Fed up with project failures, management problems and possible city overcharges, Fort Lauderdale commissioners have ordered an extensive audit of the city’s Community Redevelopment Agencies.
In a little-noted action, commissioners directed the audit of three CRAs at a conference meeting earlier this year.
The audit was triggered by the million-dollar failure of the Sixth Street Plaza project. Some commissioners expressed additional concerns about the findings of a city auditor’s report on CRAs that they said indicate the city had unfairly overcharged the CRAs for services during the past five years.
Commissioners ordered “a full audit” of the Northwest/Progresso/Flagler Heights (NWP) Community Redevelopment Agency, the Central Beach (CB) CRA and the Central City (CC) CRA, City Auditor John Herbst said in an interview. He said the audit, now under way, may be completed in two months.
Herbst said the audit was undertaken because the city wants to get in front of the matter, knowing the Broward Inspector General’s Office has been investigating CRAs around the county for some time.
Herbst said he expects the audit to determine whether CRA spending was “in compliance with state law and CRA bylaws,” and whether the CRAs were properly managed and contracts adhered to the CRAs’ limitations.
“We want to make sure money was spent in accordance with governing legislation,” Herbst said. The audit will cover the past three years – a reasonable time period, the auditor added.
Herbst said the troubled Sixth Street Plaza project is a key factor in the ongoing audit. Last May, the city auditor’s office criticized the CRA for poor oversight of a taxpayer-supported office and retail plaza that was to be the centerpiece of the city’s ambitious plans to revitalize the Sistrunk Boulevard corridor.
But the 23,000-square-foot building at 900 NW Sixth St. filed for bankruptcy, jeopardizing the repayment of $1 million in taxpayer loans.
Following that finding, Vice Mayor Robert McKinzie’s staff asked Herbst in a memo to conduct “a complete audit of the day to day operations of the CRA.” Herbst said Mayor Jack Seiler and his fellow commissioners backed the call for the audit in a consensus vote during a city commission conference meeting in January.
Herbst said the city’s CRAs have had problems because of frequent management shuffling. “There was inconsistent leadership due to transfers,” he said.
A report by his office noted that the Northwest/Progresso/Flagler Heights CRA, in a less-affluent area, was charged $1.7 million for city services over the past five years, while the Central Beach CRA, in a wealthier area, was charged $909,000 during that same period.
The finding upset City Commissioner Dean Trantalis, who said an “excessive amount of money is charged for administration, denying the neighborhood that is suffering blight and neglect and so much money being used for staff.”
Trantalis said he has asked City Manager Lee Feldman about correcting CRA allocation issues, but “he hasn’t been responding. We need to change the practice. We discovered that the city manager, to shore up the budget, has been attributing staff time to the CRA.”
Feldman did not respond to requests for comment before deadline after promising to make himself available for an interview.
At the city commission meeting in January, others expressed their concern about the auditor’s findings.
Minutes of the meetings say McKinzie “questioned why such a large portion of funds was allocated [to] the [Northwest/Progresso/Flagler Heights] CRA for administration and resources when the CRA did not have a director.”
Commissioner Bruce Roberts suggested the matter be referred to the State Attorney’s Office or some other investigative agency for a criminal probe.
“Many feel CRA funds have been drained for administrative services, and there is a lopsided disparity,” Trantalis said at the January meeting. The mayor and the city’s four commissioners also serve as directors of the CRAs.
Herbst’s audit report mainly delved into the current fiscal year salary allocations of the two CRA offices, Northwest/Progresso/Flagler Heights and Central Beach. But it found problems.
“The method used to allocate personnel costs may lead to excessive General Fund expenses being allocated to the CRA, a violation of Florida Statute 163.370(3)(c),” the report stated. The state provision prohibits the tax-increment funds that CRAs receive from covering general government operating expenses unrelated to planning and carrying out a CRA plan.
The report goes on, “We determined that the Department of Sustainable Development (DSD) and the Budget Office were not able to provide adequate support for the percentages used for personnel cost allocations to/from the CRA fund and the sub-funds. Additionally, they are allocating charges to the CRA for personnel positions which are vacant for either a portion of the fiscal year or the entire fiscal year.
“The budgeted allocations are then charged to the CRA throughout the year without reconciling those estimates to actual costs incurred, resulting in an excess of allocation over actual cost,” according to the report.
The faulty allocations can negatively impact the CRAs’ ability to achieve their goals, the report aid.
The city charged the CRAs for hours city employees spent working on agency matters.
In one instance, the report said the Northwest/Progresso/Flagler Heights CRA was “overcharged” $30,000, which should have been charged to the Central Beach CRA. That happened after an employee was promoted from assistant to the city manager to the position of economic and business development manager in charge of the Central Beach CRA. For three months, he was paid from funds allocated to a vacant position in the Northwest/Progresso/Flagler Heights CRA, the report said.
A correction was later made, but “the prior overcharging was not corrected timely” and ate into how much funding was available to meet the CRA’s goals.
Since the report, the city has begun making changes.
Trantalis said in an interview that city commissioners have removed the CRAs from reporting to the Department of Sustainable Development and made them separate entities with their own managers to oversee day-to-day operations. State law requires CRAs to operate independently of other departments.
City Manager Feldman, however, will continue to function as executive director of the CRAs.
Other changes call for improved financial oversight from the city finance director and the city auditor, identifying a separate CRA funding and accounting structure, and allocating additional funds for the two CRAs to implement changes during the current fiscal year.