Addendum to Independent Accountants Report on Consulting Services Dated February 23, 2012 State of Florida, Department of Economic Opportunity,

Florida Black Business Loan Program

2010-11 Consulting Report

May 31, 2012

State of Florida, Department of Economic Opportunity Tallahassee, Florida 32399

We have performed specific compliance consulting services as described in the scope of work in Department of Economic Opportunity (DEO) contract C0623, Attachment 1, as amended. These services were contracted by DEO to assist with its programmatic oversight and monitoring responsibilities related to the Florida Black Business Loan Program (FBBLP, or the Program) and the related Black Business Investment Corporations (BBICs). Our original report dated February 23, 2012 excluded observations related to the inspection of recipient records for the First Coast Black Business Investment Corporation (FCBBIC). We completed a site visit of the FCBBIC on May 10, 2012, and this addendum is being issued to communicate the results of that visit. These consulting services were conducted in accordance with the Statements on Standards for Consulting Services established by the American Institute of Certified Public Accountants. The sufficiency of the consulting services is solely the responsibility of DEO. Consequently, we make no representations regarding the sufficiency of the consulting services performed, either for the purpose for which this report has been requested or for any other purpose. The scope of our engagement was limited to the inspection of FCBBIC records to gain a basic understanding of Program compliance, business practices, internal control, and record keeping associated with the FCBBICs participation in the Program. We were not engaged to and did not conduct an examination, the objective of which would be the expression of an opinion on the FCBBICs compliance with statutory or contractual requirements. Accordingly, we do not express such an opinion. This report is intended solely for the information and use of the DEO and is not intended to be and should not be used by anyone other than the DEO.

Florida Black Business Loan Program 2010-11 Consulting Report Addendum May 31, 2012 Our initial engagement related to the study was completed and issued on February 23, 2012. Our study included site visits of eight organizations certified as Black Business Investment Corporations. We attempted to also perform a site visit of the First Coast Black Business Investment Corporation (FCBBIC), but the organization initially was not responsive to our requests. Subsequent to the issuance of our initial report the FCBBIC contacted our office and the Department of Economic Opportunity indicating its intent to cooperate with DEOs request to make its records available for inspection. On May 10, 2012, we performed an onsite visit of the First Coast Black Business Investment Corporation (FCBBIC). The procedures performed during the site visit included: a. Inspection of the audited financial statements and auditor work papers, as made available to us. b. Determination if funds were deposited into a separate interest-bearing account and if income was appropriately expended. c. Inspection of quarterly reports, which include a written status report of Program activities and disbursement of funds. d. Determination if eligibility requirements, as prescribed by the individual BBIC policies, are met for providing loans, loan guarantees, or investments to black business enterprises. e. Determination if funds were used for authorized purposes, and within authorized limits, to provide support to black business enterprises. f. Determination if subrecipient relationships were appropriately executed and monitored. g. Determination if the unexpended funds were appropriately safeguarded and accounted for in the records of the Recipient. h. Determination if loans or obligations were appropriately reported as current, past due, in default, etc. i. Determination of Other Funds Used, including matching funds, which are reported as being in support of black business enterprises. j. Inspection of loan files, including supporting documentation for loans and investments, and for quarterly and annual reported amounts. k. Inquiries of personnel regarding Program data and demographics and how information is gathered to provide to DEO. The time period included within the scope of our site visit was July 1, 2009 through December 31, 2011. Subsequent to June 30, 2011, the FCBBIC did not apply for recertification as a Black Business Investment Corporation, and as a result, did not receive Program funds for the 2011-12 fiscal year. The FCBBIC is a direct lending entity and awards loans primarily for working capital collateralized by contract assignments and tangible commercial property. Staffing of the FCBBIC includes one full-time employee and two independent contractors to perform underwriting services and to service the existing loans. Based on correspondence between OTTED and FCBBIC, it appeared that OTTED was aware of one of the subcontractor relationships but we could not determine if OTTED was aware of the subcontractor relationship for loan servicing.

Florida Black Business Loan Program 2010-11 Consulting Report Addendum May 31, 2012

Program funds received from the State were deposited into separate interest-bearing bank accounts and loan activity was tracked by program year on the general ledger. Subsequent to June 30, 2011, the individual bank accounts were merged into one combined bank account and, due to staffing changes that occurred during the 2011-12 fiscal year, reconciliations of Program funds by fiscal year to the cash account in the general ledger were not maintained. Written accounting policies and procedures were also not maintained during the period covered by our site visit. FCBBIC provided us a reconciliation of total Program funds received to cash on hand at June 30, 2011, net of loans made and payments received since the 2007-08 fiscal year. The reconciliation provided individual loan balances subtotaled by fiscal year and cumulative loan balances through June 30, 2011. The cumulative loan balances of $714,734.97, per the reconciliation, agreed without exception to the June 30, 2011 general ledger and to the loan balances reported on the June 30, 2011 quarterly report submitted to DEO. We were unable to reconcile cash on hand per the reconciliation directly to the general ledger or to the cash on hand reported on the quarterly reports submitted to DEO. At June 30, 2011, the FCBBIC had 11 active loans, which agreed to the number of loans reported to DEO on its June 30, 2011 quarterly report. During the period covered by our site visit, the FCBBIC had awarded 21 loans totaling $1,029,800 to 12 different borrowers. We selected five of those loans to test for compliance with FCBBICs written credit and underwriting policies. The files selected for testing included documentation consistent with what written policies require, with the exception of documentation evidencing the performance of applicant background and credit checks. We also noted that the status for three of the loans tested was not consistent with the status of the loans reported to DEO. The loan history for the loans tested indicated outstanding balances that ranged from current to 90+ days past due, but all loans were reported to DEO as current. During the period covered by our site visit, the Board of Directors was comprised of two to four individuals. Formal conflict of interest policies do not exist and the FCBBIC was unable to locate any conflict of interest forms signed by present or past directors or by management. The authority for approving new loans was delegated to the Executive Director with ratification required by the Board of Directors. We noted evidence of the Board approval in each of the loan files we selected for testing. Beginning with the 2009-10 fiscal year, OTTED limited the Executive Directors participation in the administration of Program funds and approval authority was transferred to the Board Chair. The Executive Directors participation was limited due to an active investigation being conducted by the Federal Bureau of Investigation regarding his conduct and duties as a Board member of the Jacksonville Port Authority. The Executive Director was ultimately convicted by a federal court of various corruption related charges and began serving a prison sentence in May of 2012.

Florida Black Business Loan Program 2010-11 Consulting Report Addendum May 31, 2012 The last financial statement audit performed by an independent accounting firm was for the fiscal year ended September 30, 2009. The financial statements identify Urban Core Enterprises as a related party due to existing leasing relationships between the two entities. We noted no loans made to this entity; however, we did not perform any extended procedures to determine if loans were made to any of the principal owners of Urban Core Enterprises. FCBBIC subtracts technical assistance and direct administrative costs directly from Program funds received in amounts equal to the percentages permitted by Florida Statute. Program funds received are recorded as revenue and as receivables when loaned. Principal and interest collected on outstanding loans are considered to be unrestricted to FCBBIC, although the amounts collected are used to continue to make loans to minority owned businesses. Program funds received under the Florida Black Business Loan Program prior to 2007 were the only funds used to leverage loans made during the period covered by our site visit. In our original report dated February 23, 2012, we made several recommendations resulting from the BBIC site visits performed. Those recommendations also apply to the operations of the FCBBIC. However, because the FCBBIC is no longer a certified BBIC, DEO will need to consider the relevance of requiring FCBBIC to implement some or all of those recommendations. Additionally, DEO will need to determine what legal or statutory rights the State has to require the FCBBIC to remit post 2007 program funds received and in its possession. Program funds in question would include funds currently on hand as well as loan principal and interest collected in subsequent years. DEO should continue to require the FCBBIC to report the status of active loans funded with post-2007 Program funds until such time as loans are paid in full.