PALM BEACH COUNTY DEBT PRACTICES FAILED TAXPAYERS
Clerk Review Uncovers a Costly Lack of Oversight, Internal Controls and Transparency
WEST PALM BEACH, FL (April 20, 2009) – Palm Beach County’s practices and procedures for issuing bonds may have cost taxpayers as much as $5.3 million in unnecessary charges over five years, according to a review released today by Clerk & Comptroller Sharon Bock. The 40-page report, available at www.mypalmbeachclerk.com, includes nine observations and 21 recommendations for improvement. It addresses a flawed debt issuance process that is susceptible to manipulation, while lacking internal controls, transparency and oversight.
The Board of County Commissioners authorized Clerk Bock’s analysis of Palm Beach County’s debt issuance practices after the January 2009 federal indictment of former County Commissioner Mary McCarty for honest services fraud. The indictment alleged, in part, that McCarty manipulated the bond issuance process by voting on bond issues from which she and her husband benefited financially. “Had the county corrected many of its deficiencies in the past, opportunities for manipulation may have been reduced,” said Clerk Bock. “I urge the Board and staff to review the recommendations and work together to eliminate problems and begin restoring the public’s trust.”
The approximately three month review evaluated bonds issued during a five-year period and focused solely on the County’s policies, practices and procedures related to debt issuance. Recommendations for change include replacing the current practice of negotiating bond sales with a competitive bid process; creating an independent Debt Oversight Committee which includes citizen members; adding transparency and documentation to the selection of bond underwriters, bond counsel, disclosure counsel and financial advisor positions; limiting the purchase of often unnecessary bond insurance; and combining multiple bond issues to reduce issuance costs.
Since the review focused on debt issuance practices, it did not examine, among other items, compliance with state and federal statutes or regulatory requirements; pre-issuance policy decisions; refinancing decisions; or specific conduct of elected officials or County staff. In addition, the review was in no way related to the soundness or safety of the bonds issued by Palm Beach County.
Bonds are an important financing tool for the County, which allow the cost of public purpose projects, such as buildings and roads, to be spread over time and shared by those who will benefit from them now and in the future. As of September 30, 2008, the County had $1.89 billion
in outstanding debt. During the 2008 fiscal year, it made debt payments totaling $200 million or approximately $320 per Palm Beach County taxpayer.
The Clerk & Comptroller’s Audit Services Division conducted the review with special expertise provided by Fairmount Capital Advisors, Inc.
The Florida Constitution established the independent office of the Clerk & Comptroller as a public trustee, responsible for safeguarding public records and public funds. Clerk Sharon Bock is directly elected by and accountable to Palm Beach County residents. In addition to the roles of Clerk of the Circuit Court, County Recorder and Clerk of the Board of County Commissioners, the Clerk & Comptroller is the Chief Financial Officer, Treasurer and Auditor for Palm Beach County.
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