Minutes for August 3, 2006
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DRAFT
Board of Trustees
Regular Meeting
Thursday, August 3, 2006
1:00 p.m. – Building D&E
Madame Chairman Wilma Weglein called the meeting to order at 1:00 p.m.
Ms. Weglein led the Pledge of Allegiance.
Ms. McCahan called the roll. All Trustees were present. Mr. Torpy was present as counsel.
Mr. Torpy commented that in the July 14th meeting Ms. Claiborne presented the audit report. From that meeting, Mr. Torpy developed some concerns with the dialogue occurring between the Community Manager and the auditor. Mr. Torpy spoke with Ms. Claiborne regarding her concerns about Barefoot Bay finances and the audit, including information the District did not transmit, and some current problems with tracking finances. A subsequent conversation led Mr. Torpy to make contact with Ms. Weglein. Mr. Torpy and Mr. Malek then contacted individual board members. consequently, Mr. Malek and Mr. Torpy have met with Mr. Hunt and Ms. Claiborne to discuss all the issues raised.
Mr. Torpy commented it is very important the Board understand what caused the problems so the Board can make informed decisions, and effectively monitor future progress. Mr. Torpy does not believe any one individual or piece of machinery caused the financial problems. The audit is now done. Mr. Torpy directed focus to current every day operations, ensuring the District has appropriate equipment and manpower to carry out the task.
“As your attorney, one of the things this Board can do wrong that I really worry about is public finance. Managing citizens’ money.” Mr. Torpy said he did not appreciate until the last two weeks some of the problems Mr. Hunt was dealing with. The problems when the computers broke down, and problems with a former employee, caused a lack of reconciling bank statements. That is still an open and outstanding issue. If someone were to start today and do nothing but that, 40 hours a week, Mr. Hunt and Ms. Claiborne estimate it will take between 6 and 8 weeks of staff time to reconcile the statements. One recommendation is to allocate staff to catch up the records.
Mr. Torpy is concerned regarding the IT person who keeps track of all of the computer workings, the one who maintains the tool, to make sure it’s adequate and performing properly. It’s a difficult job and a complicated one. The person performing this function requires a background in information systems, especially when the programs concern public finance. Mr. Hunt’s memo states he is addressing those issues. There is concern about existing staffing. Barefoot Bay operates a $5.5 million a year corporation with amazing components [to it]. Many facilities must be maintained on a daily basis. Mr. Torpy commented perhaps the Board and the citizens did not fully appreciate what it meant to become a public body. [You] created the entity so [you] could acquire the assets [you] wanted to maintain. Public finances are one of the most scrutinized forms of ‘baggage’ that came along with Barefoot Bay’s acquisition. Mr. Torpy is aware of at least two instances in which the State has taken charters away from special districts for not managing their money. Managing public finances requires time and talent. The Board must focus on whether the District has enough staff. It’s difficult to balance “don’t want to spend the money” with the necessity of getting the work done properly given the level of demand. This Board, and previous Boards, have been adamant about the lack of financial reports that used to be presented once a month. What does it mean to have that? Is it a piece of paper that makes [you] feel warm and fuzzy? Or do [you] really read it and understand it, and if not, does it need to be changed? Since 1999 Mr. Torpy has heard many financial reports read to the Board, which told the Board what the bank balance was, what the expenses were, but did [you] really know those reports were accurate? The Board needs to focus on how far in this direction it wants to go.
Where did the audit problem come from? Mr. Torpy said it was staffing, staffing, and staffing. The computer was a problem but staffing made it 10 times worse than it needed to be. What Ms. Claiborne’s office has been doing for close to a year is trying to get back, from an auditor’s standpoint, to the point they tell the computer “start here”, with a starting balance, and they are convinced those numbers, to the penny, are 100% accurate. At one point, there was a lot of manual accounting going on in Barefoot Bay. Manual accounting and electronic accounting never mix. The only way to check that is line item by line item. When the historical data is added in electronically the concern is that the numbers may not merge and carry forward correctly.
Has some of this been Mr. Hunt’s fault? Yes. When Mr. Hunt came to the Bay, like he had nothing else to do here; there were two hurricanes that provided a lot of distraction. At that point, he assigned his staff to handle finances. This got out of hand, and Mr. Hunt did not jump back in quick enough. That is for the Board to talk with Mr. Hunt about. Mr. Torpy said he was firmly convinced Mr. Hunt had jumped back in now.
By October 1, Mr. Hunt with Ms. Claiborne’s help, will have put together a program that corrects the deficiencies in tracking the Bay’s money, specifically, reconciling the bank accounts. Finish the audit. Make sure the right staff is in the right place, and put Mr. Hunt in the right place to make sure staff is performing its function. The comprehensive plan, if implemented, and it will require some help from the Board of Trustees, by October 1 [we] will stop having these conversations. Ms. Claiborne expressed concern to Mr. Torpy the Board was not reacting quickly enough to what she perceived as a staffing problem in the finance department. Mr. Torpy believes that problem has been fixed. Mr. Torpy commented “let the chips fall where they may” and move forward. He commented the District has spent a “crazy” amount of time and money on this issue and it is time to end it.
Mr. Hunt commented that 7 things have come out of the meetings he and Mr. Torpy and Ms. Claiborne have had. Mr. Torpy and Ms. Claiborne convinced Mr. Hunt the District needs a full-time Information Systems Director, and Mr. Hunt’s recommendation is that this be done. Mr. Geer will head up project management and be shifted over to Public Works. Ms. Marsocci [Finance Officer] will attend advanced training in fund accounting. Betty Anderson was tapped to assist in data entry and refinement. Leslie will come from Code Enforcement to assist in data entry. Mr. Hunt commented a letter will go from the District to NPT to request additional installation assistance, not entirely at the District’s cost. Mr. Hunt said he will shift some of his project management duties to Mr. Geer. Mr. Hunt will spend time in the financial office when the audited numbers are transitioned into the general ledger.
Mr. Torpy commented he is not sure what the fiscal impact of this will be. Mr. Hunt will need to gather some specific some numbers. If [you} factor in the money that would have been saved on the legal fees and the audit, it would more than pay for a permanent IT person.
Yvonne Claiborne commented for the auditors’ part, once the reconciliations were complete on the year ending 9/30/05, it showed that all cash had made it into the general ledger. The auditors identified all the checks and receipts. The State of Florida deposits are in the bank account. There were some problems with the software. There were instances where the software did not work appropriately. All of the instances in which the software did not operate correctly would have been discovered if the reconciliations had been completed on a timely basis. Problems the District conveyed to the auditors concerning financial information being generated out of the reports appeared to be capacity issues. The auditors could find no substantive evidence there was anything else wrong. The software issues should ultimately have been discovered by staff. Ms. Claiborne is concerned that within 90 days of the change in finance personnel the Board did not receive budget versus actual expenditures information. This should have been of grave concern to the Board. Finances are an essential part of managing the District. With temporary staffing to catch up with organization and data entry, the Board will save money by not having the auditor firm involved in day to day operations. Ms. Claiborne asked to be copied on any correspondence with the software company, and said she needed to feel the Board thought these issues were important.
Mr. Keegan asked what qualifications an IT should have and what salary the District could expect to pay. Ms. Claiborne responded the Finance Officers Association would be able to provide that information. The District will want someone with a degree in information systems, someone knowledgeable and educated in maintaining networks and software systems. Ms. Howard requested when the applications come in the Board would like to have access to them. An IT person’s typical role is making sure the software is installed appropriately and that it is supported by the appropriate level of capacity within the network; that backups are taking place, and that the security protocol related to the software itself is in place, and that any updates that come in from the software company are installed on a timely basis, and any staff training on new software takes place. Mr. Torpy commented the IT person is the one responsible for making sure the tool is adequate to the job required and the one who troubleshoots before there’s a major problem.
Mr. Bailey asked Mr. Torpy if the Board could receive training as to face certain challenges in the future. Mr. Torpy responded he thought training the Board as a whole is not practical, but training staff is a must. With as much concern as the Board has for the District, there is a lack of understanding about how to track that the process is, in fact, occurring. Mr. Hunt needs to implement training of backup staff. The Board should develop the capacity to understand financial reports. An IT person is not going to support Mara. The IT person will support the entire computer system for Barefoot Bay. The restaurant, the golf course, Code Enforcement, all the facilities that operate computers. The District will be paying for a certain skill level in a particular profession as the market requires.
Mr. Keegan asked if the Board could vote on the IT proposal at this meeting. Mr. Hunt responded the Board had the power to vote at a special meeting. Or, if the Board prefers, staff can come back at the next Board meeting with a more lengthy report. Ms. Weglein opted for the more detailed report.
Ms. Claiborne commented the issue might be reworded to say the District Manager has the ability to research what [the IT person] would cost the District and come to the Board with a staffing plan for that position which would include a salary range, and an experience set that would be advertised. The Board could agree on the position at that point.
Mr. Keegan made a motion that incorporated Ms. Claiborne’s language. Second Ms. Donahue.
Mr. Smith prefers the IT person have experience. Mr. Torpy responded there are schools and associations which could guide the selection and ensure the needs of the District are met. In this perspective, there would be no training time. Mr. Carillion asked if the District really needed a full time person, or perhaps was too big for a consultant. Mr. Torpy responded that unequivocally he feels the position needs to be dedicated to Barefoot Bay. Ms. Donahue commented the IT person ensures there is less work stoppage.
Motion carried unanimously.
Ms. Claiborne commented next Friday is the audit presentation [8/1106]. [We] are hoping to have the bound documents tomorrow [8/4/06]. The District’s response to the comments within the report will not be incorporated into the bound document. There is not time to allow the Community Manager and the Finance Officer to develop appropriate responses. The auditors did not wish to “push that envelope”. The auditor General requires the responses, but they are not required to be bound with the document. In this case it will be presented at the same time as the audit report.
Ms. McCahan asked about the management letter. A document came to the Board on March 8, 2004 that gave specific instructions regarding accounting procedures like Food and Beverage, making change, performing “no sales”, etc. Ms. Claiborne responded that document was in response to an agreed upon procedures project around the cash receipts when there was an allegation of fraud. Potential problems were identified during that process. Ms. McCahan asked how the Board could ascertain those procedures were currently followed with new staff. As part of the audit process, the auditors took that same report along with the management letter comments that had been issued in 9/30/03 audit report. Due diligence requires that the procedures were incorporated into District policy by motion of the Board. The auditors sample cash receipts to ensure the procedures and policies are in place and being currently performed as designed. These procedures and policies were in place as of 9/30/05, but Ms. Claiborne could not speak to the current fiscal year. The management letter is a required letter that goes with the audit report. The management letter says the auditors have issues during the audit process that don’t warrant being classified as a material weakness in your internal control, but are worth mentioning with recommended actions. The District responds to that, either accepting the recommendation, or approaching it in a modified manner, or ignoring it. The Community Manager drafts the response, and as part of accepting the audit report, the Board accepts the District’s response.
Mr. Torpy commented that when “this” first came up, his concerns were intense. He expressed this view to each of the Board members individually. He said as intense as he was at that moment, he is comfortable today. Mr. Hunt has responded excellently to his and the auditors’ comments and come up with a viable program. [You] will know by October 1 whether these things happened or not. Mr. Torpy said that if he were a Board member, he would request these reports, and pay attention to the goals and objectives that have been set. It is the job of the Board as supervisors to monitor progress toward goals and objectives. Board members should not attempt to keep track of day to day operations. The Board is elected to set policy and procedure, to monitor the performance of the paid professional staff. Mr. Torpy said he didn’t want to leave the room after having this conversation and have anyone think everything is perfect: it isn’t. There is still a big problem and a long way to go. There is a plan in place to fix it, [I think] Mr. Hunt’s the best man to fix it for you, but I suggest to you as a Board there is a short period to wait and see if he implements the plan. Finances are the biggest issue the Bay has got from the standpoint of protecting the further existence of Barefoot Bay. “I would be remiss in my duties if I left here without [you] understanding how important I believe this is.” [We will all] be anxious to see if this system gets working and works well.
Ms. Weglein clarified, speaking to Mr. Torpy, that the plan and the resulting policies need to be carried out. Mr. Torpy shared that in his legal practice he is not fond of performing as a manager, but when he and his partner make decisions, they expect their manager to carry them out. District leases are of concern, especially in the Shopping Center. Mr. Torpy commented Mr. Hunt has not been with the District very long and the hurricanes were paramount when he got here. Now that the hurricane issues are largely resolved, Mr. Hunt can get back to the business of management. Ms. Claiborne commented the challenge the District Manager faces concerns the comments the auditors made two or three years ago. When the new system is in place, those recommendations may not be relevant, effective, or efficient any more. Finance has the challenge of making sure the policies and procedures that are in place can be adapted to the new system. There will be modifications throughout the year as the District incorporates the new software.
Ms. McCahan asked if the auditor could provide a short list of major concerns. Mr. Torpy said he would provide one.
Mr. Keegan asked Mr. Hunt if the new computer program was adequate to handle the demands about to be placed on it. Mr. Hunt said he thought it was. Mr. Bailey asked the same question to Ms. Claiborne. She said the auditors did not evaluate the system currently in place. The problems addressed in the audit were with the old IMS software. The auditors have had conversations with the Community Manager regarding a consultant versus a full time [IT] position. As far as the finance accounting software is concerned, neither the software company nor the current finance officer were conveying any real issues. Mr. Bailey asked Ms. Claiborne if the auditors could monitor the process approximately October 6th. Ms. Claiborne commented the auditors would like to defer that until the reconciliations are caught up and the Finance Officer feels the internal financial reporting is caught up. The auditors will come in and help develop the internal financial report. Ms. Claiborne wants to be at the first Board meeting when the first internal finance report is presented to the Board.
Loretta Lynch expressed concerns regarding hiring an IT employee. Mr. Torpy commented that based on the conversations he has had with Mr. Hunt and Ms. Claiborne and others, he is confident [everyone] will work together to ensure the IT position is filled with a competent person.
Min Bolon expressed disappointment that the attorneys did not take up Ms. Weglein’s report in March [2006]. Mr. Torpy responded he had several conversations with Ms. Weglein in March. His office was aware of the concern. The problem was a finance and audit issue, and that is not what the attorneys do for a living. Mr. Torpy said the legal office has worked consistently with the auditors to ascertain that there was no money missing. The rest of it was an administrative nightmare. First you must identify the problem before you can implement a fix. That process has been ongoing since March. There was no failure to react to Ms. Weglein’s comments, or your husband’s comments, or anyone on the Board. The auditor has done a remarkable job. The legal office responded when the auditor didn’t say everything was fine. The July 14th Board meeting was the first indication the attorneys had from a legal standpoint there was a need for intervention. The Board, the attorneys, the auditors, and the District Manager each have a role. When the issues became bigger, it became the attorneys’ problem. Ms. Weglein commented Ms. Claiborne came to her in January and indicated there was a problem. At that point Ms. Weglein notified Mr. Torpy. Mr. Torpy commented even at this juncture he has been performing outside the normal range of legal duties in coordinating District’s hired staff to come up with a solution and present it to the Board. Mr. Bailey contends there should have been a special meeting called sooner to work out the existing problems. Mr. Torpy responded the meeting could not have been held much sooner because the exact nature of the problem had to be identified by Ms. Claiborne through the audit process. The data was not available sooner.
Ms. Howard admonished Mr. Hunt for not being up front with the Board and leading the Board to believe everything was okay. Mr. Hunt responded to the question “Is everything okay” by saying he would reserve his answer until Ms. Claiborne’s presentation on August 11th. Mr. Hunt commented he told the Board on several occasions there were issues and problems. Mr. Hunt said he was not sure he could get an IT professional of the caliber that everyone would like to see on staff and up to par by October 1st. Mr. Hunt expressed that he might fail, and if that were the case, the Board could “get rid of me and get someone new”. Mr. Torpy’s advice reflects a solution, and staff is working on it. There is a systemic problem, but there is no problem financially. Mr. Hunt commented that if he had one thing to do over, he would let staff handle projects more and he would have paid more attention to the administrative procedures.
Ms. McCahan commented after Mr. Malek’s phone call to her, and Ms. Claiborne’s presentation at the July 14th meeting, she has been thinking about what her culpability is as a Trustee. When people speak to the Board, and they are insulting and nasty and make personal remarks, and don’t preface their remarks in a professional way, she tends to tune out what they’re saying. Name calling does not get her respect or attention. Ms. McCahan acknowledged the computer problems and admonished the rabble rousers for trying to get everyone upset. She suggested speakers at the podium keep their sarcasm in check. She urged speakers to stick to the issues as she values their input.
Ms. Donahue commented Ms. Claiborne’s allegation the bank statements hadn’t been balanced since 2005 is not accurate. Ms. Marsocci has been balancing the statements every month to a zero balance and ascertained nothing is missing. It’s possible to start with a zero balance and balance out the next month by including income and expenditures from the previous month. Ms. Claiborne said accounting for transactions is not reconciliation. Ms. Claiborne made the point that reconciliation by definition requires a general ledger to reconcile back to. Ms. Claiborne agreed that Ms. Marsocci has been accounting for the cash transactions. The minutes revealed there is no general ledger in place. Ms. Donahue reiterated for the audience and TV land Ms. Marsocci has been doing her job although it didn’t sound that way initially. Ms. Claiborne offered an apology for being hung up on terminology, and made clear the bank statements are being opened and accounted for since Ms. Marsocci’s arrival.
Ms. Weglein entertained a motion to adjourn. Mr. Smith made the motion. Second Mr. Bailey. The meeting adjourned at 2:24 p.m.
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