City of Gainesville receives a troubling operational audit

Gainesville. Florida. USA on a map

The City of Gainesville started the new year with a not-so-glowing operational audit report from the State of Florida Auditor General.

The audit, approved in Nov. of 2019, was prompted by State Sen. Keith Perry and State Rep. Chuck Clemons, who both represent the City, following a letter Perry and Clemons co-authored to Florida’s Joint Legislative Audit Committee, which directs the Auditor General to perform reviews.

In the letter, Perry pointed to concerns about the city’s lack of financial transparency and general oversight following the commission’s dismissal of the City of Gainesville’s auditor, after he had “issued some reports that showed a lack of oversight with City programs.”

Some of the fired city auditor’s concerns were subsequently confirmed during a JLAC committee staff analysis, and the audit findings reflect the concerns of the dismissed city auditor and Perry and Clemons were warranted including:

• Possible misuse and complete lack of transparency of Federal grant funds. This has resulted in an internal investigation by the Department of Justice

• The transfer of City funds, received through grants and donations, over a period of years to private 501(c)(3) organizations. These organizations have no transparency or reporting to the City or its citizens.

• Current efforts to discontinue having an independent City Auditor.
• Failure to provide, or maintain on file, formal evaluations for the six Charter Officers.

Like Ocala, Gainesville has a municipal utility company. There were questions surrounding how much money was transferred between the city’s general fund and the Gainesville Regional Utility considering increased debt and milage rate.

Staff summarized the circumstances in their report to the committee:

• Each year, GRU transfers funds to the City’s General Fund. During the 2017-18 and 2016-17 fiscal years, the amount transferred was $36.4 million and $35.8 million, respectively. The transfers, made monthly, are based on a pre-defined formula that is predominately tied to the revenues generated. However, the funds may only be transferred to the extent they are not necessary to pay operating and maintenance expenses, debt service on outstanding bonds, and subordinated debt or to make other necessary transfers under the Utilities System Revenue Bond Resolution.
• Long-term debt increased by $696.9 million, or 75%, in the 2017-18 fiscal year. This was due to the issuance of utilities system revenue bonds and tax-exempt commercial paper notes. During the prior year, long-term debt decreased by $18.1 million or 1.6%. 

Since financial audits had already taken place, and to avoid duplication of efforts, committee staff recommended only an operational audit, “to evaluate management’s performance in establishing and maintaining internal controls and administering assigned responsibilities in accordance with laws, rules, regulations, contracts, grant agreements, and other guidelines.”

The full audit report and the City of Gainesville’s report outlining remedial efforts in response to the audit can be read using this link: https://bit.ly/gainesvilleaudit.

According to Florida Statutes Section 11.45 (2)G), the Auditor General is required to conduct an 18-month follow-up audit to determine the City’s progress in addressing the findings and recommendations of the Auditor General.

Operational audits of local governments are not conducted regularly but are performed by the Auditor General at the request or direction of the JLAC, according to Derek Noonan, audit manager for the Auditor General.

A search of the Auditor General’s website finds that there has never been an operational audit of Marion County or the City of Ocala.