March 1, 2011
The Honorable Mike Haridopolos
President of the Florida Senate
The Honorable Dean Cannon
Speaker of the Florida House of Representatives
The Capitol
Tallahassee, FL 32399
Dear President Haridopolos and Speaker Cannon:
Attached to this letter, please find an update to the Audit of Department of Management Services
First District Court of Appeal Courthouse Construction Project dated October 12, 2010. The
original audit may be accessed via the Department of Financial Services website at the following
link: http://www.myfloridacfo.com/PressOffice/DMSAuditReport10122010.pdf. While the audit
was initiated by my predecessor, I have not found anything to indicate that the critical findings of
the Bureau of Auditing were incorrect.
Since assuming office as Chief Financial Officer, I have been gravely disappointed and shocked
by the lack of stewardship of taxpayer funds shown by the prior Department of Management
Services (DMS) administration and by certain Judges of the First District Court of Appeals
(DCA) in connection with the project. As the Chief Financial Officer of the State of Florida, as
well as a taxpaying citizen, it is my responsibility to point out certain observations regarding the
DCA courthouse construction project and express my disapproval of the way the Department of
Management Services managed the project.
The First District Court of Appeals Courthouse Project was funded by the Florida Legislature as
a facility in the Florida Facilities Pool. The project was requested by the Court to address
expansion needs. The Legislature provided funding with the assumption that the building
contract would be properly bid and managed by DMS. The Legislature had recently approved a
similar construction project at the Southwood location for the Department of Revenue (DOR),
which was constructed without the sort of issues that arose during the construction of the DCA
building.
President Haridopolos
Speaker Cannon
Page Two
March 1, 2011
Unlike the DOR building, the DCA construction project suffered from an assortment of
mismanagement issues, including the lack of a competitively bid, price-based contract and
appropriate contract management, as well as inappropriate influence from certain First DCA
judges. Lax oversight by DMS, coupled with improper behavior by the Judges, led to high
construction costs and extravagant furnishings, all of which I consider to be an unconscionable
waste of taxpayer funds. Moreover, even after the building is occupied and the court is paying
rent, the building will continue to be a drain on the State as lease payments for the building are
insufficient to pay the debt service. As a result, the courthouse will be subsidized by lease
payments for all other state buildings in the facilities pool.
The constitutional office of Chief Financial Officer does not enjoy unlimited supervisory
authority over State spending. Given that degree of authority, I would certainly be in a position
to reject lavish and unwarranted expenditures of State funds. Unfortunately, I am obligated by
law to pay for expenditures that were not expressly prohibited by law but were unwisely
approved by DMS in its capacity as the manager of the Florida Facilities Pool. While my hands
may be tied statutorily, it is my intent to publicly identify and record wasteful and inappropriate
expenditures to better protect the taxpayers of this State.
The design and finish of the First DCA courthouse compels the conclusion that the building was
both larger than necessary for the needs of an appellate court and furnished with a degree of
lavishness not found in any other similar facility. It is no wonder that critics of the project have
branded it as a “Taj Mahal.” In today’s constrained fiscal climate, it is especially offensive that
taxpayer money was spent on items such as twenty or more miles of African mahogany, custommade, built-in bookshelves, robe lockers, and library shelving, or the construction of mahogany
and granite workstations for judicial assistants. Nor was there any rational justification for the
building’s extravagant space allotments or the construction of judicial suites outfitted with plush
carpeting and separate kitchen facilities.
It is evident that DMS did not resist self-interested demands by some First DCA judges for an
egregiously decorated building far grander than that occupied by the Florida Supreme Court.
DMS owes a non-delegable duty to the taxpayers of this State to ensure that the cost of
construction of buildings funded by State bonds is as reasonable and economical as possible. In
my judgment, DMS did not fulfill that duty here.
President Haridopolos
Speaker Cannon
Page Three
March 1, 2011
I must also express my dismay at the manner in which DMS has documented its spending for the
courthouse project. Invoices covering courthouse spending were submitted for payment without
proof that the items purchased had actually been received and accepted by DMS. I am even
more appalled by what appears to have been efforts to obtain payment for dubious expenditures
by means of invoices that did not accurately identify what was being purchased. Specifically,
our audit team rejected an invoice that actually sought payment for large screen televisions that
was supposed to cover “labor” by a subcontractor. In fact, it was only after DFS held a public
meeting with DMS that we received the supporting documentation for the vouchers received for
payment.
As a result, all outstanding vouchers will be processed for payment with the following
exceptions:
1) During the audit of the new First District Court of Appeals construction project, the
auditors learned of the existence of a $357,500 contract between Peter Brown
Construction Co. Inc., and Signature Art Gallery of Tallahassee for the purchase of 369
framed photographs to be hung for decoration in various locations throughout the
courthouse. The Department of Management Services authorized Peter Brown
Construction to proceed with the purchase of these photographs and has sought to pay for
them out of the fixed capital outlay appropriation for the construction of the building. To
date, we have received invoices from Signature Art Gallery totaling $333,235. These
invoices cover the acquisition, framing, and installation of these decorative photographs.
Although the framing of pictures has been completed, none has been installed and they
remain in the possession of Signature Art Gallery. Although it appears as though
Signature Art Gallery acted in good faith, the firm may suffer as a result of the untoward
behavior of DMS.
Based on the opinion of counsel, I have determined that the purchase of these decorative
framed photographic images is not a lawful expenditure of State funds and, for that
reason I have declined to make payment for the purchase. Fla. Admin. Code Rule 69I40.103(6) specifically identifies the purchase of decorative items with state funds as a
prohibited expenditure unless the purchase is “expressly provided by law.” I have found
no provision of Florida law that expressly authorizes the purchase of decorative framed
photographs by a state agency.
President Haridopolos
Speaker Cannon
Page Four
March 1, 2011
2) Moreover, the Department of Management Services sought to fund the purchase of
items that are not permanent fixtures from a fixed capital outlay (FCO) appropriation
funded by construction bond proceeds. Even if the purchase of decorative items was not
a prohibited expenditure, the cost of the purchase of items which are not fixtures may not
lawfully be funded from FCO funds.
See Section 216.292(1)(a), Fla. Stat.
(appropriations for fixed capital outlay may not be expended for any other purpose). As a
result, this is not a lawful expenditure and it will be disallowed.
Similarly, I will not approve payment from bond-financed FCO appropriations for the
building and refinishing of First DCA furniture. DMS has sought payment for $18,647
for this purpose. In the absence of specific legislative approval, this is not a lawful
expenditure from fixed capital outlay monies and it will be disallowed.
Sound contracting practices and rigorous fiscal controls are essential to proper oversight of
public funds. As Chief Financial Officer, I intend to review the processes by which this agency
reviews invoices and audits payments in order to make sure we are doing everything within our
control to safeguard public funds and to protect taxpayers from fraud, waste, and abuse. I have
directed our staff to solicit a third party analysis of DFS auditing, contracting and procurement
policies to make certain that we are asking no more from other agencies than we are asking of
ourselves.
Going forward, the Department of Financial Services will work proactively with other agencies
to provide guidance regarding proper contract administration and invoice submission. I will also
work with the Legislature to identify the appropriate authority for the CFO and the Department
to ferret out wasteful and extravagant spending that comes from inadequate contract management
and agency procedures.
Until we can collectively develop and promulgate a set of fair and consistent procurement and
contracting procedures for all agencies across State government, business men and women who
we might invite to share their private sector expertise for the betterment of public sector
challenges, may very well be unwilling to risk their time and resources. The business
community of this State must have confidence that if they respond to contracting and
procurement requests, they will be treated fairly and receive full and timely compensation for
their efforts.
President Haridopolos
Speaker Cannon
Page Five
March 1, 2011
I look forward to working with all our partners in the Legislative and Executive branches to
improve the business climate for all Floridians.
Sincerely,
Jeff Atwater
Chief Financial Officer
Ksm
Attachment
State of Florida
Florida Department of Financial Services
Division of Accounting & Auditing
Bureau of Auditing
Follow up to Audit of Department of Management Services
First District Court of Appeal
Courthouse Construction Project
March 1, 2011
On August 30, 2010, the Department of Financial Services (the Department) initiated an audit
to reconcile and validate all sources and uses of project funding, including bond proceeds and
other state funding, and to determine whether the project was in compliance with applicable
provisions of Florida Statutes.
The methodology involved the examination of documents and financial records associated with
the project, including 1) documents relating to bond issuance and sale; 2) appropriations
records; 3) procurement documents; 4) contracts; 5) change orders; 6) project management
reports; and 7) all invoices tendered to support payments associated with construction of the
project.
During the audit, the Audit team reviewed documentation for the project, including
expenditure documentation, contracts, purchase orders, written correspondence, and emails.
The documentation was provided by the Department of Management Services (DMS), the First
District Court of Appeals (DCA), and certain vendors associated with the project.
The audit was published on October 12, 2010, (copy attached) which listed a total of seventeen
(17) findings, each of which appear to be violations of and/or are inconsistent with Florida
Statutes, the Florida Administrative Code, or acceptable internal control practices.
Since the audit was published, the Department has continued to receive vouchers from the
DMS which lacked or were entirely devoid of supporting documentation necessary to allow
their processing for payment. The continued submission of vouchers by DMS with only
summary totals and no explanation of the goods or services purchased raised further questions
regarding the legitimacy of the expenses associated with this project. In an effort to get the
information necessary to process the invoices, the Department held a public meeting with the
Department of Management Services to receive all of the supporting documentation for the
vouchers received for payment.
On January 20, 2011, the Division of Accounting and Auditing staff met with the Department of
Management Services staff at a public meeting. The DMS was provided a list of outstanding
invoices and issues preventing payment of those invoices in the absence of proper
documentation. DMS subsequently provided additional documentation sufficient to make
payments for those invoices, with the following exceptions:
1) An invoice for the purchase of $357,500 worth of decorative framed photographs to be
hung in the courthouse was disapproved. This invoice was in addition to the previous
invoice of $100,000 worth of framed paintings and photographs commissioned for the
building under the authorization of the Art in State Buildings program established by
Section 255.043, Florida Statutes. Decorative items such as the framed photographs are
prohibited expenditures under Fla. Admin. Code Rule 69I-40.103(6). Even if the
photographs were not a prohibited expenditure, they would not be allowable as
expenditures from fixed capital outlay funds. See Section 216.292(1)(a), Fla. Stat.
(appropriations for fixed capital outlay may not be expended for any other purpose).
2) Payment from bond-financed fixed capital outlay (FCO) appropriations for the building
and refinishing of DCA furniture was denied. DMS has sought payment for $18,647 for
this purpose. In the absence of specific legislative approval, this is not a lawful
expenditure from fixed capital outlay monies; however, the DMS may resubmit with a
payment request from an OCO or Expense appropriation.
As of March 1, 2011, all invoices received from DMS related to the First District Court of Appeal
Courthouse Construction Project have been paid, with the exceptions noted above.