State Forfeited Funds and Related ExpendituresBUDGET AND PERFORMANCE IMPROVEMENT
Internal Audit Division INTERNAL AUDIT REPORT
TO: Jorge M. Gonzalez, City Manager
VIA:
FROM:
Kathie G. Brooks, Budget and Performance Improvement Director
James J. Sutter, Internal Audi~
DATE:
AUDIT:
PERIOD:
April 13, 2012 (r.r
State Forfeited Funds and Related Expenditures Audit
October 1, 2008 through April 30, 2011
This report is the result of a regularly scheduled audit of the State forfeited monies earned,
received, deposited, expended and recorded by the Miami Beach Police Department, City
Attorney's Office and Finance Department between October 1, 2008 and April 30, 2011. In
addition, the audit scope was expanded to include any monies reimbursed to the City for such
related expenditures as overtime, vehicle leasing and travel.
INTRODUCTION
Florida Statutes Section 932.701 -706 or the Florida Contraband Forfeiture Act is the statutory
authority for State asset forfeiture as it sets forth the purpose and procedures to be utilized for
the appropriation and expenditures of the Police Confiscation Trust Fund. Unlike the Federal
system, there is no provision for criminal forfeiture, and all forfeiture proceedings must be held
in the civil division before a circuit court judge. Before the government can seize property, it's
required to notify anyone with an interest in the property that the forfeiture action is being taken
and they have a right to request a preliminary adversarial hearing.
The State's policy is that law enforcement agencies utilize the provisions of the Florida
Contraband Forfeiture Act to:
• Deter and prevent the continued use of contraband articles for criminal purposes;
• Protect the proprietary interests of innocent owners and lien holders;
• Authorize such law enforcement agencies to use the proceeds collected under the
Florida Contraband Forfeiture Act as supplemental funding for authorized purposes; and
• Ensure that all seizures made under the Florida Contraband Forfeiture Act, their officers
adhere to Federal and State constitutional limitations regarding and individual's right to
be free from unreasonable searches and seizures, including, but not limited to, the illegal
use of stops based on a pretext, coercive-consent searches, or a search based solely
upon an individual's race or ethnicity.
The State permits forfeited funds to be used for crime prevention, keeping neighborhoods safe,
drug abuse education, drug prevention programs or such other law enforcement purposes
approved by the City. Such funds shall not be a source of revenue to meet normal operating
needs of the law enforcement agency. It also requires the City to expend or donate a minimum
of fifteen percent of the forfeited funds acquired provided the City receives at least $15,000
within a fiscal year for the support or operation of any drug treatment, drug abuse education,
drug prevention, crime prevention, safe neighborhood, or school resource officer programs.
These funds may be expended only upon request by the Chief of Police to the City Commission
We are committed to providing excellent public service and safety to all who live, work, and play in our vibrant, tropical, historic community.
Internal Audit Report
State Forfeited Funds and Related Expenditures Audit
April 13, 2012
which is accompanied by a written certification that the request complies with the provisions of
Florida Statute Section 932.7055.
The Miami Beach Police Department or MBPD periodically participates in task forces whereby
joint investigations are conducted with other cities, counties, agencies, etc. However, only one
involving the Strategic Investigations Unit's participation in the South Florida Money Laundering
Strike Force (Strike Force) resulted in the City receiving forfeited funds from the State of Florida
during the October 1, 2008 through April 30, 2011 audit period. The City Commission approved
MBPD's involvement in the Strike Force during this time period through the ratification of
Resolution Numbers 2008-26919 covering 09/18/08 through 09/01/09 and 2009-27167 covering
09/01/09 through 09/01/12.
The City of Coral Gables initially receives all Strike Force forfeited monies from the State after
the legal process has been exhausted which can take an indefinite amount of time. These
received monies are then reduced by any amounts owed to confidential informants who aided
the police officers in making the arrest. Additionally, some monies may be retained for
budgetary purposes as the Strike Force's goal is to have enough monies to fund operations for
at least one year in the future.
Any remaining forfeited funds are allocated and distributed to the participating cities, counties,
agencies, etc. based on the number of assisting personnel in relation to the total as recorded on
the Case Distribution Information Sheet. For example, if Miami Beach provided 4 police officers
of the 50 in total who worked on the case then the City is entitled to receive 8% of the allocated
funds.
Coral Gables attaches a physical check and sends the documents to MBPD's Strategic
Investigations Unit Captain. They are subsequently forwarded to the Financial Management
Unit who prepares a Miscellaneous Cash Receipt so that the transaction can be processed by
the City's Central Cashier with the monies deposited into general ledger account numbered
607-8000-351210 entitled "Confiscated Property-State$".
The City is also reimbursed on a quarterly basis by Coral Gables upon the submittal of
supporting documentation for any MBPD officers' overtime hours worked in the Strike Force
(general ledger account number 011-1140-000135). Similarly, any participating police officers'
leased vehicles are also currently reimbursed quarterly for up to $750 per month (general ledger
account number 011-1140-000323). These reimbursement monies are received from Federal
grants and not from State forfeited funds so the Florida Contraband Forfeitures Act does not
apply.
In addition, the MBPD joined the Internal Revenue Service Financial Investigative Strike Force-
HIDTA Group 5 (HIDTA/IRS Group 65-09) for the fiscal year ending 09/30/11. The Treasury
Forfeiture Fund initial budget was authorized for $27,600 which was comprised of $15,000
overtime and $12,600 travel reimbursable expenditures. Subsequent increases may be granted
upon receipt of written requests from the Special Agent in Charge. There were no State
forfeited funds received from this task force during the audit period per the Special Agent in
Charge.
Also, the City Attorney's Office through negotiated Stipulation of Settlement and Agreements
and issued Court Orders assists MBPD in the confiscation of assets following felonious arrests
Page 2 of 8
Internal Audit Report
State Forfeited Funds and Related Expenditures Audit
April13, 2012
based upon the strength of the City's case and the amount of monies involved. Any confiscated
vehicles, boats, etc. may be sold at auction or used by MBPD as needed. Upon receipt of
monies, a Miscellaneous Cash Receipt is prepared and the transaction is processed by the
City's Central Cashier with the monies also deposited into general ledger account numbered
607-8000-35121 0.
The following table reports the state forfeiture revenues received less those monies expended
during the audit period:
10/01/08-10/01/09-10/01/10-
09/30/09 09/30/10 04/30/11 TOTAL
STATE FORFEITURES:
Strike Force Revenues $138,479 $23,800 $161,614 $323,894
City Attorney's Office Claim Recoveries $455,959 $43,115 $162,707 $661,781
Total State Forfeitures Revenues* $594,439 $66,915 $324,321 $985,675
City Commission Approved Expenditures ($205,362) ($50,779) ($229,277) ($485,418)
STATE FORFEITURE DIFFERENCE
(REVENUES -EXPENDITURES) $389,077 $16,136 $95,044 $500,257
* These amounts do not include any interest earned on the invested monies prior to the monies being
expended.
The Police Confiscations-State or 607 fund's April 30, 2011 overall cash balance equaled
$1,905,356 according to the Eden System's G/L Trial Balance Report. However, this amount
included the $50,415 flash roll and $5,631 in the Strategic Investigations Unit's imprest account,
which are independent of State forfeited funds, thereby lowering the fund's forfeiture cash
balance to $1,849,311.
Finally, the following table lists the amounts reimbursed to the City's general fund during the
audit period (separated by source) from police officers participation in the Strike Force and
HIDTA/IRS Group 65-09 task forces:
10/01/08-10/01/09-10/01/10-
09/30/09 09/30/10 04/30/11 TOTAL
REIMBURSEMENT OF EXPENDITURES:
Strike Force Overtime $176,182 $115,468 $39,263 $330,912
Strike Force Vehicle Leasing $38,160 $32,487 $8,120 $78,767
Total Strike Force Reimbursements $214,342 $147,955 $47,383 $409,679
HIDTA/IRS Group 65-09 Overtime $0 $0 $11,840 $11,840
HIDTA/IRS Group 65-09 Vehicle Leasing $0 $0 $3,738 $3,738
HIDTA/IRS Group 65-09 Travel $0 $0 $263 $263
Total HIDTA/IRS Group 65-09 Reimbursements $0 $0 $15,842 $15,842
TOTAL REIMBURSEMENTS $214,342 $147,955 $63,224 $425,521
Page 3 of 8
Internal Audit Report
State Forfeited Funds and Related Expenditures Audit
April 13, 2012
OVERALL OPINION
The Miami Beach Police Department maintained valid agreements with the South Florida
Money Laundering and HIDTA/IRS Group 65-09 task forces during the audit period. Organized
and sufficient documentation was provided by the Strategic Investigations Unit and the City
Attorney's Office to properly support all tested transactions. In addition, tested expenditures
authorized by the Chief of Police and the City Commission were found to have been timely
made. Despite these positive findings, the following items were noted during our analyses that
are in need of improvement:
• The City did not fully comply with the Florida Contraband Forfeiture Act as they did not
satisfy the 15% requirement and expended/donated $86,851 less on required purposes
during the audit period.
• The Police Department's Financial Management Unit incorrectly recorded $36,154.7 4 as
Criminal Investigations Division's overtime (011-1140-000135) rather than to forfeited
funds (607-8000-351210). As a result, these monies were not expended in accordance
with Florida Statute Section 932.7055.
• The overtime, vehicle leasing and travel reimbursement requests are not entered in the
Eden System's Accounts Receivable Module to better ensure that all corresponding
payments are completely received and to allow for proper accruals.
PURPOSE
The purpose of this audit was to determine whether tested State forfeited monies were received
in the proper allocation; whether tested receipts were completely and timely deposited by the
Finance Department's Central Cashier; whether tested expenditures were made in adherence
with City Commission approved Resolutions and State Statutes; and whether tested
transactions were accurately recorded in the City's Financial System.
OBJECTIVES
1. Confirm that comprehensive updated policies and procedures exist, are known to staff
and are properly followed.
2. Confirm that the internal control process implemented including a proper segregation of
duties is adequate.
3. Confirm that maintained documentation and software systems are organized, complete
and sufficient.
4. Confirm that the City's voluntary cooperation mutual aid agreements are current and
valid.
5. Confirm that the City received the correct allocation of forfeited funds and that all tested
funds are present and accounted for.
6. Confirm that tested expenditures were made in accordance with the Florida Statutes and
City Commission approved Resolutions.
7. Confirm that tested transactions were timely and accurately entered into the City's
Financial System.
Page 4 of 8
Internal Audit Report
State Forfeited Funds and Related Expenditures Audit
April 13, 2012
FINDINGS, RECOMMENDATIONS AND MANAGEMENT RESPONSES
1. Finding -The City's Expenditures or Donations Were $86,851 Less Than the Amount
Required By the Florida Contraband Forfeiture Act For the 10101108-04130111 Audit
Period
Any State forfeited funds disbursed that are subject to Florida Statutes 932.701 -706 or
the Florida Contraband Forfeiture Act are required to be used for crime prevention,
keeping neighborhoods safe, drug abuse education, drug prevention programs or such
other law enforcement purposes approved by the City. Furthermore, Florida Statute
932.7055 requires the City to expend or donate a minimum of fifteen percent of forfeiture
funds provided the City receives at least $15,000 within a fiscal year for the support or
operation of any drug treatment, drug abuse education, drug prevention, crime
prevention, safe neighborhood, or school resource officer programs.
All State forfeiture transactions are to be entered into general ledger account number
607-8000-351210 entitled "Confiscated Property -State $" as there is no distinction
made between those applicable to the Florida Contraband Forfeitures Act and any that
are not. Although it was applicable to all tested forfeitures during the audit period, the
City's Attorney Office stated that this is not always true and different rules are applicable
when and if this occurs.
As shown below, testing performed on funds received and expended subject to the
Florida Confiscation Forfeiture Act during the 10/01/08 through 04/30/11 audit period
found that the City's expenditures or donations were $86,851 less than the amount
actually required:
*
1 0/08 -09/09 10/09-09/10 1 0/1 0 -04/11 Total
Strike Force * $138,479 $23,800 $161,614 $323,894
City Attorney's Office $455,959 $43,115 $162,707 $661,781
Total Applicable Revenues $594,439 $66,915 $324,321 $985,675
Donation Percentage 15% 15% 15%
Donation Amount Required $89,168 $10,037 $48,648 $147,851
Donation Amount Paid $38,500 $0 $22,500 $61,000
Difference (Required -Paid) $50,666 $10,037 $26,148 $86,851
The10/08-09/09 South Florida Money Laundering Strike Force (Strike Force) figure includes the
$36,154.74 inadvertently miscoded to overtime as discussed further in finding #2.
Recommendations:
General ledger account 607-8000-351210 should be renamed to show that it is subject
to the Florida Contraband Forfeitures Act's stipulations. Meanwhile, another State
forfeiture account that is not subject to the act should be created if and when needed.
Going forward, the Miami Beach Police Department's (MBPD) Police Chief's Office and
the Financial Management Unit should more closely monitor those revenues subject to
the Florida Contraband Forfeiture Act so that they can better ensure that the 15%
donation provision is complied with. Also, the City Commission should consider
approving the donation of at least $86,851 in forfeiture funds in a manner that satisfies
Florida Statute Section 932.7055.
Page 5 of 8
Internal Audit Report
State Forfeited Funds and Related Expenditures Audit
April 13, 2012
Management Response:
The City Commission adopted Resolution No. 2012-27839 on 02/08/12 authorizing the
donation of $90,000 in state funds to drug and crime prevention school resources
programs which satisfied the recommendations above. It is anticipated that additional
requested expenditures will be brought before the City Commission close to the end of
the 2011/12 fiscal year that would help ensure that the 15% expenditure/donation
requirement in Florida Statute Section 932-7055 is satisfied.
2. Finding -State Forfeiture Monies were Incorrectly Miscoded Thereby Used to
Reimburse Overtime Expenditures Incurred by the Criminal Investigations Division
Rather than for the Purposes Authorized in Florida Statute 932. 7055
The City of Coral Gables receives all South Florida Money Laundering Strike Force
(Strike Force) forfeited monies from the State after the legal process has been
exhausted which can take an indefinite amount of time. These received monies are then
reduced by any amounts owed to confidential informants who aided the police in making
the arrest. Additionally, some monies may be retained for budgetary purposes as the
Strike Force's goal is to have enough monies to fund operations for at least one year in
the future.
Any remaining forfeited funds are allocated and distributed to the participating cities,
counties, agencies, etc. based on the number of assisting police officers in relation to the
total as recorded on the Case Distribution Information Sheet. A physical check is
attached and mailed to MBPD's Strategic Investigations Unit Captain indicating the
applicable case numbers for these forfeited funds. These documents are then
forwarded to the Financial Management Unit for the preparation of a Miscellaneous
Cash Receipt instructing the City's Central Cashier to deposit the monies into general
ledger account 607-8000-351210.
The City is also reimbursed on a quarterly basis by the City of Coral Gables upon the
submittal of supporting documentation for any officers overtime hours worked with the
monies deposited into general ledger account 011-1140-000135. Similarly, any
participating officers' leased vehicles are also reimbursed quarterly for up to $750 per
month currently with the deposit made into general ledger account 011-1140-000323.
These reimbursement monies are received from Federal grants and not from State
forfeited funds so the Florida Contraband Forfeitures Act does not apply.
Any State forfeiture funds disbursed that are subject to the Florida Contraband Forfeiture
Act are to be used for crime prevention, keeping neighborhoods safe, drug abuse
education, drug prevention programs or such other law enforcement purposes approved
by the City. It is also required that the written certification presented with a request for
contraband forfeiture funds must certify that the request made by the Chief of Police
complies with the provisions of Florida Statute Section 932-7055.
Testing performed on all Strike Force forfeiture, overtime and equipment leasing
transactions occurring during the 10/01/08 through 04/30/11 audit period found two
miscodings by MBPD's Financial Management Unit. First, the City's forfeited fund
allocation of $24,173.91 from Strike Force's case number 08-0425 was inadvertently
placed into the Criminal Investigations Division's overtime general ledger account
Page 6 of 8
Internal Audit Report
State Forfeited Funds and Related Expenditures Audit
April 13, 2012
instead of the forfeitures account. A second similar mistake occurred during the same
June 2009 time period with an $11,980.85 payment received from case numbers 05-
05830 and 05-05831. Therefore, the subsequent expenditure of this $36,154.7 4
($24, 173.91 + $11 ,980.85) balance would not have been certified by the Chief of Police
nor approved by the City Commission as it would have been used to reimburse overtime
incurred by the Criminal Investigations Division rather than for the purposes authorized
by Florida Statute Section 932.7055.
Recommendations:
The City's Finance Department should prepare a journal entry transferring $36,154.7 4
from general ledger account 011-1140-000135 plus any interest that would have been
earned to 607-8000-351210. The creation of City Bills in the Eden System addressed in
finding #3 for overtime and vehicle leasing expenditures will help reduce the likelihood of
similar miscoding from occurring. However, the unpredictable nature and amounts of
State forfeited funds prevents these transactions from being processed in a similar
manner. Going forward, the MBPD's Financial Management Unit should closer
scrutinize these transactions to better ensure that they are processed correctly.
Management Response:
These two (2) checks were deposited incorrectly into the General Funds account 011-
1140-000135 on June 5, 2009. The City's Finance Department will process the
reclassification of those funds as recommended by the end of this fiscal year.
3. Finding -The Eden System's Accounts Receivable Module is Not Used to Track and
Record Reimbursable Overtime and Vehicle Leasing Expenditures
The Strategic Investigations Unit Captain prepares Word documents requesting
reimbursement for any Strike Force participating officers' overtime and vehicle leasing
expenditures incurred following each quarter. Supporting documentation consisting of
signed overtime logs, overtime & court attendance forms, vendor invoices, etc. would
also be attached before the information was faxed to the City of Coral Gables requesting
payment. Accordingly, there was no entry into the City's Eden System until the
reimbursing payment was received thereby hindering the monitoring and accrual
process.
Recommendations:
Separate City Bills should be timely created in the Eden System's Accounts Receivable
Module for each quarter's overtime and vehicle leasing expenditures incurred. These
City Bills and the aforementioned supporting documentation should then be sent to the
City of Coral Gables requesting reimbursement. This more automated process would
create accounts receivables in the City's Eden System to help ensure that all
reimbursement payments are fully received and that the proper accruals are made in the
corresponding general ledger accounts.
Management Response:
We believe that using the Eden System's Accounts Receivable Module is a viable idea.
However, we will meet with all the parties involved in requesting overtime reimbursement
from outside agencies to determine if there will be any anticipated negative ramifications
from this change. If not, the Financial Management Unit will implement this change but it
will require the timely submittal of reimbursements to be truly effective.
Page 7 of 8
Internal Audit Report
State Forfeited Funds and Related Expenditures Audit
April13, 2012
EXIT CONFERENCE
A meeting was held to discuss the audit report and to solicit management responses noted
above. Attendees included Police Chief Carlos Noriega, Assistant Police Chief Ray Martinez,
Police Plans and Policies Manager Michael Gruen, Police Strategic Investigations Unit Captain
Richard Clements, Internal Auditor James Sutter and Senior Auditor Mark Coolidge. All parties
were in agreement as to the contents of this report. Management responses were solicited and
are included above.
JS:MC:mc
(Audit performed by Mark Coolidge, Senior Auditor)
F:\OBPI\$AUD\INTERNAL AUDIT FILES\DOC10-11\REPORTS-FINAL\STATE FORFEITED FUNDS RPT.dOCX
cc: Raymond Martinez, Assistant Chief of Police
Richard Clements, Police Captain, Strategic Investigations Unit
Patricia Walker, Chief Financial Officer
Jose Smith, City Attorney
Page 8 of 8