IRS GRANTS CFO SINK’S REQUEST THAT
MSFH GRANTS NOT BE SUBJECT TO FEDERAL INCOME TAX
Florida Chief Financial Officer Alex Sink announced grants awarded to
homeowners through the My Safe Florida Home (MSFH) program will not be
reported as taxable income to the federal government.
CFO Sink made the announcement after receiving a Letter Ruling from the
Internal Revenue Service (IRS) stating that MSFH grants will be excluded
from “gross incomes for federal income tax purposes.”
“Floridians taking personal responsibility to harden their homes and receive
a grant from the My Safe Florida Home program shouldn’t be hit with an
additional tax bill in January 2008,” said CFO Sink, who runs the Department
of Financial Services and the MSFH program. “I commend the IRS for granting
our request that mitigation grants should not be considered part of a
homeowner’s income.” CONTINUED
Following a June 2007 request from CFO Sink, the IRS issued a Letter Ruling
in late November that all grants given through the MSFH program will not be
considered income and will not be reported as income to the federal
government. Without this recent ruling, matching grant recipients could have
been facing a tax liability of $1,250 on a $5,000 MSFH grant, based on the
IRS Flat Tax calculation rate of 25 percent. With $8.6 million in grants
issued to date, CFO Sink’s request has potentially saved Floridians from
being subject to approximately $2.15 million in additional federal income
The MSFH program resumed offering wind inspections and expanded statewide in
April 2007 after conducting a pilot program during the previous year. During
the last 7 months, the MSFH program has performed approximately 114,000 free
wind inspections, and a total of 127,816 inspections since the program
began. Approximately 15,985 homeowners have been approved to receive
matching grants and are working with the MSFH program to harden their homes.
Statewide, the program has issued a grand total of more than 2,637 grants to
homeowners for more than $8.6 million.
CFO Sink has reported that the vast majority of homeowners who have received
free wind inspections from the MSFH program are eligible for discounts on
their wind insurance premiums without making a single improvement to their
homes. To date, 95,807 (76 percent) of participating homeowners are eligible
for an average discount of $210 on their wind insurance premiums, based on
the current structure of the home during the free MSFH wind inspection. Over
the last seven months, the program has alerted Floridians to a potential
savings in windstorm insurance premiums totaling more than $20 million.
Any Floridian who lives in a single-family, site-built home is eligible for
a free wind inspection through the program. Floridians can apply on-line at
www.MySafeFloridaHome.com or by calling the program toll-free at
1-866-513-6734. Homeowners who receive free wind inspections through the
MSFH program will get a detailed inspection report, complete with additional
eligibility information on matching grants and estimated insurance premium
discounts, if the homeowner is eligible.
In order to be eligible for the program’s matching grant reimbursements of
up to $5,000, the Legislature requires that homeowners meet the following
requirements: have received a completed wind inspection after May 1, 2007;
live in a single-family, site-built home built before March 1, 2002; have a
valid homestead exemption; have an insured value of $300,000 or less; and be
located in the wind-borne debris region.
Additionally, while the free wind inspections will still cover seven
potential wind-resistance improvements, matching grants may only be applied
to opening protections, including windows, exterior doors and garage doors,
as well as the bracing of gable ends.
CFO TALKS TO TAX WATCH
CFO Sink on
Wednesday joined Lt. Governor Jeff Kottkamp and House Speaker Marco Rubio as
a speaker before nearly 200 members of Florida TaxWatch, a private,
non-profit, non-partisan research institute that in the past 25 years has
developed a reputation as a watchdog of citizens′ tax dollars. The meeting
was held in Palm Beach.
The CFO said Florida’s anticipated revenue shortfall of $2.5 billion this
fiscal year and next presents an opportunity to create more efficiencies in
state government by taking advantage of purchasing power and economies of
scale. “I think millions can be saved by managing dollars more efficiently,”
She said that the Department of Financial Services, Division of Treasury and
Bureau of Accounting and Auditing, are putting together a Partners in
Accountability program to work with state agencies in the way they manage
vendors and helping them negotiate better deals and hold vendors more
accountable. She said she also is pushing for state agencies to do a better
job of managing employee safety and workers compensation programs.
She also encouraged the business members of TaxWatch both to prepare for the
financial risks of climate change but also take advantage of the
opportunities. She said “the rest of the world is way past debating whether
or not climate change is happening and what caused it, and are totally
focused on adaptation.”
She finished her speech by saying urging members to learn all that can about
the impact of the property tax amendment that will appear on the January 29
ballot, saying once something is in the state’s constitution, “it is really,
really hard to roll back.”
CFO SINK ADDRESSES COUNCIL OF CEOs IN TAMPA
About 100 CEOs from throughout Tampa Bay attended a breakfast Thursday
morning where CFO Sink spoke about Florida’s economy. Her optimistic outlook
garnered several laughs and a hearty round of applause from the audience,
all members of the Council of CEOs of Tampa Bay.
She said the real estate downturn and mortgage fallout has left Florida in a
“real estate recession,” but that Florida has a history of surviving and
thriving. She said the current downturn is “like the python eating the
chicken, it just going to take a while.”
LETTER FROM CFO SINK TO THE MEMBERS
OF THE STATE BOARD OF ADMINISTRATION AUDIT COMMITTEE
December 10, 2007
Ms. Melinda Miguel
Chief Inspector General, Office of the Chief Inspector General
Executive Office of the Governor, PL 05, The Capitol
400 South Monroe Street, Tallahassee, FL 32399
Mr. Douglas Darling
Division of Accounting and Auditing, Director, Department of Financial
200 East Gaines Street Fletcher Building, Suite 516, Tallahassee, FL
Ms. Kimberly Ferrell
Chief Auditor, Medicaid Fraud Control Unit, Office of the Attorney
PL 01, The Capitol, 400 South Monroe Street, Tallahassee, FL 32399-1050
<<SENT VIA HAND DELIVERY>>
Dear Ms. Miguel, Mr. Darling and Ms. Ferrell:
The growing national subprime mortgage crisis, a lack of investor
confidence and inadequate transparency led to the recent instability of
a state-managed investment pool. Managed by the State Board of
Administration (SBA), the Local Government Investment Pool (LGIP) is a
short-term investment fund used by a number of counties, school boards,
and other government entities in Florida, which have relied on the
pool’s stability and liquidity for nearly twenty-five years.
This instability led to investors withdrawing more than $14 billion from
the once $27 billion pool. In an effort to protect remaining investors,
the Trustees of the SBA (Governor Charlie Crist, Attorney General Bill
McCollum and I) met November 29, 2007, to take appropriate action to
temporarily suspend withdrawals and hire an experienced, independent
financial firm to develop a plan of action with the input of the pool’s
investors. Last Tuesday, December 4, 2007, the SBA Trustees enacted a
plan to isolate the pool’s distressed assets into a separate fund,
allowing the investments to mature with the goal of returning investor
premium. The majority of the LGIP’s assets (86 percent) remain in a
high-quality money-market type fund, which will be rated and
conservatively invested. An independent financial management firm will
manage both funds; some liquidity has been made available for all
participants and the Trustees have stressed the need for increased
transparency and communication between the SBA and its investors.
While this new plan provides the best opportunity to reach the goal of
returning investors’ principal, many questions remain. When investors
display such an extreme lack of confidence and a “run on the bank”
scenario follows, it is essential that the state does all it can in an
attempt to restore confidence if the LGIP is to continue.
As members of the Audit Committee of the SBA, you have a role in
restoring this confidence. As an independent and objective party, the
Audit Committee is most appropriate to review the circumstances
regarding the LGIP that resulted in our current situation. I understand
that you will be meeting Wednesday, December 12, 2007, and I ask you to
delve into the many unanswered questions that remain for both the
Trustees and investors alike. Please include the following in your
• What are the LGIP’s investment guidelines and were assets acquired
below those guidelines?
• Who sold the SBA the “distressed assets” in Fund B, when were they
purchased, and what were their ratings at the time of purchase?
• When were the “distressed assets” downgraded, and what were the SBA’s
actions following these downgrades?
• What are the SBA’s disclosure requirements and policies regarding
downgraded assets, and what actions were taken to inform investors?
• How frequently was the SBA communicating with investors, and how much
detail was provided to the public about the pool’s investments?
• Was the LGIP investing in riskier assets than communicated to
investors or than the pool’s stated objective?
• What other funds managed by the SBA include these type of investments?
• If other funds do include these “distressed assets”, what actions, if
any, are recommended/planned by the SBA?
I applaud you for your service in assisting the Trustees of the SBA in
fulfilling their oversight responsibilities. I am sure you will be
exploring other actions and decisions in addition to those suggested
above. Please let the Board know when you will be prepared to submit
your report, along with any recommendations of potential changes in
policies and procedures.
Chief Financial Officer
State of Florida
cc: The Honorable Charlie Crist, Governor
The Honorable Bill McCollum, Attorney General
The Honorable Ken Pruitt, Senate President
The Honorable Marco Rubio, Speaker of the House
CFO MEETS WITH STATE ATTORNEY MARK
While in the Tampa area on Thursday, CFO Sink met with Mark Ober, State
Attorney for the Thirteenth Judicial Circuit in Hillsborough County. As CFO,
Sink oversees two law enforcement agencies, the Division of Insurance Fraud
and the Bureau of Fire and Arson Investigations in the Division of State
Fire Marshal. Ober’s office will be adding a dedicated prosecutor and
paralegal in the coming year, which will allow for more prosecutions of
financial and insurance fraud crimes investigated by the department, and the
two talked about some of the latest trends in fraud cases.
Sink and Ober also discussed the department’s plans to create an
investigator academy to help train new insurance fraud and arson
investigators, and discussed how Ober’s office might be able to assist with
the training program.
Ober’s office is one of the busiest in the state, prosecuting 94,000 cases
CFO SINK CONVENES FINANCIAL LITERACY COUNCIL
CFO Sink convened the seventh meeting of the Financial Literacy Council
on Wednesday. During the conference call, the council announced they
will partner with other groups to create Florida Saves – a statewide
campaign that will promote saving, reducing debt, and building wealth.
Florida Saves Week is set to take place February 24 – March 2. The
council also set a meeting schedule for 2008 and decided to hold town
hall meetings and other events around the state during Financial
Literacy Month in April.
CFO Sink has created a Web site dedicated to the Financial Literacy
Council, its duties, appointments, and upcoming meetings. Floridians who
would like to learn more about the council are encouraged to visit the
Web site at