Thursday, May 15, 2014

A Review of Resolution 14-03

As you may be aware, Commissioner Nielsen presented proposed Resolution 14-03 at the May 6 City Council meeting. The purpose of this proposed resolution was to present to the City Council the many reasons why it is time for our City to move on to a new City Manager.

The process for termination of our City Manager is spelled out in the City Charter. It must be presented as a proposed resolution to Council. It must list the specific reasons for the proposed termination. If such a resolution is passed, the City Manager is suspended pending a public hearing upon the City Manager's request. You can read more about the process in the below presentation documents.

Commissioner Nielsen presented to the Council six reasons for terminating our present City Manager, each supported with documentation and audio recordings. She informed the Council that it did not have to agree on all of the reasons - any one of these six reasons, which include numerous violations of our City's rules and Charter, could justify the resolution all by itself.

Below, you will find copies of all the information presented to the Council regarding proposed Resolution 14-03. It includes a PowerPoint presentation (both in PowerPoint and PDF formats) as well as a supplement booklet containing the original documents referenced in the presentation. The audio recordings are integrated into the PowerPoint presentation, or you can download them separately below.

Presentation (PowerPoint) - click the audio icons to play the recordings linked on last page of each transcript (if you don't have PowerPoint, just download the PDF below)

Presentation (PDF) - audio recordings can be accessed separately below

Audio Recording (November 5, 2013 - Severns/Readey)

Audio Recording (April 1, 2014 - Nielsen/Auditor)

Audio Recording (April 30, 2014 - Severns)

Supplemental Documents (PDF) - use PDF bookmarks to navigate sections corresponding to each numbered paragraph in the resolution

Following the presentation, Commissioner Readey presented his own evidence in support of the proposed resolution. Later, Commissioner Gold questioned the legality of continuing to employ Mr. Severns as City Manager despite apparent conflict with our City Charter and the minimum job qualifications enacted by the City. In response, Commissioner Gold was informed by City Attorney Frank Kruppenbacher and Mayor Brooks that he was not obligated to follow the City Charter or minimum job qualifications in this matter because they were unclear or just "guidelines."

The other Council members appeared unconcerned about the numerous Charter violations and the fact that Mr. Severns does not meet any of the substantive requirements for employment as Belle Isle City Manager. Furthermore, no one on the Council besides Commissioners Nielsen and Readey expressed any concern about the financial misinformation that has been provided by Mr. Severns.

It may be that the remaining commissioners simply do not understand the seriousness of this error. The City Manager is tasked with some large responsibilities under our City Charter, including keeping the Council informed about the City's financial position. The City Manager must provide an accurate financial picture to the City Council because such information provides the basis for the Council's financial decisions.

Mr. Severns has regularly informed Council that the City has well over $1 million in unrestricted cash reserve funds, meaning cash funds available to the City after spending everything allocated in the budget, including the entire $532,000 allocated for vital capital improvement projects this year, such as road maintenance. See and hear Mr. Severns' responses to Commissioner Readey's questions on November 11 in the presentation documents above.

On April 1, it was proven by the CAFR and the auditor's presentation that Mr. Severns' prior statements to Council about our City reserves were wrong. It was revealed that our City would only have the reserve funds stated by Mr. Severns if the City forgoes the half million dollars in capital improvement projects planned for this year. This led to Mr. Severns' April 30 statement to Council that our City suddenly "can’t afford to spend a dime on the infrastructure." You can read and listen to his entire statement in the presentation documents above.

This massive financial error from someone tasked under the Charter to "keep the council fully advised as to the financial condition and future needs of the city" was not rebutted by Mr. Severns or the Council. To date, Mr. Severns has not provided the Council with any explanation or apology for this error.

This error highlights the need for the Council to follow our City's hiring requirements when choosing City employees, especially the minimum job requirements. These requirements were enacted by the City for good reasons. A City Manager meeting our City's minimum requirements would be guaranteed to have the training and experience to present accurate financial information to the Council.

Following the Council's discussion about the proposed resolution, Mr. Severns responded to some of the issues raised in the presentation. He related the story of becoming friends with Mayor Brooks while on the Council, after which he was invited to resign from the City Council so that he could become our new City Manager. Mr. Severns stated that he was the only choice left after the Council was unable to locate a single qualified candidate out of dozens and dozens of applicants.

Although Mr. Severns and at least one Commissioner spoke at length about the time Mr. Severns "volunteered" to serve the City without pay, both omitted the fact that Mr. Severns and the Council originally intended to pay his $150,000+ salary from day one. This plan only changed after Commissioner Readey alerted residents of the Council's intention to breach the City Charter in an article published in the Conway News. The Council's discussion also completely omitted the fact that Keith Severns was earning money from no-bid contracts awarded to his construction company, KNS Construction, during this supposed "volunteer" period.

Mr. Severns discussed the allegation that he has not been obtaining competitive bids on City purchases over $10,000, as required by law. I have been requesting records of these bids for over year via public records requests, yet I have not received a single bidding document in response to my requests. You can see these requests in the presentation documents above, along with Commissioner Nielsen's unfilled requests for similar documents.

While discussing the missing bids, Mr. Severns held a stack of papers that were never shown or distributed to Council while claiming to have documentation of each and every bid required. If this is true, then there is no explanation for the City failing to produce these documents over the past year as required under the Sunshine Law. Regardless, Mayor Brooks ordered Mr. Severns to produce these bidding records immediately. But over a week later, I still have not received anything from the City regarding my request for bids.

Some locals involved with the Pioneer Days Committee attended the meeting to express their disappointment at the fact that Mr. Severns had still not issued the check to Pioneer Days which he was directed to issue by the Council all the way back on February 4. In response to Committee members' claims that Mr. Severns would not return calls regarding this check, Mr. Severns repeatedly stated that he had not received a single call about the Pioneer Days check.

However, in emails from Commissioner Pisano to the Pioneer Days Committee, Commissioner Pisano stated that she had called Mr. Severns about the check and he had not responded to her inquiries. On April 29 she wrote that "No. He didn't answer me back. Let me call him." A week later on May 6, Commissioner Pisano still had not received a reply from Mr. Severns regarding the unissued Pioneer Days check.

After the presentation by Mr. Severns, the Council voted on proposed Resolution 14-03. Some Commissioners indicated that they would have liked more time to review the resolution before voting. This could have easily been accomplished through a motion to table the resolution until the next meeting while they explored the evidence. No Commissioner made such a motion, so the proposed resolution went to a vote.

Commissioners Readey and Nielsen voted in favor of the resolution. Commissioners Pisano, Ady, Shuck, Gold and Van Dyke voted against. After the meeting, Mayor Brooks expressed his appreciation to Commissioner Nielsen for her professionalism in presenting this proposed resolution.

Later, Commissioner Gold expressed his preference that this review process be conducted in private, as would be done in a private company. However, one of the biggest concerns raised by residents during the last election was how much City business goes on behind closed doors. Furthermore, it is important to remember that this process cannot be conducted in private. It is a decision that must be made by the Council, and any Council discussion of these issues outside of a public meeting would be illegal.

To the many residents who have expressed disappointed about the outcome of this vote, I'd like to remind you that change is often a slow process. But we have another election coming up soon enough, with Commissioners Pisano and Readey up for election at the beginning of next year.

But before that, there is a lot to do in our City. Commissioner Pisano has discussed a number of specific changes that are important to residents, including a change in Council meeting times sought by so many residents but repeatedly opposed by Mayor Brooks. Although Commissioner Pisano has brought these issues up for discussion over the course of the last two months, she has yet to present an actual resolution on any of these issues for Council vote.

Thorough discussion of ideas is important. Presenting a proposed resolution ensures that Council discussion stays focused on the idea up for vote. Without a specific resolution on the table, Council discussion often devolves into "wish lists" that accomplish little more than filling out our City's meeting minutes. Hopefully, we will continue to see our commissioners proposing and discussing specific resolutions that address the small and large changes residents want to see in Belle Isle.

Thursday, May 8, 2014

Financial State, Part 3 - Confirmations and Corrections

You may have noticed that we have been having some technical difficulties here at the Sun due to an unexpected growth in readership. Linked documents are in the process of being transferred to a new hosting service capable of handling this additional traffic. Needless to say, this has put us a bit behind schedule on publishing new articles, as well as implementing a new commenting system.

I know many of you were expecting to learn more about Resolution 14-03, presented for Council consideration at the May 6 meeting. That information is forthcoming, but first there are a few remaining details about our City's finances that need to be addressed.

After the May 6 City Council meeting, I had an opportunity to speak with Tracey Richardson, our City's finance manager. Despite needing to get home to her kids, Ms. Richardson was more than willing to take time to speak with me about the conclusions drawn in the previous "Financial State of Belle Isle" series of articles.

Belle Isle's Emergency Reserve Fund Balance

So what is our City's true emergency reserve fund balance? The previous Financial State article concluded that we must deduct the overdue impact fees to Orange County from the unassigned fund balance to determine this number. These unpaid impact fees total over a half million dollars.

However, I learned that despite not being specifically listed as a liability in the CAFR, these impact fees are already deducted as a general liability, eliminating the need to again deduct these unpaid impact fees from our City's unassigned general revenue fund. So after deducting non-spendable funds and the funds assigned to be spent over the next four months, $543,735 in unassigned funds remain. This amount is verified on page 13 of the 2013 CAFR and by the Auditor's presentation at the April 1 meeting.

Although $543,735 is higher than the amount concluded in the prior article, it is nowhere near the $1.2 to $1.3 million in unassigned cash reserves reported by Mr. Severns at the November 5, 2013 meeting. (Transcript linked below.) Which explains the auditor's April 1 statement that "you really don't have a million dollars of unassigned revenue. It's only half that amount."

November 5, 2013 Meeting Transcript re: Unassigned Reserves

Can Our City Create Financial Statements?

I discussed a number of questions regarding monthly financial statements with Ms. Richardson. She explained that the "Revenue and Expenditures" statements that the City recently began publishing are the monthly statements that were previously requested by the Council. She explained that these revenue and expenditures statements are the standard form of monthly reporting. If the Council wanted anything further, they would basically be requesting a monthly form of the CAFR, which would not be practical for our City to produce monthly.

As you may recall, one of the "significant deficiencies" described in the 2013 CAFR is that "The City of Belle Isle, Florida does not have controls over preparation of the financial statements which would prevent or detect a misstatement in the financial statements." Although the auditors' wording in the CAFR appear to imply that Belle Isle has no one on staff capable of preparing these monthly financial statements without additional training, Ms. Richardson clarified in no uncertain terms that she currently has the training and experience to create the monthly finance statements required for the CAFR. The only impediment to her producing these monthly statements has been her heavy workload at the City.

I did not ask about the City's plans or timetable for implementing the its stated goal of preparing these financial statements in-house, but I will follow up on this question at a later date.

Although I can't evaluate the accuracy of Ms. Richardson's statements, she gave me the clear impression that she was being straightforward. She offered an open door regarding any financial questions about the City that might come up in the future. Since Mr. Severns has still not offered a single explanation for the statements he made to Council on November 5, it may be prudent to direct any future financial questions to Ms. Richardson, who seems more than willing to openly discuss our City's real financial picture.

A Full and Open Hiring Process

One other point of discussion with Ms. Richardson was the issue of how she was hired. Ms. Richardson was understandably frustrated that people have recently been questioning her qualifications despite the fact that she is fully-qualified for her job. I explained that residents have no way of evaluating whether our City has hired the most qualified candidate for a position when the City does not perform full and open hiring processes.

Ms. Richardson did not debate my assertion that full and open hiring processes would produce more confidence from residents, but she also correctly noted that she was the person hired, not the person doing the hiring.

But while the circumstances of her hiring certainly should not be held against Ms. Richardson, this issue highlights why we need more open and transparent City hiring processes in which multiple qualified candidates are selected and interviewed without regard to their connections with City personnel and their colleagues.

What Does the CAFR Really Audit?

In Financial State, Part 2, I noted that after the financial presentation, the auditor acknowledged to Commissioner Nielsen that a different, more extensive type of audit would be required in order to truly verify the financial state of Belle Isle.

I distilled this information from a longer conversation, in which Commissioner Nielsen asked the auditor whether the audit performed for the CAFR was the type of audit where every transaction is checked between the City's accounting records and the actual bank transactions, invoices, contracts and other financial records. The auditor informed Commissioner Nielsen that the audit performed for the CAFR would not examine every such City financial record, but that the City could request a more extensive audit for this purpose.

Auditor Kelly Leary from the accounting firm McDirmit Davis, LLC offered a formal response to this statement about the depth of the audit performed for the CAFR, concluding that "Commissioner Nielsen has definitely distorted many things." I would expect a professional firm like McDirmit Davis to have a clear basis before making such a statement about one of its clients, but Ms. Leary appears to offer little in this regard. Here is Ms. Leary's statement in its entirety so you can judge for yourself:

"Commissioner Nielsen has definitely distorted many things. I told her that we did perform the type of audit required by the Auditor General but if the Commission wanted a 'fraud' audit or other specific agreed-upon procedures performed, we could do that as a separate engagement. I never said that a 'more extensive audit would be required in order to truly verify the financial state of Belle Isle.'"

Ms. Leary's statement seems to support and expand upon the conclusion that a deeper audit is needed if we want to truly verify our City's financial state. Her statement even gives a name to the more extensive type of audit our Council could request, calling it a "fraud" audit.

Neither Commissioner Nielsen, nor the Sun, has ever questioned whether McDirmit Davis provided the services they were contracted to provide and that they were required to provide by law. The only question addressed has been whether our City should consider contracting for a deeper type of audit - exactly the topic Commissioner Nielsen and Ms. Leary discussed at the April 1 meeting.

All statements made by the City and the auditor appear to support the conclusion that our Council would need to request a more extensive "forensic" or "fraud" type of audit if we wanted an auditor to review each and every City transaction to ensure the accuracy of our City's accounting records. This review is vital if there is any doubt about the accuracy of these records, because they form the basis for the CAFR.

A forensic audit is fully within the purview of the Council pursuant to the City Charter, Section 3.18, which gives the Council control over City audits, including the type of audit, frequency of auditing, and the identity of the auditing firm.

A Final Suggestion

As described above, the City has begun publishing regular revenue and expenditure reports. However, the great majority of our City's Commissioners and residents, including myself, do not have the financial expertise to be able to glean any useful information from those reports.

One solution would be to require brief oral financial status reports from our City's finance manager and/or city manager at each Council meeting. These reports could include all revenues and expenditures over a certain dollar figure, including bids requested and received on all expenses over $10,000, as are required by our City Charter.

These monthly reports would ensure that Commissioners and residents always have accurate, comprehensible, and up-to-date information about our City's financial state, while also guarding against misunderstandings and unanswered questions. Furthermore, this would allow our City to return to its procedure from prior to the appointment of Keith Severns as City Manager, in which the Council reviewed and approved bids on all large purchases before such expenditures were authorized.

Tuesday, May 6, 2014

Extremely Important Meeting Today at 5:30 [UPDATE]

Sorry for not getting this information out sooner. There are a few new Sun articles in the works, but for now please direct your attention to the agenda for today's meeting:

May 6, 2014 Meeting Agenda

May 6, 2014 Meeting Agenda (Revised)

(Some readers are having trouble opening the above links. If so, you can download the above agendas from the City page here:  Belle Isle Minutes and Records)

The revised agenda, among other changes, includes Proposed Resolution 14-03 regarding the proposed removal of City Manager Keith Severns. As you may already know, Mr. Severns presently makes $150,000 per year, plus $500 per month vehicle allowance and benefits while serving in a position for which is not eligible or qualified.

You will learn much more at the meeting, so please be sure to attend. A copy of Proposed Resolution 14-03 is attached to the revised agenda linked above.

Also up for discussion at today's meeting are the results of the recent opinion survey, which appears to have cost a substantial amount to the City. Despite the apparent cost, this study completely ignores the three focus groups commissioned and paid for by the City. Instead, it bases all results on a voluntary online survey answered by 5.4% of the our City's residents. You can find the survey results attached to the original agenda linked above.

After spending large amounts of City funds on studies like the one linked above, it's no wonder our City has no money left to actually make any improvements to the City. As stated by Keith Severns at the April 30 workshop meeting, "We can’t afford to spend a dime on the infrastructure." You can read a complete transcript of Mr. Severns' statement about capital improvements below.
Well basically, if we were going to spend everything in the CIP, it’s $532,000.  Which we’re not going to obviously spend in CIP.  Because we can’t afford to sit there and…

I mean, these are all the things that everyone wants done, Harv.  Everybody wants the streets done.  Everybody wants the infrastructure taken care of.  That $532,000 comes from the CIP page.

Quite frankly, we’re not going to spend a dime of it.  We can’t afford to spend a dime on the infrastructure.

And that leaves us all like, “What are we going to do with it?”  Obviously, we don’t have the dollars to sit there and fund the CIP.
Please be sure to attend today's meeting if at all possible. These are extremely important issues that affect all of us. The meeting will likely run for a while, so you can always arrive late if necessary. The meeting begins today, Tuesday March 6, at 5:30 p.m.

UPDATE 5/6/14:
A helpful reader noted that the focus groups may have been used to form the basis for the online questionnaire. Regardless, the study still obtained opinions from only a small percentage of residents and only those on the internet.

Furthermore, the waste of time and money involved in using three large scale focus groups to simply come up with some basic online survey questions, and not any results, is staggering and remains unexplained. Was the Council informed and in approval of this City expenditure?