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