03-006 FIPO-AUDIT REPORTadobe 1-03
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C: The Honorable Mayor Manuel A. Diaz Commissioner Tomas Regalado Commissioner Arthur E. Teele, Jr. Commissioner Johnny L. Winton issioner Joe M. Sanchez Commissioner Angel González Javier E. Fernandez, Acting Chief of Staff, City Manager’s Office Robert H. Nagle, Firefighters’ and Police Officers’ Retirement Trust’s Administrator Firefighters’ and Police Officers’ Retirement Board of Trustees Sandra Ellenberg, General Employees’ and Sanitation Employees’ Retirement Trust Administrator Members of the Audit Advisory Committee Robert J. Nachlinger, Chief Financial Officer Genaro Iglesias, Acting Chief Neighborhood Officer Alejandro Vilarello, City Attorney Priscilla A. Thompson, City Clerk J. Scott Simpson, CPA, Director, Finance Department Marcelo A. Penha, Acting Chief of Strategic Planning, Budgeting and Performance File AUDIT OF THE PROPRIETY OF NON-INVESTMENT EXPENDITURES INCURRED BY THE FIRE FIGHTERS’ AND POLICE OFFICERS’ RETIREMENT TRUST (FIPO) FOR THE PERIOD OCTOBER 1, 2001, THROUGH SEPTEMBER 30, 2002. TABLE OF CONTENTS INTRODUCTION.......................................................................................................................................... 1 SCOPE AND OBJECTIVES.......................................................................................................................... 2 METHODOLOGY.............................. ...
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C: The Honorable Mayor Manuel A. Diaz Commissioner Tomas Regalado Commissioner Arthur E. Teele, Jr. Commissioner Johnny L. Winton Commissioner Joe M. Sanchez Commissioner Angel González Javier E. Fernandez, Acting Chief of Staff, City Managers Office Robert H. Nagle, Firefighters and Police Officers Retirement Trusts Administrator Firefighters and Police Officers Retirement Board of Trustees Sandra Ellenberg, General Employees and Sanitation Employees Retirement Trust Administrator Members of the Audit Advisory Committee Robert J. Nachlinger, Chief Financial Officer Genaro Iglesias, Acting Chief Neighborhood Officer Alejandro Vilarello, City Attorney Priscilla A. Thompson, City Clerk J. Scott Simpson, CPA, Director, Finance Department Marcelo A. Penha, Acting Chief of Strategic Planning, Budgeting and Performance File
AUDIT OF THE PROPRIETY OF NON-INVESTMENT EXPENDITURES INCURRED BY THE FIRE FIGHTERS AND POLICE OFFICERS RETIREMENT TRUST (FIPO) FOR THE PERIOD OCTOBER 1, 2001, THROUGH SEPTEMBER 30, 2002. TABLE OF CONTENTS INTRODUCTION.......................................................................................................................................... 1
SCOPE AND OBJECTIVES.......................................................................................................................... 2
METHODOLOGY ......................................................................................................................................... 3
AUDIT FINDINGS IN BRIEF....................................................................................................................... 4 FIRE FIGHTERS AND POLICE OFFICERS RETIREMENT TRUST ................................................. 4 PROCUREMENT PRACTICES/QUESTIONABLE EXPENDITURES .............................................. 4 SALES TAX PAID ON TRANSACTIONS .......................................................................................... 5 WRITTEN QUOTATIONS AND/OR REQUEST FOR PROPOSALS/BIDS WERE NOT OBTAINED............................................................................................................................................ 5 QUESTIONABLE TRAVEL EXPENDITURES. ................................................................................. 6 PERSONNEL SERVICES AND FACILITIES COSTS ARE NOT SHARED BY FIPO AND GESE. 9 INADEQUATE PAYROLL RECORDS.............................................................................................. 11 CERTAIN CAPITAL ASSETS ARE NOT RECORDED ON THE FINANCIAL STATEMENTS... 12 AUDIT FINDINGS AND RECOMMENDATIONS ................................................................................... 13 FIRE FIGHTERS AND POLICE OFFICERS RETIREMENT TRUST ............................................... 13 PROCUREMENT PRACTICES/QUESTIONABLE EXPENDITURES ............................................ 13 SALES TAX PAID ON TRANSACTIONS ........................................................................................ 14 WRITTEN QUOTATIONS AND/OR REQUEST FOR PROPOSALS/BIDS WERE NOT OBTAINED.......................................................................................................................................... 14 QUESTIONABLE TRAVEL EXPENDITURES. ............................................................................... 15 PERSONNEL SERVICES AND FACILITIES COSTS ARE NOT SHARED BY FIPO AND GESE. .............................................................................................................................................................. 19 INADEQUATE PAYROLL RECORDS.............................................................................................. 20 CERTAIN CAPITAL ASSETS ARE NOT RECORDED ON THE FINANCIAL STATEMENTS... 22
INTRODUCTION Pursuant to Article IV, Sections 40-191 through 40-196 of the City Code and the verdict resulting from Court Case number 77-9491 CA 04 (Gates Case) of the 11th Judicial Circuit of Miami-Dade County, the City provides the funding for the administration/operations of the Firefighters and Police Officers Retirement Trust (FIPO). FIPO, which manages the pension contributions made by City Firefighters and Police Officers, has a total of 5 employees and its mission is as follows:
To provide effective services to all active and retired members. To accumulate, manage and disburse the retirement fund assets in accordance with fiduciary standards, actuarial soundness and all applicable statutes, ordinances, and regulations. To maximize investment returns while exercising a prudent investment policy.
The Administrator of FIPO reports to a Board of Trustees, which is comprised of nine members selected as follows: •One trustee selected by the City Manager. •Two trustees selected by the International Association of Fire fighters (IAFF). •Two trustees selected by the Fraternal Order of the Police (FOP). •Four independent trustees selected by the IAFF and FOP and confirmed by the City Commission.
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SCOPE AND OBJECTIVES The proper administration of public funds requires agencies to establish and maintain internal controls that would ensure that public agencies achieved their primary objectives/responsibilities as mandated by the City Code/Charter. As part of its oversight responsibilities, the Office of Internal Audits (OIA) performs financial, performance, and compliance audits to determine the extent of compliance with those objectives. The audit included an examination of certain financial transactions, operational, and compliance related issues. The examination covered the period of October 1, 2001, through September 30, 2002. In general, the audit focused on the following 4 objectives: •To obtain and review applicable City Codes and Florida Statutes and other related documents. •To determine the propriety of certain disbursements and compliance with applicable provisions of City Codes/Charter and good business practice. •To determine whether the internal control system relating to procurements/disbursement is in place.
•Perform other audits procedures as deemed necessary.
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METHODOLOGY We conducted our audit in accordance with generally accepted government auditing standards and applicable standards contained in theStandards for the Professional Practice of Internal Auditing, obtain an Toby the Institute of Internal Auditors.issued understanding of the internal controls, we interviewed appropriate personnel, reviewed applicable policies and procedures, and made observations to determine whether effective controls were in place. The audit methodology included the following:
•understanding of the internal control policies and proceduresObtained sufficient and determined the nature, timing and extent of substantive tests necessary and performed the required tests. •compliance with all the objectives noted on page 2.Determined
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AUDIT FINDINGS IN BRIEF
FIRE FIGHTERS AND POLICE OFFICERS RETIREMENT TRUST
PROCUREMENT PRACTICES/QUESTIONABLE EXPENDITURES Pursuant to Article IV, Sections 40-191 through 40-196 of the City Code and the verdict resulting from Case number 77-9491 CA 04 (Gates Case) of the 11th Judicial Circuit Court of Miami-Dade County, the City provides the funding for the administration/operation of the Firefighters and Police Officers Retirement Trust (FIPO). During the audit period (October 1, 2001, through September 30, 2002) the City remitted a total of $637,566.23 to FIPO. Our review disclosed the following questionable expenditures: PURCHASES OF FOOD/BEVERAGES
•Our review of pertinent records disclosed that a total $1,550.71 of City funds were used for the purchase of food, beverages, and other related items during the audit period. The records/receipts reviewed indicated that some of the food/beverages were purchased for the Board of Trustees meetings and the public purpose of several other food/beverages purchases were not documented. Article IV, Sections 40-193(d) and 40-243(d) of the City Code stipulates that the Board of Trustees of FIPO who are not employed by the City shall be paid a stipend of $300 a month. Our review disclosed that all non-City employees who are members of the Board of Trustees were properly compensated. During the audit period, we noted that the budget document submitted to the City Budget department included non-investment expenditure items such as salaries, office supplies, travel, and professional/contractual fees. There was no specific category for food/beverages and/or entertainment. Therefore, this Budget document, which was approved as part of citywide budget, did not include authorization for the purchase of food/beverages. However, we noted that the purchases of
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food/beverages were classified and reported as Office Expenses on FIPOs financial records.
SALES TAX PAID ON TRANSACTIONS
FIPO is a governmental entity and therefore is exempt from paying sales/use • taxes. However, our review of selected records/invoices disclosed that FIPO paid $1,742 of sales tax on the transactions tested. We noted that the said taxes were paid on the purchase of office supplies, hotel charges, car rental services, airfares, and food/beverages.
WRITTEN QUOTATIONS AND/OR REQUEST FOR PROPOSALS/BIDS WERE NOT OBTAINED.
•Small Purchases and Section 18.79(a) titledArticle III, Section 18-82(c) titled Competitive Sealed Bidding of the City Codes mandates that procedures be established to ensure adequate and reasonable competition for all purchases of goods/services. Our review of a sample of 18 purchases ranging from $1,225 to $61,192, which totaled $333,294, disclosed that written quotations and/or Request for Proposals/Bids were not obtained for 14 procurement transactions, as required. The 14 procurement transactions totaled $315,625. The competition process ensures that the prices paid are reasonable and consistent with the quality of services rendered or goods purchased.
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QUESTIONABLE TRAVEL EXPENDITURES.
FIPO records indicated that a total of $26,830 was incurred on travel related expenditures during the audit period. Our review of the pertinent records disclosed the following discrepancies:
•A Board member was scheduled to attend the Second Annual Fire and Police Academy Conference in Key West, Florida, from January 12, through January 16, 2002. Check number 102410 for $395, which was originally made out for the conference registration fee was voided on December 15, 2001, which implied that the Board member no longer planned to attend this conference. Additionally, check number 102411 for $956, for the hotel charges was also voided on December 15, 2001. However, we noted that $228.57 (equivalent of one-day hotel reservation fee) was charged to FIPOs corporate credit card on January 18, 2002. Therefore, it appeared that the hotel was not promptly notified as soon as it became apparent on December 15, 2001, or soon after the trip was cancelled. Consequently, the hotel charged FIPO one-day hotel reservation fee on January 18, 2002.
•Five Board members were scheduled to attend Investment related training in New York City on June 7, 2002. The total airfare of $865, which was charged to FIPOs corporate credit card on May 22, 2002, was reversed on July 11, 2002. The reversing of this credit card charge implied that the Board members did not attend this conference. However, we noted that FIPO was not reimbursed for the $1,004.95 check dated May 23, 2002, which was made out to the Hilton hotel in connection with this training session. Upon audit inquiry, Hilton Corporate Office acknowledged that the hotel reservations were never used and issued FIPO a $1,004.95 check dated December 26, 2002.
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•to attend the 23rd Annual Police Officers andOne Board member was scheduled Fire Fighters Trustees School Program, at Florida State University in Tallahassee, Florida on March 25, through 27, 2002. The registration and the hotel reservation fees for this conference, which totaled $205 and $280.50, respectively were paid with FIPOs checks. We noted that FIPO received a reimbursement of $280.50 from the hotel. The refunding of the $280.50 check for the hotel reservation fees to FIPO implied that the Board member did not attend this conference. We noted that the conference fee of $205 was not reimbursed to FIPO. However, the conference registration form stated that, If you cancel in writing at least 6 business days prior to the conference start date, you will receive a refund minus a processing fee on a sliding scale. If your cancellation is received after that date, or if you fail to give official notice, you will be liable for the fee. It appeared that FIPO failed to give the conference sponsor the required official cancellation notice and consequently did not receive any refund.
•The registration fees for five Board members who attended the City of Fresnos Retirement System Educational Conference, which was held in Fresno, California during September 19, through September 20, 2002, totaled $855; the hotel reservation for the trip totaled $2,701.60; and the airfare totaled $1,577.24. However, the receipt supporting $405 airfare ticket charges relating to a Board members trip to this conference was not provided for our review. A receipt validates the propriety of an expenditure. Additionally, the public purpose in connection with an expenditure of $187, which was charged to and paid for with FIPOs corporate credit card was not documented. Upon audit inquiry, the Administrator stated that the $187 charge is being investigated.
•The receipt supporting $470.34 hotel charges relating to a Board members trip to Ponte Vedra Beach, Florida on April 29, 2002, in connection with the Florida Public Pension Trustees Association was not provided for our review. Therefore we could not determine the nature and/or propriety of this expenditure.
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