Metro Jacksonville

QuoteCity audit: JEDC ‘lacking in oversight’
12/22/2011
by Karen Brune Mathis, Managing Editor

A City Council Auditor’s report issued Wednesday found that the City has lost money because of a lack of oversight by the Jacksonville Economic Development Commission.

“Based on our audit, it appears that JEDC has been lacking in its administration and oversight of economic incentive agreements, as well as operations at Cecil Field,” said the report’s audit conclusions.

“The lack of basic internal controls and procedures has resulted in financial losses for the City of Jacksonville,” it said.

The 25-page report was submitted Wednesday by Council Auditor Kirk Sherman. It said the scope of the audit was Oct. 1, 2007-Sept. 30, 2010, comprising fiscal 2007-08, 2008-09 and 2009-10.

In summary, it found:

• It appears that JEDC does not administer and monitor economic incentive agreements in a proper manner.

• It appears that JEDC does not properly administer expenditures related to Cecil Field operations.

• It appears that management controls established by JEDC to ensure accurate and timely collection, recording and depositing of Cecil Field revenues are inadequate.

“To correct this issue, we believe JEDC should develop and enforce detailed standard operating procedures, provide proper training and increase management’s oversight,” the report said.

Mayor Alvin Brown said Wednesday that he has yet to read the JEDC audit but would review it and ensure in the second phase of his propsed government reform that the administration is “making the corrections they are asking.”

“I welcome the audit report,” Brown said. “That’s one of the reasons I changed JEDC … I’m excited about it and I look forward to really making those changes.”

Under Brown’s reform proposal, the economic development director will report directly to the mayor.

“That person will be held accountable and responsible,” Brown said, “and that’s the key, holding people accountable and responsible.”

The commission is the City’s economic development agency. It oversees the administration of local and state incentives, Downtown development and permitting, film and television initiatives, sports and entertainment programs and redevelopment of Cecil Field.

The City’s part of Cecil Field, a formal Naval Air Station, is usually called Cecil Commerce Center.

The Auditor’s Office did not include the film and television or the sports and entertainment programs in its audit, but said they should be considered for future audit work.

Among audit findings for economic incentives:

• Compliance with reporting, Jacksonville Small and Emerging Business program involvement and jobs creation requirements is not adequately enforced.

• Data provided in jobs and JSEB reports by incentive recipients is not verified by JEDC staff.

• Out-of-state jobs were included in job creation reports by two companies that were overpaid by at least $156,000, although the Auditor’s Office said $328,620 has now been recovered from one company.

• JEDC does not adequately monitor the use of Qualified Target Industry funds once they are sent to the state.

• Some incentive payments were calculated inaccurately, although findings showed $26,570 has been recovered.

• Multimillion dollar contracts are awarded by City procurement after minimal advertising.

• JEDC does not have standard operating procedures and JEDC employees are not reasonably cross-trained.

• $180,000 could be saved annually if JEDC moved into a City-owned building.

• The Sports Trust Fund balance is more than $593,000, which could be used to reduce the subsidy of sporting events from the City’s general fund.

Among audit findings for Cecil Field:

• A five-year Cecil Field maintenance contract for $7.5 million was not advertised well and was awarded after only one bid was submitted by the existing service provider.

• Adequate supporting documentation is not received for large invoices and receivables.

• The maintenance contractor overcharged JEDC in multiple billings.

• The JEDC failed to seek reimbursement of $54,000 for utilities from a tenant at Cecil Field, and the auditor said that recovery is unlikely because of the tenant’s bankruptcy.

• There is a lack of segregation of duties between employees who process revenues.

• The Cecil Field Trust Fund’s balance is more than $3 million, which could be used to offset a subsidy from the City’s general fund.

• The post office occupied a building without a signed lease for about 10 years.

• Four checks totaling about $50,000 were lost for an extended period of time.

• The tenant leasing the housing complex for the past 10 years has not provided, and the JEDC has not requested, annual financial statements required by the contract.

According to the report, the Auditor’s Office provided a draft audit report to the JEDC and excerpts to other City agencies addressed in the report on July 8.

It said the office requested written and electronic responses to the comments be provided by July 22.

It said it received responses from five officials who are no longer employed by the City in the positions they held when responding. The officials are Chief of Procurement Michael Clapsaddle, Budget Officer Kent Olson, Central Operations Director Devin Reed, Public Works Director Joey Duncan and Recreation and Community Services Director Roslyn Mixon-Phillips.

The reports said JEDC management did not provide responses but requested a meeting that was held in the Council Auditor’s office on July 20. It said the JEDC requested additional support for some audit findings and some verbiage changes to the report and also agreed to provide more information.

The process was then prolonged by the City budget process from July 15-Sept. 28 and also the release of JEDC Executive Director Ron Barton in September. Barton declined to comment Wednesday.

According to the report, the Auditor’s Office provided an updated draft report to JEDC on Oct. 14 and requested responses by Oct. 31, but did not receive a response.

The report said that on Nov. 23, the acting JEDC director provided draft written responses but that many did not address the findings and recommendations “and in some cases the responses were misleading.”

According to the report, the Auditor’s Office met with the City’s CFO for better responses, but received nothing further as of Dec. 20.

“At this time, five months after receiving responses from other City agencies, we need to issue our report so that the City can consider our recommendations during the reorganization process,” he said.

Brown, who took office July 1, has called for changes in the City’s economic development strategy and structure.

His plan calls for the JEDC, which has overseen both Downtown and overall Duval County economic development, to be reconstituted as a Downtown agency, while overall county economic development would be handled by an “economic development commission” within his administration.

The Duval Legislative Delegation has backed Brown’s request to file a local bill that would allow the City to repeal and amend the JEDC, but is waiting for a City Council decision before issuing a resolution of support.

The JEDC has been the clearinghouse for City economic development efforts, including Downtown development, since 1997. Barton joined the JEDC in August 2005, becoming its third full-time executive director.

After Brown was elected May 17, Barton was one of the department heads expected to submit his letter of resignation, which is standard procedure with new administrations. The letter was accepted and he left the City at the end of September.

The commission, created by the John Delaney administration, is the City’s economic development office.

It covers the county as it negotiates incentives for projects and monitors the deals, assists developments and also serves as the Downtown development arm of the City.

The stated mission of the JEDC is to develop and execute policies that result in sustainable job growth, rising personal incomes and a broader tax base throughout Northeast Florida.

Its five main objectives are to recruit and expand higher-wage job opportunities; promote and encourage private capital investment; increase the growth and expansion of small business; promote and leverage investment in economically distressed areas; and promote a healthy and vibrant downtown.

A nine-member commission meets regularly to review and approve economic development projects and then sends them to City Council for further approvals.

Barton said in July that the JEDC staff, which had reached 42 people at its peak, had contracted to 16.

The Auditor’s Office reported that full-time staff was 18 in fiscal 2007-08 and 2008-09 and 17 in 2009-10, while three positions in 2007-08 were funded by the Tourist Development Council.

JEDC revenues rose from $12.2 million in fiscal 2007-08 to almost $12.6 million the next year and fell to about $11.3 million in 2009-10.

Expenditures were $12.2 million in fiscal 2007-08 and rose to $12.7 million the next year and fell to $11.3 million in 2009-10.

Among the recommendations from the Auditor’s Office about incentives:

• JEDC should establish verification controls for the jobs reports submitted by the incentives recipients.

• JEDC and the Central Operations Department should start communicating about the incentive agreements that are in progress and Central Operations should be notified about every newly signed economic incentive agreement.

• JEDC should establish and enforce carefully designed standard operating procedures and implement effective internal controls to ensure that incentive agreements are approved in a manner required by the incentive policy and that mandatory reports are submitted by the companies and reviewed by JEDC before any incentive payments are made.

• JEDC should review its templates to ensure that formulas used to calculate payments are in compliance with the incentive agreements’ requirements.

• JEDC should consider publishing comprehensive annual public investment reports as it did through 2005 to increase transparency and make data on public investments easily available to the public.

Among the recommendations from the Auditor’s Office about Cecil Field:

• As the contract administrator, JEDC should make it a standard operating procedure to request and review detailed supporting documentation for invoices submitted for payment.

• JEDC should develop and implement standard operating procedures that include detailed personnel duties.

• JEDC should seek reimbursement for expenses, plus markup, not allowed by the contract but billed to the City. The audit report showed $3,425.46 in expenses not allowed under the contract, including subscriptions to the Daily Record, The Florida Times-Union and the Jacksonville Business Journal, along with DirectTV service, a blood pressure monitor, coffee, cocoa, a decorative brass egg and sphere stand and other purchases.

QuoteDespite grand jury probe, JEDC continued to let deals go unreviewed
Posted: December 22, 2011 - 8:29pm  |  Updated: December 22, 2011 - 9:08pm


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By Timothy J. Gibbons 
Just a few years after the Shipyards Project debacle, in which a grand jury found the Jacksonville Economic Development Commission didn’t adequately monitor how millions of taxpayer dollars were spent, the JEDC’s small staff was letting other deals go unreviewed.

Those findings, part of a report released by the council auditor Wednesday, surprised Adam Hollingsworth, chief of staff to former Mayor John Peyton, who was in office during the 2007-to-2010 period the audit examined. Peyton declined to talk about the audit Thursday.

“We took compliance seriously, and I know the JEDC took it seriously,” Hollingsworth said Thursday.

The mayor’s office hired additional compliance staff for the JEDC in the wake of the Shipyards Project problem, he said.

In that situation, which occurred in the John Delaney administration, the grand jury found the JEDC paid out money without verifying work was done.

The recent audit charged the JEDC with improperly paying out hundreds of thousands of dollars in incentives and being careless in reviewing contractor expenditures.

Although the commission’s focus is on bringing companies to town, it is also the entity charged with making sure such companies lived up to their end of the deal. That task, however, appeared to fall by the wayside as the JEDC staff shrunk from over 40 people to around a dozen.

Hollingsworth did acknowledge that shrinking staff could lead to problems.

“One of the things we always said in the midst of budget reduction is we were making the best of the bad decisions available to us,” he said.

However, the former chief of staff said he had not yet read the audit and didn’t want to deal with hypotheticals.

To be sure, the audit report paints the most dire picture of the agency, which did not officially respond to the findings, as is typical. In most audits, the responses will discuss ameliorating factors, something absent here.

“That’s disappointing,” Kerri Stewart, Peyton’s chief administrative officer, said about the lack of response. “This is a raw audit. There could have been an audit finding and a response.”

Still, she said, as the staff shrunk, it was possible the JEDC had trouble juggling its responsibilities.

“The primary focus of that agency and where resources were placed was on creating jobs, not on compliance monitoring,” she said.

It’s unclear what other oversight the organization had. Unlike independent authorities, the JEDC executive director reported to the mayor, with its board serving only as advisers. The commission members’ responsibility is to vet deals brought to them, not oversee operations, the way a board at an independent agency would.

“It was much more an advisory role, a policy role,” said Bob Rhodes, a longtime commission member who stepped down as chairman at the end of 2008. “For the most part, the commission was relying on staff, not getting involved in day-to-day procedures.”

Former Executive Director Ron Barton, who was in charge during the audited years and resigned after Mayor Alvin Brown took office, did not return messages left on his cell phone. Also unresponsive was acting Executive Director Paul Crawford, who is traveling.

The Council Auditor’s Office report came after years of caviling about the organization.

The Concerned Taxpayers of Duval County had been pushing for an audit since around 2006, said Tony Bates, a former leader of the group, initially because of philosophical objection to incentives.

Those objections turned into more practical concerns when the group was unable to get from the JEDC information it felt it should have, such as number of jobs created.

Such concerns led some City Council members to ask for the audit, which began in July.

The results were worrisome, said Councilman Clay Yarborough, one of those who made the request.

“It’s a very concerning report,” Yarborough said. “Council members and the mayor are trying to be be very diligent, but have an agency that may not be able to handle taxpayer dollars.”

Yarborough said he wasn’t sure how the council will now deal with JEDC, which brings projects to the council for approval on a regular basis.

“If we now have reason to believe the dollars are not being spent as they should be,” he said, “we shouldn’t be approving them.”





Read more at Jacksonville.com: http://jacksonville.com/news/metro/2011-12-22/story/despite-grand-jury-probe-jedc-continued-let-deals-go-unreviewed#ixzz1hKzT0Pub

I am shocked no one has a response to this? What do you yall think? It sounds like to me that Brown's re-organization may have good reasoning. The JEDC looks like it may have had some hidden issues. Thoughts???

Quote from: duvaldude08 on December 23, 2011, 01:44:31 AM
I am shocked no one has a response to this? What do you yall think? It sounds like to me that Brown's re-organization may have good reasoning. The JEDC looks like it may have had some hidden issues. Thoughts???

I just know that I'll be going pieristic if in 19 days at the next Jacksonville Waterways Commission meeting the Historic Promised 680' Downtown Public Pier SHIPYARDS III is not part of the list for FIND (Florida Inland Navigation District). I know that I would testify in a heartbeat to a Federal probe that would look into a conspiracy to deny the people of Florida to access and economic opportunity to our St. Johns River our American Heritage River a Federal Initiative. My councilman is totally aware of the issue.

FIND is GOOD. Jacksonville is LOST.

The Public Trust just completely and absolutely destroyed in this community. We just had the Charter Revision Commission Recommendation that the original Code of Ethics that was in our Charter in 1968 then removed in 1972 be restored. So whats happening? Its being stalled and not advanced by our City Council and  Duval County Legislative Delegation.

VISIT Jacksonville- We have no ETHICS

Duvaldude08-What are your thoughts??? How about the upcoming sentencing of Tony Nelson. Your a 3 post in a row on this. Whats your passion to how the people of Jacksonville are being treated?

Quote from: duvaldude08 on December 23, 2011, 01:44:31 AM
I am shocked no one has a response to this? What do you yall think? It sounds like to me that Brown's re-organization may have good reasoning. The JEDC looks like it may have had some hidden issues. Thoughts???

Maybe that's why this story came out a day or two before Christmas.

Quote from: duvaldude08 on December 23, 2011, 01:44:31 AM
I am shocked no one has a response to this? What do you yall think? It sounds like to me that Brown's re-organization may have good reasoning. The JEDC looks like it may have had some hidden issues. Thoughts???

DD, this stuff happens all the time, even in little firms like the one I work for.  It's not a big a deal as they're making it out to be.  In the words of one Stephendare, "meh".

The dumbed down version:  A contract of $5M is awarded for maintenance to Grass Mowers to maintain medians for a year.  Over the course of the year, several 'additional' things were asked of them to do outside of the contract - garbage clean up, landscaping, etc..., so additional money was paid in the form of change orders.  Then the paperwork doesn't get processed properly or even at all, and when the bean counters go over it 4 years later it just 'appears' that Grass Mowers $5M contract ballooned to $6M for no rhyme of reason and they get their panties in a wad.  But in fact the 'overpayment' was just payment without a solid papertrail. 

Personally the preferential treatment that minority owned, women owned, small business type models get over everyone else is a farce.  Other municipalities focus on local and established first, then move into the others.  Point is that COJ will give a contract to a start-up, minority owned business from Nashville before they would give the contract to a local firm that's been here for 50 years if the bids were identical due to the credits given to those other business models.  It doesn't make sense and is a problem that I would like to see fixed.

Quote from: duvaldude08 on December 23, 2011, 01:44:31 AM
I am shocked no one has a response to this? What do you yall think? It sounds like to me that Brown's re-organization may have good reasoning. The JEDC looks like it may have had some hidden issues. Thoughts???

I posted your thread on my comment to Shelton Hulls facebook post.
Ive had several encounters with JEDC when my wife and I wanted to attain a building(s) as artists. These were properties owned by the city that were in "disrepair". We were laughed out of City Hall for the prices we bid on those properties.
But, in retrospect, JDEC has less to do with it than the city itself. And the beginning of this year our prayers were answered with a dream loft studio w air/heat attained at CoRK. And our beautiful home in Riverside.
I dont know what to think. I wish the best for our mayor in getting to the matter of this problem!

Quote from: duvaldude08 on December 23, 2011, 01:44:31 AM
I am shocked no one has a response to this? What do you yall think? It sounds like to me that Brown's re-organization may have good reasoning. The JEDC looks like it may have had some hidden issues. Thoughts???

Shame on us that the revelations per outside Auditor

It is all about us,we the public,MJ, lack of discernment,oversight.

Quote from: duvaldude08 on December 23, 2011, 01:44:31 AM
I am shocked no one has a response to this? What do you yall think? It sounds like to me that Brown's re-organization may have good reasoning. The JEDC looks like it may have had some hidden issues. Thoughts???

Yesterday front page headline in the Times Union FEDS seeking at least 10 years for ex-JaxPort chief. Also another TU lead editorial on the JEDC.....There's a stench coming from City Hall. Thoughts???

first thought...JaxPort isn't a City agency

Quote from: duvaldude08 on December 23, 2011, 01:44:31 AM
I am shocked no one has a response to this? What do you yall think? It sounds like to me that Brown's re-organization may have good reasoning. The JEDC looks like it may have had some hidden issues. Thoughts???

Quote from: tufsu1 on January 05, 2012, 11:41:42 AM
first thought...JaxPort isn't a City agency

Jaxport is an Independent Authority.

Downtown is an Independent Authority. Thoughts??????

downtown authority doesn't exist yet...and I believe the Mayor want it under his purview...so it wouldn't be independent

Quote from: tufsu1 on January 17, 2012, 09:25:02 PM
downtown authority doesn't exist yet...and I believe the Mayor want it under his purview...so it wouldn't be independent

Quote from: duvaldude08 on December 23, 2011, 01:44:31 AM
I am shocked no one has a response to this? What do you yall think? It sounds like to me that Brown's re-organization may have good reasoning. The JEDC looks like it may have had some hidden issues. Thoughts???

Yet. OK When it does and it will be Independent unless an expenditure exceeds $29,000,000 or is it $26,000,000 then it will require city council attention.

^What? As tufsu1 just said, the proposed downtown authority would be under the Mayor. It would not be an independent authority like the port. Not sure what you're complaining about here.

Quote from: duvaldude08 on December 23, 2011, 01:44:31 AM
I am shocked no one has a response to this? What do you yall think? It sounds like to me that Brown's re-organization may have good reasoning. The JEDC looks like it may have had some hidden issues. Thoughts???

Thoughts???

Tony Nelson sentencing this month. It was suggested that the Ethics Commission seek a clawback that could be used to fund the Independent Ethics Office. Wasn't that in our original charter?

^All right, I'll bite. Yes, the JEDC has issues. As NRW said above, this particular one is not as bad as the article makes it sound. Neither Jaxport nor the Nelson trial have anything to do with the above, other than also being blown out of proportion.

So what has changed?