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OIG Annual Report 2022 OFFICE OF THE INSPECTOR GENERAL Annual Report 2022 “Sunlight is said to be the best of disinfectants; electric light the most efficient policeman.” Justice Louis D. Brandeis 2 TO THE MIAMI BEACH CITY COMMISSION AND RESIDENTS OF THE CITY OF MIAMI BEACH: It has been an honor for me to serve as the first Inspector General of the City of Miami Beach for the past three years. The Office of the Inspector General was created following a voter referendum in 2018, which established the office as an independent body to oversee City affairs, and to conduct audits, investigations, contract oversight, and other reviews of the City’s operations and expenditures. Our mission is to detect as well as prevent fraud, waste, abuse, and inefficiency in City government. Miami Beach has established itself as a leader in promoting strong ethical standards in City government. The creation of the OIG has been a further step in that direction, which we hope will establish a model that other communities will look to as an example of good government. Miami Beach is an exciting and dynamic city which often confronts special challenges that are not common to other cities of its size. Among those challenges is the need to protect itself against rising seas and flooding in our island community. The OIG has conducted lengthy reviews of some of the resiliency projects to date on Palm and Hibiscus islands, West Avenue, and Indian Creek. The latter two are summarized in this annual report. Having learned lessons from the problems experienced on these projects, we have worked with the City Administration to create a policy for the management of major construction projects, which should serve to avoid similar issues in the future. We are here to serve the public and are always accessible. More than anything, we depend on getting information from residents, local businesspeople, and City employees who may have information about activities that need attention and oversight. Our website, www.mbinspectorgeneral.com, our hotline, 786- 897-1111, as well as our regular office number, 305-673-7020, may be used to communicate with us, even anonymously if that is preferred. We are located on the 6th Floor of Historic City Hall at 1130 Washington Avenue, and we welcome the public to visit our office to discuss issues of concern. Sincerely, Joseph M. Centorino Inspector General City of Miami Beach 3 LEGISLATIVE INITIATIVES • Management Policy for Internal Controls on Major Construction Projects Based on findings and recommendations included in OIG Report No. 20-07, Management of the Palm & Hibiscus Neighborhood Improvement Project, the OIG worked in collaboration with the City Administration to develop a comprehensive management policy for major City construction projects with a value of $5 Million or greater. This resulted in the Commission’s approval during 2022 of a City Ordinance directing that such a policy be created and maintained together with passage of a Commission Resolution approving the policy. The policy provides for procedures and Internal controls for managing projects from procurement through completion and codifies best practices in construction management. It addresses project delivery methods, emergency procurements, contract modifications, and change orders, with an eye toward stronger management, compliance with applicable laws and regulations, and reduction of financial risks. The Management Policy is included in this report in Appendix I. • Amendment to Debarment Ordinance Upon the recommendation of the OIG, the Commission adopted an ordinance amending the City’s current procedures for debarment of City contractors, that may be used to protect the City against contractors that commit fraud or other serious misconduct. The Amendment authorizes the City Manager to transmit a request for debarment or suspension of a contractor to the OIG for investigation and to prepare a report for consideration by the Mayor and City Commission. 4 OUTREACH AND EDUCATION The Inspector General participates in all regular orientation programs for new City of Miami Beach employees, acquainting them with resources and services that the OIG provides and encouraging their own involvement in oversight activity. He also responds to any request to speak to resident or business groups about the OIG's role in the community. In October of this year, the Inspector General was honored to speak at the Annual Training Conference of the Association of Inspectors General (AIG) In Washington D.C. The office maintains membership in both the national organization and the Florida Chapter of AIG, and participates in training activities of the Florida Chapter, one of the largest and most active of all the state chapters. All senior staff, Internal Auditors, Sanitation Tax Auditor, and Investigators have received AIG certification in their respective disciplines. The Inspector General and Chief Auditor Mark Coolidge recently joined the Florida Chief Audit Executive Roundtable, a statewide consortium of local auditors from around the state, who meet periodically to share and discuss relevant developments, trends, techniques, and programs in the audit field. Mr. Coolidge was selected by the Association of Internal Auditors to conduct a peer review of the City of Atlanta audit agency, which was completed in July 2022. 5 INTERNAL AUDIT REPORTS Chief Auditor Mark Coolidge and Deputy Chief Norman Blaiotta Internal Auditors Tomas Valdes and Jessica Romero 6 Internal Audits include analysis and testing of City operations and expenditures, contractor performance, as well as compliance with contractual and legal requirements on City projects and programs. They are used to promote efficiency and accountability and are a major function for OIGs. Chief Auditor Mark Coolidge serves as the liaison to the City's Audit Committee, which provides, among other functions, advice and input on planned and completed audits. • State Beachfront Management Agreement #3595 (Financial and Operational Reports) for the 2019/20 Fiscal Year State Beachfront Management Agreement No. 3595 requires the City of Miami Beach to remit to the State 25% of monies collected from private concessionaires for the use of State beachfront property (“sand tax”). The OIG annually completes two separate related reports: (1) a Financial report informing the State of the accuracy of the City’s quarterly sand tax payments; (2) an Operational report that reviews City procedures and internal controls and the accuracy of transactions occurring on State-owned property. Based upon an examination of City records for the period of October 1, 2019, through September 30, 2020, the OIG found underpayments and overpayments of sand taxes owed to the State, resulting in a net $18,605.94 underpayment. One cause of this was not updating the EnerGov system by the required Consumer Price Index adjustment at the beginning of the fiscal year. City staff incorrectly processed the Boucher Brothers Inc. Minimum Guarantee payment, which led to a $14,853.13 underpayment to the State. Also, the City's documentation related to sand tax was not sufficiently reconciled with the entries made in the City's Munis system, which contributed to the inaccurate payments. • Compliance with Selected BDO Audit Recommendations Audit Unit staff annually reviews the Finance Department's compliance with recommendations from the BDO USA, LLP audit conducted as a result of a $3.6 million fraud involving the City's Treasury Department and Automatic Clearing House disbursements during the fall of 2016. The review focused on compliance with recommendations numbered 27, 34, 44, 52, and 53 in that audit. The following deficiencies were found: • Eight individual transactions of more than $100,000 (total $2,674,846.61) were not dually approved, i.e., by two department employees (#27). The Customer Service Complaint Log did not include the number of complaints closed or outstanding each quarter (#53). The Finance Department reported taking appropriate action regarding these issues. No deficiencies were found regarding the following: • Audit testing verified that the Deputy Finance Director properly had no recordkeeping rights assigned during the review of reports (#34). 7 • The audit confirmed that the Human Resources Department is conducting criminal background checks on all temporary employees, including those obtained through third-party employment agencies (#44). • The functionality of the ACD system used to document, file, and track customer complaints was verified by the OIG (#52). • Public Towing Pricing Methodology Analysis A City Commissioner requested the OIG evaluate the methodology used in the public pricing being negotiated by the City’s Parking Department with Beach Towing and Tremont Towing to arrive at a flat rate fee rather than the previous method of calculating the fee for each tow based on variable service factors. The OIG opted to calculate its own recommended fixed rate for non-resident tows based on its recent review and previous audit documentation (October 1, 2017 through October 31, 2018). The OIG's recommended fixed rate per tow was based on the frequency in which additional fees would be charged for specified services under the previous towing permit. Those percentages were then applied to the City Commission approved Maximum Allowable Rates in effect since March 1, 2018, also taking into account a new State law requiring that the City’s portion of the fee be billed separately on the customer's invoice and no longer paid from the amounts collected by the tow companies. The OIG recommended a flat rate for non-residents; a lower fee for City residents; acceptance by the towing companies of both debit and credit cards for City residents; and acceptance of at least debit cards for non-residents. The OIG provided the input to the Parking Department for its consideration in connection with the ongoing negotiations, which concluded with the adoption of a flat non-resident fee of $250 plus the $30 City fee for a total of $280, and a resident flat fee of $150 with no City fee. An agreement was reached for the acceptance of both debit and credit cards for residents and debit cards for Miami-Dade County residents. • Building Department Permitting Process OIG Audit Unit staff conducted this review in connection with complaints from residents and businesses dissatisfied with current Building Department permitting procedures. The OIG worked collaboratively with the Building and Information Technology Departments in analyzing the permit application process and the customer interface to develop possible solutions to address software and other concerns. The review included consideration of the 2019 Matrix study commissioned by the City, Florida Building Code requirements, online applications, a compilation of and graphic illustration of Building Department survey responses over time, a listing of the ten most common complaints (timeliness was the most common issue), an analysis of the EnerGov system data showing the average number of times each type of permit failed the review process until finally being approved, a comparison of time the permit spent with the City compared with the customer, the distribution 8 of the Building Department’s call volume over time, recent departmental improvements, technological deficiencies, and its future outlook. A follow-up process review is planned. • Miami Beach Garden Conservancy, Inc. Management Agreement The Botanical Garden, a City-owned asset, is managed by the non-profit Conservancy. This audit, conducted at the request of the City Manager, noted the following deficiencies in connection with the Management Agreement between the Conservancy and the City: • The City’s annual contributions to the Botanical Garden were not reduced by the Conservancy's reported net income, resulting in an excess of $115,579.20 paid by the City during the audit period and another $38,000 paid during the 2021/22 fiscal year. • The Conservancy was not fully compliant with insurance requirements. • The Conservancy did not ensure that the City received all Resort Tax monies due from food and beverage sales occurring at the Botanical Garden pursuant to the agreement. • The Conservancy did not maintain certificates of insurance from tested vendors necessary to enable the OIG Auditor to determine whether each was compliant. • The Conservancy charged facility rental rates which differed from the rates approved by the City. • The Conservancy submitted required reports to the City after designated due dates. • The required inventory list was not updated, although additions and deletions occurred during the audit period. The OIG also reported on the circumstances surrounding the November 3, 2021, termination of the Conservancy's prior Executive Director. Finally, the report recommended several opportunities for future improvement related to Garden operations. 9 Sanitation Tax Audits are conducted to determine whether private contractors collecting construction debris and other solid waste deposited in roll-off containers are properly permitted and paying the City 20% of gross receipts per City Code. In addition, periodic audits are performed on City Commission approved waste contractors related to their monthly remittance of franchise fees. as required by City Ordinance. • Sanitation Field Observations Report The OIG Sanitation Tax Auditor performed unannounced field observations of roll-off activity at various Miami Beach properties from May 20, 2021, through July 15, 2021, to determine whether the associated contractors had obtained valid business tax receipts (BTRs), acquired the required Building and/or Roll-off permits, and filed Roll- off Permit Fee Returns with the City. Any deficiencies observed were promptly forwarded to the Code Compliance Department for review and issuance of warranted Notices of Violations (NOVs), resulting in the following: • Code Compliance Enforcement Officers issued 76 NOVs to non-compliant contractors ranging from $100 to $1,000 and totaling $35,400. • All County Waste, Inc. received NOVs, paid $1,558 to obtain its 2020/21 and 2021/22 BTRs, and remitted $5,165.22 in roll-off fees due from July 2021 to September 2021. • A recycling contractor, Medley Metal Recycling LLC, was identified that was not remitting any required reports to the City, meriting an audit. • Riteway Systems, Inc. was found non-compliant and paid $754.00 to obtain its 2021- 22 BTR and will be subsequently audited to determine if roll-off fees are due. SANITATION TAX AUDITS SANITATION TAX AUDITOR – JUAN OSPINA 10 In addition, the OIG made recommendations to improve the enforcement process and relevant City Code provisions, some of which were subsequently adopted by the City Commission to increase compliance. • Ojito Waste Systems, Inc. Roll-Off Fee Revenues Audit The OIG Sanitation Tax Auditor located roll-offs placed by Ojito Waste Systems, Inc., for which the contractor had not filed Roll-Off Permit Fee Returns with the City. A subsequent examination of contractor records determined that it owed the City a total of $59,706.13 including penalties and interest for the January 1, 2017, through December 31, 2020 audit period. In addition, the contractor began filing and remitting monthly roll-off permit fees due to the City following the audit period, which equaled $25,366.65 for the period of January 2021 through October 2021. • Pronto Waste Service, Inc. Roll-off Fee Revenues Audit After the issuance of two subpoenas for company records, the previously unresponsive roll-off contractor furnished the necessary records for examination to the OIG, which determined that the contractor had unreported gross receipts, resulting in the levying of a $70,894.31 assessment (including penalties and interest) and $4,765.69 in audit costs. The Code Compliance Department issued retroactive Notices of Violations to eight Miami Beach properties serviced by the contractor where required permits were not obtained. In addition, the contractor did not always timely remit its monies owed during the audit period, resulting in interest and penalties being levied. • Trash Be Gone, Inc. Roll-off Fee Revenues Audit The contractor filed six Roll-Off Permit Fee Returns and remitted $1,494.00 to the City Finance Department during the June 1, 2017, through August 31, 2021, audit period. An examination of the records determined that the contractor owed $57,612.24 in unpaid roll-off fees (including penalties and interest) and another $2,992.11 in audit costs. The contractor also remitted $4,560.88 in permit fees due for seven months outside of the audit period, which would not otherwise have been collected. The Code Compliance Department issued retroactive Notices of Violations to 23 Miami Beach serviced properties where required permits were not obtained. Lastly, the contractor did not always timely remit its owed monies during the audit period, resulting in interest and penalties being levied. • Pending Sanitation Tax Issues • As a result of an ongoing roll-off permit fee revenue audit, one contractor has already remitted over $183,000 on account to the City, pending completion of the audit. • The OIG is currently collaborating with the Public Works Department and Office of City Attorney on revising City Code provisions related to Sanitation Tax issues to clarify ambiguities and improve enforcement regarding roll-off containers and recycling. 11 The Resort Tax Audit Unit conducts audits of hotels, motels, rooming houses, apartment houses, bars, nightclubs, and restaurants required by City Code to pay City-imposed resort taxes on collected revenues. There are currently more than 4,000 active Resort Tax accounts registered with the Finance Department, with the number expected to increase due to short-term rentals. Any reporting deficiencies identified during a Resort Tax audit are subject to penalties of 10% per month with a maximum of 50%, and interest of 1% per month from the date on which the tax first became delinquent. Due to the COVID pandemic, no penalties or interest were charged for deficiencies occurring during March 1, 2020, through November 30, 2020, pursuant to City Commission Resolutions. All Resort Tax audit assessments are forwarded to the City's Finance Department for appeals and/or collection, which may include the placement of liens on taxpayer- owned property. Any amounts remitted due to these assessments represent monies that the City would not have otherwise collected. Resort Tax Auditors completed 158 audits during the fiscal year from October 1, 2021, through September 30, 2022, with net assessments of $1,866,519.34. The OIG also issued two related semi-annual reports to the City Commission dated April 6, 2022 (OIG No. 22- 05) and October 3, 2022 (OIG No. 22-19) to increase transparency regarding this important revenue source. RESORT TAX AUDITORS MEETING WITH OFFICE MANAGER ELISA ALONSO RESORT TAX AUDITS 12 The OIG Investigative Unit conducts Investigations of possible fraud, waste or abuse within City government that may include either criminal or administrative misconduct. It works with OIG auditors and with criminal justice or other enforcement agencies when the need arises. The unit also works collaboratively with the City Administration to address needed reforms to City processes or procedures. Reviews and inspections of City projects or departments may also be performed by either investigators or auditors as part of the OIG oversight function. Dylan Hughes joined the OIG investigative staff in August of this year, bringing with him a vast amount of experience. Investigator Hughes previously worked for 11 years with the Broward Office of the Inspector General, serving as the Assistant Inspector General since its inception. Prior to that, he served as a Supervisory Special Agent with the Miami-Dade County OIG and as a Special Agent with the Florida Department of Law Enforcement. His background also includes stints as a law enforcement investigator with the Florida Department of Insurance, as a criminal investigator with the Indian River County Sheriff's Office, and a 13-year career with the Florida Army National Guard. Investigator Hughes holds a Bachelor of Professional Studies and a Master of Science degree in Human Resource Design and Administration from Barry University, certifications from the Association of Inspectors General as an Inspector General and Inspector General Investigator, and is also a Certified Fraud Examiner. INVESTIGATIONS, REVIEWS, AND INSPECTIONS NEW OIG INVESTIGATOR DYLAN HUGHES 13 • Investigation/Review of Indian Creek Stormwater Drainage Project The OIG completed an extensive investigation of the Indian Creek Stormwater Drainage Project and identified systemic weaknesses and lack of internal controls that led to mismanagement of the planning and construction of the project. The identified weaknesses included the failure in some instances to use the competitive bidding process in some instances; the repetitive use of emergency procurements to circumvent procurement procedures; the disregard of contractual terms that had been negotiated with the Florida Department of Transportation; permitting violations that caused the project to be delayed; and the bypassing of orderly administrative functions. These process failures led to an increase in the total budget from $25.4 million to $50.6 million and delayed delivery of the final project for five years. The OIG recommended that the City Charter be amended to prohibit a single elected official or any member of a City advisory board from directing the City Manager or any employee of the City in an administrative function; to prevent any employee from responding to an order from the Mayor, Commission member or advisory board, and to prohibit the City Manager from knowingly allowing the violation of this prohibition. The OIG encouraged the Commission to recommend that the City Manager lead a comprehensive fraud risk assessment by the Directors of Public Works, Procurement, and Capital Improvement Projects of the City’s major construction projects. The final recommendations sought to restrict the award of noncompetitive contracts, educate private owners on the proper maintenance of gravity wells and the likelihood of their failure as a result of sea level rise, and hasten discussions with FDOT and DERM regarding the requirements for allowing future connections of private and commercial stormwater systems to new drainage projects that are jointly undertaken. • Review of Permitting Issues at 310 Meridian Avenue and 333 Jefferson Avenue 310 Meridian This review began following the OIG receipt of complaints from adjacent property owners and other residents regarding numerous alleged permitting violations in connection with the apartment/hotel conversion at 310 Meridian Avenue. The City Commission also requested this review as well as an independent opinion on the legal issues, for which the OIG engaged an outside law firm. A review of the permitting process was conducted, which included Planning and Building Department records, procedures, and practices, interviews with present and former City employees, attorneys for the residents and the developer, and a review of relevant laws with retained legal counsel. A series of findings were issued, which included violations of City Land Development Regulations (LDRs) and the Florida Building Code. The report also included recommendations for remedying legal and procedural deficiencies, strengthening the City’s underlying policies on such conversions, and improving transparency. 14 333 Jefferson A separate request from the City Commission to review the procedures for the conversion of the property at 333 Jefferson Avenue was received. That project raised similar issues, and the OIG’s independent counsel found corresponding violations of the City’s Land Development Regulations. An additional issue was raised by the fact that at 333 Jefferson a stop-work order was issued by City inspectors because the scope of demolition at the site exceeded building permit plans. This led to an after- the-fact Certificate of Appropriateness request that was approved by the Historic Preservation Board (HPB). Independent counsel opined that the after-the-fact application was consistent with City LDRs and that any procedural deficiencies were remedied by the hearing before the HPB. Notably, during these reviews the City has taken corrective action to clarify its procedures to resolve issues raised by these types of projects in the future. • Review of Termination of Tai Chi Instructor City Contract The OIG initiated a review of the facts and circumstances related to the termination of the City’s agreement with a popular instructor of Tai Chi classes for residents and visitors at five City Parks and Recreation Department facilities. The instructor was terminated following a complaint to the City by the owner of a local fitness center who alleged that the City’s employment of the instructor violated a non-compete agreement with the center. Litigation was pending at the time between the instructor and the center. Following discussions by the OIG with the instructor regarding his defense to the suit, as well as with the Parks and Recreation Department and the City Attorney’s Office, it was determined that the instructor could continue to be employed by the City pending the outcome of the litigation, which, in the end, determined that the instructor would be barred from teaching in the North Beach area, but could teach at other City sites. • Criminal Investigation of City Employee for Theft/Official Misconduct Based on a tip from a City source, the OIG investigated an Operations Supervisor in the Department of Property Management, alleged to have directed a City employee to build a large aluminum kayak holder on City time utilizing City materials, for the Supervisor’s personal use. With the assistance of the Miami Beach Police Department, evidence was obtained from cooperating City employees for issuance of a search warrant for an area adjacent to the employee’s home, where the City property was located and seized. The investigation led to the filing of criminal charges for Theft and Official Misconduct, and the termination of the Supervisor's City employment. • Investigation of Unauthorized Outside Employment by a City Facilities Manager An OIG investigation commenced following receipt of information that a Department of Property Management Facilities Manager, a licensed electrician whose duties included electrical services, was performing unauthorized outside employment involving private electrical work performed by his own company. Evidence was gathered confirming the outside work, for which no authorization had been received, and which showed that the subject was using online images of City electrical work done by him in order to promote his private business. It was also determined that the employee was on Family Medical Leave (FML) while engaged in the private work, 15 which is disallowed. The investigation led to his resignation from his City position, and found that department records did not clearly indicate whether the tools he was in possession of belonged to the City or to him personally. The investigation resulted in the adoption of stronger controls over City-issued tools as well as a clarification of FML procedures. • Review of West Avenue Phase II Project A review was conducted of the West Avenue Phase II Project upon a referral from the City Commission that sought an explanation for the extensive delay in moving the project forward, with an emphasis on the problems encountered in convincing area residents to sign the harmonization and license agreements necessary for construction to commence. The findings in the report included the need to more specifically inform residents of the impacts on individual properties, including the costs involved; to comprehensively address encroachments in rights-of-way; to have the Public Works Department more effectively resolve conflicts with design criteria and provide clear guidance on drainage and harmonization issues during the design phase; and that the Project Manager should have used CIP’s mandated project management software, E- builder, rather than email, to manage information and provide more timely reviews and approvals of harmonization plans. Additionally, the OIG found that the review process stagnated due to COVID-19 restrictions as well as the lack of engagement by the former City Engineer with residents and team members, in opting not to attend many of the bi-weekly project team meetings; and that confusion and distrust among residents resulted from a lack of transparency caused by inter-departmental delays in reviewing and commenting on proposed plans. The recommendations in the report included the hiring of a full-time project manager or engineering consultant firm with the proper experience and resources; clarification of the roles of Public Works and CIP during the design phase; development of a consistently-used design criteria package for resiliency projects and use of design- bid-build methodology; full utilization of E-Builder; the need for a comprehensive plan for dealing with private encroachments on public property; more strategic cooperation among City departments; and establishment of a community adaptation fund to assist residents with harmonization costs. 16 Both OIG audit and investigative personnel may be involved in the Contract Oversight function, which may lead to an audit, investigation, review, inspection, or evaluation of a City contract at any point from procurement through completion. • OIG Contract Risk Assessment Procedure To readily identify high risk City contracts and to prioritize the OIG contract oversight function, the OIG has developed a Risk Assessment procedure for City contracts during the past year with the helpful assistance of the Palm Beach County Inspector General and the cooperation of the City’s Procurement Department. A Risk Assessment Form has been created that evaluates each City contract based on nine risk factors. City Procurement personnel include the calculation of these risk factors for each solicitation on a Request for Issuance Approval Form. The OIG compiles these scores to rate the contract as having a high, medium, or low risk level and to plan its oversight accordingly. The Contract Risk Assessment Form is included in this report as Appendix II. • G.O. Bond Oversight OIG Investigator Jani Singer continues to attend internal implementation team meetings, bi-weekly Capital Improvement Projects (CIP) and Procurement staff meetings, G.O. Bond Oversight Committee meetings, and scheduled meetings with the Program Director, when necessary. In Report No. 21-35, the OIG documented that spending trends on Tranche 1 projects had started to slow. The OIG met with the City’s CFO and GO BOND Program Director to discuss the impact of the slowed spending on the prioritization of the projects as well as the budget shortfalls on some of the larger projects. The OIG also conducted a financial analysis of the Fire Station #1 project and identified a discrepancy between the G.O. Bond dashboard and E-Builder. E-Builder reflected a total spent to date of $173,724.83 and the dashboard reflected a total spent of $185,960.00. This was discussed with CIP and a review of the transactions in E-Builder was done, which resulted in the correction of recording errors. E-Builder and the dashboard are now in alignment. As part of the internal controls implemented this year, the OIG recommended that all bids, technical proposals, letters of interest, or other submissions by contractors related to any construction contract, include a coordination plan that would demonstrate that the selected firm understands the project’s requirements; has identified all critical technical and construction issues; and has developed engineering solutions to address them. This was discussed by the Oversight Committee and it was assured, CONTRACT OVERSIGHT 17 during a discussion of Fire Station #1, that the design team will provide design, constructability, schedule analysis, cost estimates, and site complications prior to beginning construction to alleviate any unexpected budget impact that may delay the project. Additionally, the internal controls policy requires that any major design change in a construction project, defined as a change to the scope that requires significant redesign or revision to any major design element or any change that may result in a project construction cost increase of more than 10%, requires the responsible City department to initiate, prepare and sign a Request for Major Modification to the Project’s Scope which shall be submitted to the Project Directors and respective City managers. On March 2, 2022, the new policy was presented to staff working on G.O. BOND projects and again to the Oversight Committee on March 31, 2022. • CBRE Complaint Re: RFP For City-Owned Parking Lots The OIG received a complaint from the law firm of Foley & Lardner on behalf of CBRE, a City contractor, alleging improprieties in connection with the City’s acceptance of the proposal of a competing firm, Colliers, which was awarded a contract to act as the City’s real estate consultant in connection with the development of Class A office space in city-owned parking lots. The allegations of procedural errors were determined to be unfounded after the OIG's review of the process followed by the Economic Development and Procurement departments. The OIG review then focused on the enormous disparity between the cost of the Colliers proposal ($15,000) and that of CBRE ($375,000) and the other responding firm ($300,000). The inquiry determined that a 4% advisory fee, which had not been included by Colliers in its original proposal, was added to its contract proposal, and then rightly rejected by the City. Colliers then confirmed its original proposal and proceeded to carry out its contractual responsibilities to the City's satisfaction. Appendix I MANAGEMENT POLICY FOR INTERNAL CONTROLS ON MAJOR CONSTRUCTION PROJECTS Management Policy for Internal Controls on Major Construction Projects Section 1 -Definitions. Architectural and Engineering Services means professional services of an architectural or engineering nature as defined by Section 287.055, Florida Statutes. City's contingency means an amount approved by the City Commission to cover construction­ related costs which were not foreseeable or quantifiable at the time design requirements were prepared for competitive bidding. The contingency amount is typically ten (10) percent of the contract amount. The City Commission approval authorizes the City Manager, or designee, to utilize the contingency at his/her discretion to defray any additional expenses relative to design and construction of the project, as well as additional expenses expressly chargeable to the City pursuant to the Contract Documents, including material changes. The contractor or design-build firm has no right or entitlement whatsoever to the City's contingency and any unused amounts in City's contingency remaining at the completion of the project shall accrue solely to the City. Competitive sealed bidding means a procurement method based on an Invitation to Bid (1TB), which shall, at a minimum, include design requirements (as applicable), terms and conditions, and cost. Competitive sealed proposals means the procurement method based on a Request for Proposals (RFP), which shall include specifications, design requirements (as applicable), terms and conditions, and cost. The RFP shall establish the evaluation criteria against which proposals will be evaluated. Proposals are typically evaluated and ranked by an Evaluation Committee appointed by the City Manager based on the evaluation criteria established in the RFP. Construction documents means the written and graphic instructions necessary for the construction of a project that define the work and responsibilities required under a construction contract and are legally binding on the parties (City and Contractor). Construction manager at-risk means a project delivery method that entails a contractual obligation to deliver the project within the agreed to Guaranteed Maximum Price (GMP). The construction manager acts as consultant to the owner in the development and design phases (often referred to as "preconstruction services") and as the equivalent of a general contractor during the construction phase. Design-bid-build means a project delivery method for which the City sequentially awards separate contracts, the first for architectural and engineering services to design the project and the second for construction of the project according to the design. Design-build means a project delivery method in which the City enters into a single contract for design and construction of an infrastructure facility. Design-build-finance-operate-maintain means a project delivery method in which the City enters into a single contract for design, finance, construction, maintenance, and operation of an infrastructure facility over a contractually defined period. Design-build-operate-maintain means a project delivery method for which the City enters into a single contract for design , construction, maintenance, and operation of an infrastructure facility over a contractually defined period. Design Criteria Package (DCP) means concise specifications intended to be the baseline design requirements about project requirements to permit design-build firms to prepare a proposal in response to a request for proposal. The design criteria package must comply with the requirements set forth in Section 287.055, Florida Statutes. Design Criteria Professional means an individual or firm that is duly licensed to practice architectu're or engineering and who is employed by or under contract to the City to provide professional architecture or engineering services in connection with the preparation of the design criteria package for a particular project for which the design-build project delivery method will be used. Design requirements means the written technical and contractual requirements of a project that should include (but not necessarily be limited to): the features, functions , characteristics, qualities, and properties that are required by the City; the anticipated or desired schedule or time for completion; and the estimated budget. Design requirements may be used synonymously with DCP, construction documents, and specifications, as applicable to a particular project. Independent Cost Estimate means a cost estimate, prepared by an organization independent of the project design or construction phases, using the same detailed technical and relevant project information to establish or validate the anticipated construction costs. Independent Reviewer Services are additional architectural and engineering services provided to the City in design-build-operate-maintain or design-build-finance-operate-maintain procurements. The function of the independent peer reviewer is to confirm that the key elements of the professional engineering and architectural design provided by the contractor are in conformance with the applicable standard of care. Services include (but are not limited to) constructability, estimating and inspection services. Infrastructure Facility means a building, structure, or networks of buildings, structures, pipes, controls, and equipment that provide transportation , utilities, or facilities utilized by residents, visitors, or employees. Examples may include (but are not limited to) government buildings; educational facilities ; public safety or judicial facilities; water, stormwater, wastewater facilities, and pumping stations; public roads and streets; public parking facilities; public transportation systems, including terminals. Job Order Contract (JOC) means a contract for a fixed term or maximum dollar value in which a contractor is competitively selected to perform various separate job orders during the life of the contract, typically based on prices established in a construction task catalog and an agreed-to fee or multiplier. Major Change means any change to the project scope that requires significant redesign or revision to any major design element or any change that may result in a project construction cost increase of more than 10%. Major Construction Project means building, improving , renovating, restoring , altering, repairing or demolishing a city building or physical infrastructure asset with a construction value of $5 million or greater. Material Change means: (i) any change to a project's budget, construction contract or construction documents that would result in an overall increase or decrease in excess of five percent (5%) in cost; (ii) a change in the design intent of the project or additional scope that wo uld add or decrease costs in excess of 5% of the overall value of the contract; or change in construction schedule in excess of 25% of the contract duration beyond the allowable delays stipulated in the contract. Qualifications-based selection means the procurement method based on a Request for Qualifications (RFQ) which shall include the format for submitting qualifications-based proposals and the applicable terms and conditions. The RFQ shall establish the evaluation criteria against which proposals will be evaluated. Proposals are typically evaluated and ranked by an evaluation committee appointed by the City Manager based on the evaluation criteria established in the RFQ. Responsible Director means the director of the department primarily responsible for the construction or design, of the project, as applicable. Section 2 -Project Delivery Methods. 1. Scope. This section specifies the allowed project delivery methods, except as provided in Section 3 (Small Purchases), Section 4 (Job Order Contracting), Section 5 (Continuing Contracts) and Section 6 (Emergency Procurements). Notwithstanding any project delivery method identified below, the Procurement Director may make a determination that an alternate project delivery method is better suited for the particular project. 2. Design-bid-bu ild. For the design phase , a qualifications-based selection process shall be used to procure architectural and engineering services. For the construction phase, a competitive sealed bidding process should be used to procure construction in design-bid-build procurements, except in the case of contracts for construction manager at-risk for which competitive sealed proposals or qualifications-based selection process should be used. a. Prior to issuing a solicitation for the construction phase of the design-bid-build project delivery method, the responsible director must affirm the following: i. Construction documents have been completed and submitted to the Procurement Department for inclusion in the solicitation . ii. The Budget Department has confirmed the availability of funding for the construction phase. iii. For projects with an estimated construction cost greater than $5 million, an independent cost estimate has been completed and submitted to the Procurement Department. 3. Design-build. A competitive sealed proposals process should be used to procure contracts for the design-build project delivery method, except in the case of progressive design build procurements for which a qualifications-based selection should be utilized. a. Prior to issuing a solicitation for the construction phase of the design-build project delivery method, the responsible director must affirm the following : i. The DCP has been completed, signed/sealed by the design criteria professional, and submitted to the Procurement Department for inclusion in the solicitation. ii. The Budget Department has confirmed the availability of sufficient funding for the project. iii . For projects with an estimated construction cost greater than $5 million, an independent cost estimate has been completed and submitted to the Procurement Department. 4. Design-build-operate-maintain and design-build-finance-operate-maintain. A competitive sealed proposals process shall be used to procure contracts for the design-build-operate- maintain or design-build-finance-operate-maintain project delivery methods. a. Prior to issuing a solicitation for the design-build-operate-maintain or design-build-finance- operate-maintain project delivery methods, the responsible director must affirm: i. The DCP has been completed, signed/sealed by the design criteria professional, and submitted to the Procurement Department for inclusion in the solicitation. ii. The Budget Department has confirmed the availability of sufficient funding for the project iii. For projects with an estimated construction cost greater than $5 million, an independent cost estimate has been completed and submitted to the Procurement Department. Section 3 -Small Purchases. 1. Scope. Projects with a value estimated at less than the formal bid threshold, pursuant to Section 2-366 of the City Code, may be procured through open market procedures as stipulated in Administrative Order PO.16.02 or, in the case of electrical projects, up to $75,000, pursuant to Section 255.20, Florida Statutes, except as provided in Section 4 (Job Order Contracting), Section 5 (Continuing Contracts) and Section 6 (Emergency Procurements). Notwithstanding, the requirements of Section 10 (Performance and Payment Bonds) shall apply to any project with a value equal to or greater than $200,000. Section 4-Job Order Contracting. 1. Scope. Notwithstanding the requirements of this procedure, job order contracting may be utilized as a project delivery method providing that the requirements of the construction phase of the design-bid-build project delivery method with regard to the completion of construction documents and an independent cost estimate are met, as well as any applicable requirement relating to performance and payment bonds, prevailing wages and local workforce. Job Order Contracting may not be utilized on federal and state funded procurements without the prior written authorization of the funding agency. Section 5 -Continuing Contracts. 1. Scope. Continuing contracts for construction services (e.g ., push button contracts) and design services, providing that the requirements of Sec. 287.055 have been met, are expressly allowed. Section 6 -Emergency Procurements. 1. Scope. Emergency goods and services shall be procured in accordance with Section J, Administrative Order PO.16.02. Section 7 -Prevailing Wages and Local Workforce 1. Scope. The requirements of Chapter 31 of the City Code shall apply to all contracts for construction services greater than $1,500,000 . Section 8 -Federal Requirements 1. Scope. The requirements of Administrative Order PO .16.06 shall apply to all contracts that are federally funded or subject to federal reimbursement requirements. Section 9 -Bid Bonds 1. Scope. All competitive solicitations for projects which are federally funded shall include the requirement that the bidder submit a bid bond in the amount stipulated in the funding agency agreement or in 2 CFR Part 200, Code of Federal Regulations, as applicable. For other projects, the competitive solicitation may require a bid bond if such is a requirement of a grant intended to fund any portion of the construction contract or, for non-grant projects, when deemed appropriate by the Procurement Director. For non-grant projects, the bid bond requirement shall not exceed five (5) percent of the estimate of the cost of the work. In the discretion of the bidder, the bid bond may be in the form of a cashier's check, bank money order, bank draft of any national or state bank, certified check, or surety bond, payable to the City. Section 10 -Performance and Payment Bonds 1. Scope. All contracts for construction services in excess of $200,000 shall include a requirement that the contractor submit a performance and payment bond. The performance and payment bond shall be in an amount equal to 100% of the portion of the contract price for construction. Any change order that increases the amount of the project by more than $100,000 shall require a review of the performance and payment bond. If the remaining contract amount, after payments have been applied, on the project plus the amount of the change order is less than or equal to the amount of the existing bond, there shall be no requirement for a new performance and payment bond. If the unpaid amounts on the project plus the amount of the change order is less than or equal to the amount of the existing bond, there shall be no requirement for a new performance and payment bond. If the remaining contract amount, after payments have been applied , on the project plus the amount of the change order is greater than 10% of the amount of the bond , the contractor may furnish a revised bond (or bond rider) for the remaining contract amount plus the change order. Section 11 -Technical Review for Design-Build Projects 1. Scope. The City's design criteria professional, and its sub-consultants, shall assist the City during the bidding and award phases of the design-build project delivery method. The design criteria professional must review and evaluate submissions from the design-build firms for completeness, technical compliance and satisfaction with the Design Criteria Package on its technical merits, including the technical proposal and the design-build coordination plan. The purpose of the technical review is to provide the city manager, responsible city director(s) and the evaluation committee with a written assessment of any material issues of compliance with the DCP for each submission by a design-build firm . 2. The design criteria professional will prepare an evaluation matrix comparing each submission and may be required to assist during any interviews with short-listed design-build firms. The design criteria professional may also be required to participate in pre-bid conferences, attend the bid opening and attend any presentations by the design-build firms, and assist during the negotiation phase of a contract with a selected design-build firm. Section 12 -Construction Phase Requirements for Permits and Plans 1. Permit Applications. Notwithstanding any provision in a City contract or the City Code, no City official shall sign a permit application for a major construction projects unless the City official who signs the application as permittee on behalf of the City has confirmed that the permit application and associated construction plans accurately and fully describe the project the City intends to construct. 2. Notice to Proceed. Notwithstanding any provision in a City contract or agreement, no city official shall issue a Notice to Proceed with the construction phase of a construction project until all required permits have been issued by all agencies havin g jurisdiction. 3. Precedence. Notwithstanding any provision in a City contract or the City Code, under no circumstances, including public emergencies, shall the approval of a project's plans by the responsible director supersede the project's permitted plans or substitute for any of the above. Section 13 -Contract Modifications and Change Orders 1. Scope. Notwithstanding any provision in a City contract or the City code, after award of a design, construction or Design-Build contract, no City official shall approve a major change in scope to the project until (a) the City Manager receives a fully executed "Request for Major Modification to the Project's Scope" report; (b) the City Manager submits the modification request to the Mayor and the City Commission; and (c) the Mayor and City Commission approves the major change. The City Manager shall have the authority and discretion to utilize the project's contingency as needed and in the best interest of the city to keep projects moving forward .. Section 14 -Request for Major Modification to the Project's Scope 1. Scope. In the event that a major change in the project's scope is warranted, the Responsible City Department shall initiate, prepare and sign a "Request for Major Modification to the Project's Scope" ("Modification Request") and submit to the affected Department Directors and respective Assistant City Manager(s). The Modification Request form shall include the following information: a) A summary of the current status of the project, including the percentage of the project's completion; the total amount expended to date; the estimated cost to complete the project without the major change; the project's current anticipated completion date. b) A detailed summary of all pertinent facts and circumstances that serve as the basis of the request; the expected benefits to the project of the change; the estimated increase in the cost of the project and impact on the schedule if the change is approved; and a cost- benefit analysis of the proposed change; any risks to the project's cost and/or schedule if the request for a major change is denied or delayed. c) A statement from the City Engineer, ArchitecUEngineer of Record, or Design Criteria Professional, as applicable, providing their evaluation of the requested change and the following issues: the extent to which the requested scope change will require changes to the project's basis of design criteria , design criteria package or actual permitted/construction plans; any potential technical, architectural/engineering, or construction risks that could result from the change; and their assessment of any proposals by the Design-Builder or Contractor to mitigate such risks. The Responsible Department Director shall sign the Modification Request and indicate their recommendations. The completed Modification Request shall be provided to the City Manager. Appendix II RISK MANAGEMENT FORM IG CONTRACT RISK ASSESSMENT Using Department: Bid #/ Project/Service(s): _________________________ Key Contact: _____________________________ Phone/Email: ___________________________________ RISK FACTORS Points 1-6 RISK VALUE RESPONSE STRATEGIES (Suggested Considerations for Risk Value Assignment) 1 This is a new program or service, or has revised changes to a previous contract/solicitation (3) New programs or services may require early monitoring to ensure any issues are addressed in a timely manor 2 Statement of Work is complex – there are multiple components to the service to be provided. (3) Complex programs or services may require early monitoring to ensure any issues are addressed in a timely manor 3 Payment method to be used: • Performance Based • Fee for Service • Cost Reimbursement • Revenue Generating (1) (2) (3) (4) • Performance Based – Contract must include periodic reporting to ensure required performance is achieved. • Fee for Services – Reporting must include periodic tracking of services performed. • Cost Reimbursement – Contract must include language to track progress toward achievement of contract to ensure budget is not overspent • Revenue Generating - Contract must include language to track progress toward achievement of contract to ensure revenue is being generated and properly recorded 4 Contract will be awarded for this project utilizing: • Competitive Procurement • Non-competitive or Sole Source (2) (3) 5 Vendors for this/these services must maintain accreditation or licensure requirements. (2) Contract must address the requirement and consequences if the accreditation or licensure is not maintained for the life of the contract. 6 Project has been or will be publicly debated and may generated negative opinions in the community and poses possible negative publicity (6) This includes projects that are contingent upon voter referendum approval under the City Charter 7 This project represents a significant portion of the City’s comprehensive plan and poses a financial or environmental risk (5) Determine the potential impact on the City if a vendor does not meet their obligation.and there is no secondary vendor to complete the project. 8 Project Maximum Amount: • $1,000,000 and above • $500,000 to $999,999 • $250,000 to $499,999 • $50,000 to $249,999 • Below $50,000 (5) (4) (3) (2) (1) 9 Vendor will be allowed to subcontract key activities of this project. (2) If subcontractors are allowed, identify in the contract the monitoring that the vendor must complete to ensure subcontractors are compliant TOTAL PROJECT RISK RISK LEVEL: HIGH (23 OR >) SCORE MEDIUM (13-22) LOW (0-12) Worksheet completed by: Date: __________________ INSTRUCTIONS 1. To be completed by IG Contract Oversight Unit for competitive solicitations. 2. Identify risk factors that you know pertain to the project and enter corresponding number (in parenthesis) in the RISK VALUE column. 3. If no factors apply, leave the box empty; if you believe the risk value should be adjusted higher/lower enter that number and explain circumstances in comment section. 4. Add the risk value numbers and enter the total score in the red box – Enter a total score of “0” if no factors applied. Using the scoring system, place the appropriate number in the box to indicate the level or risk. GENERAL GUIDELINES 1. A risk assessment worksheet is required for all projects. The worksheet is conducted as early in the process of development as possible, preferably prior to competitive solicitation. 2. Using the risk assessment worksheet prior to contract development is an effective screening/selection strategy identify unique risks that may be mitigated by the addition of Special Terms and Conditions. 3. If new factors are identified that do not appear on the list, use the “Other Risk Factor” space to explain. 4. While the risk level largely determines the type and frequency of monitoring, the contract type may also influence the monitoring method used. 5. Risk level ratings may be adjusted either up or down during the life of a contract. 6. Once the risk level is assigned, an appropriate monitoring schedule should be developed and implemented. Goals for frequency of review will be based on Risk Level as follows: • High risk contracts - semi-annually • Medium risk contracts - annually • Low risk contracts – as needed 7. Regardless of a project risk level, staff is encouraged to provide assistance throughout the contracting process as an effective risk management strategy. NOTE: Each risk factor can be mitigated by some action or response, either before or after the contract is executed. This action or response can take the form of training, technical assistance, special contract requirements/conditions/limitations. COPIES OF OUR POSTER WILL BE PROVIDED UPON REQUEST.