Friday, April 27, 2012 The Florida Legislature Joint Legislative Auditing Committee 111 West Madison Street

Room 876 Claude Pepper Building Tallahassee, FL 32399

AO S
Senator Jim Norman Representative Debbie Mayfield Senator Arthenia L. Joyner Senator Evelyn J . Lynn Senator Maria Lorts Sachs Senator Stephen R. Wise Representative Larry Ahern Representative Daphne D. Campbell Representative Jeff Clemens Representative Bryan Nelson Representative Kenneth Roberson Timothy "Chaz" Stevens PO Box 1123 Deerfield Beach, FL 33443 Sent via: email and fax Dear Honored Officials; In the September 21, 2011 letter to Representative Hazelle Rogers, the Joint Legislative Auditing Committees review of the City of Lauderdale Lakes noted: A 34.5% increase in the millage rate and an across-the-board increase of all Special Assessment funds An illegal transfer of CRA money The need for a complete redo of the Citys Finance Department Since that report, blistering incompetence, unabashed cronyism, and outright criminal felony acts, once transacted in the shadows of that city, now take place in the light of day. To wit: Lauderdale Lakes cannot finalize its FY11 audit -- their own auditor noting, the numbers dont add up. Amazingly, the Citys exact cash position remains yet a mystery The FY12 budget is seriously flawed and does not correct any of the substantive issues outlined by your committee FY13-17 budgets are also deeply flawed

Page 2

Frustratingly, while those in charge of Lauderdale Lakes have willfully, intentionally, and repeatedly violated numerous Florida laws, concerned taxpayers have stood helplessly by and watched: 1. Money, derived from Special Assessment fund increases (both illegal and excessive), being transferred to the General Fund, and from there, recklessly misspent 2. What once stood at $1.7M, the CRA loan now exceeds $2.5M 3. A proposed lease-buyback that only stood to benefit the lessee 4. Restructuring of various substantial debts with protracted terms

M
I stand ready to assist.

AO S
Allens transgressions continue as he ignored the LACs advice; installing two unqualified individuals as the Finance Director and Assistant City Manager. Clear rookie mistakes of his; gaffes made by someone well outside of their element. Take the case of his hiring of Marie Elianor; once former assistant to the Oakland Park City Manager and now Lauderdale Lakes Finance Director. A woman who admitted: She was not balancing cash, had no idea which fund cash belonged to, and was not recording pooled cash properly For FY12, she left out the building fund, overstated (by some $600,000) the budgets debt and the fire fee, and could not answer simple millage questions Has consistently overstated the General Fund cash balances, revenues (suggested 98% of taxes collected in December, 2011), and the 2012 cash flow analysis What is most troubling is Elianors inability to produce the FY11 financial statements that are required to complete previous years audit. And, as a direct result of Elianors mistakes and contrary to Florida statutes, the Citys FY12 budget has yet to be amended. As the City looks to move forward, their Long Range Plan is based upon a flawed and overstated FY12 budget as noted by both City and County auditor. Those in charge also continue to incorporate Special Assessment fund transfers and provide regular financial updates with overstated cash positions and clearly fictitious accounting. With the financial situation in Lauderdale Lakes growing worse by the day and given your own staffs recommendations, the need for an Auditor General review is now prudent, obvious, and long overdue.

Recently, the Broward Office of Inspector General launched an investigation (OIG 11-021) of Lauderdale Lakes City Manager Jonathan Allen and determined he engaged in intentional bid splitting [FS 838.22] and other misconduct and created both real and apparent conflicts of interest.

Page 3

Timothy Chaz Stevens Winner 2010 New Times Activist of the Year MyActsOfSedition.com Enclosures: (1)

AO S
I. September 2011 letter to Representative Hazelle Rogers

MIKE HARIDOPOLOS
President

DEAN CANNON
Speaker

THE FLORIDA LEGISLATURE

JOINT LEGISLATIVE AUDITING COMMITTEE

Senator Jim Norman, Chair Representative Debbie Mayfield, Vice Chair
Senator Atthenia L. Joyner Senator Evelyn J . Lynn Senator Maria Lorts Sachs Sen a tot Stephen R. Wise Representative Larry Ahern Representative Daphne D. Campbell Representative Jeff Clemens Representative Btyan Nelson Representative Kenneth Roberson

September 21 , 2011

AO S
Honorable Hazelle P. Rogers Co rporate Park ofinverrary 3800 Inverrary Boul eva rd , Suite 100-J Lauderhill, Florida 33319 Dear Representative Rogers : This letter is in response to your letter, dated July 15, 2011, to the Joint Legislative Auditing Committee (Committee), regarding your concerns relating to the City of Lauderdale Lakes (City) and requesting an audit of the City by the Auditor General. The City is experiencing various financial problems and $1.7 million of Community Redevelopment Agency (CRA) funds have been transferred from the CRA Trust Fund to the City's General Fund to apparently cover general operating expenses of the City. Our office has reviewed your letter, as well as news articles, the most recent financial audit report, and other documents, and have spoken with the Acting City manager. Below is a summary of issues, thoughts, and the Committee staff recommendation: Audit Findings Included in the City 's Audit Report for the Fiscal Year Ended September 30, 2010: o The auditors reported the following seven audit findings: (Note: The first four findin gs were considered to be significant deficiencies by the CPA firm.) 1. Deteriorating Financial Conditions (#20 10-01 ): Application of financial condition assessment procedures indicated deteriorating financial conditions at the City. The auditors recommended that the City follow the recommended practice of the GFOA and establish a formal policy on the level of unreserved fund balance that should be maintained in the general fund. The City's response stated that a Financial Recovery and Sustainability Plan is being developed which will outline the steps to enhance the financial condition over a short-term and long-term period. It further stated that the FY 2011-12 budget would include an appropriation to begin a multi-year process to restore the fund balance to a more acceptable level.
Kathryn H. DuBose, Coordinator 111 West Madison Stteet, Room 876, Claude Pepper Building, Tallahassee, Florida 32399-1400 Telephone (850) 487-4110 Fax (850) 922-5667 jlac@ leg.state.fl.us

Honorable Hazelle P. Rogers September 21, 2011

2. Year End Closing Entries (#20 10-02): Balance sheet accounts, such as accounts receivable and accounts payable, were not properly reconciled to reflect the appropriate balances as of year-end. The auditors recommended that the City consider developing formal year-end closing procedures to reduce the need for numerous adjustments to the financial records during the audit process and the delay in the preparation of financial reports needed by management and the auditors. The City's response stated that the Financial Services Department Director and/or designee will evaluate the existing year-end closing procedures and make improvements as needed.

AO S
3. Other Postemployment Benefits (OPEB) (#2010-03): The City did not consult an actuary to perform an assessments of the other postemployment benefits to determine the effects of an OPEB obligation on the City's financial statements. The auditors recommended that the City obtain the services of an actuary to calculate the OPEB obligation. The City's response stated that the Financial Services Department Director and/or designee will work with the Purchasing Division to obtain the services of an actuary to calculate the OPEB obligation and that the FY 2011-12 budget would contain sufficient funding to pay for such services. 4. Annual Budget Process (#2010-04): The budget provided to the auditors from the City's financial reporting system did not match up with the City's approved budget in its entirety, and, although the budget was amended during the fiscal year, the financial reporting system was not updated for the amendments. The auditors recommended that the City more accurately evaluate operational performance by revising current budgeting procedures to provide for updating the current year's budget as soon as budget amendments are approved. The City's response stated that all current year's budget amendments, when approved, would be accurately updated in the financial system prior to the end of the month that the amendments were approved. 5. User Access (#2010-05): Procedures performed during the audit to test the access levels for several users disclosed that the access levels for certain users were not consistent with their job functions and duties. The auditors recommended that the City review the access controls of its employees to determine that employees only have access to functions as required and considered necessary to carry out their assigned job duties . The City's response stated that the Financial Services Department performed a comprehensive citywide workflow systems audit of all computer users, and standardized forms were enhanced and a dual depmiment review and sign-off process was established as a result. 6. Approval of Journal Entries (#2010-06) : Journal entries were being entered and posted into the City's financial reporting system without the review and approval of the financial director or a designated staff within the finance depmiment. The auditors recommended that a policy be adopted whereby all joumal entries will be approved by the finance director or other designated staff within the finance department and are accompanied by full explanation and by reference to adequate
2

Honorable Hazelle P. Rogers September 21, 2011

supporting documentation. The City's response stated that the Financial Services Department Director and/or designee now reviews and approves all journal entries and journal reports would be completed monthly as opposed to annually. 7. Monthly Financial Statements (#2010-07): No financial statements are being presented to the City Council during regular council meetings. The auditors recommended that the finance department implement a process to present either monthly or quarterly financial statements to the City Council during regular council meetings and that reports should include key performance measures to understand the financial condition of the City. The City's response stated that the Financial Services Department developed a Budget and Brief Report which includes revenues and expenditures, budget versus actual, for all City funds, cash on hand, debt service obligations, and outstanding payables. The Report will be distributed monthly to the Mayor, Commission, and senior staff.

M
o

AO S
Implementation of corrective action to address any audit findings included in the audit rep01t is the responsibility of the City's board and management, as well as the citizens living in the City. The City's responses to the audit findings indicate that the Commission and staff are serious about implementing corrective actions to address the audit findings. The Auditor General's Office is the state's CPA firm and does not have any enforcement authority. It would only result in a duplication of effort to direct the Auditor General's Office to perforn1 an audit on the same areas that have already been subjected to audit. Forensic Audit of the City's Community Redevelopment Agency: A forensic audit of the City's Community Redevelopment Agency (CRA) is currently being performed by a forensic accounting firm hired by the City. It is our understanding, based on conversations with the City's Acting City Manager, that the forensic auditors are: (1) reviewing the transfers of CRA funds to the City and how the funds were ultimately used by the City, and (2) scheduled to present the audit findings to the CRA Board at its September 20, 2011, meeting. It would be beneficial to delay any decision regarding an audit by the Auditor General until after this audit report has been issued, in order to review any audit findings that may be included in the report. Additional corrective actions being taken by the City (per review of Commission meeting agendas and conversation with Acting City Manager): The City's FY 2011-12 budget has a proposed property tax millage rate increase to 9.5000 mills (an increase of 34.21% from the rolled back rate). A debt service millage rate of 1.3560 is also proposed to fund the debt service on the general obligation bonds approved in 2004 by the voters. These increases are considered to be necessary in order to address the City's deteriorating financial condition. The resolution was approved at the first budget hearing on September 12, 2011; the second budget hearing is scheduled for September 26, 2011.
3

Honorable Hazelle P. Rogers September 21, 20 11

The City has approved an increase in the stormwater fee for FY 2011-12 in order to meet debt and operational service requirements associated with proposed major capital improvement stormwater projects. The City has approved an increase in the solid waste service charges for FY 2011-12 in order to pass the costs charged to the City by the vendor for residential curbside solid waste and recycling services on to the residents benefiting from the services. The City has approved an increase in the annual fire assessment rates for FY 2011-12 in order to cover the expenses associated with fire response operations.

AO S
o A resolution to authorize the Acting City Manager and the City Attorney to investigate and report on available financing options, including but not limited to securing debt with City assets, both real and personal, to support the City's current and future financial needs was approved at the September 12, 2011, Commission meeting. o The City has a consulting firm evaluating the Financial Services Department to determine if any restructuring needs to be done and what additional internal controls need to be implemented. o City management is cunently evaluating the individual who perforn1ed the transfers of the CRA funds to the City's general fund in order to determine if this employee should remain in the position with the City. o The Acting City Manager confirn1ed that the City Commission has not declared a state of financial urgency as contemplated by s. 447.4095 , F.S. To recap, based on review of information available related to the City's cunent financial problems, the City appears to be making a concerted effort to address the audit findings included in its FY 2009-10 audit report. The City Commission and management staff have been and are continuing to review the internal controls smTounding the financial accounting and repmiing system and implementing revisions as they deem necessary. In addition, property taxes and other fees and assessments are being increased in an effmi to address the City's deteriorating financial condition. In addition, a forensic audit is currently in progress relating to the use of CRA funds, and an audit report is expected to be issued in the near future. In accordance with Section 218.39, F.S ., the District has obtained annual financial audits of its accounts and records by an independent ce1iified public accountant (CPA) and has filed the audit reports with the Auditor General's Office as required. Pursuant to Section 218.39(8), F.S., these audits are required to be conducted in accordance with mles of the Auditor General promulgated pursuant to Section 11.45 , F.S. The Auditor General has issued Rules of the Auditor General, Chapter 10.550- Local Governmental Entity Audits and has adopted the auditing standards set forth in the publication entitled Government Auditing Standards (2003 Revision) as standards for auditing local governmental entities pursuant to Florida law.
4

Honorable Hazelle P. Rogers September 21, 2011

If there are any concerns relating to the work of a licensed CPA firm, such concerns should be directed to the Florida Board of Accountancy (Board). Pursuant to Chapter 473, F.S. , the Board was created in the Depatiment of Business and Professional Regulation to regulate the practice of public accounting and adopt rules to implement the provisions of law, including rules relating to competence and technical standards and discipline. Such rules include references to rules of the Auditor General. Every CPA and CPA firm in the state is governed and controlled by this law and these rules. Neither the Auditor General's Office nor the Committee have the jurisdiction to review and comment on the professional judgment applied by a CPA fin11.

M
cc:

AO S
Section 11.45(3), Florida Statutes, provides, in part, that the Auditor General may, pursuant to his own authority, or at the direction of the Legislative Auditing Committee, conduct audits of the accounts and records of any governmental entity created or estabbshed by law. The audits performed by the Auditor General's Office of local governmental entities, when directed by the Committee, are put on the schedule to be initiated after priority issues, such as statutorily mandated assignments, are completed as staffbecome available.
Recommendation: Since the City is in the process of implementing various pobcies, procedures, and other measures to address the City's deteriorating financial condition, Committee staff recommends that the decision regarding whether the Auditor General should perform an audit be delayed until December 2011 or later. Such a delay should allow time to see if the measures implemented by the City will be effective in resolving the current financial-related issues. At that time, Committee staff will make the necessary inquiries to determine the stah1s of the City's progress in resolving its financial-related issues and make a recommendation to the Committee as to whether an audit of the City by the Auditor General would be beneficial.

If you have any questions or further concerns, please do not hesitate to call Debbie White, Legislative Analyst, at (850) 487-4110. Sincerely,

;;?~~~./~

Chai , Joint Legislative Auditing Committee

Representative Debbie a field Chair, Joint Legislative Auditing Committee

David Martin, Auditor General