Auditor says: City of Fort Lauderdale Senior Management “Engaged in Misconduct”

A report by Fort Lauderdale City Auditor John Herbst states

“The CAO (City Auditor’s Office) has determined that senior management at DSD (Department of Sustainable Development) engaged in misconduct that included “fraudulent billing”. The Auditor’s report states “Misconduct generally refers to intentional violations of laws, regulations, internal polices, and expectations of ethical business conduct which and employer has a right to expect of its employee. It undermines the public trust and can damage the CIty’s reputation for integrity”. The CAO report goes on to say :“The circumstances surrounding this situation represent a complete breakdown in the “tone at the top”.

“The circumstances surrounding this situation represent a complete breakdown in the “tone at the top”.

DSD management hired numerous temporary staff and compensated them at rates that were far in excess of the rates provided for in the contract. The staffing services complied by going along with this “fraudulent billing”. When the overpayments led to unpaid invoices, Management made an attempt to cover up their overspending by delaying payments so they would carry-over into the subsequent fiscal year.

Issues noted in the Auditor’s review:

  • Starting in July 2013 DSD began hiring under a temporary staffing contract with Transhire. DSD unilaterally set a rate of $19.68 for a clerk, 83% higher than the $10.79 allowed in the contract. THis was later increased as high as $23.94.
  • When Albion took over for Transhire the practice of overpayment continued. The overpayments ranged from 67% higher to 95% higher than the rates allowed under the City’s contract.
  • As an attempt to justify these excessive rates of pay, a new job title was created by DSD, “Project Specialist”.
  • Management within DSD continued to override the controls in place and to take advantage of weaknesses in the internal control system
  • Albion invoices were either not paid, or were not paid promptly once they exceeded the purchase order – this violates Florida Statute 218.73
  • Temporary staff were funded primarily through the Building Permit Fund, while not all were engaged in permitting activities. Legally restricted Building Permit funds were improperly spent in violation of Florida Statute 553.80.
  • CAM #15-1040 “seems to have been a deliberate attempt to deceive the City Commission”. The request for approval of overspending and for additional funds failed to accurately disclose the root cause for the overspending.

The Auditor’s report goes on to state “The 3 elements of the fraud triangle were present”. no-bs-ring-44001

“The 3 elements of the fraud triangle were present” – Auditor John Herbst

In this investigation, The Auditor reviewed over 2500 emails, sampled time cards and reviewed hours worked and overtime that had been performed. The CAO reviewed the agreements in question and conducted numerous interviews and group meetings with the City Manager’s Office, City Attorney’s Office, as well as Finance and Human Resource.

The City Auditor made several “findings”

A finding occurs when there is a violation of an established law, rule, regulation, contract term, policy, or fundamental internal control mechanism. The CAO made the following findings in this case:

  • The official position classification system is being undermined by DSD through the use of “working titles”.
  • DSD did not adhere to billing rates and job descriptions in the temporary service contracts.
  • DSD failed to follow the requirements of Florida Statutes relating to timely payment of vendor invoices by holding onto invoices when they realized they had exceeded the PO, telling Albion that they would  make payment after the new fiscal year began in October.
  • DSD used Building Permit funds for purposes other than included as allowable charges to enforce the Florida Building Code in accordance with Florida Statute 553.80 (7) (a).
  • DSD’s agenda item, CAM 15-1040 dated August 18, 2015 seeking ratification of the overspending and increased budget for additional temporary staffing provided misleading information regarding the reasons for the overspending

Assistant City Manager has no emails on this topic

The CAO was unable to find any emails from the Assistant City Manager responsible for DSD indicating any knowledge/approval of the billing rates and position classifications prior to August 13, 2015, even though the payment problems for temporary staffing began to surface in May 2015. The CAO report says “Failure to use written forms of communication by the Assistance City Manager inhibited transparency and accountability.”

“Failure to use written forms of communication by the Assistance City Manager inhibited transparency and accountability.”

The City is now in a lawsuit with the vendor in an attempt to recover some of the lost funds.







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