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CFO Alex Sink Releases Audit of DMS "Taj Mahal" Construction Project

10/12/2010

CONTACT: Jerri Franz or Jayme O’Rourke, 850-413-2842

TALLAHASSEE – Florida CFO Alex Sink today released the results of an audit of the Department of Management Services (DMS) construction project to build the new First District Court of Appeal (DCA) in a letter to Governor Charlie Crist and Chief Justice Charles Canady. The audit shows that DMS lost control of the project and spent millions more of taxpayer dollars than was necessary to build this courthouse. Outlined within the audit are 17 findings that appear to be inconsistent with Florida statutes, the Florida Administrative Code or generally acceptable internal control practices.
 
A copy of the letter follows, and a copy of the audit is attached to this email:
October 12, 2010

The Honorable Charlie Crist
Governor of Florida
The Capitol
Tallahassee, Florida 32399
 
The Honorable Chief Justice Charles T. Canady
Florida Supreme Court
500 South Duval Street
Tallahassee, Florida 32399-1925
 
Dear Governor Crist and Chief Justice Canady:
Enclosed is a copy of the Department of Financial Services’ audit report concerning the Department of Management Services (DMS) Fixed Capital Outlay Project to construct the new First District Court of Appeal (1DCA) courthouse.  This audit, conducted by my Bureau of Auditing, shows that DMS lost control of the project and spent millions more of taxpayer dollars than was necessary to build this courthouse.  The audit lists 17 findings that appear to show actions inconsistent with Florida Statutes, the Florida Administrative Code, or acceptable internal control practices.
 
I called for the audit under the authority of Section 17.03, Florida Statutes following reports in the St. Petersburg Times that pointed to profligate spending of taxpayer dollars on this project; which is particularly notable at a time when our court system – and our state – continues to make cuts to meet budgetary constraints.
 
I am transmitting a copy to each of you in your capacity as heads of the executive and judicial branches, and I strongly urge you to turn this matter over to your Inspectors General for further investigation of the failures outlined in this audit.  The audit findings strongly suggest that DMS officials acquiesced to actions by judges that were inconsistent with the prohibitions of Article V, Section 13 of the Florida Constitution that all justices and judges shall devote full time to their judicial duties.  Mr. Chief Justice, I urge you to convey our audit record to an investigative panel of the Judicial Qualifications Commission to determine what disciplinary action is warranted for the questionable conduct revealed by the audit.
 
Florida laws provide common sense internal controls to ensure that state-owned buildings are constructed in the most cost-effective manner possible.  In the case of this courthouse, our audit shows that these controls were circumvented and the interests of the state and the taxpayer were not protected.  Two significant categories of failures were found by the audit:
 
First, the Department of Management Services did not use the time-tested process of competitively bidding out this project and also began construction on the project without a set maximum price, which was not determined for more than a year after construction had commenced.  Instead, DMS gave itself an exemption from the statutory requirement for competitive bidding of large state construction projects.  Contrary to the statute and its own administrative rule, DMS offered no written justification for its abandonment of the competitive bid process.
 
Second, this audit reveals that key decisions regarding the courthouse by DMS were ceded to a few powerful 1DCA judges whose level of involvement raises questions of exercising good judgment and potential ethical considerations.  DMS ultimately abdicated to the judges its statutory authority in making decisions related to the construction of the courthouse and operated from the outset without a guaranteed maximum price to protect the state’s interests, while the contractor received both a guaranteed maximum profit in addition to fees for services as the construction manager.  With no guaranteed maximum price established until more than a year into the project, costs escalated quickly with taxpayers footing the bill.
 
The lion’s share of those funds – $33.5 million dollars in Florida Facilities Pool bond proceeds – were borrowed money, making the project the only courthouse ever built by the state of Florida with bond proceeds. It is also worth noting that the first two years’ worth of interest on these bonds — approximately $5 million dollars — was taken from the Workers’ Compensation Trust Fund rather than the Florida Facilities Pool.  In 2008, $5.5 million in extra funding for the courthouse project was taken from the Workers’ Compensation Trust Fund, over and above the bond funding and despite resolute objection from my office.  The Workers’ Compensation Trust Fund is set to fund the costs associated with regulating and adjudicating Workers’ Compensation cases.  Especially in these trying economic times, it is not appropriate for any portion of the assessments paid by Florida’s employers and insurers to contribute to the lavish appointments at an appellate courthouse facility.
 
This audit determined that the annual lease payments due from the 1DCA for the new courthouse will be insufficient to cover the annual debt service, making it appear to be the only facility in the pool with a debt service that is subsidized by all other agencies in the pool.  Since this building is nearly complete and the taxpayers’ money has already been committed, I recommend that the best possible use of this space be identified before the building is allowed to open, taking into consideration the needs of other state agencies and the public.
 
The audit clearly shows that without compromising in any way the functional aspects of the new courthouse facility, this project could have been – and should have been – constructed within the budget of the original legislative appropriation.  Taxpayers are entitled to expect that officials responsible for construction of new state-owned facilities exercise proper stewardship of funding, and as this audit shows, that due measure of stewardship was absent here. 
 
Sincerely,
 
Alex Sink
Enclosure
cc: Chief Judge Paul Hawkes 
 Secretary Linda South
 Senator J. D. Alexander
  Representative David Rivera
  
 

To access the audit click here: