Troubled Waters in City of Delray Beach-Facing State Audit Day Before Municipal Election
Delray Beach is in trouble. On Monday, March 13, a day before the Delray Beach municipal election, the Delray Beach mayor, commissioners, and city manager have been asked to explain to a state committee in Tallahassee what’s happening with the city’s financials. In other words, show them the money.
State Representative Peggy Gossett-Seidman, a former Highland Beach commissioner, requested that the state Joint Legislative Audit Committee (JLAC), chaired by State Representative Mike Caruso (Rep) and State Senator Jason Pizzo (Dem), perform an audit of Delray Beach.
JLAC is a mighty legislative committee. They can recommend that the governor remove commissioners or city mayors from office and appoint new ones. They can recommend not allowing appropriations, meaning requested state money, to be approved. They can make recommendations to the state legislature to terminate city charters. They can also order audits of any city, municipality, district, or agency throughout the state.
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Gosset-Seidman has requested the Auditor General to perform an operational audit of the City of Delray based on concerns regarding current and inter-local agreements between the City of Delray Beach and the Town of Highland Beach regarding a long-standing fire rescue contract.
The audit scope will include looking into drinking water issues, for which the state already fined Delray Beach over a million dollars, high turnover with city staff, and renovating the municipal golf course. The city’s payroll will also be audited. Highland Beach’s forensic auditor identified a continual lack of financials to follow up on the annual true-ups. True-ups are actual costs vs. projected costs.
Delray Beach has provided fire and rescue services to the residents of a small neighboring town called Highland Beach for approximately thirty years. The most recent contract from 2016 requires the city to provide the cost projection for each fiscal year several months in advance. Then, shortly after the end of the fiscal year, Delray Beach provides the true-up amount, which is the actual cost vs. originally projected amounts, and bills the difference to Highland Beach.
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There has been written correspondence between Highland Beach and Delray Beach for six months, all provided to the state. The cost projections for the six years ranged from. 3.6 million to 5.1 million per year; the net amount owed by Highland Beach to Delray Beach for the true-up is $540,112. During the last two years, there was a significant increase in the supposed true-up cost owed by Highland Beach to Delray Beach.
Why so much more money for fire rescue services? Highland Beach requested documentation to support the actual cost of the work they were given. Delray Beach never provided it. In other words, there’s no proof of the expenses that Delray Beach claims Highland Beach owes them. The $540,112 was due December 31, 2021, but Highland Beach didn’t pay it since they were never given the supporting documentation. They also didn’t pay the amount due December 31, 2022.
Delray Beach notified Highland Beach that they were in breach of their contract after providing unusable documentation that the town of Highland Beach said was unusable. They finally offered better data to support the true-up amounts for the past two years. The Highland Beach town manager’s financial director, a CPA, reviewed the documentation and determined that the true-ups needed were incorrect. An outside forensic auditing team also reviewed the documents and came to the same conclusion.
The town manager indicated that a significant issue is the city’s use of “actual” costs rather than “in rank” (an average of all employees at each position) as required by the interlocal agreement for salaries and related personnel costs.
Highland Beach has provided Delray Beach with the required three-year notice to cancel its fire rescue contract with the city. Highland Beach will provide its own fire rescue services starting spring of 2024, a substantial financial blow to Delray Beach.
The city of Delray Beach has denied wrongdoing for years. Life in the fishbowl has ended, and finally, the state will see what is going on. The residents deserve transparency. Justice will be served.
Will Delray Beach Mayor Shelly Petrolia and City Manager Terrence Moore show up for JLAC? Jolt will live Tweet from the JLAC committee on Monday from 10:00 to 12:00. Check @JoltTracy on Twitter for updates.
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