Summary

Matters coming to our attention relating to noncompliance with various guidelines and those relating to significant deficiencies in the design or operation of the internal control for those operations audited are as follows:

Written Policies and Procedures

The Authority does not have comprehensive written policies and procedures regarding several significant areas of the Authority’s operations. Written policies and procedures, if properly designed, communicated to employees, and effectively placed in operation, would provide management additional assurances that Authority activities are conducted in compliance with applicable laws, bond resolutions, etc., and in an economic and efficient manner; that Authority financial records provide reliable information necessary for management oversight; and that Authority assets are adequately safeguarded. (See paragraphs 41 through 44.)

Budget Preparation

During the 1996-97 fiscal year, the Authority did not adopt budgets for its Debt Service and Capital Projects Funds. Also, for numerous expenditure categories in the General Fund, actual expenditures exceeded the legal level of budgetary control established of record by the Authority. (See paragraphs 45 through 49.)

Banking Services Agreement

Deficiencies in the Authority’s internal control over cash limited management’s assurances that cash disbursements from the Authority’s local operating bank account were made only for authorized public purposes. The Authority’s banking services agreement for the local operating bank account only requires one signature on all checks, notes, or drafts drawn on the account. Additionally, the banking services agreement had not been updated to reflect a change in Authority members. (See paragraphs 50 through 52.)

Investments

On November 15, 1996, the Authority entered into an investment advisory agreement whereby the investment advisor agreed to provide investment management services to the Authority, including managing the investment of the Authority’s bond proceeds. Under the terms of the agreement, the investment advisor is authorized to purchase, sell, loan, or exchange portfolio securities on behalf of the Authority with brokers or security dealers recommended by the investment advisor or the Authority. In regards to the investment of bond proceeds, the bond trustee retains custody of the cash, securities, or other assets and the investment advisor’s responsibilities are limited to directing the investment of the proceeds in securities authorized by law and the bond covenants. Upon receiving instructions from the investment advisor, the trustee, acting as a custodian on the Authority’s behalf, was authorized to settle transactions for the purchase and sale of securities. Our review of the Authority’s investment program for the bond proceeds disclosed certain internal control deficiencies and matters of noncompliance as follows:

• Without independent verification, the Authority relied on the bond trustee and investment advisor to determine the amount of interest earnings due to the Authority from the investment of bond proceeds. As a result, the Authority could not be assured that it received all investment income due. (See paragraphs 55 through 58.)
• Section 218.345, Florida Statutes, establishes the authorized investment types for special districts. Contrary to the provisions of Section 218.345, Florida Statutes, the Authority’s investment advisor invested bond proceeds in certain unauthorized securities. (See paragraphs 59 through 63.)
• Because the Authority did not obtain the actual securities purchased on its behalf by the investment advisor or trust receipts from the trustee, the Authority’s investments were subject to an increased risk of loss. (See paragraphs 64 through 67.)

Contractual Services

Our review disclosed deficiencies in the design and operation of the Authority’s internal control relating to the acquisition and management of legal consultant services as follows:

• Contrary to good business practices, the Authority paid one legal consultant for services provided without benefit of a written agreement. Also, written agreements for legal consultant services with two other firms did not contain provisions establishing a fixed billing rate for services provided. During the 1996-97 fiscal year, the Authority paid approximately $1.5 million for services rendered by these three legal consultants. (See paragraphs 69 through 72.)
• Written agreements for legal consultant services were not always signed and executed by the Authority and/or by the consultant prior to the date services began. (See paragraphs 73 and 74.)
• Documentation available in the Authority’s records was not adequate to support reimbursements to four legal consultants for out-of-pocket expenses totaling approximately $34,500 during the 1996-97 fiscal year. (See paragraphs 75 through 77.)

Right-of-Way Accountability

For right-of-way and mitigation land acquisitions, the Authority did not maintain an accurate and complete subsidiary record containing appropriate parcel information, such as a detailed legal description, the number of acres acquired, the date acquired, and the cost of each parcel acquired. As a result, management’s assurances as to the reliability of Authority financial records are significantly reduced. (See paragraphs 78 through 82.)

Risk Management Programs

Authority management had not documented, of record, its consideration of the various risks to which the Authority is exposed and how it plans on financing those risks. (See paragraphs 83 and 84.)

Use of Bond Funds

Without apparent legal authority, the Authority entered into an agreement to loan a private utility company $328,079.50 to construct new water lines and convert old water lines affected by the bridge project. As of April 29, 1998, the Authority had made payments to the private utility totaling $208,697.63. (See paragraphs 85 through 89.)

For several disbursements made subsequent to the audit period from the Revenue Bonds, Series 1996, Project Construction Fund moneys, documentation was not available to demonstrate that the disbursements were for authorized costs of the Series 1996 Project. (See paragraphs 90 through 93.)

Bond Issuance Costs

The Authority expended $3,081,299.80 from the proceeds of the Revenue Bonds, Series 1996, on bond issuance costs without obtaining documentation evidencing the basis for payments (such as written agreements and/or detailed invoices or receipts) for a significant portion of these issuance costs. (See paragraphs 94 through 97.)

Compliance With Environmental Permits

Authority records did not demonstrate compliance with certain conditions required by Federal and State environmental permits. (See paragraphs 98 through 105.)

The Executive Director's written response to the audit findings and recommendations included in audit report No. 13327 is presented as Exhibit E.