Submitted Terri DiSciullo

MARCO ISLAND — Suspicions and questions raised about Marco Island’s accounting practices are expected to be answered Monday with the presentation of results from a forensic audit of the $42 million Collier Boulevard reconstruction project.

Upon the recommendation of the Ad Hoc Forensic Audit Committee, council hired James Moore and Co. at a cost of about $80,000, to conduct the audit of the construction project, which spanned about seven years.

Bernadette Britz-Parker and Michael Sibley of James Moore will be presenting the results of the audit at a public meeting with council 1 p.m., Monday.

Per the reports created by James Moore, and shared by audit committee Chairwoman Terri DiSciullo Thursday morning, several of the concerns raised by Dana Souza and Amadeo Petricca were confirmed.

Souza, who resigned as the city parks and recreation director in 2008 after having served as interim city manager for several weeks, wrote a transition report to then-incoming City Manager Steve Thompson in May 2008.

When the report went public in October 2008, concerns about city financial practices came to a head and led to the hasty retirement of Bill Harrison, the city’s finance director at the time.

Petricca, a former accountant and member of the Marco Island Taxpayers’ Association board, had been looking over the finances of the project with Harrison. Petricca had said he found money, in the $1 million range, which had been transferred inappropriately between funds and budget years.

Souza outlined similar concerns and pin-pointed “red flags” in his report released in October 2008, shortly following his announcement that he was resigning from the city.

AUDIT PROCESS

Council decided to hold off on choosing a firm for the annual audit until after the results of this Collier Blvd. audit. Councilmen expressed varying degrees of concern about two finance department personnel being on the committee to choose the auditor. Also of some question was whether there was a conflict of interest with James Moore vying for the annual audit contract while performing the forensic audit.

In their report, James Moore recommended the city consider having an audit committee, similar to the ongoing code enforcement and planning advisory boards.

Councilmen Frank Recker and Ted Forcht were among those who agreed with that recommendation, as does DiSciullo.

“I disagree with having anyone from the finance staff rating and choosing the auditing firm. In order to increase transparency and trust with our residents, the city should do all it can to minimize the appearance of a conflict of interest on the part of the city’s employees,” DiSciullo wrote in an e-mail to the reporter on the issue.

Councilman Jerry Gibson said he did approve of citizens’ involvement, but city staff was needed as well in the audit firm selection process.

“I don’t think advocating responsibilities to a committee is the way to handle everything. It’s not the form of government we have to be run by committees,” Gibson said.

James Moore’s forensic audit also included a look at the city purchasing policies, internal controls, income and expenditures on the project, allegations of fraud, abuse and improprieties, as well the accounting system and program.

RESULTS

The results will be shared and explained in more detail Monday, but per the report, no fraud or abuse was explicitly reported. Improprieties, included the following:

- More than $1 million worth of items were charged to the Collier Boulevard that should have been coded to other projects or accounts.

- There were purchases that did not have documentation indicating proper competitive bidding was performed.

- There was the purchase of equipment for another project, at a cost of $36,000, improperly billed to the Collier Boulevard project.

- The STRP fund was undercharged by about $3,000.

- Overruns occurred without documentation of proper approval.

- Budget amendments, including one $900,000 overrun, was not approved by council until about six months after-the-fact.

- Documentation for the rationale of expenses allocated between capital projects and utility funds was not maintained.

- Commingling money of large projects hindered tracking projects’ and account balances’ progress.

MOVING FORWARD, DEVELOPING NEW PROCEDURES

Having reviewed the results with auditors, members of council and the committee said having recommendations to move forward is the most beneficial aspect of the audit.

“From what I’ve learned to date, one of the main benefits of the audit will be their specific recommendations regarding how to improve the city’s financial management processes,” said Councilman Bill Trotter.

Among the auditors recommendations to council and city management are:

- Segregate duties to allow for independent checks and balances, particularly between the controller and accounts payable personnel.

- Consider amending the purchasing ordinance to address the approval process for change orders, which currently is not addressed in the city ordinance.

- Consider lowing the city manager’s ability to spend up to $100,000 without council approval

- Ensure the accounting software will not allow an override when an expense causes a project to go over budget

- Create a comprehensive, thorough manual of accounting practices

- Establish a threshold for which separate funds should be maintained for projects.

- Create a fraud hotline.

- Hire a high-level, full-time accountant because the finance department has not grown commensurately with the city.

- Establish an audit committee.

DiSciullo said she hopes to see council direct the implementation of the auditors’ recommended procedures.

“These changes will increase the residents’ confidence in the financial system of the city and give the City Council far better tools to work with in making future decisions, especially regarding capital projects,” she said.

RESPONSIBILITY

City Manager Steve Thompson has said he saw no reason, prior to the audit, to believe Harrison’s name needed to be cleared.

Differing opinions exist as to whether the results indicate hasty allegations against Harrison, who is an Island resident.

“It’s a good thing to ask questions. It’s important to find the mistakes and learn from those mistakes. However, I think it’s a disgrace what happened to Bill Harrison,” Gibson said.

On the other end of the spectrum is resident John Putnam, who wrote to the Eagle that he found city directors grossly irresponsible when it came to these financial concerns.

“They intentionally allowed a fox in the hen house. There can be no other reasonable conclusion,” said Putnam.

Gibson said he hoped the results would encourage the accountability and transparency fought for by Vice Chairman Recker to continue among this and future councils.

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