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OIG No. 24-27 FY 2023 Annual Follow-Up on OIG RecommendationsJoseph M.Centorino,Inspector General TO:Honorable Mayor and Members of the City Commission FROM:Joseph M.Centorino,Inspector General DATE:November 25,2024 RE:City Administration Follow-up on OIG Recommendations on OIG No.23-01 Miami Beach Watersport Center,Inc.,OIG No.23-06 Procurement Card Program Audit,OIG No.23-22 The Ballet Valet Parking Company LTD Lease Agreements,OIG No.23-24 Lincoln Place Ground Lease Agreement,OIG No.23-26 Insurance Certificate Tracking System Review. OIG No.24-27 PERIOD:January 1,2023,through December 31,2023 It is an internal audit best practice to conduct a follow-up analysis of completed engagements, typically within a year from their issue date,to determine whether the auditees have taken any corrective actions to resolve the identified deficiencies.Consequently,the City of Miami Beach Office of the Inspector General (OIG)examined its issued audit reports related to the 2023 calendar year in connection with OIG reports to identify City departments or divisions that received recommendations to implement corrective actions. Due to the limited internal audit staff at the OIG,a test-based follow-up analysis could not be conducted for every implemented corrective action.Instead,the OIG requested that each relevant City department or division carry out a self-assessment of their implementation of OIG recommendations.Some recommendations from issued reports may be excluded because they pertain to independent entities rather than City departments or divisions,involve non-audit activities,or have already undergone follow-up work by the OIG.If time allows,OIG staff may conduct future testing to evaluate the effectiveness of the reported corrective actions. Management is solely responsible for its internal controls.City departments or divisions have various options to achieve desired outcomes,including accepting the risk without changing current practices,implementing OIG recommendations,or adopting other compensating controls. Pages 3 through 7 of this report contain schedules showing the recommendation status of all self- assessments received from each department. Page 1 of 7 Proposed Definitions for Implementation Status: •Not implemented:management has not taken action to implement the recommendation to decrease the likelihood that the noted deficiency may continue to occur. •Partially implemented:management has taken some steps to remedy the shortcomings,but additional ones are necessary to reduce the associated risk to more acceptable levels. •Fully implemented:management has taken the necessary actions to provide reasonable assurance that the listed deficiency will not continue to occur. •Will not implement management is willing to accept the associated risks and will not implement corrective action. •No longer applicable:the circumstances have changed since the completion of the original engagement (e.g.,new technology implemented,new agreements reached,new vendors providing the service),thereby making the listed recommendation inapplicable to existing circumstances. According to the self-assessment performed,21 of the 27 recommendations referenced in this were fully implemented and six were partially implemented. f-2¢0;2/ate //e»Date cc:Eric Carpenter,City Manager OFFICE OF THE INSPECTOR GENERAL,City of Miami Beach 1130 Washington Avenue,6"Floor,Miami Beach,FL 33139 Tel:305.673.7020 •Hotline:786.897.1111 Email:CityofMiamiBeachOIG@miamibeachfl.gov Website:www.mbinspectorqeneral.com Page 2 of 7 Audit #OIG No.23-01 Audit NameMiami Beach Watersports Center,Inc.LeaseAgreementAudit/ContractOversight Audit Period February 1,2021-January31,2022 Follow-Up ReportDate 2/8/2023 Implementation Statusper Auditee Auditee Comments Risk Management Division Asset ManagementDivision Asset Management Division Asset Management Division The insurance parameters for the Watersport Center entered into Exigis should be revised by City staffto mirrorthe requirements listed in Section 9.2 of the THE WATERSPORTS CENTER WAS o,[ease Agreement.Asset Management Division staff FULLY COMPLIANT WITH THE STATED should notify the Watersports Center of the INSURANCE REQUIREMENTS IN SECT[ommercial Liability insurance deficiency and the 9.2OFTHE LEASE AGREEMENT.[missingpolicies related to the requiredAutomobile Liability insurance or Liquor Liability insurance coverage.If not timely resolved,the available disciplinary actions in the lease Agreement may be enforcedbytheCity. All hazardous materials stored on the premises should always be properly secured.Furthermore, the lessee should timely furnish the required hazardous materials report to the Asset Management Division pursuant to Section 9.7. Although Section 9.7 does not specify whether the annual hazardous material report needs to be filed THE WATERSPORTS CENTER WAS NOT if no hazardous materials were stored on the COMPLIANT WITH THE HAZARDOUS premises during the stated period,it is MATERIALS REQUIREMENTS IN SECTIONS recommended that the report be filed each January 9.5AND 9.7OF THE LEASE AGREEMENT.1 and the Lease Agreement be clarified.Asset Management Division staff should periodically perform unannounced site visits of leased properties to verify compliance with stated requirements.The corresponding results should be documented and maintainedinthelessee's file,and any identified deficiencies should be forwarded to thelesseeforpromptresolution. The Watersports Center should not enter into Sublease Agreements unless prior written consent is received indicating City Manager approval pursuant to Section 13.1.The OIG Auditor SUBLEASESWERE EXECUTED BYTHELESSEE recommends that the existing Sublease Agreement WITHOUT APPROVAL OF THE CITY between the Watersports Center and Hydrow Inc. MANAGER,AS REQUIRED BY SECTION 13.1 be reviewed by the City,and be revised asdeemed OF THE LEASE AGREEMENT./necessary.Also,the OIG recommends any City approved Sublease Agreements should include insurance requirements reviewed/approved by the Risk Management Division to minimize the City's risk exposure. Page 3 of 7 Fully Implemented Fully Implemented Fully Implemented Asset Management Division did take it upon themselvestosecurethe correct CertificatesofInsuranceorCOis,which were received November2022,bringing the COi to $4M of Commercial Liability coverage (on two policies)and $1Min auto.Theydonot sell liquor,so liquor coverage is not necessary. Lessee was notifiedofthe required hazardous material notificationeachyear. The Asset Management Divisionand Facilities Managers conduct regularsite visitseach year.Identifieddeficienciesare communicatedwith lessee by the Facilities Departmentasnecessary. The Lessee was notified and educatedon thepropertiming of providingtheAsset Management Divisionwith notification on anewsub-lease,evenif theyare short term,sothat the City Manager hastimeto review andprovide approval. Audit#OIG No.2306 AuditName Procurement Card Program Audit AuditPeriodOctober 1,2018 September30,2021 Follow-UpReport Date4/19/2023 Finance Department Finance Department Finance Department Finance Department Finance Department Finance Department OVERPAYMENT THE SEGREGATION OF DUTIESPRINCIPLE, $75,374.31 TOTALING $1,356.28 NOSUPPORTING DOCUMENTATION,AS REQUIRED BYTHE PROCEDURESMANUAL, WASFOUNDIN THEMUNIS SYSTEM REtATEDTOTWO SAMPLED TRANSACTIONS,TOTALING $8,317.23 PCARDEXPENDITURES,TOTALING MANUAL THE PROCEDURESMANUALCONTAINS VAGUE,INCOMPLETE,AND UNDEFINED GENERALTERMS,WHICH MAYCAUSE CONFUSION REGARDING THEVAUDITY OF SOME PCARDTRANSACTIONS EXPENDITURESTOTALING$23,581.99, ALTHOUGH NOT EXPRESSLY DUETOTHE NATUREOFTHE TRANSACTIONS. employee responsible forthe recovery process,(3)whenattempted recovery should begin;(4)howvendors shouldbe notified,and (5) howtodocumentthe recovery efforts DepartmentorDivision Directorsrequestingchangesto the established Munis system P Card approval queue shouldensurethat a properSODismaintained after the changes areimplemented.The cardholdershouldneverbeable toapprovehis/her own P-Card examination regardingthe 208 identified P-Card transactions, totaling$75,374.71,to determine the legitimacyof eachpurchase. Appropriate action shouldbe taken regarding any verified unpermitted purchases. scrutinize future P-Card purchasestohelp preventsimilarerrors fromoccurring.Anynoted futuredeficiencies should be documented andprovided periodically to the Chief Financial Officer and City Administration.Repeatoffenders shouldbe required to attend refreshertrainings. As part of the review/approval process,designatedCityemployees shouldverifythat sufficientsupporting documentation isattached to the PCard Statement,which may indude a completed "Missing ReceiptDocumentation Form."If not provided,the transaction should notbe approved and should be returned to the cardholder for corrective action.Repeated noncompliant cardholders should be requiredto attendadditional refreshertrainings,and P-cardsmay be revokedifthebehavior is not altered.TheCitymay consider reimbursement in cases involvingunsupportable expenditures. Furthermore,the Finance Departmentshouldrecordall non- compliant P-Card behaviorto provide an audittrailinsupport ofany disciplinary actions taken. Card purchases should complywith theapproved relatedCitywide Procedures and/or Procedures Manual.Alternatively,the City Administration mayconsiderrevising eitherofthese documentsto include a provision allowing the stated termsto be overridden by documented approval of the City Manager priorto the purchase. Predetermined Department orDivision P-Card approversand conductingCitybusiness.Iftherequired criteriaare not satisfied, the cardholder and the PCard Administratorshould be immediately notified.In addition,the City Administration shoulddetermine whethera cardholder should be subject to cancellationof his/her P Card and/orotherdisciplinary action,pursuantto Citywide Proceduresand/or Procedures Manual. The pertinentCitywide Procedures,as wellas the Procedures Manual,shouldbe revised to define terms,reduce ambiguities, address the usage ofP-Cardsto donate moniestoother organizationsor charities,buy event tickets,and the amount of allowable tips orgratuities.Also,the Human Resources Department should update itsS0P concerning timelynotification of the Finance Department ofthe terminationof any employee so thatP-Cards can be promptly deactivated. Cardholders,reviewers,approvers,ortheir designeesshould scrutinize all transactions to validatewhether they areeligible and serve a direct,official,and lawful purpose as the reasonable and necessary expenses ofconductingbusiness.Ifany transaction is notification ofall relevantparties of the identified deficiency.Once the deficiency isverified,the availabledisciplinary actions in the Citywide Proceduresas wellas the Procedures Manual maybe utilized. 10 11 12 18 19 Implementation Status per Auditee Partially Implemented Fully Implemented Partially Implemented Partially Implemented Partially Implemented Partially Implemented Partially Implemented AuditeeComments Finance Departmentisinthe process of updating the Purchasing Card procedures guidelines.The Finance Department isrecommending that departments periodically review their actual expensesand compare to budgetto ensure that no duplicates are made andthat corrective actions are taken by the individual departmentsin the unlikelyeventof such an occurrence.Updated procedures will emphasize this iteminboth the Purchasing Card Procedures andto cardholders and approvers during their respective training andothercommunications.Also,reconcilers were recommended to startadding invoice numbers to the Munis P-cardModule whenadding the required supportand G/L allocation. The Munis workflowis laid out to avoidduplicateapprovals and for segregation ofduties.However,the Munisworkflowdoesnot prohibitthe forwardingoftransactionstoanotherindividual which has,historically, resulted in approval of the cardholders own p-cardpurchases.The Finance Department will emphasize this item in both the updated Purchasing Card Procedures(Section 5B)and to cardholders andapprovers duringtraining andother communications.The transactions that were identified in this finding were reviewedbythe approversand physicalsignatureswere obtained foreach statement.These signed statements wereuploaded intothe Munis record.Also,as a detective control,the finance department reviewsa reportquarterly toidentify and mitigate anysituationswhere the cardholdermayinadvertentlyapprove their respective card transactions.Corrective actions,if neededare communicatedto Department personnel The Finance Departmentwill emphasize thisitem in boththe updated PurchasingCard Procedures(Section 2)andto cardholders andapprovers duringtrainingand other communications.Toassist the cardholders,the new JP Morgan Chase Pcards indudes the City'sState ofFloridatax exemption ID onthe frontofthe card toavoidnothaving the number available at the time ofpurchases.Anexplanation ofwhy sales taxwas paid will be required to be induded in the supporting documents for purchases with taxes.In today's methods of procuringgood andservices, especially with e-commerce,it is not always conduciveto presenting atax exemption certification.It is also importantto note thatmost Electronic points-of-sale have no provisions for providingtax exemption information and eliminating Floridasales tax payment Certaintransactions noted in thisfinding,were sufficiently described and were foralegitimate purpose at the time of purchase andapproval.To clarify for cardholders andapprovers what is considered "sufficient, adequate,and relevant"supporting documentation,the Finance Departmenthasprepared a checklist for supporting documentationand added(ExhibitD)to the updated Purchasing Card Procedures(Section4A and 5A).Sufficient,adequate,and relevant supporting documentationare theresponsibilityof the cardholder andapprover.The Finance Departmentwill emphasize thisitem in boththe PurchasingCard Proceduresandtocardholdersand approversduringtrainingand other communications. The Finance Departmentisin the process of revising the PurchasingCard Procedure guidelinesinduding instructions on Procedures,Guidelines along with Exhibitsoutlining updates tothe permitted utilization ofthe City's Purchasing Card.In addition,there are provisionsallowing the cardholder to document andrequestapproval from the City Manager prior to the purchase.The PurchasingCard Proceduresguidelines are administered by City Administrationand are applicable to all those under the authorityof the City Managerand the City Manager'sadministrative team. The Finance Departmentis in theprocess of revisingthe Purchasing Card Procedures guidelines.Therewill beinstructionson Procedures, Guidelines including Exhibits.All the underlying factors for thefindings hereinwill be addressedinthe reviseddocument The Finance Department AccountsPayable Teamwasadded totheAccess Termination emaildistribution list to inform Finance of the needto remove inactive p- cardholders ona timely basis. The itemsin this findingare notexpressly prohibited,however,sufficient, adequate,and relevant supportingdocumentation would avoid the questionable nature ofthe itemand allow fortransparency.As noted in the response tofinding No,4,theFinance Department will providea checklist ofwhatis deemed sufficient,includingpreapproval from the City Managerwhere applicable.(Section 4A,54)The Finance Department will emphasize thisitem in bothupdated Purchasing Card Proceduresand tocardholders and approvers during trainingand othercommunications. The Finance Departmentshould establishand follow adocumented procedureto reduce the risk ofduplicatepayments.Itshould THE CITY MADE NINE DUPLICATE PAYMENTS /contain,at a minimum,the following recommended provisions:(1)a TO VENDORS RESULTING IN $5,984.92 /process to recover duplicate payments;(2)identification ofthe The City Administration shoulddecide whether any action should be taken pursuanttoSOP FL16.01toobtain reimbursementfor incorrectlypaid salestaxesin P-Card purchases.All individuals involved in the processing ofP-Cards,including thecardholders, TAXWAS IMPROPERLY PAID SYTHE CITYON assigned reviewers,approvers,Departmentor Division Directors, 94SAMPLED PCARD TRANSACTIONS /designated Finance Department staff should be instructedto $236,643.91,WERE PAID BY THECITY Idesignees shouldclosely review all transactionsto determine Finance Department /DESPITEBEING SPECIFICALLYDISALLOWED whethertheyare related toCitybusiness andserve a direct,official, INSECTION 1.16.1OFTHE PROCEDURES and lawful purpose forreasonable and necessary expenses of PROHIBITED IN THE PCARDPROCEDURES related toa noneligible expenditure,the PCardrevieweror MANUAL,APPEAR QUESTIONABLE /approver shouldfollow the establishedguidelines fortimely The Finance Department should requestthe City contractedbank to 39PCARDPURCHASES,TOTALING [declineor block all PCard purchases of businesses containing $12,387.24,WEREMADE FROM \disapproved MCCs listed inSection 1.3of the Procedures Manual.As Finance Department /DISAPPROVED MERCHANTCATEGORY [a compensatinginternalcontrol,PCard reviewers and approvers CODES THATWERE NOT 8LOCKED INTHE (should validate that all purchasessubmitted forreimbursement CITY BANKING SYSTEM [complywithall requirements,includingthose in Section 1.3 of the Procedures Manual Page 4 of 7 20 Similarto theCity's previousfinancial institution,the)P MorganChase PurchasingCard program has implemented MCC blocks resulting in Fully Implemep [declinesof purchaseswiththerestricted MCCcodesnotedin this finding. Exceptionswere andaremade forthe MCCcodesoutlined in the proceduresguidelines forspeaficcards due to the natureof the cardholder's business. Audit #OIGNo.23-22 Audit NanThe BalletValetParkingCompany,LTD.Parkingand Lease Agreements OversightAudit Audit Peri August 1,2018-July31,2023 ReportDa November 20,2023 AssetManagementDivision RE-CALCULATION OF THE MONTHLY RENTAL,TheAssetManagement Division shouldre- PAYMENTS REQUIRED UNDER THE LEASE calculateand creditBalletValet forthe AGREEMENT DETERMINED THAT BALLET\$20,581.13 overpaid plusFlorida Sales Tax. VALET OVERPAID THE CITY BY A TOTALOF In addition,ajournal entry shouldbe $21,924.75,CONSISTING OF $20,581.13 IN]createdto reducetheCity SalesTax liability BASE RENT AND $1,343.62 IN FLORIDA[general ledger account dueto theidentified SALESTAX.$1,343.62 overpayment. Implementation Status erAuditee AuditeeComments Fully Implemented 'Thisfindingwas reviewed,corrected and paidback to Ballet Valeton September 21, 2023. Parking Department RE-CALCULATIONOF THEMONTHLYFEE The Parking Departmentshould validate the Fully Implemented ParkingDepartment PAYMENTSTO BE PAID TO THECITYUNDER figures using the methodology approved by THE PARKINGAGREEMENT RESULTEDINA the OIG and CAO.Once finished,BalletValet NETUNDERPAYMENTOF$17,349.38,[shouldbeinvoiced accordingly.In addition, EXCLUDING FLORIDA SALES TAX.the Parking Department should ensure that all future monthly rentals are billed in accordancewith theAgreement terms. THE PARKING DEPARTMENT DID NOT'The Parking Department should review the COLLECT AND REMIT FLORIDA SALES TAX OIG's calculations,and if agreed,invoice DUE TO THE STATE FOR THE USE OF/Ballet Valet for the$12,879.72 ($1,419.25 + LICENSED PARKING RENTAL FEES,RES UL,$11,460.47)due in Florida Sales Tax.Once TING INAN UNDERBILLING OF$12,879.72.the City receives payment,it should be promptly remitted to the State.In addition, the Parking Department should,at least anually,obtain documentation indicating the number of parking spaces sub- leased/rented,any used by Ballet Valet/Goldman Properties,and any used to provide free parking.lt is important to note that if any are used to provide freeparking, the entire consideration paid becomes taxable pursuant to Rule 12A-1.073 (3). Applicable Florida Sales Tax should be assessed on the correspondinglicense rental fee for those spaces not sub-leased/rented and used by Ballet Valet or any authorized parties.Furthermore,the Parking Department should retain copies ofall ResaleCertificate forms to document exempted license rental feesintheeventofa Florida Sales Taxaudit. Page 5 of 7 10 TheOIG findingwas reviewedandvalidated. TheParkingDepartment invoiced BalletValet for the underpayment of$17,349.38 on November7,2023InvoiceNo.46571 (Attachment A),andpaymentwas receivedon November29.2023.In responsetothis0IG auditfollow-up,theParking Department met with theFinance Departmentto reviewthe monthly billings fromAugust1,2023 to date. Adiscrepancywasidentified resulting in a netunderbillingof$8,430.48for the period fromAugust1,2023 toAugust1,2024,and $189.42 for thefirst two months oftheperiod fromAugust1,2024 toAugust1,2025.The ParkingDepartmentinvoicedBallet Valetfor thetotal underbillingamountof $8,619.90. Invoice No.52298(AttahchmentB)dated September 11.2024,attached,includes a detailed breakdownof thecosts.Payment was recievedon October 2,2024.Going forward,the Parking Departmentwill invoice BalletValet at thecurrent monthlyrateof $114.58 per access cardand adjust the monthly access cardratefortheperiod from August 1,2025 to August 1,2026 per the agreement. Fully Implemented TheDIGfinding was reviewedand validated. Ballet Valetwas invoiced fora total of $12,879.72 on November 7,2023.The Parking Depatrment issuedinvoice No.46564 (Attachement C).Payment wasreceived on November 29,2023;and,pertheattached email,the FinanceDepartment remitted the amount totheState(Attahcment D).Pursuant to theOIG's recommendation,the Parking Department will obtain documentation from Ballet ValetbeginningOctober 1,2024 (Attahcment E),andannually thereafter, detailing the numberofparking spaces sub- leasedorrented byBallet Valet,used by Ballet Valetor anyauthorizedparties,as well as anyspaces usedto provide freeparking. Audit#0IGNo.2324 uditNamincoinPlaceGround teaseAgreementComplianceAudit AuditPeriJanuary 1,2019,throughDecember 31,2022 ReportDaNovember 30,2023 ssetManagement Divisionstaffshouldperformits owncalculations Implementation Status erAuditee AuditeeComments Facilities and FleetManagement Department THECITYWASUNDERPAID $9,922.96INB8ASERENT,[and determinewhether it agreeswiththeOIG Auditor's calculations of NCUDING$488.20INFLORIDASALESTAX,DUETO [$9,92296in baserentduetotheCitytor the auditperiod.Once INCORRECT CALCULATIONS INVOLVING THECUMULAT ,[ompiered,itshouldinvoice theTenantaccordingly.s thebase rent, ADJUSTMENTS PURSUANT TOSECTION 3 OF THE GROUP [includingFlorida 5alestax,isbasedon theprioryears'calculations,LEASEAGREEMENT.[the monthlychargesinvoiced for futureleaseyears starting withJanuary1,2023,throughDecember 31,2023,should bereviewedand adjusted,as needed. 11/30/2023 FULLYIMPLEMENTED TheAsset Management Divisionacknowledgedthe miscalculationfrom2013,recalculated and properly adjustedthe historical billingsfrom2013 through 2022 Facilities and Fleet Management Department FLORIDASALES TAXON COMMERCIALRENTWAS NOT CORRECTLYAPPLIED TO THE PERCENTAGERENTPAYMENTS RECEIVED RESULTING INA$45,692.14 UNDERBIL/NG INCUING$2,048.42 DUE TO THESTATE. TheAsset Management Division shouldexamine theOlG's calculations anddetermine whether they agreewiththem,Oncecompleted,it shouldpromptly invoicetheTenantaccordingly.Thedifference between theFrida5$ales taxpaidandthecorrespondingtaxdue shouldbeincludedin theCity's next paymentto the StateofFlorida Department ofRevenue.Furthermore,AssetManagement Division staff shouldreviewitsgeneral ledger account distributions related tothe percentagerent payments outsidethedesignated audit period,and promptlymake anyneededcottetions. 12/1/2023 FUYIMPLEMENTED TheAsset Management Divisioncollaboratedwith the Finance Departmentto indude the difference for SalesTaxintheamountof$2,048.42to the Stateof Florida Departmentof Revenue.TheAsset ManagementDivision identified and hadcorrected thisissue withthe 2022 percentage rent payment. Facilities and Feet Management Department PERCENTAGERENT PAYMENTS WEREREMITTEDO TOTHE CITY AFTERTHE DUE DATES SPECIFIED IN THEGROUNDLEASE AGREEMENT,BUTATE FEES WERENOT ACCURATEY CHARGED,RESULTINGIN $2,729.19 DUE,WHICHINCLUDES $64289INFORIDA SALESTAX TheAsset Management Division shouldensurethat futurepercentage rent paymentsateremittedtimelypursuantto theGroundLease Agreement.Itnot,thespecifiedlatecharges should bepromptly and accuratelybilled.TheAsset ManagementDivision shouldreviewthe OIG calculations,andif itagrees,credit thecurrent Tenantin the amountof$1,41383($7,651.19 billed$5,856.68due $380.68 Florida Sales taxdue)related toits 2021 calendaryearpaymentand remit$380.68to theStaterelatedtothepercentagerent latefee collectedduringthe auditperiod.In addition,theAssetManagement Division shouldinvoicetheformer tenant,16StreetPartners,LC,for the identifiedlatecharges plusFlorida Sales taxof $2,345.25 for2018 and $1,797.16 fr 2019. 1O 12/2/2023 IMPLEMENTED ThecurrentAsset ManagementDivision staffhadno historyofthe previousmanagement company(LNR)to confirm ifthoselatefeeswere waived by the City. Since LNR isnolonger managing thisproperty,the AssetManagement Division did not agreewith back billing theselatefees.OnAugust25,2022,theAsset ManagementDivision billed andcollectedthelatefee for the 2021period where the Tenantwas 175days late in the amount of$7,65119.However,inreviewing the late fee charged,itwasnotcalculatedcorrectly. TheAsset ManagementDivision reviewedtheOIG's calculation,and afterconsultingwith theCity FU'4qztorney'sOffice aswell asthe Finance Department,it was determined theOIGbasedtheprime interest rate calculationsolelyon the rate in effecton the firstday the paymentwaslate.However,inaccordanceto section 4.1 "Late Charges","...the late paymentshall bearinterestfromthe date due untilthedate paid ata rate(the "LateCharge Rate")equalto the lesserof(a) FourPercent(4%)per annum in excessof the prime rateineffect fromtime totime..."Since the prime ratechanged four(4)timesoverthe 175 daysthe Tenantwaslate,theamountdue byTenant would be $6,629.88plussales taxof$430.94,fora total of $7,060.82. Facilities and Fleet Management Department Facilities and fleet Management Department THETENANT DIDNOTSUBMIT ALL THEREQUIREDREPORTS FORTHEPERCENTAGERENT PAYMENTS BYTHE DESIGNATED DUEDATES SPECIFIEDINTHEGROUNDLEASEAGREEMENT. PERCENTAGERENT PAYMENTS COULDNOT BEVERIFIEDDUE TO INSUFFICIENT SUPPORTING DOCUMENTATIONAS REQUIRED PERTHE GROUND LEASE AGREEMENT TheTenantshouldtimely submitall required reports to the CityAsset ManagementDivisionpursuant totheGroundLeaseAgreement.All reports shouldbetime/datestampedupon receiptby theCityto enforcementactionsavailable intheGroundLeaseAgreement,where applicable. TheTenantshouldtimely submitall requited financialstatements and back-updocumentationtotheAssetManagement Divisionunder the executed Groundteasegeement.Inaddition,theAssetManagement Division shouldvalidatethecorrespondingfigures as per the supportingdocumentation tothosereported intheannual percentage , rent calculations provided bytheTenant.Ifthedocumentation still needsto bereceivedas partofsubmittingthepercentagerent payments,theAssetManagement Division should promptlynotify the Tenantof thedeficiencyinwritingand implementany disciplinary actionsavailablein theGround LeaseAgreement. 11/30/2023 FULLY IMPLEMENTED 11/30/2023 FULLY IMPLEMENTED TheAssetManagementDivision didnot believethe reportsmentioned aboveweredeliveredlateto the City.The current AssetManagement teamhasbeen maintaining time/date stampson received documents,despite itnotbeing a lease requirement. The teamfollows up withtenantsfortheir deliverables andimplementstheappropriate enforcementperthe lease. Theseprocesses andprocedures have beenineffect since 2022,which ispriortothecommencementof this audit.Unfortunately,wecannotcommenton anythingprior. facilities and lee Management Department Risk ManagementDivision TheresponsibleCitystaffshould revisethe Exugis softwareparametersrelatedtoLincolnPlacetomirrortheinsurancerequirementslistedin rticle?,Insurance,of theGround easeAgreement.Asset 12%.12%2.%o.be«a«rarer«or· GROUND LEASEAGREEMENTFORMOST OF THEAUDIT [insuranceis fullycompliant with theGround teaseAgreement and [17:EE:z3722 Division should periodicallyreviewExigis softwaretovalidate that the Tenantcomplieswiththerelated insurancerequirements. Page 6 of 7 11/30/2023 FULLYIMPLEMENTED The AssetManagement Division verifies the received certificatesofinsurance in accordancewith the lease requirements.Thisrecommendation comesupon all audits duringthe same period.Priorto the first finding ofthisdiscrepancy (forthecurrentAssetStaff),the Asset Management staffhad noknowledgethat Exigis parameters would notnecessarily mirror the lease requirements.Thishasbeen corrected andcontinues to be reviewed regularly.Risk Management confirmed that tenantis in compliancewith Insurance re uuirements. Audit#OIG No.23-26 AuditNameInsurance Certificate Tracking System Process Review AuditPeriod N/A ReportDate12/21/2023 ImplementationStatus erAuditee Auditee comments RiskManagement The above deficienciesrelated totheprofileof the20 sampled Eigisvendors withnoncom pliantinsuranceparameters should be revisedbyCitystaffto mirror the insurancerequirements ofthe associated contracts/agreements.Giventhehigh percentage of sampledcontracts/agreements containingdeficiencies (20/21= MISALIGNMENTBETWEEN EXIGIS 95.24%),theOlG stronglyrecommendsthatRiskManagement SYSTEMPARAMETERSAND Divisionstaffreviewall otherCity contracts/agreements,including INSURANCE REQUIREMENTS IN20 thoseexecuted prospectively,to determinewhetherthelisted of2101GSAMPED insurance parameters aresufficient.Ifdeficient,the necessary CONTRACTS/AGREEMENTS.corrections should bepromptlymade.ltis also recommended that theRiskManagement Division developanalternateprocedurefor anycontract/agreementwithaninsurancerequirementnot verified byExigis(eg,Business Interruptioninsurance)to determine whether pertinentvendorsarecompliantthroughan Umbrella Package oranotherpolicy. All departments havebeen informed tocontactRisk Management forinsurance requirements.Weconduct periodicchecksofvarious fully implemented /vendorsand providefeedbackto EXIGIS.Peasenotethat customization withinEXIGIS is not possible withoutadditionalcost andthis can causetovarianceor exception fromtime to time. RiskManagement The Risk Management Minimum Insurance Requirements,the insurance provisions in the executed contracts/agreements,and the parameters in the Exigis system should be aligned. Furthermore,thevendor-maintainedinsurancecoverageshould,at or-:7222%:22"2."1,I«a to««to«« ea·zzrzz:... the stated terms with the required insurance coverage.Also,the City should contact associated vendors to try to amend any existing contracts/agreements containing materially deficient insurance coverage provisions. fully implemented All departmentshavebeenmade awaretoreachoutto Risk Managementforinsurance requirements prior toentering the evaluation into EXIGIS.Please notethatcustomization within EXIGISisnotpossible without additional costandthiscan cause to variance orexception fromtime to time. RiskManagement RiskManagement NO DOCUMENTEDMETHODOLOGY ORPROCESSHAS BEENFOLLOWED TO CONFIRMTHATVENDORS MAINTAINTHE REQUIRED INSURANCE COVERAGE THROUGHOUTTHETERM OFTHEIR CONTRACTS/AGREEMENTS. NOVEMBER3,2022. Risk Management Division staff should document a methodology orprocess to determinewhether eachapproved vendor insurance policy continues to satisfy the designatedrequirements duringthe remainingtermofthecontract/agreement.Ataminimum,Risk Management Division staff should periodically examine the vendor's insurance coverage and document the results.Vendors should be promptly notified of any identified deficiencies,and available disciplinary actions should be enforced against repetitive non compliant vendors or those entities that do not timely correct theidentifieddeficienc- The OIGAuditorsentan email tothecurrentCityRiskManager recommending deactivation ofall activeaccess related to terminated employeesandtodeterminewhetherthetwounknown users needsystemaccess.Ifnotalready completed,any active accounts belonging toformer employeesshouldbepromptly anyindividuals separatedfromemployment aretimely deactivated. •Risk Management Divisionstaffshouldalsoexamine,atleastannually,the Exigis system User Rolesassigned to individualsto determine ifanychangesareneededbased onthecurrent position andjobduties. 12 13 fullyimplemented fullyimplemented Exigis completes this upon notification fromthe vendor orthe expiration dateon thecertificate ofinsurance.Anotification email is sent tothevendor 30days and 14dayspriorto expiration requestingan updatedcertificate ofinsurancecoverage fromeach vendor. AtthistimeEXIGISwill send a reportquarterly for Risk Managementto reviewand reconcile.This will control the numberof associatewhohave accessto thedatabase OUTDATEDEXIGISUSERLISTWITH deactivated. UNREVOKEDSYSTEM ACCESSFOR ·Adocumented processshouldbecreated todeterminewhich 81TERMINATED EMPLOYEESASOF employees needaccesstoExigisand toensure thattheaccounts of Risk Management The CityManageror herdesigneeshould createandadopta THE LACKOFACENTRALIZED Citywideprocedurerequiringdepartmentsanddivisionsto LISTING OFALLCITYAGREEMENTS providecopies ofall contracts/agreements totheProcurement HINDERSTHEDETERMINATIONOF Department,including thosethatdidnotgo throughthe THOSEREQUIRINGINSURANCE establishedprocurementprocess.Oncereceived,each COVERAGE.contract/agreementshould beuploaded totheCitywebsiteto centralizetherelatedinformation andto facilitateidentification. 14 fullyimplemented Risk Managementmonitors monthlyall agreements that cannot beenteredinto EXIGISfor compliance,seetheattached spreadsheetusedtocomplywith this finding. Risk Management UNCERTAINTYEXISTS IN IDENTIFYINGCITYSTAFF RESPONSIBLE FORTHEEXIGIS RISKWORKSSOFTWARE ADMINISTRATION,INCLUDING OWNERSHIP OFTHE DATA. The CityManageror herdesigneeshould implementan oversight process to monitor thedata withintheinsuranceCertificate TrackingSystem,including determining thecorrespondingdata ownerand theduties ofeachinvolveddepartment/division,tohelp establishaccountabilityandprevent thedeficienciesnotedin this reportfrom reoccurring.Otherwise,all theanticipatedbenefitsof contractingwithExigis may notberealized and theassociatedCity fundsmay notbewell spent 15 RiskManagement teamconducts monthly reviews of EXIGIS fullyimplemented information toreduce deficiencies andmaximizetheeffectivenss of thevendor. Risk Management NOEVIDENCE WASPROVIDEDOFA The CityAdministrationorits designeeshould developand ?".a.sols.n««««or««r««««rno«o MAINTAINED INSURANCE [insurance requirements includedincontracts/agreements andto o«on.srceosors /2.7.7.,7,2.12"277"«.«to PARAMETERS,AND FOLLOW-UPOF NON-COMPLIANTRES ULTS.Pa e 7 of 7 16 Procurementsends a weeklynon- compliancereportto every department citywide.Each department is responsiblefor fullyimplemented contactingthevendor and requestingthe missing information.Risk Management will conduct periodic trainingto our business partners. DOCUMENTEDSTANDARD