Summary

The Auditor General is authorized by State law to perform independent audits of independent special districts in Florida.  Pursuant to Section 11.45(2)(a), Florida Statutes, the Legislative Auditing Committee, at its July 19, 2005, meeting, directed us to conduct an audit of the Florida Keys Aqueduct Authority.  The summary of our findings for the period October 1, 2004, through November 30, 2005, and selected actions taken prior and subsequent thereto, is as follows:

Finding No. 1:  We disclosed several matters in this report in which we question the public purpose served by incurring certain operating expenses or providing specific benefits to certain Authority employees.  The Authority has no funding source for operating purposes, other than user fees.  Accordingly, the decision to provide these expenses affects the fees charged water and wastewater users.

Finding No. 2:  The Board had not established policies and procedures clearly establishing the level of budgetary control for monitoring Authority expenditures.  Also, budgetary comparison reports provided to the Board did not include all expense categories.

Finding No. 3:  The Authority did not consider all prior year net assets balances in preparing its 2004-05 or 2005-06 fiscal year budgets.

Finding No. 4:  Bank account reconciliations were not always prepared on a timely basis.

Finding No. 5:  The Authority could have increased investment earnings during the 2004-05 fiscal year by investing with the State Board of Administration.

Finding No. 6:  The Authority could realize a cost savings and improved efficiency if it changed its payroll processing from weekly to biweekly or monthly.

Finding No. 7:  The Authority’s employment agreements with its current and former General Counsel and Executive Director contain provisions for severance pay without documenting in its public records the public purpose served.  In addition, the severance pay provisions do not require cost savings to the Authority as a prerequisite to severance pay upon early termination.

Finding No. 8:  The wording of health and life insurance provisions in certain employment agreements, as well as the personnel policy, is insufficient to clearly determine what benefits the eligible employees are entitled to receive and to ascertain what liability the Authority is agreeing to assume for employees upon retirement. 

Finding No. 9:  The Authority did not document in its public records, the public purpose served or the legal basis used, in incurring $49,271 for employee awards and banquets.

Finding No. 10:  The Authority’s policies and procedures for completing travel vouchers and documenting travel and training expenses could be improved. 

Finding No. 11:  Meal allowances for day travel (Class C travel) were not reported to the Internal Revenue Service as taxable wages to the employee, contrary to Internal Revenue Service regulations.

Finding No. 12:  The Authority did not allocate $160,000 paid by the wastewater system for the portion applicable to improvements to the water system.  Additionally, some indirect costs for administrative support functions were not allocated to the wastewater system.

Finding No. 13:  Contracts with, and invoices from, consultants and outside attorneys did not contain specific deliverables or otherwise provide a basis for payments.

Finding No. 14:  The Authority used continuing contracts with engineering firms for projects costing over $1 million, contrary to Section 287.055, Florida Statutes, which requires a competitive selection process.

Finding No. 15:  The Authority did not consider directly purchasing materials for major construction projects or, awarding bids by major components.

Finding No. 16:  The Authority overpaid some engineering firms, made a final payment prior to completion of the work, and paid for some charges not included in contracts.  Additionally, the Authority paid for some services without the use of competitive bids, contrary to its policies.

Finding No. 17:  The Authority did not always establish substantial and final completion dates for wastewater projects or document the reasons for delays in meeting these dates.  As a result, the Authority may not have assessed contractors for liquidated damages provided for in their contracts.

Finding No. 18:  During the 2003 calendar year, the Authority utilized a law firm that was affiliated with its General Counsel, an employee, thus violating Section 112.313(3), Florida Statutes.