1. Florida Politics

Auditors find millions in 'questionable costs' at water district, but will it matter?

Noah Valenstein got the job as secretary of the Department of Environmental Protection on Tuesday May 23rd, on a unanimous vote by Gov. Rick Scott and the Cabinet. His previous job? Executive director of the Suwannee River Water Management District, which was flagged by state auditors for $22.5 million in "questionable costs". The audit covered the time Valenstein led the district. He oversees the district in his new job. [Special to the Times]
Published Jul. 14, 2017

TALLAHASSEE — Officials in charge of the smallest water management district in Florida were making a big mistake: they appeared to be keeping millions of dollars acquired from land sales instead of returning it to the state's general fund — and they had no paper trail.

The Suwannee River Water Management District, which oversees land and water resources in a 15-county rural swath of north-central Florida, failed to properly account for more than $26 million, according to a critical audit recently released by the Florida Auditor General.

Weak budgetary controls led to $22.5 million in "questionable costs," auditors found. Officials had transferred $13.3 million of it into the district's operating account without proper authority. They may have overspent some areas of the budget and directed money to other areas to make up for shortfalls. They set aside $3.8 million "in the event of an economic crisis" without authorization, and they steered $1.7 million "to cover routinely anticipated budget shortfalls" without explanation.

Auditors concluded that accounts were "misclassified because district personnel misunderstood" standard accounting requirements and budget staff members were "somewhat new to the process" so they couldn't explain how and why it happened.

Why is this a problem? In plain language, if you don't know how to track the taxpayers' money, you risk spending too much of it, the auditors said.

"Absent effective budgetary controls, including budgetary monitoring controls, there is an increased risk that district expenditures will exceed established budgeted amounts and available resources," the report concluded.

The district is overseen by the Florida Department of Environmental Protection, which is now headed by Noah Valenstein. His last job was executive director of the Suwannee River WMD during the time the audit was underway.

The district counters that its budget staff "has well over 50 combined years of budget and finance experience" and, after initial resistance, is now convinced it has some cleaning up to do of its books.

"We agree that the district may hold funds that need to be returned to the state," said Roary E. Snider, the district's chief of staff, in a statement. "We are undertaking an extensive review of dated accounting and land acquisition records to ensure that the amounts in question are accurate. Once that is determined, we will proceed to return the money or act as otherwise provided by law."

Critics say the fiscal troubles revealed at the Suwannee WMD are a manifestation of the deep budget and veteran staff cuts imposed on the districts during the tenure of Gov. Rick Scott who made it a priority to roll back property taxes used for environmental protection.

Beginning in 2011, Scott slashed $700 million from the state's five water management districts in what he promised was "just the first steps in ensuring that Florida's precious water resources are protected and managed in the most fiscally responsible way possible."

The Auditor General conducts operational audits of governmental entities to provide the Legislature and Florida's citizens information needed to promote government accountability. A 2011 state law required an operational audit of the state's water management districts every five years. Prior to 2014, the last audit was done in 1997.

The five districts, whose boards are appointed by the governor and operate under the oversight of the Department of Environmental Protection, were purged of hundreds of veteran professionals, and budgets were cut in half. They continued cutting their budgets through 2016. Suwannee, because of its small size, had proportionally fewer cuts.

The audit "is consistent with some of the problems we've seen at the Suwannee River district with the change of leadership over the years," said Eric Draper, executive director of Audubon of Florida, an environmental advocacy group that works closely with the water management districts. "They need to get their books in order."

He said the district "was once fairly well run," but the findings show that "record keeping was sloppy and DEP, which was supposed to review things, wasn't paying close attention to it."

Tania Galloni, managing attorney for Earthjustice's Florida office, sees the audit as a "canary in the coal mine."

"We are starting to see the effects of when you gut budgets and get rid of expertise in these institutions. Lo and behold, it makes these districts not function the way they are supposed to," she said. "Our waters statewide are in peril, and the water management districts are supposed to be the stewards of these resources but, there's no question, they're breaking down."

Emilio "Sonny" Vergara, a Republican and the former executive director of the Southwest Florida Water Management District, which controls the water supply for the Tampa Bay area, blames the governor for imposing political and centralized control over the districts from Tallahassee and says "you can expect such audit findings to become common."

"The infractions, while serious, reflect simple incompetence," he said. "Every WMD and state agency with responsibilities to protect public interests has been systematically stripped of professional competence in favor of far less experienced political appointees who then were given redirected priorities to protect private interests."

Some problems at the Suwannee district were raised by auditors in 2014.

In 2014, the Auditor General warned the district that it didn't have proper procedures in place to prevent the misuse of 23 state-owned vehicles and said then the district needed stronger budget controls. Neither of those problems were fixed by the time the auditors arrived to inspect the books from March to September in 2016.

State law requires that when land purchased through the state's land-buying Preservation 2000 is then sold, the money must be returned to the DEP which then puts it back into the pot for new land acquisition, the Florida Forever Trust Fund.

The millions in proceeds from Preservation 2000 and Florida Forever land sales should have been returned to the state general fund to be used by DEP, auditors said. But because the district has kept no paper trail, neither the district nor auditors could determine how much should be returned to the state.

"Consequently, the district may have retained funds to which they were not legally entitled," the audit concluded.

In a response to the audit, district officials said they thought that putting money into the district's coffers was "permissible and properly unrestricted."

"We disagree," the auditors bluntly replied. State law doesn't exempt "the district from compliance with other statutory restrictions associated with timber sales, Preservation 2000 moneys and the Florida Forever Program Fund."

Snider said the district is confident it has turned over the $6.8 million auditors suggest it owes the state from Preservation 2000 sales and $2.4 million in Florida Forever sales but has hired a new chief financial officer to address all the audit issues.

He also disputed the auditor's claim they don't have documentation. "While we absolutely will provide these records, these documents were largely in hard copy," Snider said. "Staff couldn't assemble these additional records in time."

The district said it would turn to the Department of Environmental Protection for advice on how to resolve the dispute over whether money is owed to the state.

"DEP has communicated with staff at the Suwannee River Water Management District, and they have informed us that they are reviewing accounting and land acquisition records for additional information," said Lauren Engel, spokesperson for Valenstein.

"If it is determined that these funds should be returned to DEP, they would go to the trust fund from which the funding was issued, however, DEP would require spending authority from the legislature to use it."

Contact Mary Ellen Klas at Follow @MaryEllenKlas


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