The auditor general conducted a 9-month investigation into the deteriorating financial condition of the City of Lauderdale Lakes. The investigation found that the city manager and auditor, who are long-time friends, appear to have intentionally withheld the actual cash balance of the city in an effort to defraud the public. Loans exceeded reported cash balances, and two different cash balances were reported. As a result, the auditor general is requesting an investigation into the auditing firm that conducted the city's financial audit.
The auditor general conducted a 9-month investigation into the deteriorating financial condition of the City of Lauderdale Lakes. The investigation found that the city manager and auditor, who are long-time friends, appear to have intentionally withheld the actual cash balance of the city in an effort to defraud the public. Loans exceeded reported cash balances, and two different cash balances were reported. As a result, the auditor general is requesting an investigation into the auditing firm that conducted the city's financial audit.
The auditor general conducted a 9-month investigation into the deteriorating financial condition of the City of Lauderdale Lakes. The investigation found that the city manager and auditor, who are long-time friends, appear to have intentionally withheld the actual cash balance of the city in an effort to defraud the public. Loans exceeded reported cash balances, and two different cash balances were reported. As a result, the auditor general is requesting an investigation into the auditing firm that conducted the city's financial audit.
The auditor general conducted a 9-month investigation into the deteriorating financial condition of the City of Lauderdale Lakes. The investigation found that the city manager and auditor, who are long-time friends, appear to have intentionally withheld the actual cash balance of the city in an effort to defraud the public. Loans exceeded reported cash balances, and two different cash balances were reported. As a result, the auditor general is requesting an investigation into the auditing firm that conducted the city's financial audit.
Copyright:
Attribution Non-Commercial (BY-NC)
Available Formats
Download as PDF, TXT or read online from Scribd
Download as pdf or txt
You are on page 1of 9
Saturday, August 11, 2012
David W. Martin, CPA
State of Florida Auditor General Claude Pepper Building 111 West Madison Street Tallahassee, FL 32399-1450 Chaz Stevens MAOS / The Broward Post 1600 S. Dixie Highway #300 Boca Raton, FL 33432 Sent via: email, fax, and FedEx overnight. RE: FY 2011 Financial Statements of the City of Lauderdale Lakes and the 2011 Audited Financial Statements by the firm Harvey, Covington & Thomas, LLC Dear Sir: After an exhaustive nine-month investigation into Lauderdale Lakes rapidly deteriorating financial condition, I believe both City Manager Jonathan Allen and Rod Harvey, CPA have engaged in an organized scheme to defraud the public by intentionally withholding the citys actual cash balance. Long-time friends, those individuals would appear to have a mutual vested financial interest in the curtailing of such information. From my painstaking audit review, I noted cash due to/from: p. 17: Governmental Funds ($2.9M in loans) p. 21: Proprietary Funds p. 51: Non-major Governmental Funds Cash and cash equivalents fund amounts including: Proprietary Funds: $1,692,976 Total Pooled Cash: $1,726,312 Total Investments: $37,005 Governmental Funds: $33,336 Supposedly insolvent, the following loans were made: General Fund: ($4.8M) deficit / $1.4M loan Fire Fund: ($1.7M) deficit / $511,490 loan Other restricted-usage fund loans listed: Page 2
2005 Bond Construction Fund: $646,128 CDBG Minor Home Repair Fund: $206,987 Transportation Gas Tax Fund: $72,396 Law Enforcement Fund: $25,444 All together, these loans exceeded the FY11 Ending Total Pooled Cash balance; of which there were two different reported balances: 2011 Audited Financial Statement: $1,726,312 Citys accounting system: $1,433,788 As the audit clearly fails to identify the actual cash balance, it therefore does not meet Governmental Accounting Standards Board and Generally Accepted Accounting Practices disclosure requirements. Given all this, I request an investigation of Harvey, Covington, and Thomas, LLC. Regards;
Chaz Stevens Investigative Reporter MAOS / The Broward Post [email protected] 818-468-5433 CC: Broward County Commission Lauderdale Lakes City Commission Broward Office of Inspector General Broward State Attorneys Office State of Florida Legislative Auditing Committee Florida Department of Financial Services C1TY OF LAUDERDALE LAKES, FLORII>A BALANCE SHEET GOVERNMENTAL FUNDS SEPTEMBER 30, 2011 2005GO Other Total Fhe Grnnt Community Bond Construction Go,enmentl Gowrnmntul General Rscue Fund Fund Redevelol!ment Fund Funds Funds ASSETS Cash and Cash oquivalents $ 16,237 $ - $ - $ - $ - s 17,099 $ 33,336 12,368 . . 23,881 756 . 37,005 1.747, 110 155, 142 . 4,766 . 452.214 2.359,232 "*Duo from other funds 1.414,015 511,490 - 50,000 646, 128 314.827 2,936,460 Due from other 272,630 16,212 1,049,539 135,420 . 2,859 1,476,660 Advance to general fund . . . 2,518,031 . 2,518,031 Pn:paid assets 28,548 . . . . . 28,548 Inventory held for resale 99.390 . . - - . 99.390 Restricted cash . . . 818 288 - 818.288 Total assets 3,590,298 682 844 1,049,539 3,550,386 646,884 786,999 10)06,950 . LIABILITIES AND FUND BALANCES Liabilities: Accounts payable and accmcd liabilities 484,969 360 22,595 52,495 1,410 36,337 < 598, 166 to other fimds 50,000 - 1.414,015 106,534 . 1,365,911 2,936,460 Due to other agencies 5,293,054 2,245,576 . . . 83,034 7,621,664 Advance from CRA 2,518,03 1 . . . . - 2,5 18,031 Deferred revenue 97 744 172.470 . . - . 270 214 Total liabilities 8 443 798 2,418,406 1,436,610 159,029 1,410 1,485,282 13,944,535 Fund Nonspendabk Prep aids 28,548 . . . . . 28,548 Inventory held for resale 99,390 . 99,390 . . . . . Advilnces . . - 2,518,031 . . 2,5 18,031 Restricted: Special revenue fimd . . . 873,327 . 235,966 l , 109,293 Capital project fund . . . . 645,474 . 645,474 Un;usigned: General Fund (4,98 1,438) . - . . . (4,981,438) Special revenue fimds . (1,735,562) (387,071) . . (445,318) (2,567,951) Capital project limd - - . . (485,523) (485.523) Debt service fund - - - - Total fund balances (deficits) (4,8531500) (1,7351562) (3871071) 3,3911358 645 474 (698,2831 (3,637,584) Tutalliabilities and fund bDlan<es $ 3,590,298 $ 682,844 $ 1,049,539 s 3,550,387 $ 646,884 $ 786,999 $ 10,306,951 The notes to the financial statements are an integral part of this statement. 17 CITY OF LAUDERDALE LAKES COMBINING BALANCE SHEET NON-MAJOR GOVERNMENTAL FUNDS SEPTEMBER 30, Wtl Setdal Revenue Debt Servlu Caplral Projllctr Law Code Alz.hllimer Minor Trantt portatfun 2005 Bond Copltol Proj ect Impact Enforcenumt Enforcement C:ue Centn HomeRep:dr G;nTax Debt Senlce Project Construction Fee Fund Trurt Fund Trust Fund Fund Fund Funrl Fund Fund Fund TOTAL ASSETS Cash i\nd cash etJuival enls s s s s $ s 16.302 s 797 s s 17,099 Rt::ceivables, net 76,470 375, 744 452,214 * DUt:: fimn ofht::r funds 25,444 10,000 72,396 Due trom ofht::r Agencies 2,859 2,859 Toti11As:;e1s 28,303 ___ l_O,ODO 76,470 206.987 88,698 797 375,744 786,999 Ll ABlLITIES Accounts I 5,786 20,551 36,337 Payable ' A..:cmerl pilyroll nnd relnted linbilities Due to o1ht:r Agt:: m;it:: s 77,471 4,205 * Out: tD other fwuts 246.979 504,644 395,491 21S,797 1,365,91 l
Total LiAbilities 77.471 20,551 4,205 395,491 21S,797 I FUND BALANCES for: Spt::liJAl revcmlt 10,000 129.516 235,966 projt:cts Dt:bt st:Jvh:t:
(445, 3U) (445,318) projr:.;;ts (! 46,9i9) (19,747) (218,?97) (485,523) Debt St:lVictl (3,408! (3,408) Total F1md BaJaucts (deficits) (!46,979) 2S,303 10,000 (445, 318! 129.516 (3,408! (19,747) (218,797) (6Y8,283) Tot<ll Lillbilities: am1 Fm1d s s 2S,303 $ 10,000 $ 76, 470 s 206.987 s 88,698 $ 797 s 375,744 s $ 51 ASSETS -*cash and Cash equivalents Accounts Receivable ~ D u e from other funds Due from other agencies Total current assets Noncurrent assets Capital assets: Infrastructure Equipment Vehicles Total capital assets Less accumulated depreciation Total Capital assets, net Total assets Overdraft LIABILITIES Current liabilities: Accounts payable and accrued liabilities Due to other agencies Compensated absences payable Other liabilities Due to other funds Bond payable Total current liabilities Noncurrent liabilities: Compensated absences payable Bond payable Total noncurrent liabilities Total liabilities NET ASSETS In vested in capital assets, net of related debt Unrestricted Total net assets CITY OF LAUDERDALE LAKES, FLORIDA STATEMENT OF NET ASSETS PROPRIETARY FUNDS SEPTEMBER 30, 2011 Stonnwater Solid Waste Building Services Fund Fund (Nonmajor Fund) $ 707,028 $ 985,048 $ 28,486 148 352,107 6,693 735,514 1,343,996 4,519,149 151,953 53,615 439,724 16,790 5,110,826 70,405 (2,671 , 9 9 2 ~ (47,951) 2,438,834 22,454 $ 3,174,348 $ 1,343,996 $ 22,454 53,710 436, 165 80,574 377 6,095 352,107 213,768 273,950 436, 165 432,681 30,475 1,479,242 1,509,717 1,783,667 436,165 432,681 745,824 22,454 644,859 907,831 (432,681) $ 1,390,683 $ 907,831 $ (410,227) The notes to the financial statements are an integral part of this statement. Total $ 1,692,076 28,634 352,107 6,693 2,079,510 4,519, 149 205,568 456,514 5,181,231 (2,719,943) 2,461,288 $ 4,540,798 570,449 377 6,095 352,107 2 13,768 1, 142,796 30,475 1,479,242 1,509,717 2,652,513 768,278 1, 120,009 $ 1,888,287 21 CITY OF LAUDERDALE LAKES NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2011 reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. Proprietary funds distinguish operating rever.ues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the stormwater, solid waste/recycling and the building services funds are charges to customers for sales and services. Operating expenses for enterprise funds include the costs of services, administrative expenses and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non- operating revenues and expenses. D. Assets, liabilities, and net assets or equity 1. Deposits and investments The City's cash and cash equivalents include cash on hand, demand deposits, and investments with the State Board of Administration (SBA) and short-term investments with original maturities of three months or less from the date of acquisition. Resources of all funds have been combined into a pooled cash and investment system for the purpose of maximizing earnings. Interest earned on pooled cash and investments is allocated monthly based upon equity of the respective funds. For the purpose of the statement of cash flows, cash and cash equivalents mean short term, highly liquid investments with an original maturity of three months or less. 2. Receivables and Payables Activity between funds that are representative of arrangements outstanding at the end of the fiscal year are referred to as either "due to/from other funds" (i.e. the current portion of interfund loans) or "advances to/from other funds" (i.e. the non- current portion of interfund loans). All other outstanding balances between funds are reported as "due to/from other funds." Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as "internal balances." Advances between funds, as reported in the fund financial statements, are offset by a fund balance reserve account in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources. All trade and property tax receivables are shown net of an allowance for uncollectible accounts. The receivable allowances are estimated based on historical trends. 27 13. Net Assets CITY OF LAUDERDALE LAKES NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2011 Net assets of the government-wide and proprietary funds are categorized as invested in capital assets net of related debt, restricted ur unrestricted. The first category represents net assets related to capital assets net of any outstanding debt associated with the capital assets. In the government-wide and proprietary fund financial statements, restricted net assets are used to indicate the segregation of a portion of net assets equal to certain assets that are restricted by requirements of revenue bonds and other externally imposed constraints or by legislation in excess of the related liabilities payable from restricted assets. There were no restricted net assets as of September 30, 2011. NOTE 2- STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY At September 30, 2011, the following funds reported deficits in fund balances (all deficit balances were for governmental funds): Fund General fund Fire rescue fund Grant fund Alzheimer Care Center Project construction fund Capital projects fund Impact fee fund Debt service fund Deficit $4,853,500 1,735,562 387,071 445,318 218,797 19,747 246,979 3,408 In the General fund the deficits were attributed to the decline in property values, a reduction in State revenue sharing, reductions in various other revenue sources, coupled with an over projections of revenues. The general fund expenditures continued on target with budget projections. As a result expenditures exceeded revenues by nearly $3.4 million. The City contracts Fire Rescue services through Broward Sheriffs Office. The cost for the contractual services increase nearly by 5% annually, however the major source of revenue is the special assessment which is insufficient to pay for the cost of service. This attributed to the deficit in fund balance. The other governmental funds the revenues continued to decline and expenditures continued on target therefore expenditures exceeded revenues to perpetuate the deficits in fund balance. ~ NOTE 3- DEPOSITS AND INVESTMENTS For accounting and investment purposes, the City maintains a cash and investment pool for use by all City funds. This gives the City the ability to invest large amounts of idle cash for short periods of time and to maximize earning potential. Each fund type's portion of this pool is displayed on the combined balance sheet as cash and equity in pooled cash and investments. Income earned on pooled cash and investments is allocated to the respective funds based on average daily balances. A. Cash deposits As of September 30, 2011 , the City did not overdraw on its cash. Because of overdraft protection plan the City's cash overdrafts are paid by the financial institution. 31 ... CITY OF LAUDERDALE LAKES NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2011 All deposits with financial institutions are fully insured or collateralized as required by the City Commission. The deposits are covered by federal depository insurance and, for the amount in excess of such federal depository insurance, by the State of Florida's Public Deposits Act (the "Act") . Provisions of the Act require that public deposits may only be made at qualified public depositories. The Act requires each qualified public depository to deposit with the State Treasurer eligible collateral equal to or in excess of the required collateral as determined by the provisions of. the Act. In the event of a failure by a qualified public depository, losses, in excess of federal depository insurance and proceeds from the sale of the securities pledged by the defaulting depository, are assessed against the other qualified public depositories of the same type as the depository in default. B. Investments Florida Statutes, Chapter 218.415, authorize the City to establish its own investment policy by ordinance. The investment ordinance allows up to 1 00% investment in the following instruments, subject to maturity limitations: local government surplus trust fund (the "SBA"); Securities and Exchange Commission (the "SEC") registered money market funds with the highest quality rating from a nationally recognized rating agency; savings accounts and certificates of deposit in state-certified qualified public depositories; direct obligations of the U.S. Treasury; and, securities issued by federal agencies and instrumentalities. Up to 10% may be invested in common stocks, subject to quality restrictions. The City's investments were insignificant to the individual fund assets and pooled cash balances at September 30, 2011 and were comprised solely of amounts deposited with the SBA. NOTE 4- RECEIVABLES The City uses a third party to manage the collection process for receivables associated with its contracted service provider, Emergency Medical Services ("EMS"). With the exception of fire inspection fees and occupational licenses, EMS receivables and the corresponding allowance for doubtful accounts are recorded in the General fund. The receivables and allowances for fire inspection fees and occupational licenses are recorded in the Building Services and Fire Rescue funds, respectively. All allowances have been established based on historical collection rates. Receivables at September 30, 2011, in aggregate, are comprised of the following amounts, net of allowances: General Fire Rescue CRA Non major Total Receivables: Utility $ 562,180 $ - $ . $ $ 562,180 Certificate of Use 7,188 7,188 Occupational Licenses 80,387 80,387 Alzheimer Care 76,470 76,470 Emergency Medical Service 1,004,254 1,004,254 Fire Inspections 155,142 155,142 Other 93,101 4,766 375,744 473,611 Total $ 1,747,110 $ 155,142 $ 4,766 $ 452,214 $ 2,359,232 32
:.:. mun1s Financials, Revenue & Citizen services and Human capital Management r 06 / 05/2012 07 : 41 ICity of Lauderdale Lakes l PG 1 chandrag ACCOUNT DETAIL HISTORY FOR 2012 01 TO 2012 09 glact hst ACCOUNT NET LEDGER NET BUDGET JNL EFF DATE SRC REF1 REF2 REF3 CHECK # OB AMOUNT BALANCE BALANCE 000 Cash Accound I 1' 433-:-:;a 8. 87 J SOY BALANCE 12/01 1008 10/03/11 CRP BL 100311 18,467.35 1, 452 ,256 . 22 12/01 1009 10/03/11 CRP BL 1032011 1,600 .00 1 , 453,856.22 12/01 1012 1 0/03/11 GEN D/R COMM DEV 3.60 1 ,453,859.82 12/01 1012 10/03/11 GEN D/R COMM DEV 20.09 1 ,45 3,879 .91 12/01 1012 10/03/11 GEN D/R COMM DEV 395.00 1 ,454,274.91 12/01 1012 10/03/11 GEN D/R COMM DEV 185. 00 1 ,454, 459.91 12/01 1012 10/03/11 GEN D/R COMM DEV 136.20 1 ,454,596.11 12/01 1012 10/03/11 GEN D/R COMM DEV 200 . 00 1,454,796.11 12/01 1012 10/03/11 GEN D/R COMM DEV 46 . 17 1,454,842.28 12/01 1012 10/03/11 GEN D/R COMM DEV 75.00 1,454,917 . 28 12/01 1012 10/03/11 GEN D/R COMM DEV 8.00 1, 454,925.28 12/01 1012 10/03/11 GEN D/R COMM DEV 4.48 1, 454,929 . 76 12/01 1012 10/03/11 GEN D/R COMM DEV 5 . 82 1 ,454,935.58 12/01 1012 10/03/11 GEN D/R COMM DEV 3 . 00 1,454,938 . 58 12/01 1012 10/03/11 GEN D/R COMM DEV 10.00 1, 454,948 . 58 12/01 1013 10/07/11 APP apchk ' 150.00 1, 455,098 .58 12/01 1014 10/07/11 APP apchk -584,518.75 870,579 . 83 12 /01 1015 10/10/11 APP apchk 251.00 870,830.83 12/01 1016 10/10/11 APP apchk -13,853. 12 856,977 . 71 12/01 1017 10/12/11 PRJ 100711 1100711 1100711 70,293 . 98 927,271 . 69 12/01 1017 10/12/11 PRJ 100711 1100711 1100711 - 153,634.11 773,637.58 12/01 1020 10/12/11 PRJ 100711 4100711 4100711 4,027.21 777,664. 79 12/01 1020 10/12/11 PRJ 100711 4100711 4100711 - 12,231.68 765,433 .11 12/01 1022 10/04/11 CRP BL 100411CASH 816 . 63 766,249 . 74 12/01 1023 10/04/11 GEN D/R COMM DEV 2,316.43 768,566.17 12/01 1030 10/03/11 GRV D/R COMM DEV - 136 .20 768,429.97 12/01 1030 10/03/11 GRV D/R COMM DEV - 200. 00 768,229 .97 12/01 1030 10/03/11 GRV D/R COMM DEV -4 6 . 17 768,183.80 12/01 1030 10/03/11 GRV D/R COMM DEV - 75 . 00 768,108.80 12/01 1030 10/03/11 GRV D/R COMM DEV ' -8.00 768,100.80 12/01 1030 10/03/11 GRV D/R COMM DEV -4 .48 768,096.32 12/01 1030 10/03/11 GRV D/R COMM DEV - 5.82 768,090.50 12/01 1030 10/03/11 GRV D/R COMM DEV -3 .00 768,087.50 12/01 1030 10/03/11 GRV D/R COMM DEV - 10.00 768,077.50 12/01 1030 10/03/11 GRV D/R COMM DEV -395.00 767,682.50 12/01 1030 10/03/11 GRV D/R COMM DEV -185.00 767,497.50 12/01 1030 10/03/11 GRV D/R COMM DEV -3.60 767,493.90 12/01 1030 10/03/11 GRV D/R COMM DEV -20.09 767,473.81 12/01 1 031 10/03/11 GEN D/R COMM DEV 1 ,092.36 768,566.17 12/01 1032 10/05/11 GEN D/R COMM DEV 1 ,039 . 76 769,605 . 93 12/01 1 033 10/06/11 GEN D/R COMM DEV 3,552.94 773, 158 . 87 12/01 1034 10/06/11 CRP BL 10611 600.00 773,758 . 87 12/01 1035 10/06/11 CRP GB 100611 1,190.00 774,948.87 12/01 1036 10/06/11 CRP BL 100611 11, 111.35 786,060 .22 12/01 1037 10/11/11 CRP BL 101111CASH 904 . 78 786,965. 00 12/01 1038 10/12/11 CRP BL 1012 11 13, 949 . 06 800 ,914.06 12/01 1039 10/10/11 GEN D/R COMM DEV 2,263.23 803,177 . 29 12/01 104 0 10/11/11 GEN D/R COMM DEV 1 ,771.92 804,949.21 12/01 1041 10/12/11 GEN D/R COMM DEV 7,466.80 812,416.01 12/01 1046 10/13/11 APP apchk - 92,783.44 719,632.57 12/01 1049 10/14/11 APP apchk 14,205.00 733,837.57