Florida auditor general may be final arbiter

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By Rich Pollack

For more than a year Delray Beach has claimed that Highland Beach owes it thousands of dollars for fire and rescue services, even going so far as to claim the town is in default.
Now, in a reversal of the story, Highland Beach says that Delray Beach actually owes the town money — close to $238,000 — under a contract in which the city staffs a town-owned fire station.
That number, which Highland Beach says is based on overcharges by the city the last two years, could grow dramatically if the town discovers it’s been paying more than it should have ever since the current contract was signed in 2016.
The state waded into the controversy in March, when a legislative committee instructed the Florida auditor general to take a deep dive into Delray Beach’s books related to its contract with Highland Beach and “put these financial disputes to rest.”
The Joint Legislative Audit Committee action was taken at the request of first-term Rep. Peggy Gossett-Seidman, who had been a Highland Beach town commissioner before being elected to the state House in November.
“This is the best method for both municipalities to set the record straight and move on,” said Gossett-Seidman, a member of the audit committee.
During her presentation to the committee March 13, Gossett-Seidman said that one of her biggest concerns was Highland Beach’s claim that Delray Beach failed to provide records supporting the city’s conclusion that the town owes it $121,514 for 2021 and $396,140 for 2022.
“I’m asking Delray Beach to show us the money,” she said.
Highland Beach Town Manager Marshall Labadie said the town had repeatedly asked for records from Delray Beach and finally received some of what it was looking for in early February.
When the town’s financial team members reviewed those numbers, however, they came to a very different conclusion than did Delray.
“The Town of Highland Beach has determined the City of Delray Beach has overcharged the town for FY 2021 and FY 2022 in the total amount of $237,852,” Labadie wrote in a letter to Delray Beach City Manager Terrence Moore on March 10.
For his part, Moore said Highland Beach’s conclusions don’t square with the city’s analysis of the numbers.
“We’ve done the math,” he said.
In analyzing Delray’s “true-ups” — bills sent to the town to cover the difference between what it paid based on projected costs and what the city says it owes based on the actual final costs — Highland Beach used an in-rank average method to reach its conclusions.
That method, which the town says is specified in the contract, uses the average of all Delray Beach Fire Rescue personnel in a given rank as a multiplier, which is then applied to the number of employees in the same rank assigned to the fire station in Highland Beach.
For example, if there are five paramedics from Delray Beach assigned to the Highland Beach station, the cost to Highland Beach would be the average pay to paramedics throughout the city’s entire fire-rescue department times five.
In a different interpretation of the contract, Delray Beach says the cost to Highland Beach should be based on the actual salaries of the individuals assigned to the station in Highland Beach.
But Labadie said the town calculated the numbers both ways and determined that Delray would owe even more money to the town — about $100,000 more — using the city’s contract interpretation.
Highland Beach also challenged Delray Beach’s claim that the town needs to pay back more than $100,000 for ambulance service reimbursements that the city said it incorrectly refunded to the town. Labadie said that the town may need to give some of the funds back to Delray, but not as much as the city was requesting.
In his letter to the city about the true-ups, Labadie said the town discovered that the amount of costs being assessed to Highland Beach for the last two fiscal years didn’t match the amounts listed in the city’s published budget.
That apparent discrepancy also drew the attention of state Rep. Mike Caruso, co-chairman of the joint legislative committee and the representative whose district included Highland Beach and part of Delray Beach until redistricting last year.
“What I see here is that internal controls and operational controls appear to be very lax when it comes to Delray Beach,” he said.
Caruso said the work of the state auditor general’s office, when it does look at Delray’s financial processes, should determine if that is indeed the case.
“We’re not accusing the city of doing anything wrong, but just in case, let’s have the auditor general go in and check,” he said. “This is to make sure the city of Delray Beach is operating in a prudent and efficient manner.”
Caruso said the auditor general’s team will conduct a hard look at Delray’s finances in relation to its contract with Highland Beach from 2017 to 2023 and then provide its findings to the committee, which can make recommendation as to any further actions.
That process, Caruso said, could take up to 18 months, in part because the auditor general’s office is conducting about a dozen other reviews.
By that time, Highland Beach will have its own fire department, having decided in 2021 to break away from Delray due largely to high costs. In 2021, Highland Beach paid about $4.6 million to Delray Beach and in 2022 the town paid its neighbor $5.1 million, according to Labadie.
Highland Beach is also interested in getting documentation from Delray Beach similar to what it received for the last two years, this time for the 2016-17 fiscal year through the 2019-2020 fiscal year.
The town is now holding off further requests for that information, pending the audit.
Both Delray Beach’s Moore and Highland Beach’s Labadie say they welcome the audit.
“We are very supportive of any review,” Moore said. “Meanwhile the city of Delray Beach will continue to evaluate options to help consider a resolution of this matter.”
Labadie hopes the audit will bring an end to the financial disagreement.
“If they owe us money or if we owe them money, so be it,” he said. “We just can’t get to any conclusion.”

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