visa credit card, while at the same time reducing the time
and effort normally associated with ordering and paying for these types of
purchases. Citywide Procedure FL.16.01 specifically provides guidelines
concerning their usage.
When questioned, the Building Department Director stated that the training funds
related to the enforcement of the Florida Building Code were commingled with
other unrestricted monies. Therefore, OIG staff is unable to identify the revenue
source(s) used to pay for these $20,602.29 ($6,955.30 + $13,646.99) Training and
Awards expenditures.
G. Bank Fees: unable to quantify how much the Building Department was
undercharged
Account #011-1510-000313-21-401-501-00-00-00 (Bank Fees)
The Finance Department used merchant account numbers to identify the bank
fees, including E-check fees, associated with the Building Department. However,
OIG staff noted that this method is not optimal because the merchant accounts
change frequently, and identification of the fees depends on a manual list of
merchant accounts and human memory. The questioned Financial Analyst Ill
stated that when they are unsure as to which of the merchant accounts is
applicable, such as for when the transaction was processed at the Central Cashier
or by the Customer Service Division, the charges are entered in the miscellaneous
(City Hall) account and are paid completely from General Fund revenues.
Consequently, Building Department's incurred bank charges may be incorrectly
reported in the miscellaneous account and not paid with restricted Building funds.
OIG staff was unable to determine the corresponding amount of bank fee
expenditures that the Building Department was undercharged.
Recommendation( s ):
The City's Building Official should comply with the Florida Statutes which restrict usage of
Building Department Funds, and members of the City Administration should not place
undue pressure on the Building Official to deviate from its restrictions.
A. The Building Department should be reimbursed for the $4,836,490.50 in
unallowable expenditures related to the Munis and EnerGov systems purchase
and implementation.
B. The Finance Department should create an adjusting journal entry to reimburse the
Building Department for the $269,000.00 improperly used to pay for the planning
study.
C. The Building Department should be credited in the amount of $465,421.37 for the
annual EnerGov maintenance fees paid with restricted Building funds. In addition,
the I.T. Department should annually re-calculate all City department's EnerGov
usage and use this updated percentage in its future maintenance fee calculations.
D. The Finance Department should create an adjusting journal entry to reimburse the
Building Department for the $38,474.00 improperly used to pay for the Matrix
study.
E. The Building Department should be credited in the amount of $1,909.60 for the
temporary labor costs incorrectly paid with restricted Building funds.
Page 12 of 34
F. The Building Department should request the creation of a separate general ledger
account to record the funds related to the Training and Awards expenditures
subject to the Florida Building Code. Furthermore, the transactions paid with
unrestricted funds using issued City p-cards should always comply with the terms
listed in Citywide Procedure entitled Procurement Card (P-Card) Guidelines
(Fl.16.01 ). Finally, sufficient documentation should always be maintained in
support of any amounts expended with restricted Building Department funds to
avoid further questions about the legality of such expenditures.
G. Finance Department staff should determine a reasonable methodology and
allocation process to charge all involved City departments based on actual usage
for bank fees, E-check fees, etc.
Building Department's Response:
Finding 1.A: On July 30, 2014, Resolution #2014-28706 authorized the appropriation of
$5,700,000 of Building Department funds as a funding source for the Tyler EnerGov/Munis
ERP system implementation. The Building Department's response to finding 1.A. is based
on the following assertions: 1) in alignment with Tyler working papers and the proposal
attached to Resolution #2014-28706, the OIG, Building Department, and Finance
Department agreed that the Building Department was not part of the Munis
implementation, and, therefore, had no responsibility to contribute to the Munis
implementation costs; 2) the I.T. Department calculated, and the Building Department
agreed, that based on the number of Building Department transactions in the EnerGov
system, the appropriate share of EnerGov system costs for the Building Department is
45.00%, making the Building Department the largest user of EnerGov in the City; and 3)
the exact cost to implement the EnerGov system alone was difficult to determine because
the Munis and EnerGov invoices were commingled. Therefore, the OIG, Building
Department, and Finance Department agreed to use the $1,918,910 amount stated in the
Tyler EnerGov/Munis ERP proposal as the cost to implement the EnerGov system.
Based on foregoing assertions, $4,836,490.50 should be returned to the Building
Department fund (i.e., the $5,700,000 of Building Department funds appropriated for the
Tyler EnerGov/Munis ERP system implementation, minus 45.00% of the Building
Department's share of EnerGov implementation equal to $863,509.50). To date,
$4,063,000 has already been credited to the Building Department fund balance through
the creation of a stand-alone Building Department fund. As of the writing of this response,
the remaining balance to be credited to the Building Department fund for the Tyler
EnerGov/Munis ERP system implementation is, $773,490.50.
Finding 1.B: Included in the actualizing of Building Department fund balance and creation
of a Building enterprise fund as of October 1, 2020, was the repayment of $269,000.00 for
the Planning Study.
Finding 1.C: The Building Department has reviewed the invoices identified in this finding
and the unallowable amount of $465,421.37 presented by the OIG and agrees with this
unallowable amount. As part of the reconciling of Building Department fund balance and
creation of a stand-alone fund, the Finance Department reconciled payments made for
EnerGov maintenance and credited the Building Department fund for over payments from
FY 2016- FY 2020 in the amount of $462,500. However, a rounding discrepancy was
identified by the OIG whereas 45.23% was applied during the reconciliation and crediting
of EnerGov maintenance overpayments versus the agreed percentage for Building's
proportionate share of EnerGov of 45.00%. Finance Department has agreed to
Page 13 of 34
additionally credit the difference of $2,921.37 due to this percentage discrepancy.
Finding 1.D: The study procured on November 6, 2018 performed by the Matrix
Consulting Group, Ltd., pursuant to Request For Qualifications (RFQ) 2018-074-KB, for
the City's regulations and processes relating to private development projects, was a City
Manager's Office initiated and managed project. The Assistant City Manager (ACM) at the
time over the Planning Department and Building Department asked that staff from
Planning Department and Building Department assist with coordination of the study and
contract deliverables, and also instructed the use of available funds in the Building
Department to request the purchase order for the consultant in order to move the project
forward more expediently, and the costs would later be redistributed to the appropriate
departments included in the study. On Wednesday, February 13, 2019 1:58 PM the ACM
at the time sent an email including the Budget Office, directing that at the forthcoming
budget meeting the appropriate means to reimburse the Building Department be
discussed. At this point the Building Department assumed the Budget Office would
facilitate the transaction to allocate the expenses to all the departments involved given
that 1) the email sent included the Budget Office, 2) the allocation of funds(see breakdown
below) for the study were 45% Building, and 55% from other non-Building departments,
3) that the Building Department was not the owner of this study, and 4) the Budget Office
is the City's central station for funding allocations and has the budget/general ledger
account numbers for all the departments.
Apparently, this was a misunderstanding and inversely the Budget Office assumed the
Building Department would prepare and submit the journal entry request to debit the funds
from other departments.
Upon being alerted by the OIG of this finding, the Building Department reached out to the
Budget office, realized that there was a miscommunication, and worked together to submit
the journal entry. The Budget Office prepared the journal entry and emailed it to Building
Department staff on January 15, 2021, and Building Department forwarded the email the
same day to the Finance Department to process. The email referenced in this response
is attached herein.
Allocation of the costs for the study
Planning 45%
Building 45%
Fire 2%
Public Works 4%
Urban Forestry/ Environmental 2%
Transportation 1%
Parking 1%
Finding 1.E: Building Department agrees the 1,909.60 which was incorrectly paid due to
transferring of temporary staff from Finance Department to the Building Department made
it difficult to confirm the time period of the temporary staff in the Building Department. The
Finance Department initiated a journal entry on 12/17 /20 and is pending to be
credited/posted to the Building Department account at the writing of this memo.
Finding 1.F: $20,602.99 in unallowable costs from Training & Awards account.
Regarding proper documentation, numerous samples of agendas and explanations of
events were provided, the titles of the examples of trainings listed in the audit finding is
Page 14 of 34
also indicative of the topics discussed at these trainings. The sign in for the trainings and
registration was noted and sent to the professional doing the training. Often the training
sign-in for department wide trainings is the daily timesheets.
The training and awards account are funded through 4 sources:
10% Retained earnings from two Surcharges for State - 553.721 & 468.631 "The unit
of government shall retain 1 O percent of the surcharge collected to fund the participation
of building departments in the national and state building code adoption processes and to
provide education related to enforcement of the Florida Building Code."
1.5% Retained earnings from Surcharge for County - Miami-Dade County Code
Section 8-12 If a governmental authority (City of Miami Beach Building Department)
remits the funds on or before the due date set forth, such authority shall be entitled to
retain a portion of the remittance due to Miami-Dade County, which represents its cost of
collection of this code administration fee, not to exceed 1.5 percent of the total remittance
due for that period. In the event that the remittance is not made when due, the
governmental authority shall remit to Miami-Dade County the entire balance of fees
collected pursuant to this section to defray Miami-Dade County's additional costs incurred
in connection with that government's delay in remitting the amount.
6% City Training & tech surcharge section 14-69, provides as follows: "A surcharge to
building, electrical, mechanical, plumbing and demolition permits will be added for training,
education and safety of building department employees, and to procure and implement
the latest technologies available for enhancement of services provided by the department,
according to the schedule specified in Appendix A" The discussion and ruling from the
city legal department is that those funds can be used for trainings and awards.
All retained amounts and the 6% City training & tech surcharge have been comingled in
one account 601-7000-229253(state, county, and city) making it difficult to differentiate
revenue sources to determine restricted and non-restricted uses. As of 12/8/2020 the
balance in that account is $2,913,659.95. A reconciliation of the balance as of FY 2018
ending (performed on 6/25/2020) found that the following breakdown of the sources of
these revenues is applicable for 2018. While it was a practice in previous years to combine
all retained earnings into this one account, it may be in the departments best interest to
undue the co-mingling of these retained earnings and put them into the segregated
accounts in order to properly identify the sources and their allowable uses.
Backup available
SUMMARY for FY 17/18 (93 printed pages)
Total FY 2018 Year End Balance $ 2,178,023.16
Rollover Balance from previous year -$ 1,690,150.78
Transferred in from retained State and County surcharge -$ 69,808.71
Transferred Out to cover Traininq & Tech expenses $ 141,591.29
Actual collected from City Ordinance 6% Training &
Tech Fee for FY 2018 $ 559,654.96
The Building Department Director has provided the breakdown in the accounts previously
to the OIG audit staff that information was not included in this report. Prior to this audit
the department requested that Finance create additional accounts to better differentiate
these revenue sources. And while none of the governing legislations for the surcharges
Page 15 of 34
explicitly omit the use of funds for food and beverage at training events, the department
will ensure that only City collected funds be used for food & beverage and employee
recognition in accordance with City policy and p-card policy including closer review and
additional documentation for P-card purchases.
The department is working on segregating all the funds and clear legal direction on the
appropriate use of the funds was provided. Thus, dividing into separate accounts will allow
for better tracing of the restricted funds. See attached Exhibit A for further explanation of
surcharge accounts and retained earnings. The amount collected from City ordinance is
approximately 9 times that collected from State and County legislation. Using this formula,
the amount attributed to City Ordinance Training and Tech collections would be
approximately $1,960,220. However, for the sake of brevity and fiscal responsibility the
amount being segregated as a starting balance for Building Department - City ordinance
training and tech funds will only be the amount reconciled for 2018 of $559,654.96, plus
the amount for the "Transferred Out to cover Training & Tech expenses" of $141,591.29.
Leaving $1,759,959 in the more constrained state and county account and will be dealt
with in the more restrictive manner.
Finance Department and OMB's Response:
We agree that the tracking mechanism used to segregate Building funds from the rest of
the General Fund that was created in 2003 ( 18 years ago) by individuals who are no longer
with the City was less than ideal and contributed to confusion during the audit process.
This is why a new stand-alone fund was created in FY 2020 for Building to avoid any
similar issues in the future. We appreciate the assistance of the OIG and Building staff in
reviewing and adjusting the multi-year tracking spreadsheet to ensure that the beginning
fund balance that was moved to the new Building fund in FY 2020 was as accurate as
possible. To date, all credits have been made to the multi-year tracking spreadsheet
except for $776,411.87 of remaining credits that will be processed at FY 2021 year-end.
A. EnerGov is the City's current permitting system which replaced the Permits Plus
system. The Building Department is by far the largest user of the system, by at
least 45%. At the time that funds were budgeted for the project, the prior Building
Official who is no longer employed with the City represented that since the Building
Department could not operate without the system, it was appropriate for the
Building Department to bear the entire one-time cost of the system, as well as the
recurring maintenance. It was not possible to purchase a portion of the system and
the cost of the system would not be meaningfully less if Building were a stand-
alone business purchasing the system. The Building Official's representation was
relied upon since, as the OIG report points out, under Florida law, the
determination of building eligible costs is determined by the Building Official.
Given that the current Building Official had a difference of opinion than the prior
Building Official, it was agreed to by all parties during the audit that a more
equitable way to allocate the costs would be on a percentage basis, based on
usage of the system.
Given that Building was also included in the General Fund prior to the creation of
the new stand-alone fund in FY 2020, a multi-year tracking sheet was used to track
how much of the funds within the General Fund were attributable to Building.
Adjustments totaling $1,050,91 O were made in the spreadsheet for the
Page 16 of 34
adjustments above. An additional $4,490.50 credit will be processed at FY 2021
year-end to address rounded amounts.
The Munis system is the City's current enterprise resource system that replaced
the Eden system. Munis includes several modules including financial,
procurement, and human resource functions. All of these modules were, and are,
used by or on behalf of the Building Department. As a result, $4.0 million of Building
Reserves and $1. 7 million of Building Training and Technology Funds were used
for the Tyler Implementation project. However, given that the current Building
Official had a difference of opinion than the prior Building Official, it was agreed to
by all parties that the Building Department would not be charged for a portion of
the Munis implementation costs and a portion of the EnerGov implementation
costs resulting in adjustments of $4,063,000 being made in the spreadsheet to
reimburse the Building Department for Munis-related implementation costs. An
additional $769,000 credit will be processed at FY 2021 year-end to address the
$1.7 million of Building Training and Technology Funds used for the Munis portion
of the Tyler implementation project.
B. As mentioned in Response 1.A., under Florida law the Building Official is the sole
determiner if an expense is building eligible. When the planning study was
approved during the budget process, the prior Building Official (who is no longer
with the City) represented that the study was eligible for building funds. The current
Building Official had a different opinion and notified the Office of Budget &
Management to that effect, after the budget had already been finalized. Since the
amount of the study was $269,000 and alternative funding was difficult to identify
mid-year, the direction provided was to move forward with the expense and at year
end make an adjustment to the multi-year tracking sheet used to track how much
of the funds within the General Fund were attributable to Building. We agree that
the adjustment was missed at year-end by both Budget and Building staff, which
both review the tracking sheet each year, but the adjustment was eventually made
during the audit process.
C. As mentioned in Response 1.A., the prior Building Official had also determined
that it was appropriate for Building to bear the entire cost of the recurring
maintenance since it is not possible to purchase a portion of the system and the
cost of the system would not be meaningfully less if Building was a stand-alone
business purchasing the system. Once the current Building Official expressed a
different opinion, it was agreed by all parties during the audit that a more equitable
way to allocate the costs would be on a percentage basis based on usage of the
system and a $462,500 adjustment was made to the multi-year tracking sheet
which was used to track how much of the funds within the General Fund were
attributable to Building. An additional $2,921.37 credit will be processed at FY 2021
year-end to address an additional invoice as well as rounded amounts.
D. It appears that although the P.O. was entered by Building in Munis, their intent was
for a journal entry to be done after-the-fact to charge the other departments for
their share of the costs which was not submitted due to some sort of
misunderstanding and/or miscommunication. Building assumed the journal entry
was going to be processed for them although there had not been any discussion
that we were going to handle. As a result, we worked with Building last week to
Page 17 of 34
prepare the journal entry to reimburse Building for the portion that pertained to the
other departments which Building submitted last Friday to Finance.
G. Going forward, the Finance Department will work with the I.T. Department to
develop a new EnerGov report identifying total receipts received monthly by
department. This report will be used to more accurately allocate bank fees to each
department that utilizes the EnerGov merchant account.
OIG's Response to the Building Department and the Finance Department and OMB's
Response:
Based on the CFO's management responses, a February 23, 2021 meeting was held on
Microsoft TEAMS with the former Building Director and his attorneys, whereupon OIG staff
was able to obtain the following account from him:
a. He gave approval for the Building Department to bear the entire one-time cost of
the EnerGov system, not Munis system.
b. Although he ultimately approved the expenditure's full payment in the Munis
system's approval queue, he raised strong objections to the expenditure, but was
overridden by the Assistant City Manager at the time.
c. He said the high annual maintenance costs were not presented to him initially.
However, he acknowledged that when you implement a new system that there will
be subsequent maintenance costs. Consequently, he approved the payments
during his tenure.
In addition, the City's CFO provided on January 25, 2021 an email dated January 24, 2018
whereby the former Assistant City Manager requested the approval of Building
Department funds for the $269,000 study to be performed by Miller Legg & Associates
Inc. The email stated that the project involved existing older and historic buildings with
the elevation data housed in the Building Department with the Floodplain Manager.
Therefore, she felt that it was not a Planning study but that the Planning Department would
manage the project for her as Chief Resiliency Officer. The designated parties in the
Munis system queue approved the payment with Building Department restricted funds.
The OIG agrees with the Finance Department and the Building Official that this was a
Planning study and should not have been paid from Building funds. The completion of the
October 1, 2020 actualizing of Building Department fund balance and creation of a
Building enterprise fund included the repayment of the $269,000.00.
2. Finding: THE NOTES TO FINANCIAL STATEMENTS ON THE CITY'S
COMPRENHENSIVE ANNUAL FINANCIAL REPORT (CAFR) INCORRECTLY
REPORTED A PORTION OF RESTRICTED BUILDING OPERATIONS
RESERVES AS UNASSIGNED RESIDUAL FUND BALANCE
The City of Miami Beach implemented Government Accounting Standard (GASS) 54,
Fund Balance Reporting and Governmental Fund Type Definitions for the fiscal year
ending September 30, 2009, which states: "The restricted fund balance category includes
amounts that can be spent only for the specific purposes stipulated by constitution,
external resource providers, or through enabling legislation. The committed fund balance
classification includes amounts that can be used only for the specific purposes determined
by a formal action of the government's highest level of decision-making authority. Amounts
in the assigned fund balance classification are intended to be used by the government for
Page 18 of 34
specific purposes but do not meet the criteria to be classified as restricted or committed.
In governmental funds other than the general fund, assigned fund balance represents the
remaining amount that is not restricted or committed. Unassigned fund balance is the
residual classification for the government's general fund and includes all spendable
amounts not contained in the other classifications. In other funds, the unassigned
classification should be used only to report a deficit balance resulting from overspending
for specific purposes for which amounts had been restricted, committed, or assigned.
Governments are required to disclose information about the processes through which
constraints are imposed on amounts in the committed and assigned classifications.
Governments also are required to classify, and report amounts in the appropriate fund
balance classifications by applying their accounting policies that determine whether
restricted, committed, assigned and unassigned amounts are considered to have been
spent. Disclosure of the policies in the notes to the financial statements is required."
When questioned, 0MB staff provided an Excel spreadsheet entitled "Schedule of Actual
Building Department Revenues and Expenditures", maintained since 2003 to determine
the restricted Building operation reserves balances and the "Owed by the City" amount.
The term "Owed by the City" is defined by 0MB as an outstanding Building Department
receivable (money owed by the General Fund to the Building Department).
The "Owed by the City" total, according to the Schedule of Actual Building Department
Revenues and Expenditures original version provided on December 6, 2019 has
increased significantly from its September 30, 2003 unaudited initial balance of $55,183
to its September 30, 2018 balance of $6,242,679 as portrayed graphically in Table 1
below.
Table 1
Owed by the City
$10,000.,000
$9,000,000
$8,000,000
$7,000,000
$6,000,000
$5,000,000
$4,000.,000
$3,000,000
$2,000,000
$1,000,000
$- - ■I I I I I
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
OIG staff spoke with 0MB and Finance Department personnel on several occasions to
gain an understanding of their methodology as to how some of the figures in the Schedule
of Actual Building Department Revenues and Expenditures spreadsheet were calculated.
During the audit process and based on questions from OIG staff, they submitted and then
revised the figures several times before arriving at their current amounts as they became
aware of additional information and/or inaccuracies. For example, some figures were
deleted, only to be added back later following discussions with Building Department and
OIG staff.
In sum, OIG staff did not verify the accuracy of the calculated final figures, as they were
determined solely through a collaborative effort of Finance, 0MB and Building Department
Page 19 of 34
personnel and, as such, we do not express an opinion as to their accuracy. The age of
the transactions dating back to 2003 created difficulties because many of the responsible
individuals are no longer employed with the City, and the supporting documentation is not
readily available from the data stored in various City Financial Systems in use during the
past 17 years.
The City's Note 11 to Financial Statements, as reported in the CAFR for the fiscal year
ending September 30, 2018, reported only $11,447,181 in Building Operations Reserves
as shown below, which did not reconcile accurately with OMB's Schedule of Actual
Building Department Revenues and Expenditures figures.
CITY OF MIAMI BEACH, FLORIDA
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2018
(Continued)
NOTE 11 - Governmental Fund - Fund Balance
Below is a table of fund balance categories and classifications at September 30, 2018 for the City's governmental
funds:
Miami
Beach
Resort Redevelopment Captal Other
Generai Tax Agency Projects Govemmental
Fund balances.
Non-spendable.
Prepads s 23.255 s 5 $ 22,806 $ 1,612
Total Prepaid 23,255 22.806 1.612
Restricted:
General government <E» 26,321.736 853.290
Bulang operations reserves
Pubic safety 756.200 2470.722
Human ser#ces 492.970
Physical entronment 2.561,446 00 1,701.145
Economic enronment 65.933.523 1,895.682
Quality of Lde improvement 23,681.542
Transportation 6,212,348 56,097.782
Cuture and recreation 28. 195.208 80,559.335 1,709.768
Sewer improvement 81.683
Street Improvement 2422.927
Intranstructure 20.938
Communications 78,488
RDA Caty Center improvement 3,218.443
Capital improvements 8,429,546
Neighborhood improvement 4.436.277
South Pointe Improvement 20,640.207
Debt serice 1,510,531
Total Restricted 11,447,181 28.195.208 65.933,523 155,739,574 90,413.432
Unassigned.
Non-funded Capital (97.695)
Reimbursable grants tunds (15,172,670) (3.872,177
Reim burs able boardup/ Relocation charges (6.405)
Non reimburs able grant tunds cs (1,458,832)
Residual tund balance
Total Unassigned • • 7 [15_270.365y 5337_414y
Total Fund Balance s 88,449,480 $ 28, 195,208 $ 65,933,523 $ 165,494,262 $ 101,539,031
The City's Deputy Finance Director subsequently provided documentation, as shown
below, that the $6.2 million "Owed by the City" on OM B's maintained September 30, 2018
Schedule of Actual Building Department Revenues and Expenditures was included in the
Unassigned Fund Balance of $30,871,817.
Page 20 of 34
See below for the rollforward (comparison from PY to CY)
09.30.18
Total fund balance at 9-30-2018 88,449,480.00 CAR
- 6% Reserves goal
11% Rescrves
City's sale of 1748 Jeffcrsoa Ave. Reso. 99-23396
Reservcs publc safety tados
Rescrvc - sct aside
ppropriatons carried forward
Encumbrances
Bu!ding Operations
Unassigned fund balance
Fua! budget. FY 18- 1'Tic Use of FB
Pay-Go 'Transfer & Storm Pumps
loans receivable
Check I
Non spendable
Restricted A
Committed B
Assigned C
Unassigned D
(19,851,000.00) D See attachment (Tab reser Not committed - 2 months emergency reserve
(36,393,500.00) B Sec attachment (Tab reser Reserved for Public Safety and Health
(46,725.00) B Reso. 99.23396
(500,000.00) C original budget - FY 2016
(935,000.00) B Reso. 2018-30609 4ad related TC
(2,786,000.00) H Res0. 2018-30609 and related 1TC
(1,383,000.00) B Rcso. 2018-30609 ad related LTC
(11,447,181.00) I See tab buldmg reserves for schedule provded by budget
(11,044,072.00) D Excess
(1,073,000.00) B Reso. 2018-30609 and related 1TC
(1,458,000.00) Res0. 2018-30609 and related 1TC
[1,532,002.00)_ Reso, 2016-29273
(23,255.00)
(11,447,181.,00)
(45,607,227.00)
(500,000.00)
- (30,871,817.00)
(88,449,480.00)
Consequently, OIG staff concluded that the Restricted Building Operations Reserves were
underreported as they did not include the "Owed by the City" balance, which was instead
included in the General Fund's Unassigned Residual Fund Balance. The primary
difference between the two is that restricted funds can only be used for specific purposes,
while unassigned funds have no such restrictions. The impact of the Finance Department's
decision to overstate the General Fund's Unassigned Residual Fund Balance, and,
conversely, to understate the Restricted Building Operations Reserves is difficult to
measure as others may have relied on this information's accuracy in making decisions.
Therefore, OIG staff met with various professionals to help determine any effect that this
incorrect reporting may have caused. A summary of these conversations is contained in
the following paragraphs.
When questioned as to the reasons for this reporting, the Chief Financial Officer
acknowledged that it was not best practice, and was more likely an attempt by previous
decision-makers many years ago to make the City's financial position look better. This is
the likeliest explanation for this practice, which continued until the audit that produced this
report. Notably, the City's current Building Department Director/Building Official claimed
that she was unaware of the additional Building Department monies included in the
Unrestricted Residual Fund Balance.
OIG staff met with supervisors from Crowe LLP, the independent firm hired to perform the
City's annual financial statement audit for the 2013/14 through 2017/18 fiscal years, who
did not recall being informed about additional Building Department Reserve Funds being
restricted other than the $11.4 million included in the September 30, 2018 financial
statements. In an email received on January 17, 2020, Crowe LLP staff stated
"Management is responsible for the preparation and fair presentation of the financial
statements. We have had no communications with management in regard to this matter.
Page 21 of 34
Since we have not audited the differences noted in the information that was provided to
them in a meeting with OIG staff on December 19, 2019 and the subsequent e-mail on
December 23, 2019, I cannot speak to the appropriateness of any correction. That said,
I feel the adjustment shown on the Schedule of Actual Building Department Revenues and
Expenditures provided to me is immaterial to the Financial Statements as a whole for the
City of Miami Beach for the year ended September 30, 2018, and as such, would not treat
this matter as a restatement."
OIG staff also conveyed this information to the City's current external auditors, RSM US
LLP, so that they could perform specific testing to determine the accuracy of the applicable
2018/19 fund balance reporting. As such, RSM US LLP did not identify any significant
deficiencies during their audit related to the Restricted Building Operations Reserves
reported fund balance as the City's Finance Department had made the necessary
corrections.
OIG staff then met with an RBC Capital Markets, LLC employee, Julie Santamaria, who
stated that the identified $6.2 million incorrect reporting would not adversely affect the
City's bond rating. She stated that the amount is immaterial considering all the other
factors and their assigned weights that Moody's and Standard & Poor's review in
determining their ratings.
Upon being notified by OIG staff, the City's CFO initially indicates that, instead of refunding
the $6.2 million "Owed by the City" to the Building Department, the Building Department
would be charged rent back to 2003, which would eliminate much of this balance.
However, this idea was not supported by the City Manager, and it was not pursued further.
Next, the City's CFO told OIG staff that instead of refunding the $6.2 million "Owed by the
City" to the Building Department, since this amount included monies related to elevator
operations and it would not be subject to the Florida Building Code. Therefore, he
requested that 0MB staff calculate the amounts related to elevator operations from 2003
through 2015, since those operations were transferred from the Building Department to
the Public Works Department in 2016. As a result, 0MB calculated that $5,072,469 of the
$6.2 million "Owed by the City" was related to elevator operations, and Finance decided
to leave that amount in the Unassigned General Fund after receiving the approval of the
City's Building Official.
The OIG does not agree with the decision to include the annual surplus stemming from
elevator operations in the General Fund from 2003 through 2015 because its staff and
operations were completely under the control of the Building Department until it was
transferred to the Public Works Department in 2016. Also of concern are the timing and
reasons for that determination, the accuracy of that transaction, compliance with Florida
Statutes, the use of that money, and whether the funds will be restricted for elevator
operations. For these reasons, the OIG is planning to conduct a future review of Elevator
Division operations.
Florida Statute Section 553.80(7)(a) provides that a local government may not carry
forward an amount exceeding the average of its operating budget for enforcing the Florida
Building Code for the previous four fiscal years. Any excess funds prohibited from being
carried forward must be used to rebate and reduce Building Department fees charged for
permits applications, etc. Therefore, OIG staff calculated the four-year average for the
period starting on October 1, 2015 through September 30, 2019, and noted that the
Page 22 of 34
Restricted Building Operations Reserves exceeded the four-year average by
approximately $1. 7 million, as shown below.
Operating Budget
FY 2016 $ 15,624,000
FY 2017 $ 17,143,000
FY 2018 $ 17,395,000
FY 2019 $ 16,865,000 ------- $ 67,027,000
$ 16,756,750 Average
$
$
Restricted Building
Operations Reserves as
18,489,336 of September 30, 2019
1,732,586
Recommendation(s ):
Restricted Building Department funds should only be expended in accordance with Florida
Statute Section 553.80, and they should not be used to pay for any unallowed
expenditures. All Restricted Building Operations Reserves should be properly reported
as such in the CAFR, so that persons relying on this data in their decision-making are
accurately informed. Lastly, the City's Building Official, in consultation with the City
Manager, should decide how to utilize excess funds ineligible to be carried forward for
either rebate or reduction of fees.
Building Department's Response:
The Building Department contacted Miami-Dade County concerning the elevator section
and its funds. The call to the County and follow-up with the head of Miami Dade County
Elevator section indicated that the Elevator section was removed from the County Building
Department in 2003, for the sake of uniformity with the County and their practice, the
elevator revenues and employee expenses were placed with the City of Miami Beach
Public Works Department to manage this does not include the state 553.80 fees which
remain with the Building Department. This audit assisted in the record clean-up to keep
consistent with Miami Dade County.
Additionally, the funds in excess as defined by statutes of being any amount over the
average operating of the last 4 fiscal years was reported as $1,732,586 in this audit. In
order to maintain an allowable fund balance, fees were lowered in 2017 and moreover did
not increase by the CPI increase which all other departments participated in the Building
department did not participate in order to mitigate any excess revenue.
Finance Department and OMB's Response;
As shown in the City's financial statements as of September 30, 2019, the Building
Department, operating out of the General Fund, reported $18.5 million of restricted fund
balance in the General Fund. This amount represents the multi-year cumulative fund
balance for Building operations, following several adjustments resulting from the audit
process to the multi-year tracking spreadsheet used for this purpose since 2003.
Page 23 of 34
The following language is also presented on page 85 of the City's Comprehensive Annual
Financial Report (CAFR) for fiscal year ending 2019.
The City's building operations is accounted for and reported in the General Fund as of and
for the period ended September 30, 2019. The General Fund balance included
$18,489,336 in restricted funds from the Building Department operations in accordance
with Chapter 553 section 80 of the Florida Statutes.
The above disclosure and restrictions were made based on conversations with the OIG,
Office of Management & Budget, and RSM external auditors. For the period ending
September 30, 2020, and in the 2020 CAFR, the Building Department will be accounted
for and reported in a new Enterprise Fund and shown as a stand-alone column under the
supplementary information.
Prior to September 30, 2020, the activities of the Building Department were accounted for
in the General Fund. The Building fund balance was separated into restricted and
unassigned in the GASB 54 required footnote disclosures. $11.5 million represented a
balance owed and set aside to the Building operations reported as restricted, and $6.2
million represented a balance owed and not set aside to the Building operations, reported
as unassigned and included in the $30.9 million unassigned fund balance. The reported
balances were technically correct, as both Building and non-Building operations were both
included in the General Fund. However, an additional footnote disclosure would have
better explained the specific details of the set asides.
OIG's Response to the Finance Department and OMB's responses:
Although OIG staff reviewed a significant number of transactions, we did not review all
transactions dating back to 2003, and, as such, we will not express an opinion on whether
the total transfer balance is accurate.
3. Finding: PAYROLL AND FRINGE BENEFITS RELATED TO NON-BUILDING
DEPARTMENT EMPLOYEES TOTALING $18,124.87 WERE INCORRECTLY
PAID WITH BUILDING DEPARTMENT FUNDS AND HAVE NOT YET BEEN
REPAID
Florida Statutes require that building funds shall be used solely for carrying out the local
government's responsibilities in enforcing the Florida Building Code. Only those
personnel services costs including salary and related employee benefit costs, incurred by
the local government to enforce the Florida Building Code, may be charged to the Building
Department.
During the audit process, it was noted that a few employees from the Sanitation
Department, Fire Ocean Rescue and Public Works Department were improperly paid with
Building Department funds during the audit period by a total of $18,124.87, shown as
follows:
Page 24 of 34
Department Amount
SANITATION $
OCEAN RESCUE $
(17,110.79)
(972.78)
PUBLIC WORKS $ (41.30) -----~-----'-I
TOTAL$ (18,124.87)
When asked specifically for the details concerning these amounts, the OIG received the
following explanations:
• The $17,110. 79 payout charged to salaries and fringe benefits involved a vacation
and sick payout for a terminated Sanitation Department employee that was
misidentified as a Building Department employee.
• No explanation was received from the Finance Department regarding the $972.28
incorrectly paid to an Ocean Rescue employee despite several requests.
Consequently, it may have been improperly paid with restricted Building
Department funds.
• Regarding the Public Works Department employee, Finance Department staff
stated that it was a timing issue. The employee was a Building Department
employee, who transferred to the Public Works Department on September 10,
2017, but the system was not updated until October 13, 2017. This timing
difference resulted in $41.30 being incorrectly charged to the Building Department.
In addition to the indirect costs applied to the Building Department for Finance Services,
there are five Finance Department employees who are paid 100% and two who are paid
50% with Building funds. The OIG staff questioned whether the services were provided
solely to the Building Department, as well as how the Finance Department keeps track of
the hours worked.
Finance Department staff replied that instead of tracking hours, which would be a
significant administrative burden, various data sources were used to estimate the amount
of time or activity attributable to Building from the mix of services offered in Finance.
Based on their calculations and the use of estimates, OIG could not be sure if the time
and salary payments spent on five Finance Department employees are commensurate
with the work performed.
Recommendation( s ):
Any City employees who are paid from Building Department funds, but work in other
departments, should work at least proportionately on Building Department related projects.
It is recommended that these individuals prepare daily timesheets recording their work
hours that should be forwarded to the Building Official. This practice should allow the
Building Department Director to be aware of any necessary funding adjustments, without
creating an unacceptable administrative burden.
Page 25 of 34
In addition, the methodology used by the Finance Department to justify its employees
being paid with Building Department funds should be presented to the Building Official for
her approval. Once received, the approved methodology should be followed at least
through the current fiscal year. However, this methodology should be revisited annually
and approved by the City's Building Official, as the amount of time or activity attributable
to the Building Department may change which should be reflected in the corresponding
funding.
Building Department's Response:
Payroll for non-Building Department employees $18, 124,87. Some of the employees
incorrectly charged to Building were reported to Human Resources in June 2019 and while
some incorrect entries were corrected the $18,124.87 are still pending to be corrected.
The number of Building Department funded employees in other departments has
decreased over the years.
a. There are two in the IT Department who work on Building related EnerGov
functions. IT would need to provide pay period updates and time sheets for the
staff. The Building Department has discussed this with the current IT Director and
the previous Director.
b. There is one Environmental position that verifies construction site protection for
dust control and proper permitting for underground tanks. The Environmental
Department would need to provide pay period updates and time sheets for the
staff.
c. The Finance Department staff was reduced over time at present there are three
full time and two 1/2-time employees for a total count of 4 employees. This
includes cashiering, and customer service to offset the calls that their call. The
phone tracking (ACD) system which is being implemented will assist in better
defining which calls are Building Department calls to provide the clear picture of
who does what and determine staffing levels and payment which would be
appropriate.
Finance and OMB's Response:
We reviewed the three specific instances when employees were mistakenly paid from
Building Department funds. The first instance ($17,110.79) was a leave payout for a
Sanitation employee separating from the City. Leave payouts are calculated and entered
in the system by the Human Resources Department through a manual process. It appears
that an incorrect general ledger account was used for the payout. The second instance
($972.28) was an incorrect payroll adjustment initiated by the Finance Department. The
third instance ($41.30) was a timing issue involving an employee transferring to a different
department between the end of FY 2017 and the beginning of FY 2018. Based on these
findings, a credit was processed on December 11, 2020 to reimburse the Building
Department for a total of $18,124.87 for the 3 items above.
To avoid similar situations in the future, we recommend that the payroll coordinator in the
Building Department (as well as all departments) run periodic payroll processing reports
or validate the general ledger payroll posting detail to identify any similar items.
The methodology used by the Finance Department to justify its employees being paid with
Building Department funds is reviewed periodically with the Building Official. The previous
Building Official reviewed and approved the methodology prior to the current individual
becoming the Building Official in May 2018. A few months later, during the FY 2019 budget
Page 26 of 34
process, the methodology was reviewed thoroughly by the current Building Official when
two call-taking positions were transferred from the Finance Department's Customer
Service Center to the Building Department. As part of the reorganization, the Finance
Department conducted an analysis using the number of calls that were Building-related
(32% of all calls) to determine the number of positions needed to cover the anticipated
number of calls (two call-taker positions). This is a valid methodology that is, in our opinion,
a more accurate reflection of time spent than the use of daily timesheets.
There are currently three Full-Time Equivalents (FTE's) funded by Building funds in the
Finance Department, including 1.5 FTE's for Cashiering and 1.5 FTE's at the Customer
Service Center.
• Building funds 1.5 FTE's or 30% of the Cashier team of 5. An analysis of monthly
transactions in October and November 2019 show that the percentage of building
transactions processed by the cashiers ranged from 35% to 31 %. Based on these
figures, Building-related transactions of 35% to 31 % are higher than the amount of
positions being funded at 30%.
• Building also funds 1.5 FTE's at the Customer Service Center. The justification for
funding the 1.5 FTE's includes:
o Building-related calls at lunchtime and after hours when the Building
Department is closed as well as times when no one can be reached at the
Building Department.
o The Finance Department also prepares Certified Lien Searches for
customers, in which there is an entire section dedicated to Building
Department liens and open permits. In FY 2019, 4,972 certified lien
statements were prepared. These lien statements often lead to customer
inquiries, for our Lien Section, regarding building violations and open
permits.
o Our staff also handles questions regarding the Business Tax Receipt
applications. These applications are routed to the following regulatory
review departments: Planning & Zoning; Building; and Fire. There is routine
and constant follow-up with the regulatory departments, including the
Building Department, regarding their reviews.
o The Building Department also accounts for 19% of documented phone
complaints.
We believe that the information above provides adequate justification for the Building
funded positions in the Finance Department. We are currently implementing an Automatic
Call Distribution System with the help of the I.T. Department that will more easily provide
the information necessary to facilitate an accurate update to the methodology on a periodic
basis. We recommend updating the methodology on an annual basis as part of the budget
development process.
4. Finding: THE BUILDING DEPARTMENT COST ALLOCATION PERCENTAGE
WAS NOT UPDATED AND WAS INACCURATE
During the audit process, OIG staff noted that the City hired an external firm, Maximus, to
perform the Fiscal Year 2016 Full Cost Allocation Plan (FCAP) based on actual
expenditures for the fiscal year ended September 30, 2014. However, the Office of Budget
and Performance Improvement (which is now the 0MB) did not update the cost allocation
percentage as per the Maximus Report on the Excel spreadsheet entitled "Schedule of
Page 27 of 34
Actual Building Department Revenues and Expenditures, "The corresponding schedule
(1 Version), provided to OIG staff by the Budget and Performance Improvement Director
on December 6, 2019, included the line item "Overhead Percentage" as follows:
City of Miami Beach
Schedule of Actual Building Department Revenues and Expenditures
Fiscal year ending September 30, 2019
2015 2016 2017 2018 2019 q
REVENUES Actual Actual Actual Actual Projected
INDIRECT COSTS/ADJUSTMENTS
OPEB expense allocation $ (126,146) $ - $ $ - $ -
Revised Total Expenditures $ 12,390,632 $ 12,610,049 $ 13,393,638 $ 13,740,892 $ 13,208,000
INDIRECT COSTS
Overhead Percent ~ 13.18% 13.18% 13.18% 10.64% 8.73%
Overhead Rate 1,633,085 s 1,662,004 $ 1,765,281 $ 1,462,031 $ 1,153,058
Total Indirect Costs $ 14,023,717 $ 14,272,053 $ 15,158,919 $ 15,202,923 $ 14,361,058
I I I
On January 15, 2020, OIG staff received an updated Schedule of Actual Building
Department Revenues and Expenditures from the 0MB, which agreed that the percentage
for the study completed by Maximus should be applied from 2015 to 2018, 0MB updated
the spreadsheet as follows:
City of Miami Beach
Schedule of Actual Building Department Revenues and Expenditures
Fiscal year ending September 30, 2019
2015 2016 2017 2018 2019
'
REVENUES Actual Actual Actual Actual l Projected - - - - INDIRECT COSTS/ADJUSTMENTS
OPES expense allocation (126.146) $ - $ - $ - $ -
Revised Total Expenditures 12,390,632 12,610,049 13,393,638 13,740,892 13,208,000
INDIRECT COSTS
Overhead Percent 10.64% 10.64% 10.64% 10.64% 8.73%
Overhead Rate 1,318,363 1,341,709 1,425,083 1,462,031 1,153,058
Total Indirect Costs 13,708,995 13,951,758 14,818,721 15,202,923 14,361,058
When OIG staff examined the Maximus Cost Allocation Plan, it was noted that Ad min Svcs
(Building Dept.) of $452,700 were included on the Building Cost Allocation Plan (see
Exhibit B located at the end of this audit report). When questioned as to why the Building
Department should be billed for their own administrative services, 0MB staff was unsure,
so they sent a request to the consultant that prepared the 2014 Cost Allocation study, but
the Maximus consultant never responded.
On February 4, 2020, OIG staff directly contacted Khushboo Hussain from Matrix
Consulting Group, the cost expert hired by the City to perform the Fiscal Year 2019 Full
Cost Allocation Plan, and asked, based on her expertise, if it was correct to include the
$452,700 in question, charged as administrative services to the Building Department. She
replied "In our review of the previous cost plan (2014 cost allocation plan), our assumption
was that the Administrative Services (Building Department) was included in the plan to
Page 28 of 34
allocate support from building division staff (director and administrative staff) to building
staff and code compliance. It is our understanding that this is not how the city's current
operations for the Building Department or Code Compliance are structured, therefore, we
did not include these costs in the current allocation methodology. Since there was no
support to be allocated this central service was not included in the current cost plan.
Hopefully this helps provide some insight on what is typically allocated and not allocated
in cost plans".
As a result, OIG staff recommended the revision of the cost allocation percentage for the
Building Department, which was then recalculated to exclude the $452,700. The final
Building Department allocation percentage calculation provided by the 0MB is as follows:
City of Miami Beach
Schedule of Actual Building Department Revenues and Expenditures
Fiscal year ending September 30, 2019
2015 2016 2017 2018 2019
i REVENUES Actual Actual Actual Actual Projected
INDIRECT COSTS/ADJUSTMENTS -
OPEB expense allocation (126,146) o o o o
Revised Total Expenditures 12,390,632 12,610,049 13,393,638 13,740,892 13,208,000
INDIRECT COSTS
1
Overhead Percent 12.69% 12.69% 12.69% 12.69% 8.73%
Overhead Rate 1,572,371 1,600.215 1.,699.653 1,743,719 1,153,058
Total Indirect Costs 13,963,003 14,210,264 15,093,291 15,484,611 14,361,058
It was noted that the overhead percentage, instead of decreasing from 10.64% as
reflected in the prior schedule on page 28, increased from 10.64% to 12.69%. The
calculation of the Building Department cost allocation percentage changed at least three
different times during this audit process and there remains confusion as to the correct
figure to be used. As a result, OIG staff is unsure as to the accuracy of the amounts that
were billed to Building Department funds from year 2015 to 2018.
Recommendation( s ):
It is recommended that the City more closely review the accuracy of the cost allocation
study's results prior to the completion and issuance of the report. Also, the City should
carefully review the costs included as part of the cost allocation for Building Department
to ensure that the amounts are reasonably associated with review of building plans,
building inspections, re-inspections, building permit processing, building code
enforcement, and fire inspections associated with new construction. In addition, the
Building Official or his/her designee should meet with the consultant to review and reach
agreement on the costs included for the Building Department as part of the allocation study
prior to its final approval, in order to ensure its compliance with the Florida Building Code
Statutes.
Building Department's Response:
An independent team performs the cost allocation study and determines the % due by
each department. Maximus performed the 2015-2018 study and Matrix conducted the
most recent review and study. We are available to meet with the cost allocation team and
discuss the exact percentage that the Building Department needs to pay.
Page 29 of 34
Upon discussion and explanation from 0MB on the Building Department Cost allocation
percentage applied, the Building Department was comfortable with the explanation on the
methodology for determining the cost allocation amount.
Finance Department/OMB's Response:
The Office of Management & Budget periodically engages a consultant to update the City's
cost allocation plans. These plans establish the method of allocating indirect and direct
costs across the City's various departments and funds to ensure that the respective funds
are fairly and accurately paying for the General Fund services they receive.
During each update, the Office of Management & Budget and the consultant meet with
each department to discuss the most relevant allocation factors or methodology for
distributing their costs. Once this is determined, the consultant allocates the costs using
the allocation factor or methodology and produces a cost allocation plan document or
spreadsheet. This information is then used by the Office of Management & Budget to
develop the annual budget.
The Full Cost Allocation Plan that was completed back in 2015 by Maximus was not clear
on what the Indirect Cost percentage should have been for General Fund services
provided to the Building Department. Therefore, the 10.64% was calculated based on the
limited information that was gathered and the data reported in the Maximus Full Cost
Allocation Plan. To ensure that an accurate Indirect Cost percentage was used for Building
based on the Full Cost Allocation Plan completed by Maximus back in 2015, the
information was sent to Matrix Consulting, which is the City's current cost allocation
consultant, to review and provide a recommendation. Based on the recommendation from
Matrix, the Indirect Cost percentage that should have been used was 12.69%, which
excluded the $452,700 and reflected the administrative share of General Fund costs
allocated to Building.
We agree that the Office of Management & Budget, Building Department, and every other
City department should review the accuracy of the cost allocation plan before the plan is
finalized. In practice, there are normally very few questions regarding the methodologies
used for development in the plan. If questions do come up, the Office of Management &
Budget works with the consultant to address the questions or concerns. For example,
when the new Building Official had questions regarding Building's cost allocation, the
Office of Management & Budget discussed the questions with the City's consultant and
sent responses in an email dated October 23, 2018. There was no indication provided to
the Office of Management & Budget at that time or until the time of the audit that there
were any further concerns with the cost allocation methodology. Going forward, the Office
of Management & Budget will add a specific step in the cost allocation process for all
departments to formally submit any questions or concerns regarding the proposed cost
allocations, before they are allocated to develop the annual budget.
Developing cost allocation plans is a complex endeavor which is why it is normal for cities
to use third-party consultants who also incorporate best practice allocation methods from
organizations across the country. During the audit process, OIG staff questioned the cost
allocation percentages used for the years during which the cost allocation plans were not
updated annually and recommended that the more conservative percentages be used
whenever possible instead of using the same percentage as the year before, which is also
an acceptable practice. These changes were made to the multi-year tracking sheet as
Page 30 of 34
requested by the OIG. The Office of Management & Budget has implemented annual
updates of the cost allocation plan, including FY 2019 and FY 2020, except for FY 2021
as a COVID-19 cost saving measure, to include the most accurate allocation percentages
possible in the development of the annual budget.
cc: Raul Aguila, Interim City Manager
Eric Carpenter, Assistant City Manager
Mark Taxis, Assistant City Manager
Ana Salgueiro, Building Department Director and Building Official
John Woodruff, Chief Financial Officer
Tameka Otto Stewart, Budget and Performance Improvement Director
Chris Sarandos, Chief Information Officer, Information Technology Department
Julie Santamaria, Director, RBC Capital Markets, LLC
John Weber, CPA, Partner, Crowe LLP
Valerie Coliman, RSM US LLP
Khushboo Hussain, Senior Consultant, Matrix Consulting LLC
General 7 Date
"y&C2
Mark Coolidge, Chief Auditor
03/04/302/
Date
ate
OFFICE OF THE INSPECTOR GENERAL, City of Miami Beach
1130 Washington Avenue, 6" Floor, Miami Beach, FL 33139
Tel: 305.673.7020 • Fox: 305.587.2401 • Hotline: 786.897.1111
Email: CityofMiamiBeachOIG@miamibeachfl.gov
Website: www.mbinspectorgeneral.com
Page 31 of 34
Exhibit A- Proposed Building Department Ombudsman Pilot Position
In view of the issues raised by this audit in connection with irregularities in the expenditure of
Building Department funds, as well as the current issues that have been raised by complainants
to the City administration, the OIG and other City Officials, regarding the efficiency and fairness
of the City's permitting processes and enforcement of the Building Code, we recommend the
creation of a pilot position of Building Department Ombudsman, to be created for a period of one
to two years, structured as follows:
• The Ombudsman pilot position will be created for the purpose of establishing an
independent full-time position within the Building Department for the monitoring of Building
Department expenditures, and the compilation and evaluation of serious complaints about
efficiency, fairness and integrity in all phases of permitting and Building Code
enforcement;
• The Ombudsman pilot position will be funded through restricted Building Department
funds, subject to the approval of the Building Official;
• The Ombudsman pilot position will be filled and accountable to an authority outside of the
Building Department, as designated by the City Manager and approved by the City
Commission;
• The Ombudsman will be required to have prior experience in the permitting field at the
municipal level; will have a thorough knowledge of the Florida Building Code; and have,
at a minimum, a Bachelor Degree from a four-year accredited college or university;
• The Ombudsman will be provided with information documenting all complaints made to
the Building Department and the resolution or other disposition of such complaints by the
Building Department, and, while not authorized to direct any action by the Building
Department, shall be authorized to act as an advocate for businesses and consumers in
connection with the efficiency and responsiveness of permitting activity within the Building
Department;
• The Ombudsman will act as a consultant to the Building Official, the City Manager, and
Inspector General in connection with ideas for improving the efficiency of permitting
operations, as well as in the proper expenditure of Building Department funds in
accordance with Florida law;
• The Ombudsman will report to the Inspector General any perceived corruption or serious
misconduct by any public employee or private person or entity in connection with Building
Department functions;
• At the conclusion of the designated term for the Ombudsman pilot position, the City
Manager shall make recommendations to the City Commission regarding whether the
position should be continued or alternative actions taken to provide continued oversight of
expenditures and the permitting process in the Building Department and/or other
permitting departments in the City.
Page 32 of 34
Building Department Response to the Creation of the Ombudsmen Position
The Building permitting process involves various departments and agencies the actual
Building Department comprises less than 50% of the permitting process, while being the
face of construction permitting. The Matrix Consultant was hired to review the permitting
process and was funded by both Building and Planning to study the permitting process
study which included DERM, Environmental, Fire prevention, Public Works, and provide
recommendations for process improvements.
In addition, the Building Department became ISO-9001 (management process
certification) Certified in 2018 and has maintained the certification.
Page 33 of 34
Exhibit B
MaxCars - Cost Allocation Module
02/26/2016 1047.40 AM
Miami Beach. Florida
Full Cost Allocation Plan (FCAP)
for the Fiscal Year Ended September 30. 2014
Schedule.2-Costs To Be Allocated
For Department Admin Svcs (Building Dept.)
Miami Beach, FI(FYE 2O14)FCAP V2.O
FIscal Yr Ended 2014 Version 2.0001-2
1st Allocation 2nd Allocation
Expenditures Per Financial Statement
00674 Machinery & Equipment
Total Deductions
Depreciation Expense
Mayor & Commission
Ofce of the City Clerk
City Managers Ofce
Emergency Management
Office of internal Audirt
Organizational Development
Otce of Management & Budget
Media Relatons
Revenue Management
Treasury Management
General Accounting & Reporting Mgmt
Ependiture & Captal Management
Human Resources
Procurement
Ofce of the City Atomey
Admin Svcs (Building Dept.)
Evtemal Audit & Management intems
Special Projects
Lobbyist & Tution Reimbursement
Accumulated Leave Settlement
415 Excess Pension Plan
Total Allocated Additions.
11.555.101
12,059)
12.059)
49.946
30.071
122,973
87.736
10.005
60.062
33,240
15,326
28,107
24,881)
10.,637
4.985
5,793
58.858
27.514
178.667
11.238
77.691
18,876
572
2.828
2.651
3,147
2,975
10.799
1.051
591
428
27,086
5,416
8 761
452,700
1,944
9,948
6.922
86.577
27.536
699.039 759,737
Sub-Total Total
11.555.101
12,059)
49.946
41.309
200.664
106.612
10.577
62.890
35.891
18.473
31.082
14.082)
11.688
5.576
6.221
85.944
32.930
187.428
452.700
1.944
9.948
6.922
86.577
27.536
1.458.776 1,458.776
Al Monetary Values Are $ Dollars
MAXCars ¢ 2016 MAXIMUS, INC
Report Output Prepared By Agency
Schedule 22.2
Page 303
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