OIG No. 23-09: Comment on Proposed Reassignment of Internal Audit FunctionJoseph M. Centorino, Inspector General
TO:
FROM:
DATE:
RE:
Honorable Mayor and Members of the City Commission
Joseph Centorino, Inspector General
05/16/2023
OIG Comment on Proposed Reassignment of Internal Audit Function
OIG No. 23-09
SUMMARY
This report comments on the proposed ordinance pending before the Finance and Economic
Resiliency Committee (FERC), which would amend Section 2-256 of the City Code by reassigning
the Internal Audit Function of the Office of the Inspector General (OIG) to its previous placement
under the Office of the City Manager. This proposed change would reduce the efficiency,
independence and transparency of the City's Internal Audit Function, and would impair the OIG's
ability to carry out its mission of conducting independent oversight of City affairs.
The proposed amendment stands to unwind the model of independent internal auditing that is
common throughout municipal, state and federal levels of government. Within a short period of
time, the placement of the City's Internal Audit function within the OIG has resulted in significant
audits which have been impactful and transparent. The demand for OIG audits is further evidence
of their integrity and effectiveness. OIG tax audits have led to increased enforcement of City Code
provisions and increased revenues.
The OIG takes no position on the separate issue of what resources the Office of City Manager
should be provided with in order to best serve the managerial policies of the City Administration.
The OIG acknowledges that greater managerial oversight is in the City's best interest.
BACKGROUND
The City of Miami Beach has had an Internal Audit unit for more than 35 years, providing oversight
and accountability for City departments, programs, contracts, and expenditures. The unit has had
different incarnations and has been operated under the auspices of different City authorities,
including the Office of Budget and Performance Improvement (OBPI), Office of the City Manager,
and the OIG. OBPI also once included a Management Improvement Unit that employed Industrial
Engineers, individuals with the professional background to assess efficiency in the operations of
complex City operations. The latter function was terminated several years prior to the OIG's
existence. Its absence has been noted by OIG staff who once worked with that unit, and who
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believe that there has been an overreliance on auditors for managerial oversight that should occur
at the managerial level.
The Internal Audit unit that exists today under the purview of the OIG is essentially the same as
the unit that was assigned to the OIG at the time of the OIG's inception in 2019. It consists of the
following personnel:
1) Two supervising auditors: Chief Auditor Mark Coolidge (previously Interim Internal
Auditor) and Deputy Chief Auditor Norman Blaiotta (previously Senior Auditor)
2) Three Internal Auditors: Jessica Romero, Tomas Valdes, and one currently unfilled
position
3) One Sanitation Tax Auditor: Juan Ospina
4) Four Resort Tax Auditors: John Benincasa, Yorney Sanchez, El Mostafa Achar, and
Carlos "Enzo" Villaran
5) One support staff member servicing the entire OIG: Executive Assistant/Office
Manager Elisa Alonso (previously Office Associate V with Internal Audit).
Of the above positions only one (an internal auditor) was not part of Internal Audit at the time of
the OIG's assumption of that function. Of the above-listed personnel, Mark Coolidge, Norman
Blaiotta, Jessica Romero, John Benincasa, Yorney Sanchez and Elisa Alonso worked for the
previous Office of Internal Audit. The remaining personnel have been hired due to staff vacancies
occurring since the OIG's inception.
Internal Audit unit staff is supervised directly by the Chief Auditor and Deputy Chief Auditor. The
unit is supervised overall by the Inspector General, who is in daily communication with the
supervisors and staff in setting audit priorities, reviewing and discussing pending audits, and in
revising audit reports.
The remaining three positions in the OIG--Investigators Jani Singer and Dylan Hughes and
Executive Assistant/Office Manager Elisa Alonso--are supervised solely by the Inspector General.
The Internal Auditors of the OIG has assumed all of the duties previously performed by the Office
of Internal Audit. These duties include the performance of internal audits required by City
Ordinances and contracts, which include operational and financial audits such as the audit of the
State Beachfront Management Agreement, audit of Finance Department's compliance with
selected BOO audit recommendations (stemming from the $3.6 Million fraud that occurred during
2016), Miami Beach Cultural Arts Council Audit, and quarterly reviews of completed Finance
Department Bank Account Reconciliations.
The Internal Auditors also perform discretionary audits as determined by OIG on its own initiative
or upon suggestion of the City Manager, City Commission, Audit Committee or City departments.
These audits have included, among others, three audits of the Building Department involving
permit surcharge fee rates, expenditures pursuant to a State law mandating that all revenues
generated from permit fees be spent for enforcement of the State Building Code, and an overview
of the City's permitting process. Other internal audits have included an audit of the Miami Beach
Garden Conservancy Management Agreement; three audits of the City's permitted public towing
operations; audit of the Taste Bakery Agreement; and the audit of the Miami Beach Tennis
Management, LLC management agreement.
The Internal Auditors have also assisted or supplemented the OIG's investigative staff in
supplying audit services in connection with reports on some investigations or other reviews of City
programs or processes, including, among others, the Palm and Hibiscus Island Stormwater
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Project, the Indian Creek Improvement Project, the West Avenue Phase II Project, investigation
of the usage of City take-home vehicles, and issues related to G.O Bond projects.
Due to the limited internal audit staff of only three auditors and the numbers of required audits,
requested audits and its prioritization of discretionary audits in high-risk areas in the City
government, the OIG faces significant challenges in meeting the City's audit needs
Resort Tax Auditors and the Sanitation Tax Auditor are restricted to audits of those respective
functions. Revenues generated from tax audit assessments have usually exceeded the cost of
salaries for these positions. The increased success of tax audit activities can be attributed to the
OIG's subpoena authority that facilitates retrieval of records needed for tax audits or investigations
of non-compliant contractors that resist audits by not providing all requested documentation.
These include contractors that perform taxable construction debris removal but disregard City
permitting or sanitation tax requirements.
The OIG's tax audit responsibility ends with the calculation of an assessment of the tax owed,
which may be a final assessment or, in resort tax audits where the taxpayer has failed to provide
sufficient records to complete an audit, an estimated assessment. Thereafter, the Finance
Department may collect revenues, impose liens, or negotiate settlements with those private
entities to collect the levied assessments.
The Inspector General, both OIG audit unit supervisors, current internal auditors, and the
Sanitation Tax Auditor have all completed the training and passed the exam necessary to be
certified as Inspector General Auditors by the Association of Inspectors General (AIG), the
national organization that sets standards for, and trains and advises OIGs across the country at
all levels of government. Additionally, Chief Auditor Mark Coolidge, and Investigators Jani Singer
and Dylan Hughes have earned certification as Inspector General Inspector/Evaluators, a new
certification created by the AIG for those functions. The OIG has made a substantial investment
in staff training on the standards and techniques of these OIG functions. Lastly Sanitation Tax
Auditor Juan Ospina has attained the certification of Inspector General Investigator.
PROPOSED AMENDMENT TO SECTION 2-256
Section 2-256 of the City Code is the enabling ordinance that specifies the process for selecting
the Inspector General, the functions, duties, authority, and reporting procedures of the OIG. It
follows the City Charter in establishing the agency as an independent body and provides that,
"The organization and administration of the Office shall be sufficiently independent to assure that
no interference or influence external to the Office adversely affects the independence and
objectivity of the Inspector General." It also specifically provides that the Inspector General is to
serve as the City's internal auditor, which led to the transfer of the former Internal Audit unit in its
entirety to the OIG.
The proposed ordinance amendment would create a new City department under a new position
titled, "Internal Auditor," similar to what was in existence prior to the OIG. This change would
transfer to this new department all internal audit functions now under the auspices of the Inspector
General, including all required City audits, parking-related audits, resort tax audits, audits of
franchise waste fees and roll-off permit fees (sanitation tax audits), and likely also audits now
requested by the City Manager, City Commission and department heads.
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The proposed ordinance change does not specify what personnel would be transferred to the new
department. However, based on the reassignment of the internal audit function now performed
by the OIG, and the fact that 9 out of 10 of the OIG's current audit staff positions were originally
based in the former Office of Internal Audit, it is clear that the ordinance as drafted would remove
from the OIG nearly all of the current audit staff and a majority of its entire office personnel, as
only one of the current OIG audit positions was not previously included in the former Office of
Internal Audit.
OIG POSITION ON PROPOSED TRANSFER OF INTERNAL AUDIT
The OIG opposes the pending ordinance amendment. The Miami Beach Audit Committee,
consisting of seven City residents with professional backgrounds related to the audit function and
which is appointed by the Mayor and City Commissioners and participates in the selection of the
City's External Auditor as well as advising the OIG on audit-related matters, has voted
unanimously to oppose the legislation.
There are three primary areas in which the OIG believes that adoption of the legislation or any
legislation that would remove audit personnel from the OIG, would be both detrimental to the
OIG's mission and values and diminish the efficiency, independence and transparency of the
City's Internal Audit Function.
Efficiency
The transfer of the Internal Audit function to the OIG was an efficiency move. Most cities of the
size of Miami Beach do not have an internal audit staff akin to that in Miami Beach. It would be
even rarer and almost unheard of to find a City of its size having both an internal audit staff and
an OIG in separate departments. Establishing a second audit unit with separate supervision and
support staff involved in the same essential function of producing internal audits of City
departments, programs and expenditures would be duplicative and wasteful.
The transfer to the OIG was also a bold, anti-bureaucratic move. Government expansion
inevitably occurs when new functions are added. Turf protection produces duplication. The cost
estimate for the OIG given to the voters at the time of the adoption of the Charter Amendment
establishing the office, and prior to placing the Internal Audit function under the OIG, was based
on an assumption that five new positions would be created for the OIG. But only four new positions
were actually created for the office: those of the Inspector General, two investigators and one
auditor. Consolidation with Internal Audit effected an immediate reduction in new positions for the
newly-created office. With the gradual accretion of personnel that generally occurs within
government, it is likely that maintaining separate audit units in the City would have produced future
inefficiencies.
Contrary to the assertion in the preamble to the proposed ordinance, which states that it is "not
customary for an OIG to assume the duties of an administrative internal audit function," the
practice at all levels of government has tended toward consolidation of these functions.
At the federal level, the Inspector General Act of 1978 called for the transfer of internal audit
functions in numerous federal agencies to newly-created Offices of Inspector General. Palm
Beach County Inspector General John Carey, who retired from the federal government as
Inspector General for the Defense Intelligence agency, served as one of 73 federal inspectors
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general on the Council of the Inspectors General on Integrity and Efficiency (CIGIE) that operated
under the Inspector General Act of 1978. He stated that, "almost all of these federal OIGs have
the internal audit function as part of the OIG organization. This is largely the case for OIGs across
the country at the state and local level." (See Attachment #1.)
Melinda Miguel, Chief Inspector General for the State of Florida, stated that 33 out of 35 State of
Florida OIGs also have consolidated the internal audit function within their agencies. (See
Attachment #2.)
The OIG staff conducted an informal poll of 20 local OIGs, consisting of County, City, School
District, Clerk of Court and special district OIGs within the State of Florida. It found that 16 out of
20 surveyed had the internal audit function consolidated within those offices. (See Attachment
#3)
Independence
It has become well-established in the auditing profession, in both public and private sectors, that
the independence of audit staff from any undue pressure that might compromise objectivity in
audits has become the gold standard. (See, e.g., Yang, Lang (Kate), "Auditor or Adviser
(ln)Dependence and Its Impact on Financial Management," Public Administration Review, Vol.
81, Issue 3, pp.475-487, The American Society for Public Administration (2020); Klimentchenko,
Denis, "Myth of Auditor Independence," University of Illinois Law Review, p. 1275 (2009). Indeed,
the well-publicized scandals involving major accounting firms and audit teams in past decades
have led to an increased movement toward elevating the criticality of independence in auditing.
The Association of Inspectors General promotes its general standard of independence in its
"Principles and Standards For Offices Of Inspector General," known as the "Green Book," as
follows: "The inspector general and OIG staff involved in performing or supervising any
assignment should be free from personal or external impairments to independence and should
constantly maintain an independent attitude and appearance." The Green Book includes the
following list of external impairments that "can restrict the efforts or interfere with the OIG's ability
to form independent and objective opinions and conclusions":
1. Interference or undue influence in the selection, appointment, and employment of OIG
Staff.
2. Restrictions on funds or other resources dedicated to the OIG, such as timely,
independent legal counsel, that could prevent the OIG from performing essential work.
3. Interference or undue influence in the OIG's selection of what is to be examined,
determination of scope and timing of work or approach to be used, the appropriate
content of any resulting report, or resolution of audit findings.
4. Influences that jeopardize continued employment of the inspector general or individual
OIG staff for reasons other than competency or the need for OIG services.
5. Interference with OIG access to documents or individuals necessary to perform OIG
work.
6. Improper political pressures that affect the selection of areas for review, the
performance of those reviews, and the objective reporting of conclusions without fear
of censure.
In addition, the 2018 version of the Government Auditing Standards (Yellow Book) also strongly
emphasizes the need for Internal Audit to be independent--both "independence of mind" and
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"independence in appearance"--throughout the audit process. It contained changes in six specific
areas, with one being an expanded independence standard.
It is for these reasons that the OIG cannot function as another department of the City or share its
supervisory and staff resources with the City administration.
As current OIG Internal Audit staff who served under previous City Administrations can attest, the
former Office of Internal Audit was frequently instructed what to audit by City management;
verbiage in reports was occasionally revised or omitted based on management concerns; and
some audit reports were never completed and/or issued. The office's lack of independence was
compromised and so was its work product in terms of performing an independent audit function.
An audit conducted under the direction of a CEO of a government entity may well have value for
the purpose of providing managerial insights, but is not suited to providing unadulterated and
unfiltered information to the primary City stakeholders-the general public and its elected
representatives.
No question is raised here regarding the integrity of any past or present City Manager. The City
of Miami Beach is fortunate to have had managers of integrity, even under difficult past
circumstances when it experienced corrupt activity in some departments. It is the opinion of its
current Inspector General that the City's superior ethics training program for its employees is the
best in the County, due largely to the initiatives and commitments of its managers. Yet, common
sense tells us that human nature leads almost any manager in any organization to put the best
possible image on the performance of his or her administration.
Furthermore, the judgment of the auditor involved in reviewing a particularly problematic issue
may easily be influenced by a concern that the audit report could prove embarrassing to a City
Administration and to the Manager upon whose discretion the auditor's job depends. There is no
way to avoid that problem when an audit staff is directly under the supervision of the administrator
whose departmental personnel may be under scrutiny in any given engagement.
On a related issue, the proposed ordinance also includes a provision that the Inspector General
may be removed from office upon a majority vote of the Commission. This provision is inconsistent
with City Charter Section 9.01 that a 5/7 vote of the Commission is necessary to remove the
Inspector General.
It should also be noted that the current ordinance, as well as the pending proposed amended
ordinance, in providing for removal of the Inspector General without cause, is contrary to Section
F of the AIG's "Principles and Standards for Offices of Inspector General," which provides that
the statutory authority for an OIG should include a provision that the inspector general be removed
only "for cause."
Transparency
Miami Beach residents provided the mandate for the establishment of an OIG in a 2018
referendum in which 81 % of the votes approved a Charter Amendment creating the office, which
cannot be abolished without the approval of the electorate. The explicit City Charter provision for
an independent office implicitly carries with it an expectation that the office's activity will be
sufficiently transparent for its oversight by the electorate.
An annual report is required of the office outlining its activities and has been completed for the
2020, 2021 and 2022 years. All completed audit reports are publicly displayed on the OIG website
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and sent directly to the Mayor and Commissioners, City Manager and Audit Committee. The
ordinance requirement that copies of draft OIG reports be provided to affected parties and that
comments or criticisms made in response to the draft be included in final reports has been
followed. No audit begun by the OIG has been discontinued or kept out of the public eye, as
occasionally occurred prior to the OIG's inception.
The OIG has established a hotline and website access for the confidential reporting of complaints
or other information by the public, which may be utilized without fear of retribution for audit
decisions or for any other OIG functions.
The OIG has initiated the issuance of semi-annual reports summarizing the activities of the Resort
Tax Auditors and providing the number of completed annual and monthly audits and the amount
of net assessments. Previously, this information was not shared with the City Commission and
others. Furthermore, the OIG has begun issuing an annual activity report detailing the impact of
the Sanitation Tax Auditor, which includes significant increases in (1) the issuance of business
tax receipts to contractors; (2) the issuance to non-compliant contractors of Notices of Violations,
many stemming from unannounced field observations by the Sanitation Tax Auditor outside the
scope of usual audit activity; and (3) additional Sanitation revenues resulting from the completion
of audits due to increased enforcement.
Based on the experience of members of the former Internal Audit Unit, if audit personnel are
removed from the OIG and assigned elsewhere, it may be expected that less audit information
would be available for consideration by the City Commission and the general public.
CONCLUSION
The OIG has reviewed the proposed ordinance calling for removal and transfer of the Internal
Audit unit from the OIG to the Office of City Manager and concluded that the adoption of the
amendment would diminish the efficiency, independence, and transparency of the City's internal
audit function. This issue has also been discussed with other Inspectors General and staff from
other OIG offices, both locally and nationally, and there is consensus among them that supports
this conclusion.
Half of the current OIG audit staff is limited to the audit of resort tax or sanitation tax receipts,
leaving only three auditors, aside from supervising auditors, to perform both required and
discretionary internal audits. The removal or transfer of any current OIG audit personnel would
unavoidably lead to a loss of productivity and diminish the OIG's capacity to respond to requests
for independent audits or reviews of City programs or projects. The OIG cannot support an
amendment that contravenes the basic purposes and mission of an OIG and undermines its ability
to perform the functions delegated to it in the City of Miami Beach.
The relationship between the current OIG and the Office of the City Manager has been an
amicable and collaborative one. The Commission may wish to consider adopting a provision that
would encourage such a relationship for future administrations and the OIG by authorizing
confidential updates by the Inspector General to the City Manager on pending audits,
investigations and other matters, when deemed feasible and without compromising OIG
independence, to minimize any ongoing consequences of wasteful, unethical, abusive, or
fraudulent conduct. This would obviously need to be limited to situations where disclosure would
not jeopardize a pending criminal investigation, as determined by the Inspector General in
conjunction with a law enforcement official having joint authority over such investigation.
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This conclusion in no way reflects negatively upon the current City Administration and makes no
judgment regarding what staff may be appropriate to the Office of the City Manager.
Joseph M. Centorino, Inspector General
Gr
Mark Coolidge, Chief Auditor
ens
Date
Date
cc: Alina Hudak, City Manager
Rafael Paz, City Attorney
City of Miami Beach Audit Committee Members
Nattaly Cuervo, Executive Office Associate II
OFFICE OF THE INSPECTOR GENERAL, City of Miami Beach
1130 Washington Avenue, 6 Floor, Miami Beach, FL 33139
Tel: 305.673.7020 • Fax: 305.206.5509 • Hotline: 786.897.1111
Email: CilyofMiamiBeachQIG@miamibeachfl.gov
Website: www.mbinspectorgeneral.com
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Attachment #1
Alonso, Elisa
From:
Sent:
To:
Subject:
John Carey A. <JCarey@pbcgov.org>
Monday, January 9, 2023 4:29 PM
Centorino, Joseph
Internal auditors and IGs
[ THIS MESSAGE COMES FROM AN EXTERNAL EMAIL- USE CAUTION WHEN REPLYING AND OPENING LINKS OR
ATTACHMENTS)
Joe,
I want to follow up in regards to our conversation today about officers of inspectors general and internal auditors.
1. Before I came to Palm Beach County, I was one of the 73 federal inspectors general on the Council of the
Inspectors General on Integrity and Efficiency (CIGIE) that operated under the IG Act of 1978 as amended. I
believe almost all of these federal OIGs have the internal audit function as part of the OIG organization. This is
largely the case for OIGs across the country at the state and local level. On occasion, organizations have some
sort of internal audit function in addition to that of the OIG. Where these do exist, it does not limit the
jurisdiction of the OIG audit mission.
2. While there are few OIGs that only have an investigative function or only an audit functions, the vast majority
have both. The Association of Inspectors General, IG Institute® teaches that audits and inspections are two sides
of the same coin in a model OIG. On one side of this oversight coin, the investigative function is reactive in
investigation complaints of fraud, waste and abuse. On the proactive side of the coin, audits provides
independent oversight that promotes compliance, best practices, and prevents fraud, waste and abuse. Audits
can also uncover fraud, waste and abuse that is turned over to the investigative side of the OIG.
3. Finally, in my experience, successful IGs come from a wide range of backgrounds. The Association of Inspectors
General guidance on qualifications of an inspector general is similar to that of the IG Act of 1978 as amended,
'The inspector general should be selected without regard to political affiliation on the basis of integrity,
capability for strong leadership, and demonstrated ability in accounting, auditing, financial analysis, law,
management analysis, public administration, investigation, or criminal justice administration or other
appropriate fields."
Regards,
John
John Carey
Inspector General
Palm Beach County
P.O. Box 16568
West Palm Beach, FL 33416
Office: 561-233-2350
Hotline: 877-283-7068
"Enhancing Public Trust in Government"
To report waste, fraud or abuse, please send to: inspector@pbcgov.org
Please visit our website at: http://www.pbcgov.com/QIG
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NOTICE: Florida has a broad public records law. Most written communications to or from local government officials or employees that involve
official business are public records that will be disclosed to the public and the media upon request. E-mail communications may be subject to
public disclosure.
Under Florida law, e-mail addresses are public records. If you do not want your e-mail address released in response to a
public records request, do not send electronic mail to this entity. Instead, contact this office by phone or in writing.
2
Attachment #2
Alonso, Elisa
From:
Sent:
To:
Miguel, Melinda M. <Melinda.M.Miguel@eog.myflorida.com>
Tuesday, November 15, 2022 4:50 PM
Centorino, Joseph
[ THIS MESSAGE COMES FROM AN EXTERNAL EMAIL· USE CAUTION WHEN REPLYING AND OPENING LINKS OR
ATTACHMENTS]
Please go to www.floridaoig.com to see the number of the state agency IGs.
Based on my historical perspective in Florida government, we have 33 of the 35 agency I Gs that have both internal audit
and investigative responsibilities within their statutory mandate as outlined in s. 20.055, Florida Statutes.
The Florida IG Act passed in 1994 and added the investigative piece to these office's jurisdictions. I served on the
Council of State Agency IGs in 2006 to make recommendations about the Florida IG Act. I also worked with the Florida
Legislature to enhance the independence of agency I Gs in those agencies under the purview of the Governor.
I have served in Florida government since October 1989 and went to work for the IG in December 1993 that was brought
down to Florida by Senator Chiles who signed the Florida IG Act into law.
I hope this is helpful.
Respectfully,
Melinda M. Miguel
Chief Inspector General
Executive Office of the Governor
State of Florida
Please note that under Florida law correspondence sent to the Governor's Office, which is not confidential or exempt
pursuant to chapter 119 of the Florida Statutes, is a public record made available upon request.
1
Attachment #3
MIAMI BEACH OIG SURVEY OF LOCAL GOVERNMENT OIG INTERNAL AUDIT UNITS
This informal survey was conducted by OIG Staff during January/February 2023 to determine whether
the Internal Audit functions in local governments in Florida have been consolidated into OIG units or
remain separate.
OIG Consolidated Separate
Bay County X
Broward County X
Clay County Clerk X
Collier County Clerk X
City of Jacksonville (Duval County) X
Lake County Clerk X
Lee County Clerk X
Manatee County Clerk X
City of Miami Beach X
Miami-Dade County X
Palm Beach County X
Palm Beach County Clerk X
Palm Beach County School District X
Pasco County Clerk X
Pinellas County Clerk X
Polk County Clerk X
Okaloosa County Clerk X
Sarasota County Clerk X
Seminole County Clerk X
St. John's River Water Mgt. Dist. X
City of Tallahassee X