The proposed ordinance, sponsored by Commissioner Samuelian, would create a framework for a dedicated City funding source to fund the activities and operations of the Office of the Inspector General.

On November 6, 2018, the City's voters approved an amendment to the City Charter, creating Article IX, which creates the City of Miami Beach Office of Inspector General (“OIG” or “Office of Inspector General”); establishes the functions of the office; provides the Inspector General with the power to subpoena witnesses, administer oaths, and require production of records, in order to conduct its investigations; and provides that the Inspector General's appointment, term, functions, authority, and powers shall be further established by Ordinance.

On February 23, 2019, the Mayor and City Commission adopted Ordinance No. 2019-4239, to implement the provisions of the newly created Article IX of the City Charter.

On October 16, 2019, pursuant to Section 2-256(b)(2) of the City Code, the Mayor and Commission appointed Joseph M. Centorino as the first Inspector General of the City of Miami Beach.

On December 11, 2019, the Mayor and City Commission approved the proposed ordinance on first reading and referred the item to the Finance and Economic Resiliency Committee for further discussion.

At first reading on December 11, 2019, Vice Mayor Richardson suggested that the ordinance be amended to clarify that the amounts generated for the OIG will be exclusively dedicated for the activities of the OIG, and that such funds may not be used for any other purpose. In addition, Commissioner Arriola requested a clarification that the ordinance creates a dedicated funding source only, and does not provide expenditure authority, as the annual budget for the OIG shall be determined through the City Commission’s annual budget process, in the same manner as applicable to every other City department.

On December 18, 2019, the City’s General Obligation Bond Oversight Committee considered the proposed ordinance. The GO Bond Oversight Committee adopted a motion supporting the proposed ordinance in concept, but urging the City Commission, in its final determination of the contract percentage to be allocated to the OIG Fund, to select an amount that would minimize scope impacts to G.O. Bond projects.

The Administration’s proposal for the percentage of a contract price to be allocated to the OIG, including a proposal to minimize scope impacts via a cap on the amount assessed for individual contracts in excess of $10 million, is discussed more fully below.

As noted above, the purpose of the proposed ordinance is to create a framework for a dedicated City funding source to fund the activities and operations of the Office of the Inspector General. By dedicating amounts that could only be used for the OIG, the ordinance would provide a measure of independence and predictability with regard to funding for the OIG. The proposed ordinance would provide for an allocation to an OIG Fund, based on a fixed percentage of the contract price of certain City contracts and purchase orders. The ordinance is similar to the IG Contract fee established by Miami-Dade County pursuant to Section 2-1076 of the County Code, to fund the operations of the County’s inspector general. Miami-Dade County’s IG contract fee is 0.25%.

A draft of the proposed ordinance, as amended to incorporate feedback provided by the City Commission at first reading, is attached as an exhibit to this Memorandum. As discussed at first reading and as reflected in the revised draft of the ordinance, the proposed ordinance only provides the mechanism for identifying a dedicated funding source for the OIG. The actual appropriation of funds for the OIG, and the final budget for the department, is subject to an annual appropriation by the City Commission as part of the annual budget process. If the amounts generated by the IG Contract Allocation in any given year are insufficient to fund the budget the City Commission has proposed for the OIG in the next fiscal year, the City Commission would need to identify other sources of funding through the annual budget process to make up the difference.

Similarly, if the amounts generated by the IG Contract Allocation in any given year exceed the amounts required to fund the OIG budget in the next fiscal year, such “surplus” amounts would be carried forward until appropriated by the City Commission. In this regard, it should be noted that the OIG budget includes contributions from City’s resort tax and enterprise funds, so if the OIG Fund balance had a surplus in any given year, the City Commission may elect to use the OIG Fund balance and reduce the contributions from resort tax or enterprise funds. Ultimately, the City Commission could also elect to amend the ordinance to change the percent allocation, or to increase the contract thresholds.

Similar to the Miami-Dade County ordinance, the ordinance includes a number of exemptions for categories of contracts to which an IG contract allocation should not apply, such as contracts with governmental agencies, including grants that may only be used for restricted purposes; contracts for specialized services, such as insurance, financial advisory services, legal, or audit services, leases, and management agreements, or revenue-generating contracts (as the allocation to the fund is based on expenditures only).

Finally, the ordinance requires that after April 1, 2020, each competitive solicitation and covered City contract include mandatory contract language regarding the Office of Inspector General’s audit and investigatory powers as a matter of contract. The mandatory contract language would serve to place every contractor on notice as to the applicability of the OIG to the contract, and to each contractor’s performance of work on behalf of the City. The contract language would also provide the City with an additional remedy (i.e., a breach of contract action) for a contractor’s failure to comply with the broad right of access afforded to the OIG to review, audit, inspect and investigate all City contracts under the City Charter and City Code.


ANALYSIS SINCE FIRST READING REGARDING PROPOSED PERCENTAGE

The City’s FY2020 General Fund budget for the Office of Inspector General is approximately $1.45 million. The Administration initially estimated that an IG Contract Fee of one half of one percent (0.5%) would generate approximately $550,000. Accordingly, in order to cover the $1.45 million budget covered by the General Fund, the ordinance initially proposed a contract fee of 1.5%.

Since first reading, staff further evaluated the proposed percent allocation, not only by focusing on historical expenditures, but by taking into account certain anticipated expenditures that were not fully incorporated in the estimates, including future G.O. Bond projects and stormwater/resiliency projects. In addition, the Administration considered the impacts on large capital projects, which could result in individual projects disproportionately contributing to the OIG Fund. For instance, the 72nd Street Civic Complex, with a budget of $64.4 million, would generate an OIG contract allocation of $322,000 (@ 0.5%) if no cap is put in place.

The IG Contract Allocation will be estimated at the beginning of each fiscal year by fund for each applicable department or capital project and set aside in a contingency account, with the final amounts contributed to the OIG fund to be based on the actual amounts expended by the City under covered City contracts in each fiscal year. Through a true-up process taking place at least annually, the IG Contract Allocation will be recorded as revenue in the new OIG fund.

Accordingly, based on staff’s updated projections, and the desire to generate funds to cover the OIG’s $1.45 million General Fund budget while also mitigating major scope impacts on large projects, the Administration proposes an allocation of one half of one percent (0.5%) of covered City contracts, provided that there be a cap on individual contracts so that no allocation would be made to any portion of a contract in excess of $10 million. In other words, the amount allocated to the OIG Fund for any individual contract shall be capped and shall not exceed $50,000.

If the City Commission adopts the proposed allocation above (with the cap on individual contracts), the Administration estimates that approximately $1.5 million would be generated annually for the OIG Fund.