Development Authority has excellent accounting, but should return unused money, report says

While accounting records are "very sound," more controls and clarity of procedures are needed to reduce risk and increase transparency

VIRGINIA BEACH — The office of City Auditor Lyndon Remias has released an audit report of the Virginia Beach Development Authority Friday, which probed whether proper controls are in place to distinguish procedures between the VBDA and the city’s Department of Economic Development.

The report made several recommendations and documented needed improvements, including the return of unused money to the city, increased controls to further reduce risk, create a written procurement policy, increase consistency and clarity of performance criteria for Economic Development Investment Program grants, and live stream or broadcast VBDA meetings.

Overall, the report found the accuracy, organization, and documentation of VBDA accounting records to be “very sound,” and described the “the accounting quality for the VBDA” as “excellent.”

The audit covered items included in the most current audited fiscal year — 2016-2017 — but some items from FY 2017-2018 were also included.

Although the scope of the report was not to be a financial audit, it did cite the VBDA for holding money leftover from three inactive CIP projects — money that should be returned to the city, according to the report’s recommendation.

The projects — a design of a pedestrian bridge across Virginia Beach Boulevard near Town Center, Burton Station utilities, and an Interfacility Traffic Area study — total $131,446. Money for the Burton Station and Town Center projects have not been touched since 2009 — while money for the traffic study has not been spent since 2012, Remias said.

The VBDA accountant should work with the city comptroller to “promptly return” the money to the city “so it can be utilized for high priority projects such as flooding,” according to a recommendation in the report.

Nearly all of the VBDA’s accounting functions are handled by the city’s Department of Economic Development’s accountant, which can make segregation of incompatible accounting duties — a cornerstone of effective controls — “challenging.”

The “key risk” of such a close relationship would be if a city employee “wanted to bypass city controls,” then they “could process a transaction of its own through the VBDA,” according to the report.

To mitigate that risk, the VBDA needs to adopt a written procurement policy, which could further distinguish and delineate clear operating procedures between the VBDA and Economic Development.

“I can’t speak to other development authorities, but for any agency that is doing purchasing, it is a best practice to have a procurement policy in place,” Remias said.

Remias said the VBDA agrees with that assessment

The last time the city auditor performed an audit of the VBDA was in December 2007 — five months before City Council appointed Remias as auditor. However, Remias said “there is no requirement to audit the VBDA from an internal audit side” and the VBDA is financially audited by external auditors every year.

The report also criticized a $150,000 EDIP grant to Urology of VA. Although Urology of VA met the minimum capital investment needed to qualify for the grant, the actual capital investment was below what the VBDA approved in a resolution.

According to the Nov. 21, 2017 VBDA minutes, members of the VBDA were briefed on the the company falling short of its stated capital investment — which still met the minimum criteria, and the VBDA awarded the entire grant regardless.

The report recommends that VBDA commissioners re-vote if a company cannot meet its original investment requirements, which will keep the public informed of any changes. The report noted that investment criteria for these grants are not clear nor transparent, and need to be clarified.

VBDA meetings are not broadcast to the public, either live or taped, according to the report, which recommends the VBDA and the city develop a plan to broadcast all VBDA meetings “to promote greater transparency.”

Both the Planning Commission and City Council broadcast meetings on television, the city’s website, and through Facebook Live.

Remias will next complete audits of the city’s cybersecurity and human services departments.

Always be informed. Get the latest news and information delivered to your inbox

Print Friendly, PDF & Email