Title: SWFWMD A Management and Fiscal Accountability Review and Analysis
CITATION THUMBNAILS PAGE IMAGE ZOOMABLE
Full Citation
STANDARD VIEW MARC VIEW
Permanent Link: http://ufdc.ufl.edu/WL00002222/00001
 Material Information
Title: SWFWMD A Management and Fiscal Accountability Review and Analysis
Physical Description: Book
Language: English
Publisher: Florida TaxWatch Inc
 Subjects
Spatial Coverage: North America -- United States of America -- Florida
 Notes
Abstract: SWFWMD A Management and Fiscal Accountability Review and Analysis, Jan 17, 1990
General Note: Box 10, Folder 10 ( SF Water Resources Historical Collection - 1988 ), Item 3
Funding: Digitized by the Legal Technology Institute in the Levin College of Law at the University of Florida.
 Record Information
Bibliographic ID: WL00002222
Volume ID: VID00001
Source Institution: Levin College of Law, University of Florida
Holding Location: Levin College of Law, University of Florida
Rights Management: All rights reserved by the source institution and holding location.

Full Text





SOUTH FLORIDA WATER MANAGEMENT DISTRICT
A Management and Fiscal Accountability Review and Analysis
Florida TaxWatch, Inc.
January 17, 1990



MAJOR FINDINGS AND RECOMMENDATIONS

Justifying Future Budget Growth

* For the first time in five years, growth in the district's operating budget was held to within the
combined influences of population and inflation. The district should ensure that growth in operations
spending continues to be closely tied to these prevailing economic conditions.

For four of the five years from 1979 to 1983, growth in district spending fell below the combined
population/inflation growth rate. From 1984 to the current year, the growth in district spending for
operations significantly exceeded the population/inflation growth rate. In 1987, the largest growth
occurred (31%) when population/inflation was only 5.5%.

This pattern of spending increases resulted in a 1989 operating budget which exceeds the continuation
budget by S40 million, and is 63% higher than necessary to meet increased spending that can be
attributed to growth in population and inflation.

* The district should separately account for the cost of activities necessary to comply with state
mandated programs. This will provide useful information to the governing board and district
taxpayers about how much property tax revenue actually subsidizes these state mandates. It will also
show how much budget growth is directly related to increased regulatory responsibilities and how
much is attributable to increased administrative costs.

Reining In Water Management District Taxing Authority

* All water management districts should be required to submit in a standardized format, their annual
proposed tax rates, tentative budget, and a five year. capital improvements plan to the Florida
Department of Environmental Regulation (DER). Receipt of general revenue and trust fund
appropriations should be contingent upon each district's compliance with such reporting requirements.
This information is essential for the State to be able to get a handle on what it is spending on
environmental programs statewide and at the district level. It will also provide an effective means
of making the districts accountable to the taxpayer.
* DER should review all tentative budget proposals by water management districts that require an
increase in taxes greater than the rolled-back rate adjusted by inflation and recommend
approval/disapproval to the Governor. In order to levy such a rate, the Governor the elected
official who appoints all district governing board members would have to grant approval. This
change is necessary to make water management districts accountable to someone who is accountable
to the taxpayer, and help ensure that airplane, vehicle and office building expenditures can be
justified from a statewide viewpoint.
Budgets for water management districts in 1987-88 totalled a whopping $300 million. South Florida
accounted for half of this.

Southwest Florida Water Management District Has received criticism regarding the proposed
formation of a separate bonding entity to finance construction of a new headquarters facility;


I









Suwanee River Water Management District Has allegedly misused state appropriated Surface Water
Improvement and Management (SWIM) funds;

Northwest Florida Water Management District Was criticized in a recent Dept. of Environmental
Regulation internal audit report for accounting practices related to Save Our Rivers and SWIM funds;

South Florida Water Management District Significant deficiencies identified in past financial and
performance audits still exist;

South Florida and St. Johns River Water Management Districts Have been criticized for expenditures
related to owning and operating private airplanes.

Growth of South Florida's tax base has been very dramatic, but tax rates have still increased every
year in spite of the TRIM requirements. The combined district and Okeechobee basin rate has
exceeded the rolled-back rate by an average of 10% since 1984.

Limiting Growth In Administrative Costs

* Average pay structure in South Florida should generally equate with the other water management
districts when regional price differences are considered. When average pay exceeds the other districts
after price levels are accounted for, the district should provide justification.

Average salaries and benefits for South Florida employees exceed the other districts by 10-25%.

* The semi-annual compensation review should be more stringent, perhaps through providing a cost-
of-living adjustment at the beginning of the fiscal year for all employees that meet expectations, but
requiring employees to exceed expectations in order to qualify for the lump-sum merit raise, which
would be given on their annual anniversary date. This would help ensure the second
performance/pay review provides an incentive for enhanced performance and is not seen by
employees as an automatic pay hike.

Nearly two-thirds of the employees reviewed thus far this fiscal year received a rating of "exceeds
expectations". That group received cost-of-living increases ranging from 3-8% and additional cash
merit bonuses of 5-8%, six months after their cost-of-living adjustments.

* The Deferred Compensation Plan for top management personnel should be discontinued, or
amended to require employee contribution.

This fringe benefit alone cost district taxpayers $325,000 in 1989. Five top managers also receive a
total of $40.200 for car allowances.

* The district should reimburse its employees at the standard state rate of 20 cents per mile for
using their own vehicles rather thap providing passenger-type vehicles for employees on a frequent
basis.

* Reduce the cyclic maintenance program for passenger-type vehicles to one inspection per year.

This could save the district $150,000 annually.

* At a minimum, the current ratio of mechanics to vehicles should be reduced. Better yet, all
maintenance and repair functions should be privatized.

The average annual cost for maintaining the passenger fleet is $3.522 per vehicle. The district's own
consultant estimated that the same work could be privatized at an annual cost saving of over $500 per
vehicle.

* Because there are 104 passenger-type vehicles currently underutilized (according to the district's


I i I I









own study), no vehicles of this type should be purchased until full utilization of vehicles is achieved.

The district owns 414 passenger-type vehicles, one for every three employees. Of these, 59 are driven
home each night by staff. The annual cost for maintaining these vehicles is $170,000. Despite this,
the district budgeted over $400,000 in 1990 for new vehicle acquisitions.
* The private airplanes should be sold off and the district should rely on commercial or other
available air travel alternatives.

* The Legislature should examine the issue of air travel by water management district personnel by
defining "necessary" air travel, and require a standardized cost analysis of the various air travel
alternatives be submitted to the Department of Environmental Regulation (DER).

TaxWatch determined the district could fly the six board members who require air travel to attend
meetings on 30 commercial flights each year from their place of residence to the West Palm Beach
headquarters, at a cost of roughly S35,000 per year. Based on these estimates, the district could save
over 5138,000 annually by using commercial carriers rather than flying their own aircraft enough
to fly the remainder of the staff on over 600 intrastate commercial flights.
* South Florida should develop a plan to phase in increases in permit fees so that they pay for a
greater portion of the cost of regulation.
* The district could apply the savings from its air travel and vehicle fleet to further increase the
budget of the Resource Regulation Department, enabling them to hire more and better qualified
regulatory personnel and ultimately reduce the average time taken to process permit applications.

District Budget Documents

a The district should disclose in the budget document management's goals, economic assumptions
and budgeting practices upon which the recommended spending level was determined.
* The district should, in general, include three years of financial information in all sections of the
budget document; budget year, current year (estimated 12 months), and the prior year actual.
* The district should develop and disclose in the Program Summaries performance measures (output
and outcome), funding source and historical financial information.

* The district should restructure its Capital Improvements Budget to properly reflect project costs
on an annual basis by fund source.

Performance and Financial Audits

* This report identifies several internal control problems that need improvement. The district should
extend a moratorium on any future tax and spending increases until these deficiencies have been
overcome.

Between 1987 and 1988 over one-half million dollars worth of inventory items were written-off with
no analysis as to cause and without notification or approval from the governing board.
No adequate inventory exists for the district's fixed assets which have grown to over one-half billion
dollars.



Not For Attribution Or Reproduction Withot The Written Consent Of Florida TaxWatch, Inc.




O.FO


i i I












r r


TABEI ON
COMPARISON OF WATUR MANAGDEMET DISTRICTS
19r7-198


SOUTH FLORIDA
NORTHWEST SUWANEE TOHNS SOUTHWEST T AS TOTAL AS


POPULATION 1,021,000 200,000 2,729,079 3,115,19 4,770,9 11,836,477 40%

TAX BASE $18.3 $3.1 $72.9 $6.2 1726 $353.1 49%
(Biiuon)
LAND AREA 11,200 7,640 12,367 10,200 17, 90 59,337 30
(Sq. mila)
CONSTITUTIONAL .05 1.0 1.0 1.0 1.0 N/A
VILLAGE CAP
STATUTORY VILLAGE .05 .75 .6 1.0 .8 N/A
CAP
TOTAL BUDGET $13.1 $1.9 $60.1 $64.0 143.1 $299.2 49%
(Mllions)
(\PLOYEES 9 60 397 546 1 2,361 52%

BUDGET/CAPITA $12.82 $94.48 $22.03 $20.53 $30.0 $25.26 119%

EMPLOYEES/100,000 9 30 15 18 26 20 135%
PERSONS
BUDGET/SQ.MILE $1,168 $2,473 $4,861 $6,270 *pl $5,042 160%

PROPERTY TAXES $0.9 $0.8 $16.7 $27.2 $803 $125.9 64%

EFFECTIVE TAX .s .ss .229 .316 .465 .57 1ar0
RATE (Millios)
PROPERTY TAXES *0.89 $4.10 $6.12 $8.73 $13.33 $10.63 15I%
PER CAPITAL




Source: Florida TaxWatch Survey of Water Management Districts and the Florida Statistical
Abstract, 1988.








THE SOUTH FLORIDA WATER MANAGEMENT DISTRICT


A Management and Fiscal Accountability
Review and Analysis




January 17, 1990



By


Ken Marshall
Research Analyst
Michael Walsh
Senior Research Analyst


Dr. Karen Walby
Director of Research
Greg Whitaker
Research Assistant


Not For Attribution Or Reproduction Without The Consent Of
Florida TaxWatch, Inc.


f. //




1 -1.i i i I I ;


.~.


TABLE OF CONTENTS

EXECUTIVE SUMMARY........................................

Summary of Recommendations............................

WATER MANAGEMENT DISTRICTS What Are They and How Do They Affect Your
Pocketbook?

Brief History ........................................
Structure........................................
Function..................................
District Comparison...............................
Map of State's Water Management Districts...........

SOUTH FLORIDA BUDGET GROWTH How Extensive Has it Been and How Has it Affected the
Taxpayers?

Increased State Mandates............................
Summary.......................... ............

UNBRIDLED TAXING AUTHORITY Large Tax Base Gives the District a Blank Check. Is This
Taxation Without Representation?..................

SOUTH FLORIDA OPERATING BUDGET GROWTH What Aspects of District Operations Have
Contributed Most to Big Budget Increases?

Administration..............................
Salaries and Benefits .............................
Employment....................................................
Ratio of Upper Management to Rank and File............
Contracts......................... ............
Expenses....................................
Motor Vehicles.....................................
Aircraft........................ ........

IS THE DISTRICT TOO DEPENDENT ON PROPERTY TAXES?
District Permit Fees ...............................
Survey of Private Industry About Permitting Process...

DISTRICT BUDGET DOCUMENTS Do They Provide Sufficient Meaningful Information for the
Governing Board and the Taxpayer?

Usefulness as a Policy Document...................
Usefulness as a Financial Plan..........................
Usefulness as an Operations Guide....................
Usefulness as a Communications Device...............

PERFORMANCE AND FINANCIAL AUDITS Has the District Heeded Their Recommendations?

1985 Auditor General Performance Audit...............
1988 Financial Audit............................
Summary.............................................

LIST OF TABLES AND GRAPHS.................................







1/2











SUMMARY OF RECOMMENDATIONS

Justifying Future Budget Growth

o For the first time in five years, growth in the district's operating budget was held to within the
combined influences of population and inflation. The district should ensure that growth in operations
spending continues to be closely tied to these prevailing economic conditions.

o The district should separately account for the cost of activities necessary to comply with state
mandated programs. This will provide useful information to the governing board and district
taxpayers about how much property tax revenue actually subsidizes these state mandates. It will also
show how much budget growth is directly related to increased regulatory responsibilities and how
much is attributable to increased administrative costs.

Reining In District Taxing Authority

o All water management districts should be required to submit in a standardized format, their annual
proposed tax rates, tentative budget, and a five year capital improvements plan to the Florida
Department of Environmental Regulation (DER). Receipt of general revenue and trust fund
appropriations should be contingent upon each district's compliance with such reporting requirements.
This information is essential for the State to be able to get a handle on what it is spending on
environmental programs statewide and at the district level. It will also provide an effective means
of making the districts accountable to the taxpayer.

o DER should review all tentative budget proposals by water management districts that require an
increase in taxes greater than the rolled-back rate adjusted by inflation and recommend
approval/disapproval to the Governor. In order to levy such a rate, the Governor the elected
official who appoints all district governing board members would have to grant approval. This
change is necessary to make water management districts accountable to someone who is accountable
to the taxpayer, and help ensure that airplane, vehicle and office building expenditures can be
justified from a statewide viewpoint.

Limiting Growth In Administrative Costs

o Average pay structure in South Florida should generally equate with the other water management
districts when regional price differences are considered. And, when average pay exceeds the other
districts after price levels are accounted for, the district should provide justification.

o The semi-annual compensation review should be more stringent, perhaps through providing a cost-
of-living adjustment at the beginning of the fiscal year for all employees that meet expectations,
but requiring employees to exceed expectations in order to qualify for the lump-sum merit raise,
which would be given on their annual anniversary date. This would help ensure the second
performance/pay review provides an incentive for enhanced performance and is not seen by
employees as an automatic pay hike.

o The Deferred Compensation Plan for top management personnel should be discontinued or amended
to require employee contribution.

o Each contract for consulting services (i.e. audits, water testing, engineering, design, etc.) should
appear in a separate line item in the budget and summarized by function in the budget overview.
This information would make it possible to compute the total cost of providing district responsibilities
- district payroll as well as private sector consultants. The Governing Board could then make an


1,i Ii








informed decision about whether to increase staff or use consultants.


o The value of the increased employment base should not be diluted because of the concurrent growth
in contracts and the monitoring functions associated therein. The in-house technical capacity should
not be continually enhanced if the district is going to continue to contract out the bulk of its
workload.

o The district should reimburse its employees at the standard state rate of 20 cents per mile for using
their own vehicles rather than providing passenger-type vehicles for employees on a frequent basis.

o Reduce the cyclic maintenance program for passenger-type vehicles to one inspection per year.

o The current ratio of mechanics to vehicles should be reduced.
o All maintenance and repair functions should be privatized.

o Because there are 104 passenger-type vehicles currently underutilized (according to the district's
own study), no vehicles of this type should be purchased until full utilization is achieved.

o The private airplanes should be sold-off and the district should rely on commercial or other
available air travel alternatives.

o The Legislature should examine the issue of air travel by water management district personnel by
defining "necessary" air travel, and require a standardized cost analysis of the various air travel
alternatives be submitted to the Department of Environmental Regulation (DER).

o South Florida should develop a plan to phase in permit fee increases so that these fees pay for a
greater portion of the cost of regulation.

o The district could apply savings from its air travel and vehicle fleet to further increase the budget
of the Resource Regulation Department, enabling them to hire more and better qualified regulatory
personnel and ultimately reduce the average time taken to process permit applications.

District Budget Documents

o The district should disclose in the budget document management's goals, economic assumptions
and budgeting practices upon which the recommended spending level was determined.

o The district should, in general, include three years of financial information in all sections of the
budget document; budget year, current year (estimated 12 months), and the prior year actual.

o The district should develop and disclose in the Program Summaries performance measures (output
and outcome), funding source and historical financial information.

o The district should restructure its Capital Program Budget to properly reflect project costs on an
annual basis by fund source.

Performance and Financial Audits

o This report identifies several internal control problems that need improvement. The district should
extend a moratorium on any future tax and spending increases until these deficiencies have been
overcome.




,.- .Y- rI*I .I~t *J I



WATER MANAGEMENT DSTRICTS What They Are amd iw They Affect Your ]Pcketbook?

Brief History
Maatainaing tForida's vital wawr resources the primry r ibiy of th sate's five r ioal
Wrter i at district. D" i0 peKj the epllve tdo it



feaflag for a Mteed Iprgras.
Florida's first water n Ian ttype district he C l md Saeutarn Floida Flood Control
Diserjct wa for md i i9. It w act -II igw mai Aii iD6 0ms that occamred
diarlg tiatdsdae prokll" u il n Ri 5 tf e poor flspd Nta dmralge control
chacristics ihliaset a tII mara of fatife.
Subsequtly, thb fl da Water Resourcs Act of 1957 p Ucy ua~r the domain of the
old Sae Bdord oflCosrvation to >d evI m the win iae L i t72, te Model
Wear Coo** we dWowlope g masses by

vidl e d d other works str o
lorevent dida, Sat a rm floods, sogl ero aI eaeefive dringe;t
the waiea ina- asene aOebi *st calived or flly
ontrolwt so as to reiat a6k ste ae< u tl
Manage water resources;
Promote the conservation and proper use of grface anad ground water,
Regulate dams and other works to provide water storage;
Prevent damage from floods, soil eroaa, ad excessive drainage;
Preserve natural resources, fish ad wildlife;
Promote air and water polludo control; and
Promote recreatioal development, protect public lands, and asist in maintaining the
navigability of rives and harbors.
Clapt 373 also 6 salwp ,ra tI I da apr t Q oEfviHMtAtO

asu sene.. s a s
dagor soft Ao III


Structure
Water management ditrisc are iuti-couty txing authorities. Tey are in fat tbe only regional
authority wit the power to lvy ed valetem taxs. "cair y iy s uaise ia( property
tax coIBectilao was sIde impendI i imp at ugh by the L 0ishaN1 to auaijwtbM 6 the sane
"truth in milage" (TRIM) requirements as municipal and county government, in accordance with

3



i'5i









Section 200.065, F.S. Each district is overseen by a governing board of nine members appointed by
the Governor to a four-year, non-paid term. The governing boards are statutorily required to meet
at least once a month and maintain documents and records covering all such meetings and
proceedings. The governing boards approve both the level of spending in the district budget and the
property tax rate necessary to fund the approved budget. They are responsible for providing
oversight and accountability to the taxpayers in their districts.

Sections 373.079 and 083, Florida Statutes set forth the following general powers and duties of the
district governing boards:
Employ an executive director and such engineers, other professional persons and other
personnel and assistants as it deems necessary ... to administer day to day district operations.

Contract with public agencies, private corporations, or other persons; sue and be sued; and
appoint and remove agents and employees, including specialists and consultants.

Issue orders to implement or enforce any of the provisions of this chapter or regulations
thereunder.

Make surveys and investigations of the water supply and resources of the district and
cooperate with other governmental agencies in similar activities.

Function

The major water resource issues of the state have generally centered around drainage and flood
control. At the time they were created water management districts were primarily involved with
water quantity issues, while the Department of Environmental Regulation (DER) focused more on
water quality concerns. Over time, district functions have expanded through state mandates and
delegations of authority from DER. The following is a list of the current responsibilities of the
state's five water management districts:
Drainage and Flood Control;

Consumptive Use Regulation the regulation of free flowing wells, plugging of abandoned
free flowing wells, regulating the consumptive use of water (excluding domestic consumption
by individuals);

Regulation of interdistrict ground water transfers;

Formulation of water shortage plans;

Regulation of construction, repair and location of wells;

Management and storage of surface waters;

Regulation and measurement of water discharges or diversions from any dams, reservoirs and
other such works;

Regulation of construction and dredge and fill activities within certain wetland areas;
Implementation of the Surface Water Improvement and Management (SWIM) program, which
requires all water management districts to develop and implement restoration plans for their
respective priority water bodies;

Local government comprehensive planning assistance; and










Implementation of the Save Our Rivers (SOR) Program, which requires water management
districts to purchase lands that are located near environmentally sensitive or priority water
bodies.

District Comparisons (1988)

District size varies considerably when measured in terms of population or square miles. Suwanee
River, the smallest of the five districts, has a population of only 200,000, less than 2% of the total
state population. South Florida, the largest district, encompasses 4.8 million people, or 40% of
Floridians. The Southwest district makes up 26% and St. Johns and Northwest water management
districts' populations account for another 32% of the state's population. In terms of square miles,
Suwanee River's boundaries cover 13% of the state while South Florida includes 30% of Florida's
land area. The St. Johns, Northwest and Southwest districts encompass 21%, 19%, and 17% of the
state land area, respectively.

South Florida also leads in the tax base category the ability to finance district operations with
almost one-half of the state's total taxable value located within its borders, a tax base of $172.6
billion. The other half is comprised primarily of the Southwest and St. Johns districts which account
for 25% and 21% of statewide taxable value, respectively. Northwest Florida represents another 5%
of taxable value. Suwanee is the poorest district having a tax base of only $3.1 million, less than 1%
of the total.

Budgets for the water management districts total a whopping $300 million. The $143.1 million
budget for South Florida is far and away the largest and accounts for nearly half of the total. The
Southwest and St. Johns budget totals are $63.9 million and $60.1 million respectively, together
accounting for another 40% of combined district spending. On a per capital basis, Suwanee ranks first
in district spending at $94.48 per person. (Remember that this district has only 200,000 people.) In
second place is South Florida with average spending per person of $30.00. The combined average
for all districts in 1988 was $25.26.

For the most part, the districts depend on ad valorem taxes to fund their operations. At least 40%
($126 million) of the total spending by water management districts is funded by property tax
collections levied in the counties of each district. Over $80 million or 64% of these tax dollars are
generated within the boundaries of the South Florida district which has the highest effective tax rate
of $.465 per $1000 of taxable value. The Southwest district produces another $27 million or about
22% of total tax revenues, while St. Johns makes up most of the rest. The Northwest and Suwanee
River districts together account for just over 1% of total district property tax collections. On a per
capital basis, the tax burden is the highest in South Florida at a rate of $16.83 per person. The
Northwest district has the lowest per capital tax burden of $0.89 per person which is a function of the
extremely low millage cap ($.05 per $1000 of taxable value) imposed on them by the Florida
Constitution.

The other water management districts are constitutionally barred from assessing more than 1.0 mill
- or $1.00 per $1,000 of taxable value in ad valorem property tax. An additional statutory
restriction precludes districts from exacting this constitutional millage cap. Suwanee River has an
effective millage rate total tax collections divided by total tax base of .265 well within its
statutory cap of .75 mills. The effective tax rate for St. Johns is .229 mills, also within its statutory
cap of .75. South Florida is restricted by statute to .8 mills whereas the Southwest district has no
additional statutory cap.
Southwest and South Florida, however, are further restricted in their ability to generate ad valorem
revenue. Their taxpayers are assessed both a district-wide and a basin-wide rate. The districts may
only levy a district rate up to .6 mills and a basin rate up to .4 mills yielding a total taxing restriction
of 1.0 mill.


I









As previously noted, the Northwest Flotida Water Management District is saddled with a .05
constitutional millage cap about one-twentieth the total capacity of the other districts. This inhibits
its ability to generate operating revenue and subsequently to carry-out its missions. As a result, the
State has had to supplement its basic operating budget with general revenue funds. The Legislature
should put Northwest on par with the other water management districts by removing this arbitrary
restriction so that more of its operations can be supported by district taxes.

The five water management districts also vary greatly in terms of size of the organization -
employees. Together, the districts employ 2,361 persons. South Florida employs over half of this
total 1,265. Southwest, the next largest, employs 546 people, less than half the amount employed
by South Florida. St. Johns employs 397 people or about 17% of all water management district
employees. Northwest and Suwanee River employ 93 and 60 respectively and together account for
less than 10% of all water management district personnel Finally, South Florida has 27 employees
for every 100,000 persons in the district, 35% higher than the average for all districts.

South Florida also pays it's relatively
AVERAGE S&B PER FTE AS PERCENT OF SFWMO large staff relatively well, with
,,SFS. VWa M average salaries and benefits of
M.0m $35,513 in 1988 compared to an
o.m. average for state employees of
$22,124. In fact, all of the districts
**i I pay higher average salaries and
.o. benefits than the State. Figure 1
shows the average salaries &
o.M- I benefits per employee for each
5o.= district as a percent of South
Florida's average salaries & benefits.
40.O
One important factor accounting for
o. Spending differences is not reflected
20.01. in the District Comparison table.
South Florida is responsible for
.o operating and maintaining the many
Mo.o-. -- -- -- structures that comprise the Central
rT. j 2u s, SM srATE and Southern Florida Flood Control
u. ossar rATr Project. A total of 1400 miles of
canals, levees and other structures
form this vast flood and drainage
Figure 1 system. The resource demands
associated with running this
enormous system are great. South
Florida's Resource Operations Department, which manages the system, accounted for 31% of the
district's operating budget in 1988. The St. Johns, Southwest and Northwest districts provide
important flood control functions but not nearly as extensive as the South Florida district's flood
control responsibilities.
















TABLE ONE
COMPARISON OF WATZE MANAGEMENT DISTRICTS
M87-1908


POPULATION


TAX BASE
(Billions)

LAND AREA
(Sq. miles)

CONSTITUTIONAL
VILLAGE CAP

STATUTORY MILLAGE
CAP

TOTAL BUDGET
(Millions)

W PLOYEES


r IDGET/CAPITA

EMPLOYEES/100,000
PERSONS

BUDGET/SQMILE

PROPERTY TAXES


EFFECTIVE TAX
RATE (Millions)

PROPERTY TAXES
PER CAPITAL


NORTHWETM


1,021,000

$18.3

11,200

.05

.05


$13.1

93


$12.82

9


$1,168

$0.9

.05


$0.89


SUWANE ST JOHN( SOUTH gQ1


200,000

$3.1

7,640

1.0

.75


$18.9

60


$94.48

30


$2,473

$0.8

.265


$4.10


2,729,079

$72.9

12,367

1.0

.6


$60.1

397


$22.03


15

$4,861

$16.7


.229


$6.12


3,115,519

$86.2


10,200

1.0

1.0


$64.0

546


$20.53

18


$6,270

$27.2


.316

$8.73


4,770,879

$172.6

17,930

1.0

.8


$143.1

1,233


$30.00

26


$SS
$8,079

$0.3




$16.3


11,836,477

$353.1


59,337

N/A

N/A


$299.2


2,361

$25.26

20


$5,042

$125.9

.357


$10.63


Source: Florida TaxWatch
Abstract, 1988.


Survey of Water Management Districts and the Florida Statistical


SOUTH FLORID



40%


49%

30%







48%

52%


119%

135%


160%

64%

130%


158%


! I I




1 I


Map of the Florida delineating the boundaries for the five water management districts.
0









SOUTH FLORIDA BUDGET GROWTH How Extensive Has it Been and How Has it Affected the
Taxpayers?

Over the years, property tax collections have contributed the lions share of the South Florida Water
Management District budget. This is not unexpected considering that ad valorem taxes are the only
tax source that the Florida Legislature has given water management districts the authority to levy.
Since 1978, district property tax collections have more than quadrupled, increasing from $20.3
million to $106.7 million for the 1990 fiscal year. In 1978, property tax collections made up 72% of
the total South Florida budget. The peak contribution of property taxes occurred in 1981 when they
represented 89% of total spending. By 1987 this percentage had fallen off to a low of 54%. The
annual rate of growth in taxes has been 15%, with 1990 taxes 4.3 times the amount levied by the
district in 1978.

The district's total budget has flourished
from just under S28 million in 1978 to SFWMD OPERATING AND TOTAL BUDGET
a 1990 budget of $175.1 million, more 10 M a VMM 4rM
than a $147 million increase or growth ,o.
of over 500% (Figure 2). Therefore, .8.o
while tax collections have not grown **o
quite as rapidly as the total budget '.|
during the last twelve years, ad valorem .
tax collections have funded over 60% of m.o.
the cumulative growth in the South I .o-
Florida Water Management District .
budgets since 1978. During this time, '' I


nearly $700 million in ad valorem
revenues have been collected by the
district to partially finance district
spending of just over $1 billion. The
1990 budget represents a continued
increase in property taxes relative to
total spending since 1987.


The primary emphasis of this study is to I a
assess district operations, so attention Figure 2
has been focused primarily on growth in
the operating budget. This excludes
capital projects, management projects and the Save Our Rivers components of the total district budget
and concentrates on expenditures from the general fund. South Florida's operations budget grew to
about $102.7 million in 1989 from $23.7 million in 1978, a cumulative increase of $79 million or
333%. Annual increases in the operations budget have averaged 13% with a low of 5.6% in 1983 to
a high of 31% in 1987. The 1989 South Florida operating budget increased 8% over the prior year.
Finally, operations spending in 1990 represents a significant slowing down of the incredible growth
exhibited over the last four years. The 1990 operating budget grew by approximately $1.5 million
or 1.4%. Since 1978, 96% of the district's operating needs have been funded by property tax
collections. Taxes as a percent of South Florida's operating budget have ranged from a low of about
84% to as much as 113%.

Population growth and the increased demands associated with it have been offered as an explanation
for the district's rapid budget growth. The population of the sixteen county area that makes up the
South Florida Water Management District has grown from about 3.6 million inhabitants in 1978 to
an estimated total of more than 5.2 million in 1990, for an annual district population growth rate of
3%. The per capital operating budget (which takes into account population growth) has grown at an
annual rate of about 10%. Tax collections per capital have increased at an annual rate of 11.5%.


FISCAL r)


--


I I I I; I I


"W0

























1Figure 379 a a a a a7 1n
a PIM VM

RIgure 3


SFWMD BUDGET ANNUAL GROWTH RATE


" a a a -
a OW IAMrtI


Figure 4


4. U lm Gem T


SFWID PER CAPITAL BUDGET AND TAXES
F.OW W* 11 1 111


9.22.


- i


While the population within this region of
the state has certainly increased, it is clear
that the explosive budget growth of the
South Florida Water Management District
cannot be solely attributable to population
influx. The district's operating budget has
grown from just over 56.50 per person in
1978 to about S20.00 per person in the
current and upcoming fiscal years. The
growth in taxes per capital has essentially
mirrored the growth of the operating budget
on a per capital basis, ranging from over
$5.50 back in 1978 to about $20.00 for the
1990 fiscal year (Figure 3). We have not yet
accounted for the budget increases resulting
from inflation, however.

Figure 4 plots annual growth rates in the
district budget versus the combined growth
rate of population and inflation. For four
out of the five years from 1979 to 1983,
growth in district spending fell at, or below
the combined population/inflation growth
rate. From 1984 through 1988 a much
different growth pattern can be observed.
In each of these years, the growth in district
spending for operations significantly
exceeded the population/inflation growth
rate. In 1987, the largest growth occurred
(31%) when population/inflation was only
5.5%. Growth rates in the 1989 fiscal year
for the budget and for population/inflation ._
were virtually identical. The 1990 budget
represents just over a 1% increase in the
operating budget while population/inflation
is expected to grow by more than 8%.

Another way to look at the growth in
district spending is to compare the actual
budget for each year to the hypothetical
continuation base budget for each year.
The continuation base budget is the budget
which is necessary to cover increases in
expense price-levels and workload. The
percentage change in the consumer price
index is used to measure price levels
(inflation) and population growth serves as
a proxy for increases in workload. (No
workload measures are included in the
district's budget document to justify
increases in staff or current levels of
expenditures.)








In 1984, DER delegated regulation of its Strmwater Rule to the water management districts. This
delegation required the districts to adopt performance criteria to review groundwater discharges of
stormwater. In 1981, the Save Our Rivers (SOR) program was initiated. This program required water
management districts to acquire and manage lands within their respective boundaries deemed
necessary for conservation and protection of the state's water resources. Additionally in 1985, DER
delegated the authority to issue permits for location, construction, repair and abandonment of water
wells.

Finally, in 1987, the Surface Water Improvement and Management (SWIM) program was created.
This plan initially required districts to develop a priority list of water bodies in need of restoration.
In the following year they were to adopt strategy plans to address the problems in each water body
identified and subsequently to implement those plans.

These additional responsibilities, however, are not solely responsible for the significantly increased
tax collections and operating growth that South Florida has experienced. For the most part, the
district receives either a specific state appropriation or other means of generating the revenue to
carry out these mandates. Direct state appropriations fund the SOR and SWIM programs. The other
(regulatory permitting) mandates are not accompanied by specific appropriations, but districts have
the authority to assess permit fees sufficient to recover the cost of administering them.

There are, however, some costs related to these mandates that are borne by the districts. The SWIM
program appropriation by the state covers only 80% of the funding requirements for a given year,
leaving the remaining 20% the responsibility of the district. And, even though districts can collect
fees to recover the cost of administering regulatory permits, South Florida notes that permit fees do
not capture all of the administrative costs associated with regulatory permitting, compliance
monitoring or restoration functions. It is interesting to note, however, that until 1989, South Florida
had not implemented any type of permit or user-based fee system. Further, the district has made
a policy decision not to recover costs related to enforcement (for plugging abandoned wells) even
though the Legislature explicitly authorized this type of cost recovery.

Summary

Property taxes have always been South Florida's primary source of revenue with collections
quadrupling since 1978, growing at a rate of 15% per year. Similarly, the total budget has grown to
more than five times its 1978 level with property taxes funding about 60% of this growth. The
operating budget increased over 300% during this period, an annual rate of 13%.

Population growth for the region has been about 3% a year since 1978. Average annual growth in
the per capital operating budget has been 10%, while per capital tax collections have grown by 11.5%
a year. Operating budget growth was held within the combined economic impacts of population and
inflation at the beginning of the decade (1980-82), but from 1983-88 it significantly exceeded the
growth necessary to accommodate inflation and population growth. Growth in the operating budget
falls back to within the effects of population and inflation for 1990. Figure 5 compares the actual
operating budget with a hypothetical continuation budget.

In part, such large increases in the operating budget can be attributed to the additional regulatory
responsibilities mandated at the district level by state government and increased administrative costs.
South Florida does as do the other water management districts incur some expense over and above
the existing statutory provisions for funding these regulatory mandates. We did not receive sufficient
information about the costs associated with state mandates for South Florida to properly evaluate this
issue, however, it is apparent that such costs alone do not account for South Florida's explosive
operating budget growth.


,I 1










S Recommendation
o The district should separately account for the cost of district activities necessary to comply with
state mandated programs. This will provide useful information to the governing board and district
taxpayers about how much property tax revenue actually subsidizes these state mandates. It will also
show how much budget growth is directly related to increased regulatory responsibilities and how
much is attributable to increased administrative costs.


UNBRIDLED TAXING AUTHORITY Large Tax Base Gives the District a Blank Check. Is This
Taxation Without Representation?
The South Florida Water Management District possesses powerful revenue generating capacity
because of its enormous tax base, which makes up half the taxable value of Florida. Since 1984, its
tax base has increased by 62%, growing at an average annual rate of 8.4%. Property tax revenues
have increased even more, more than doubling since 1984 and growing at a rate of more than 14%
per year. The bulk of South Florida's tax revenue is collected from its combined district-wide and
Okeechobee basin levies.
Florida law requires water management districts to conduct two public hearings to establish tax rates
each year. The Truth in Millage Law (TRIM) was enacted to ensure that taxing authorities in the
state do not reap automatic revenue increases resulting from growth in their tax base, without first
providing public notice of the following:
1) The proposed tax rate for the new fiscal year,
2) The tax rate that, when applied to the current tax base (exclusive of new construction), would
generate the same revenue'as the previous fiscal year (the rolled-back rate); and
S3) The percent increase in the proposed rate over the rolled-back rate.
Even though growth in South Florida's tax base has been very dynamic, its tax rates have actually
increased every year notwithstanding Florida's TRIM requirements. A tax increase was proposed
again for 1990. The combined district-wide and Okeechobee basin rates have increased 37% since
1984. This combined levy exceeded the rolled-back rate by an average of 10% during this period.
The public hearing requirement for establishing tax rates and adopting budgets does not appear to
provide sufficient incentive to make a non-elected governing board accountable to its district
taxpayers.

In large measure this circumstance results from the vast multi-county area that makes up the regional
taxing authority known as the South Florida Water Management District. Sixteen counties are
encompassed within the district, but the public hearings are generally held in West Palm Beach. Most
taxpayers live too far away to attend the hearings. In addition, the dollar amount of each taxpayer's
bill is not very-large relative to taxes levied by school districts, cities and counties, further reducing
the incentive for taxpayers to try to attend these hearings or more generally to stay abreast of district
activities. Moreover, water management district taxpayers do not have the ability to voice their
opinion on district taxing and spending policies at the voting booth because all governing board
members are appointed by the Governor.

Water management districts are special taxing authorities that have maintained a relatively low profile
mainly because taxpayers are not familiar with what they do. In recent years questions have been
raised about the appropriateness of various water management district spending practices. For
example:
Southwest Florida Water Management District Has received criticism regarding the proposed
formation of a separate bonding entity to finance construction of a new headquarters facility;

13
13


S24








Suwanee River Water Management District Has allegedly misused state appropriated Surface Water
Improvement and Management (SWIM) funds;

Northwest Florida Water Management District Was criticized in a recent DER internal audit report
for accounting practices related to Save Our Rivers (SOR) and Surface Water Improvement
Management (SWIM) funds;

South Florida Water Management District Significant deficiencies identified in past financial and
performance audits still exist;

South Florida and St. Johns River Water Management Districts Have been criticized for
expenditures related to owning and operating private aircraft.

These concerns add to a perception that our state government should provide more oversight of its
water management districts. By focusing such efforts toward encouraging more responsible use of
public resources, the State could help ensure that these districts are more accountable for their
somewhat autonomous activities.

The Legislature has considered getting more involved in water management district budget
formulation and review, in order to provide greater accountability to that process. A factor
complicating those efforts, however, is the fact that the fiscal year for a water management district
does not coincide with the state's Legislative session. So it is difficult for the Legislature to impact
district budget formulation.

During the 1989 Regular Session, the Senate Committee on Natural Resources and Conservation
drafted two of proposals generally aimed at enhancing accountability and control over water
management districts. The first proposed that all districts be organized by common divisional
structures in order to facilitate more uniform and consistent interdistrict comparisons and analyses.
The second would have authorized the Secretary of Department of Environmental Regulation (DER)
to perform a detailed annual review of the patterns of expenses between the districts. No action was
taken on either proposal.

Currently, neither DER or House and Senate substantive or appropriation committees have any
responsibility to actually review water management district budgets. Consequently, there is no real
oversight of water management districts except for the board members appointed by the Governor.
The lone exception to this would perhaps be that water management districts,their governing boards
and basin boards fall under the domain of Florida's Sundown Act (Section 11.611, FS). The Sundown
Act which requires routine evaluation and repeal of state advisory entities, commissions and boards
of trustees associated with executive agencies first applied to water management districts in 1988
and includes their authority to levy ad valorem taxes. Since then, the Legislature has decided to
review them on an annual basis. Authority for all of the districts will be repealed in October of this
year (1990) unless the Legislature reinacts them.

The House Committee on Natural Resources (in 1988) and the Senate Natural Resources &
Conservation Committee (in 1989) released studies of the state's water management districts. Both
reports acknowledged the importance of the districts in carrying out the state's environmental
programs and the significant contribution that taxpayers make toward those roles each year. But,
both reports also point out the practical problems associated with subjecting these districts to the
Sundown review. Water problems and the general need for water conservation are issues that are
unlikely to disappear any time soon and it is likewise doubtful that the need for water management
districts will disappear.

The districts have all grown phenomenally in recent years with regard to responsibilities and
expenditures. The largely generic Sundown review poses such questions as:

o Has the problem been solved?










o What are the governing boards doing?
o Are they operating efficiently and effectively?
o Would there be an adverse effect on the executive agency or the public if they were abolished?
As it applies to water management districts, which have evolved into rather complex regulatory arms
of the state, this review does not provide the necessary financial oversight to ensure districts operate
in the taxpayers best interest. Additionally, the Sundown Act was meant to provide review of water
management districts every decade. Notwithstanding Florida TaxWatch's belief that this is an
inadequate oversight mechanism, it conflicts with the bonding authority the State has granted to the
districts. It does not make sense to give districts authority to issue bonds in anticipation of state
appropriations for land acquisitions which mature over a longer period of time than this Sundown
review occurs -- especially when the very nature of the Sundown review is to determine whether
districts are going to be continued or repealed.
Taxpayers need and deserve a better system of checks and balances. How do we know if we are
receiving "good water management at a good price"? TaxWatch strongly recommends greater state
oversight of water management districts which collectively spend more than $300 million per year.
South Florida spends half of this amount! We concur with the proposals made by the Senate Natural
Resources Committee: DER should become statutorily responsible for the financial oversight of
water management districts.

Recommendations
o All water management districts should be required to submit, in a standardized format, their annual
proposed tax rates, tentative budget, and a five year capital improvements plan to the Florida
Department of Environmental Regulation (DER). Receipt of general revenue and trust fund
appropriations should be contingent upon each district's compliance with such reporting requirements.
This information is essential for the State to be able to get a handle on what it is spending on
environmental programs statewide and at the district level. It will also provide an effective means
of making the districts accountable to the taxpayer.
o DER should review all tentative budget proposals by water management districts that require an
increase in taxes greater than the rolled-back rate adjusted by inflation and recommend
approval/disapproval to the Governor. In order to levy such a rate, the Governor the elected
official who appoints all district governing board members would have to grant approval. This
change is necessary to make water management districts accountable to someone who is accountable
to the taxpayer, and to help ensure that airplane, vehicle and office building expenditures can be
justified from a statewide viewpoint.


SOUTH FLORIDA OPERATING BUDGET GROWTH What Areas of District Operations Have
Contributed Most to Big Budget Increases?

Administration
From an organizational standpoint the South Florida Water Management District is made up of
thirteen separate departments and offices: Executive Office; Office of Internal Audits; Office of
Communications; Office of Counsel; Office of Technical Services; Department of Land Management;
Department of Finance and Administration; Department of Resource Regulation; Department of
Resource Operations; Department of Construction Management; Department of Research and
Evaluation; Department of Resource Planning and Basin Administration. These departments and
offices are comprised of 58 different divisions.


15


9. 2 d








The 1990 operating budget for
administrative costs is $24.1 million, over
200% higher than the 1984 level. Figure 6
shows that 23 cents of every operating
O 191 OPTEO OPC aT dollar spent by the district pays for
"overhead." -The Resource Operations,
~ C.60 Planning and Control Departments account
-- c... for 64 cents of each operating dollar. An
additional 9 cents funds Land Acquisition
and Construction Management. The
remaining 4 cents is for tax commissions
and contingency reserves.
TaxWatch examined the primary
components of the district's operating
budget salaries and benefits, contractual
-_----..-. c..mn services, expenses, and other. Salaries and
benefits includes salaries, car allowance,
retirement, social security, supplemental
retirement, group life, accidental, disability,
medical and dental insurance. Contractual
services is comprised of things like
professional fees and consulting services,
Figure 6 district promotional activities, travel
expenses, postage, and communication costs,
among others. We have grouped
commodities, current charges and operating
capital outlay as Expenses. Commodities include parts and fittings, office supplies, small tools and
equipment, metal and wood products, lab supplies, fuel, oil and grease. Current charges refer to
items leased or rented, such as equipment or office space. Operating capital outlay includes
equipment purchases in excess of $200. Finally, the Other category combines contingency reserve
funds as well as tax collector and property appraiser fees.

Salaries and Benefits
SFRID OPERATING BUDGET BY EXPENDITURE
Salaries and benefits have accounted for over _a.
half approximately $31 million of the
overall increase in operations spending from ,,.
1984 through 1990 (Figure 7). The annual
growth rate between 1984 and 1989 has been
15%, two percentage points higher than the "
operating budget. In 1984, the district spent i
just over $26 million on salaries and benefits. =
By the 1989 fiscal year that figure almost
doubled and the 1990 salaries budget of over ...
$57 million is more than double the 1984 level.
In 1984, salaries and benefits represented 55% ,,.
of the district operating budget. In 1988, the
category tapered off somewhat to 46% of the
operating total. By 1989, however, salaries and "'
benefits made up half of the operating budget,
climbing to 54% in the 1990 budget. e Ing a m" -
Average district salaries and benefits in 1984 Figure 7
were a little over $28,000 per year. That figure

16


S.27









increased in 1989 to over $40 thousand
SFWMD AVG S&B COST PER FTE COMPARED TO
per year. This represents average
M.o0 OT P--- IL annual growth of 7.2% for the five-year
So. period. The 1990 budget increases the
a.o average salaries and benefits paid to
4... district employees by an additional
S*.** $3,000. The cumulative six-year
m.* increase has been $15,000 per employee,
s.0.- or 52.5%. Figure 8 compares the average
1.o salaries and benefits of district
i* employees to the level of salaries and
... benefits sufficient to cover increases in
.o the cost of living. Average salaries and
M.0 benefits for 1990 are 23% higher than
'.o what is justified by annual cost-of-
/ living adjustments since 1984. Said
\.o another way, the district has devoted
m over $20 million in the last five years to
a ;s M 7 U s a ; significantly enhance the standard of
Living of its employees.

Figure 8 Such increases can be attributed in part
to ardftrict policy of awarding increases
in compensation to employees twice a
year once as a base salary adjustment,
and six months later as a cash, merit bonus. To receive both increases, according to the district
personnel policy manual, an employee's work performance must only be judged to "meet
expectations." The second increase should be limited to only those employees whose performance was
judged to "exceed expectations."

This discussion and the information in Figure 1, should be tempered with comparative information
about prices in each district. Regional price data taken from the 1988 Florida Price Level Index -
provides comparative cost of living information about the five districts. These cost of living
differentials, however, do not adequately explain the vast pay level differences that exist between
South Florida and the other districts.

In 1988, the price level for the South Florida area was over 14% higher than both the Northwest and
Suwanee River districts, 9% more than St. Johns and more than 6% above the level of prices in the
Southwest district area. We would therefore expect South Florida's average pay rates to exceed the
other four districts by an amount roughly equivalent to these percent differences.

Instead, South Florida's average pay rate is more than twice the level of pay for Suwanee River, St.
Johns and Southwest when regional price levels are considered. South Florida's average salaries and
benefits are equivalent to the Northwest district in 1988, based on their regional price differences.
So, differences in the cost of purchasing a market basket of goods in South Florida compared to the
four other water management regions does not by itself justify the comparatively excessive pay rates
that exist in South Florida.

South Florida management defends its pay levels as appropriate to secure the level of quality and
dedication required of its personnel. The district points to a 7.9% employee turnover rate to indicate
that its higher than average salaries have contributed to a relatively stable workforce.
The turnover rate among (non-water management) state government employees is estimated to be
much higher, close to 20%. Given a direct relationship between South Florida's pay and turnover
rates and the higher state government turnover rate, the higher salaries appear justifiable. In 1989,
however, St. Johns and Southwest experienced turnover rates of 6.2% and 9.3%, respectively. This








is important since the only two districts even remotely comparable in size maintain employee turnover
at levels in line with South Florida's without paying the comparably exorbitant wages.

The district also contributes to executives and certain managers, deferred compensation plans, even
though all district employees also participate in the Florida Retirement System (FRS) for state
employees. The deferred plan contributions out of public funds should be disallowed. Many
taxpayers do not work for companies that even offer employee participation pension plans. Why
should SFWMD employees receive two employer (taxpayer) funded retirement programs. SFWMD's
Managers Deferred Compensation Plan accounted for $325,000 in 1989.

Recommendations

o Average pay structure in South Florida should generally equate with the other water management
districts when regional price differences are considered. And, when average pay exceeds the other
districts after price levels are accounted for, the district should be able to provide justification.

o The semi-annual compensation review should be more stringent, perhaps through providing a cost-
of-living adjustment at the beginning of the fiscal year for all employees that meet expectations, but
requiring employees to exceed expectations in order to qualify for the lump-sum merit raise, which
would be given on their annual anniversary date. This would help ensure that the second
performance/pay review provides an incentive for enhanced performance and is not seen by
employees as an automatic pay hike.

o The Deferred Compensation Plan for top management personnel should be discontinued or amended
to require employee contribution.

Employment

In 1984, South Florida employed 920 F FU TIME E A T MPOYS
individuals. By 1989, there were 1,289 SFD F TIME EQUIVALENT LOYEE
employees at the district, which ,1.5 1FX V W .M "e
represents an annual average growth
rate of 7% for that period (Figure 9). -. *
The 1990 budget provides for an
additional 31 employees, bringing
overall employment growth from 1984 .
to 1990 to 43.5%, an increase of 400
positions. The Florida Department of I -.
Environmental Regulation (DER), the
state agency charged with oversight of
all water management districts, employs ,.
1,314 persons compared to South
Florida's 1990 employment level of ,.-
1,320.
.95
South Florida's operation and ____
maintenance activities on the Central m a a, a wao
and Southern Florida Flood Control
Project extend to 1400 miles of canals a Ps.
and levees, over 2,000 control structures Figure 9
and 19 pumping stations. This
responsibility accounts for 30% of the
district's 1990 operating budget and a large portion of the employment base. Though total spending
in this area has grown, it has not grown as extensively as the other departmental components of the

18


9.27








budget. The Department of Resource Operations actually accounted for a greater portion of the
operating budget back in 1984 (50%). So, it does not appear that this particular function has been
the catalyst for as much of South Florida's recent growth as other aspects of its operations.
A review of South Florida's employment data from 1988 shows that 88 employees held top
management/executive level positions: the executive director, deputy executive director, assistant to
executive director, all directors, deputy directors and field station superintendents. This is a
significantly greater number of executive personnel than the other four water management districts
employ. South Florida is, however, significantly larger than the other districts in every category.
In 1988, South Florida employed one manager for every 14 employees. The smallest water
management districts, Northwest and Suwanee River had a manager to employee ratio of 1:14 and
1:10 respectively. St. Johns, like South Florida maintained a 1:14 manager to employee ratio. In
contrast, this ratio for Southwest, the only comparably sized district, was only 1: 32. Thus, South
Florida employs over twice as many managers (per employee) as the next largest district.
The South Florida district is a larger organization than the others in terms of numbers of divisions
that make up its primary departments. The Resource Operations Department alone which is
comprised of 15 separate divisions contributes greatly to this size differential. This factor
combined with the knowledge that South Florida is larger in virtually every category, helps to explain
its broader organizational structure. But, does it adequately justify the vast difference in the manager
to employee ratio that exists between South Florida and the Southwest district? A standard
departmental organization structure for all water management districts would be helpful to facilitate
inter-district comparisons, in order to answer questions such as this.

Contracts
Contractual service spending clearly represents the most dynamic component of operating growth.
The overall growth of contracts from 1984 to 1990 is about $23 million, a 450% increase. From 1984
to the 1989 fiscal year the district's contractual service budget grew from just over $5 million to
nearly $31 million, an increase of 513% or S26 million. This translates to an average annual growth
rate for the five-year period of 44%. In 1984, contracts accounted for 11% of South Florida's
operating budget. By 1988, that figure increased to 31% and represented 30% of operations in 1989.
The budget for 1990 represents a slight dip in contract spending from the last two fiscal years.
Contracts account for 27% of operating expenditures in the 1990 budget, a decrease of $3 million
from the 1989 level.
South Florida's contract spending embodies an unusually wide variety of expenditure types. It is not
clear how some of these expenditures relate to contractual service spending (clipping services,
employee physical exams, subscriptions, documentary stamps, paper back reports, postage, public
management conferences, utilities, communications, employee relocations and principal retirement).
Currently these contractual service expenditures are displayed by purpose for each division in the
final budget. Contracts for consulting services should be included with items under the category
expenses and displayed by expense type in the final budget document to provide better scrutiny of
year to year spending increases by object of expenditure.
The substantial growth in its employment base (and personal services) over the last few years has
resulted in part from the need to effectively carry out additional mandated responsibilities. At the
same time, however, the district has dramatically increased reliance on contractual services to assist
in carrying out these new roles. It is a curious phenomenon that both employees and contractual
services are experiencing substantial simultaneous growth. The Resource Planning Department the
unit that relies most on outside consultants filled 68 of 108 vacant positions budgeted from 1987
to 1988. The majority of these new hires are technical experts or professionals. New hires or new
positions budgeted in 1989 or 1990 would be over and above this amount. One would expect that as
the number of highly paid technical employees increases, the need for contractual services would







eventually decrease.


Contracting with outside consultants/firms to perform certain tasks is not unusual. Adequate
justification certainly exists when cost efficiencies can be realized or when resource limitations -
personnel, facilities/equipment and technology preclude active participation. However, it is not
clear that such efficiencies or limitations exist for South Florida to justify its significant contractual
service expenditures.
Perhaps the ultimate issue is not just that contract spending has increased so dramatically or that it
has occurred during a period of significant growth of skilled technical and professional employees.
The more important consideration may be: Are South Florida's taxpayers getting the optimum quality
work product representative of the potential of these skilled employees and the premium pay levels
they receive? Are these employees so bogged down in the minutia of monitoring the technical aspects
of contract projects that their potential value to the district is being dilued?

Recommendations

o Each contract for consulting services (i.e. audits, water testing, engineering, design, etc.) should
appear in a separate line item in the budget and summarized by function in the budget overview.
This information would make it possible to compute the total cost of prov iing district responsibilities
- district payroll as well as private sector consultants. The Governing :oard could then make an
informed decision about whether to increase staff or use consultants.
o The value of the increased employment base should not be diluted becau e of the concurrent growth
in contracts and the monitoring functions associated with them. The i -house technical capacity
should not be continually enhanced if the district is going to continue to contractt out the bulk of its
workload.

Expenses
The other element of the operating budget is expenses. District expenses include appropriations for
commodities, operating capital outlay and current charges (the cost of re ting and leasing goods and
services). Expenses have grown by about $7 million between 1984 and the current 1989 fiscal year,
approximately 74%. In 1984, expenses totaled $9.5 million and made up 20% of the district operating
budget. Expenses grew to nearly $15.5 million by 1988, and to $16.5 million by 1989. In the last two
complete fiscal years expenses comprised 16.5% and 16% of operations. The average annual rate of
growth from 1984 to 1989 has been about 12%. The budget for 1990 decreases expenses to roughly
$13.5 million, or 13% of operations spending. Specifically, TaxWatch found two types of expenses
that appear to be excessive: (1) motor vehicles and (2) aircraft.

(1) Motor Vehicles In 1988, South Florida budgeted $1.5 million specifically for the acquisition
of new vehicles passenger trucks and sedans. As of September 1989, the South Florida Water
Management District inventory of vehicles totaled 897, a five year increase of 127 units. Although
many of these are heavy equipment vehicles, or water craft used to carry out the resource operation
and maintenance activities and other-regulatory functions, 414 (46%) are classified as sedans, light
trucks, vans, station wagons etc. Essentially, the district owns one of these passenger-type vehicles
for every three employees. More than one-third (146) of these are maintained at the district
headquarters in West Palm Beach, with 59 (40%) of that number "garaged" or driven home each night
by staff. The annual cost for maintaining these 59 vehicles is S170,000 based on 605,298 miles, which
is an average cost of 28 cents per mile. Reimbursing employees at the standard state mileage
reimbursement rate of 20 cents per mile, for using privately-owned vehicles, could save the district
$50,000 annually.










One of several audit studies contracted out recently by the district relates to the issue of travel
expenses. The thrust of this report dealt with documentation and reimbursement of employee travel
expenses, however, one observation noted a lack of written policy to evaluate the economy of the
various transportation modes used by the district. The report recommended that minimum guidelines
be established to assess the need for the district's transportation resources, so that managers can more
efficiently allocate those transportation resources. The report suggested that district vehicles only
be provided for trips over a certain distance. The official district response disagreed with this
recommendation and in part, its response seems to exemplify its general philosophy about the priority
of financing its own transportation resources. "The concept of only providing vehicles for trips in
excess of XX miles is not realistic as it assumes the employee has use of a personal vehicle or some
form of local, public transportation." It is usually taken for granted that getting to work is the
responsibility of the employee.

The district recently engaged a private firm to perform a Vehicle-Fleet Operations Analysis Study.
The findings and recommendations of that study were released April 14, 1989. The following is a
summary of some of the recommendations which in the view of TaxWatch directly relate to tangible
cost-saving measures. By reducing the "cyclic" vehicle maintenance program for passenger vehicles
to one inspection per year, the district could save about $150,000 annually. The district employs too
many mechanics in relation to the number of vehicles at its field stations and could realize savings
from its maintenance and repair activities by reducing that number. The district should decrease its
current fleet of vehicles by five two cars and three trucks. The district could also save money by
privatizing all of its vehicle maintenance and repair functions. The annual cost for maintaining the
passenger fleet is $3,522 per vehicle. The consultant conservatively estimated that the same work
could be privatized at an average annual cost of $2,800 $3,400, which could represent substantial
annual savings to the district Finally, the study determined that 104 vehicles in the district's fleet
are currently underutilized. By simply not replacing them the district could avoid costs of $426,000.
This amount is very close to the money proposed in the 1990 budget for new or replacement vehicles.

Recommendations

o The district should reimburse its employees at the standard state rate 20 cents per mile for using
their own vehicles rather than providing passenger-type vehicles for employees on a frequent basis.

o Reduce the cyclic maintenance program for passenger-type vehicles to one inspection per year.

o The current ratio of mechanics to vehicles should be reduced.

o All maintenance and repair functions should be privatized.

o Because there are 104 passenger-type vehicles currently underutilized (according to the district's
own study), no vehicles of this type should be purchased until full utilization of vehicles is achieved.

(2) Aircraft Florida's Auditor General determined that in 1984 South Florida's private airplanes
flew about 30% less (383 hours) than the average annual flight hours for businesses that use private
aircraft for executive transportation (500- 600 hours). Governing board travel accounted for 13%
of the flight time. The Auditor General determined that "since the flying hours for (South Florida)
executive transportation are annually below the industry standard for executive flight hours coupled
with the likely fact that utilization of regularly scheduled commercial airlines are most always less
expensive, we recommend that, absent a showing of record that its executive aircraft is more
economical and in the taxpayers best interest, the board discontinue the use of the district aircraft
and instead use the more economical commercial flights." By 1987, the amount of time logged by the
district's privately owned airplanes grew to roughly 500 hours. One-third of that total was for
governing board travel, which is still significantly less than the industry standard referred to by the
Auditor General in 1984.


~r








Since 1980, this water management district has spent over $2.6 million acquiring aircraft. In 1980,
the district bought a 1977 Rockwell Turbo Commander airplane for $680,000, and sold it seven years
,later for $175,000. In 1981, a new Jet Ranger Bell Helicopter was purchased for $393,000. The
district spent $934,624 in 1986 to purchase another airplane, a 1981 Beechcraft King Air. Then, in
1987 bought another new helicopter, a Jet Longranger for $759,177 this was destroyed the same
year in a crash and replaced in 1989 for $814,542, with the district funding over $60,000 of the
replacement cost.
In 1987, the South Florida's total aircraft operation costs excluding amortization exceeded
$500,000, most of which was for salaries, maintenance and insurance. Pilots salaries and benefits
made up the bulk (one-third) of that figure. Routine maintenance, repair and fuel costs together
comprised another 40%, while insurance accounted for over 15% of aircraft operation costs. About
one-third of the total aircraft costs ($176,397) paid for the operation of the district's two airplanes.
These planes flew 630 passengers on 197 flights in 1987 for an average passenger load of 3.2. Those
197 flights accounted for 503 flight hours that year, so the district spent $350.69 per flight hour and
$895.42 per flight or $109.59 per passenger, per flight hour and $279.82 per passenger, per flight -
to own and operate its own airplanes in 1987, excluding the costs of capital amortization.
By 1989, the cost of owning and operating a single airplane grew to $217,000 excluding
amortization of $64,000. Total flight time for the airplane, however, decreased to 379 hours in 1989,
increasing by 63% the cost to the district per flight hour ($572.56) from the 1987 level. The average
passenger load dropped off slightly in 1989 to 2.8, increasing the cost per flight hour per passenger
by 87% over the 1987 level ($204.49).
In 1988, the district's Management Audit Department recommended that a cost benefit analysis be
done each time district aircraft usage was requested to compare against the cost of commercial
flights. The district acquiesced and responded that "we will formalize our cost comparison for staff
utilization of fixed-wing aircraft and make the data available for review in the future." The district
has initiated a cost comparison procedure for management requests for use of the district aircraft.
They are relying on a computer software package that continuously monitors costs associated with
" their aircraft to facilitate this analysis.

This procedure does not cover the executive director and his immediate staff or governing board
use of the aircraft although the management audit recommendation made no reference to their
exclusion. The district stated that it is not reasonable to expect non-paid board members to expend
their valuable time waiting for available commercial flights. Furthermore, they believe the executive
staff requires this exemption due to their substantial travel needs and the convenience and flexibility
that such unrestricted travel privileges afford them. A cost benefit analysis should include all travel
the governing board and all employees.
Florida TaxWatch concurs with the Auditor General's position, that in the absence of evidence that
use of the private aircraft is more economical and in the best interest of taxpayers, the board should
discontinue their use of the district aircraft and rely instead on the more economical commercial
flights. This recommendation, however, should be taken further. We believe that the district should
consider liquidating its airplanes and rely on commercial and/or contract service for air travel. The
district has stated that the primary reason for owning and operating a private airplane is to "minimize
unnecessary waste of time on the part of the board and executive staff". Contracting out for
governing board air travel would be both cost and time effective.
Section 373.079, Florida Statutes, addresses the non-paid status of water management district
governing board members as it relates to reimbursement for traveling and other out of pocket
expenses.





f 22


2..33


I I i




I I


"The Chairman and members of the board ... while officially on work for the
district, ... shall receive their actual traveling expenses between their respective
places of residence and the place where official district business is conducted,
subsistence, lodging, and other expenses ... These expenses may not exceed the
statutory amount incurred therefore. Payment or reimbursement to governing
board members for the use of private or charter aircraft may be no greater
than that allowed for commercial air travel for equivalent distances."
While the statutes do not prohibit use of private aircraft to shuttle governing board members and
other district personnel, the Legislature demonstrated concern for the cost imposed on district
taxpayers. There is no specific reference to, or inference of priority given to the value of any
governing board member's "wait time", irrespective of their personal/professional demands or which
water management district they represent. Florida Statutes clearly indicate that governing board
members are to be non-paid representatives for each water management district. The statutes further
provide that travel expenses incurred by board members in the furtherance of district business are
to be reimbursed at the standard state rate.
The state is clearly attempting to promote responsible use of taxpayer dollars by providing that air
travel reimbursement for board members not exceed the amount allowed for state officers and
employees. The spirit of the law is violated if the total cost (equipment, insurance, maintenance,
salaries-benefits, interest payments, etc.) of owning and operating private aircraft exceeds the
available air travel alternatives.
District staff compared costs of operating its own airplane in 1989 with leasing and commercial
airfare options. It cost a total of $282,000 to operate the King Air plane. The district estimates that
it saved from $50,000 to $70,000 over available commercial and/or lease air travel alternatives.
To get a better perspective on the air travel issue in South Florida, we obtained travel data from the
second largest water management district, the Southwest Florida district. The Southwest district
spent $56,895 on air travel for its board members and staff in 1989, one-fifth the amount expended 1
by South Florida. The Southwest district spent a total of $183,000 for aircraft services that year.
The bulk of this was for helicopter flight operations for regulatory activities. South Florida spent
nearly $1.4 million in 1989 for all of its aircraft services, more than seven times the amount spent
by the Southwest district. Though Southwest is the next largest district it is still much smaller than
South Florida in every respect, including total land area. South Florida encompasses nearly twice the
land area that Southwest does. It is not surprising that South Florida spends more on air travel, but
are justifiable air travel demands that much greater for South Florida?
Six of South Florida's current board members reside a sufficient distance away from district
headquarters to necessitate air travel to attend meetings. Florida TaxWatch determined that the
district could fly these six members on 30 commercial flights each year, from their place of residence
to the West Palm Beach headquarters, at a cost of roughly $35,000. This contrasts sharply with the
costs associated with actual governing board air travel in 1989. Board members flew 61% of the total
airplane flight hours in 1989, which cost about $172,000 of the $282,000 total airplane operating costs
that year. Based on this analysis, the district could save over $138,000 annually by using commercial
aircraft to transport board members, rather than flying their own aircraft. This savings represents
an amount sufficient to fly the remainder of the staff if deemed necessary and appropriate on
over 600 intrastate commercial flights.
Achieving lower per flight hour costs for district airplanes compared to other alternatives does not
necessarily mean that airplane ownership by the district is cost effective. For this to be so, one
must assume that only necessary trips are made, i.e. no passengers are just going along since "we have
to pay the same whether they go or not". The real issue is: Should tax dollars, that are generated to
promote vast regional water management programs, be used to provide governing board members and
staff with this type of luxury? We do not believe so. Certainly some air travel is necessary for each
water management district, just as all state agencies require a certain amount of air travel to carry

23


8.3(C







out their respective roles and responsibilities. But, because there is a great deal of disparity between
districts over air travel costs with South Florida spending a comparatively inordinate amount, the
Legislature should examine this issue from the standpoint of defining "necessary" air travel. This is
especially important because South Florida estimates that its air travel demands will double within
the next three years.

Recommendations
o The private airplanes should be sold-off and the district should rely on commercial or other
available air travel alternatives.
o The Legislature should examine the issue of air travel by water management district personnel by
defining "necessary" air travel, and require a standardized cost analysis of the various air travel
alternatives be submitted to the Department of Environmental Regulation (DER).


IS THE DISTRICT TOO DEPENDENT ON AD VALOREM TAXES?

District Permit Fees

The Legislature decided that although water management district functions benefit the entire state,
"water resource programs of particular benefit to limited segments of the population should be
financed by those most directly benefited". As a result, Chapter 373, Florida Statutes authorize both
" the establishment of permit application fees and a method of ad valorem taxation to finance" water
management district activities.
Florida law authorizes water management districts to establish and collect permit application fees for
consumptive use, water well construction, surface water management and right of way regulatory
responsibilities that have been delegated to them. These fees may not exceed the actual cost of
processing an application. Concerns have been expressed by the Legislature and by water
management districts about the difficulty of designing a permit fee system that provides sufficient
revenue to cover the total administrative processing costs. Further, costs associated with enforcement
cannot be recovered from these fees. As a result, permit review and enforcement is subsidized by
ad valorem taxpayers.
These concerns were echoed in the final report of the Environmental Efficiency Study Commission
(1988). That report characterized environmental regulation in the state as "front loaded", "where most
of the attention is paid to permitting, and little follow-up is devoted to compliance with permits".
The Commission found that permit fees generally do not account for a sufficient amount of the total
permit evaluation and enforcement costs and recommended that "permitting and enforcement should
be supported by fees paid by the applicant wherever practical". Referring to the Department of
Environmental Regulation's (DER) regulatory permitting delegations to water management districts
the report stated: "The state should not expect the WMDs to fund these new permitting and
enforcement activities through ad valorem taxes." Florida TaxWatch concurs.
The Renort on the Sundown Act Review of the Water Management District Governing Boards and
Basin Boards by the House Committee on Natural Resources (1988), noted that South Florida was
the only district that had not implemented some form of permit fee arrangement. As the report
indicated: "Permit fees would be a more appropriate way of requiring the users of the districts'
permitting systems to pay the costs that they generate. Ad valorem taxes presently used to fund the
districts' permitting programs could then be used in ways that more directly benefit ad valorem
taxpayers."


24


Y,3S









Districts are constrained in their ability to generate revenue through permit fees. They can charge
only enough to cover "processing" costs, which does not include enforcement and monitoring dt
expenses. Additionally, districts have expressed difficulty designing fee structures that recover their I
total administrative costs associated with permit processing. As of 1988, permit fees generated a very
minimal amount of revenue for each district.
The districts have since revised their permit fee schedules to enable them to recover a greater portion
of their total costs. As of 1989, a greater portion of each district's total budget was derived from
permit fee revenue. For example, permit fees were equivalent to about 3% of ad valorem revenue
in 1988 for the Suwanee River Water Management District, but in 1989 they increased to 30% of its
ad valorem revenue. Under a newly designed fee schedule, the Southwest Florida Water Management
District generated about $1.3 million in 1989. Finally, permit revenue has steadily increased at the
St. Johns River Water Management District from just over S.1 million in 1987 to $1.2 million for
1989.
Though districts are statutorily constrained to charging an amount no greater than the cost of
processing permit applications, the recently revised fee schedules illustrate that greater amounts of
revenue can in fact be generated than in prior years. This is important as the House report noted -
because it means property tax revenues which have been relied upon to subsidize regulatory permit
programs can be utilized to more directly serve all ad valorem taxpayers in a given district.
Beginning in 1989, the South Florida Water Management District changed its former policy and
implemented a system of permit fees. TaxWatch views this as a positive initiative that shows the
district is aware that user fees are a more appropriate means of funding regulatory permitting
responsibilities.

Recommendation
o South Florida should develop a plan to phase in permit fee increases so that these fees pay for a |
greater portion of the cost of regulation.

Survey of Private Industry About Permitting Process
TaxWatch surveyed representatives of the agriculture industry as well as contractor/developers within
the SFWMD about their permit application experiences with the district. The following is a summary
of the results of those surveys.
The majority of both survey groups responded that the district has generally been fair and
cooperative during their permit evaluation, provided good and effective regulation of the
environment, and provided somewhat higher quality regulatory services compared to the Florida
Departments of Natural Resources and Environmental Regulation, the Army Corp of Engineers and
local government entities.
Our survey results indicate a fairly good level of acceptance of the district's regulatory permitting
performance. There is, however, a prevalent criticism which relates to the length of time it takes the
district to process permit applications. Three out of four respondents believe the entire application
process takes too one. On one hand this is a logical private sector response, after all time is money".
The time it takes to receive compulsory operational permits is time that could be used generating
business and/or profits. Section 120.60, FS., states that permit applications mus be processed and
approved within 90 days of being submitted, however, a majority of respondents indicated that the
permitting process takes between 120 and 240 days.
A high rate of turnover among permit review staff and a lack of confidence in the technical
competency of reviewers were also commonly cited criticisms. Since 1984, the budget for the








Department of Resource Regulation the department responsible for permit issuance, enforcement
and regulation has more than tripled, growing from S2.3 million in 1984 to $7.3 million in 1990,
an increase of over 200%. These enhanced resources should be sufficient to allow the district to issue
permits competently and on a timely basis.

Recommendation
o The district could apply savings from its air travel and vehicle fleet to further increase the budget
of the Resource Regulation Department, enabling them to hire more and better qualified regulatory
personnel and ultimately reduce the average time taken to process permit applications.


DISTRICT BUDGET DOCUMENTS Do They Provide Sufficient Meaningful Information for the
Governing Board and the Taxpayer?
A budget document serves four basic functions: It is (1) a Policy Document; (2) a Financial Plan;
(3) an Operations Guide; and (4) a Communications Device. Together, they define what the entity
has done, what it plans to do and how it will accomplish the task. How well the South Florida Water
Management District's budget documents convey these functions to the governing board, the public
and other entities is a valid measure or indicator of the district's accountability and should ultimately
determine the probability of success in securing financial support to accomplish its goals.
The Government Finance Officers Association (GFOA) has developed a "Distinguished Budget
Presentation Awards Program" that evaluates budget documents on the basis of management elements
and effectiveness in a policy and public environment. The awards program is not intended to convey
approval of the substantive material or budgeting method, but rather, how well the budget document
presents information necessary to accomplish the four budget functions.
Florida TaxWatch has reviewed the SFWMD budget documents for fiscal year 1989-90 to determine
how well they accomplish these four budget functions utilizing the GFOA budget presentation
awards program criteria.

Usefulness as a Policy Document
The budget documents lack a statement of budgetary policy. Although program/department goals
and objectives are included, there is no overall defined prioritization of need verses resources.
The budget documents do not include an explanation of changes in current policy that may affect
operations, the delivery of services, and the financial impact of the changes.
Question: Are there any policy changes resulting from new state mandates, federal
regulations or other influences?
The budget documents do not include an explanation of the whole budget process: time frames, issue
development, evaluation process, and other actions utilized in the budget development.
Question: Would this information be useful in placing the budgeting process in a
context that would be helpful to the governing board and the general public?
The budget documents do not contain a statement of the economic assumptions that affect costs,
revenue projections by source (especially for the out years) that may affect the continuation of
programs and activities, or management's specific proposals.
Question: What are the economic assumptions utilized by management in its policy

26


'. 57









recommendations such as employee salary increases and projecting revenues?

Usefulness as a Financial Plan

The budget document does not include actual expenditure information for prior fiscal years. This
information is vital for comparison of the current year level of service against the budget year
request.
Question: What is the actual cost of delivering services?

The Capital Budget does not contain reference to a Capital Improvements Plan. Such a plan should
include funding needs by program, by purpose, by specific year (usually over a five year period),
and source of funding. This is necessary in controlling new project commitments that may exceed
the funds available. If project commitments exceed funding, expensive delays may occur because
of the lengthening of the acquisition and/or construction time frame. For instance, what is the total
cost of the district's new office building by source of funds by fiscal year?
Question: Is there a Board approved Capital Improvements Plan?

In addition, the Capital Budget does not include a "cross walk" between the Operating Budget for the
additional operations costs associated with the completion of capital projects. Personnel
requirements, operating capital needs (equipment, etc.), increased utility costs and other new
operating costs should be clearly identified in the budget document by project. This information
should also projected in the Capital Improvements Plan.
Question: What are the additional operating costs resulting from completion of capital
projects?

There is no explanation in the budget document as to what basis was used in the budget development;
GAAP, cash, modified accrual or other. Although no one basis is best, the budget document should
disclose the method employed.

Usefulness as an Operations Guide

The budget document includes program summaries which associate specific programs with
lead/secondary departments in the organization. Although useful, no specific financial information
is provided in the summaries. This precludes comparison of a specific program on a year to year
basis or comparison between programs.

We do acknowledge that there has been improvement in the 1989-90 Adopted Budget document in
the information provided in the Program Summary section. Financial information has been included
for the budget year, however, historical information is still lacking. In addition, the Program
Summaries still do not include a break-out of costs by fund source or issue type (continuation,
improved or new). As noted previously, this detailed information is needed to compare costs within
a program and between programs to determine the most efficient allocation of resources.
Question: Are the most recent fiscal year actual expenditure and the prior budget
year information displayed by expenditure category, fund source and issue type in the
program summaries?

The program summaries include descriptions of the budget year priorities, but lack quantitative
workload measures to justify funding of the priority issues. As an example, a request for new
positions should only be funded if current workload requirements per employee in the affected
program would be significantly increased, which in turn, may cause a decrease in the quality of the


~







work product. This can be viewed as an "output" measure.


Question: What specific workload measures are utilized in the budgeting process?

In addition, performance measures ("outcome" measures) to justify continuation of the current
program funding are also lacking.
Question: Is the program accomplishing its goal what specific performance measures
are utilized in the budgeting process?

Usefulness as a Communications Device

The budget document contains a glossary of key terms. However, the narrative used in the document
is highly technical and may be difficult for the general public and the governing board to
comprehend. The budget contains few summary charts, graphs and maps that would be helpful to
the press and the general public. The information provided is in such detail, and at such a low level
as to be frustrating and confusing. Such confusion may lead to uninformed decision making.

Based on the above observations, it is the opinion of Florida TaxWatch that the South Florida Water
Management District proposed budget document for fiscal year 1989-90 does not meet the
Government Finance Officers Association's criteria (a copy of the rating criteria is included in the
Appendix) for "acceptable" budget presentation in any of the four functional areas: Policy
Document, Financial Plan, Operations Guide and Communications Guide.

Recommendations

Florida TaxWatch recommends that the South Florida Water Management District institute major
revisions in its budget presentation practices. Such revisions must include a commitment for the
inclusion of complete, concise and meaningful budget information that facilitates the deliberations
of the governing board, informs and educates the general public, and guides the district in
accomplishing its mission. Specifically:

o Disclose in the budget document management's goals, policies, economic assumptions and
budgeting practices upon which the recommended spending level was determined.

o In general, include three years of financial information in all sections of the budget document;
budget year, current year (estimated 12 months) and the prior year actual.

o Develop and disclose in the Program Summaries performance measures (output and outcome),
funding source and historical financial information.

o Restructure the Capital Program Budget to properly reflect project costs on an annual basis by
fund source.










* PERFORMANCE AND FINANCIAL AUDITS Has the District Heeded Their Recommendations?

1985 AUDITOR GENERAL PERFORMANCE AUDIT

TaxWatch reviewed the various recommendations made in the 1985 Auditor General Performance
Audit of the South Florida Water Management District which relate to management control,
accountability, and effective allocation of resources. The following is a report on the status of each.
(1) Deficient Documentation for Corrective Maintenance Actions.
The Auditor General found that the district failed to document the repair and follow-up of
deficiencies discovered in its semi-annual inspection reports. The report noted that failure to
maintain such records created the potential for neglecting maintenance of the numerous structures
the district is responsible for. The district responded that they were going to institute a policy of
submitting written reports to document all such corrective actions.

Status: Satisfactory The district has recently instituted a program to ensure all water management
structures are in operable condition or undergoing necessary maintenance and repairs. The district
provided a document entitled Department of Resource Operations Inspection and Maintenance of
Project Structures dated November 10, 1988. This inspection and maintenance program embodies
a four point strategy plan which calls for the periodic inspection of applicable structures, the
identification of deficiencies, determination of the appropriate corrective recourse, establishment of
a time plan to address the deficiency, monitoring work in progress and finally, documenting the
actual repair/maintenance work performed.
(2) Inadequate Safeguards Over Stores Inventories.

The Auditor General determined that no work order system existed to control and document
structure maintenance work. As a result, no system was in place to account for materials from
purchase to ultimate use. This loss of accountability combined with the large number of employees
allowed to withdraw from stores inventories hampered the detection of unauthorized usage. Flaws
in the material inventory counts were also discovered: SOPs were not documented and made available
to employees; count sheet recordings were often entered in pencil; counts were often documented as
taken by the employee in charge of the particular item; and employees in charge of performing the
actual inventory counts and posting the results often knew what the expected counts were to be.

The AG acknowledged the importance of documented authorizations to provide accountability to the
district's storekeeper. However, it was noted that the written approval required to obtain materials
does not provide a means to properly evaluate the various inventory items used to further ongoing
operations and maintenance activities.
Status: Deficient Proper control and oversight of stores inventories continues to be inadequate.
The former director of internal audits for the district depicted a lack of control in the purchase order
process stating that minimal routine follow-up was performed to ensure stores materials were used
for intended purposes, requests were seldom questioned, and field station inspections were done in
an inconsistent and messy manner. Those concerns appear to be justified given that the storeroom
inventories were actually off by S.3 million in 1987 and S.2 million in 1988. The May 12, 1989 Stores
Inventories Assessment one of four audit reports recently conducted by private firms found
deficiencies still exist. Written policies and procedures do not exist for the following inventory
functions: requisitioning, purchasing, issuance of inventory items, fuel inventory, emergency
purchases, and adjusting "writing-off" inventory that cannot be accounted for. The district plans
to implement an integrated inventory management system by May, 1990.








(3) Make Recreational Facilities Self-Stpporting.


' t The Auditor General criticized the district for establishing user fees for recreational areas which
were too low to cover operational costs and consequently relying on ad valorem taxes to cover the
deficit. The Auditor acknowledged that Florida law allows ad valorem revenue to be used to fund
recreational facilities, but recommended that the district take whatever actions necessary to make
these operations self-supporting. Concerns were also expressed about the nature of the lease
arrangements entered into by the district with private concessionaires.
Status: Improved User fees have been increased at the two recreational facilities the district has
been involved with. However, the governing board determined that further increases would be
required to fully recover costs and has since decided to move the district out of this function
altogether. Osceola County now operates one of the recreational areas and the district is negotiating
with another local government entity to assume control of the other. The district will, however,
still be responsible for administering leases and budgeted $300,000 for this activity in 1989-90.

(4) Control Of Vehicle Usage Cited For Improvement.
The Auditor General recommended that the governing board define what constitutes authorized
usage of district vehicles and maintain vehicle usage records for all district employees to ensure that
vehicles are used in accordance with established policies and in the best interest of district taxpayers.
Additionally, the recommendation was made that vehicle usage records be maintained to reflect
dates, drivers names, purpose of trip, point of origin and destination, beginning and ending odometer
reading and miles driven for all district employees.
A June 1988 report by the district's internal audit department examined the vehicles available on a
24 hour basis. The report found that memos used to authorize additions to this list in accordance
with established district vehicle utilization policy were generally not written by the appropriate
department directors. The report also determined that no routine verifications were performed to
ensure that district personnel abided by established vehicle usage policy. The report recommended
i all future vehicle assignments be made by department directors in line with established policy and
that a needs assessment be conducted for current assignments. Finally, the report recommended that
daily vehicle utilization logs be maintained by the individual employees assigned with periodic
reviews conducted by department directors to ensure that vehicles are used solely for district
business.

Status: Improved The district stated that top management personnel have had a car allowance the
past two years and that utilization records are the responsibility of the applicable employees as part
of filing their federal income tax returns. The value of maintenance and gas provided by the district,
however, does appear on the employee's W-2 form. The board should confirm in both instances that
these records are kept properly and that they reflect the information referred to by the Auditor
General. The district has stated in the past that vehicle authorizations are allowed without a
department director's prior authorization. In July, 1988, however, the management audit department
concurred that all vehicle assignments should be authorized by the appropriate department director.

(5) Employment And Compensation Practices Criticized.
The Auditor General found significant differences between district salary ranges and comparable
positions in the other water management districts as well as state and local government agencies.
Salary raises for the district were also substantially higher. He recommended that the board develop
a compensation policy tied to prevailing economic conditions and that raises be clearly justified. The
district budget documents do not explain the district's compensation policies.
The district did not properly document the factors used to justify starting salaries that exceeded
minimum salary range levels. It was also discovered that verifications of employee qualifications
were not properly documented and that job descriptions did not exist for certain jobs. The Auditor

30


r.9 41








General examined salary ranges of a group of employment positions in the district in relation to
analogous positions in other WMDs and state government; director, counsel, engineer, hydrologist,
chemist, environmentalist, programmer analyst, secretary and custodian. The only position that the
district did not pay the greatest high and low range for was secretary, where the district range was
second highest. TaxWatch updated this comparison using 1987-88 data and found similar results.
Status: Satisfactory The district has addressed most of the Auditor General's concerns regarding
personnel verifications and general employment practices. Job descriptions have been developed for
every authorized position. In May of 1988, the salary administration policy was revised to take into
account the prevailing economic conditions. Personnel files now include documentation to verify
qualifications and references of all employees. The justification for all salary increases are now
documented as are the reasons for beginning new employees at salary levels in excess of minimum
established standards.
A very extensive performance-based appraisal system has been implemented by the district to
facilitate the review of all employees. However, 63% of the 799 employees evaluated the first three
quarters of the 1989-90 fiscal year received a rating of "exceeds expectations." Base salary
adjustments ranged from 3.0% to 8.0%. Persons in this category were also awarded a cash merit
payment ranging from 5.0% to 8.0% six months after their salary adjustment. Eighty-one percent
received base salary adjustments greater than the cost of living, 22% of these employees were rated
only "meets expectations." Thirty-five percent of the "meets expectations" group also received a cash
merit payment ranging from 3.0% to 4.9%. Florida TaxWatch does question whether these raises are
really merit raises justified on the basis of performance.

(6) Lack of work measure standards for field station operations
The Auditor General determined that work-unit measurement standards had not been developed to
allow district management to evaluate the value and efficiency of its field operations. In the absence
of these measures, it is not evident how management gauges the proficiency or planning adequacy
of its resource operations activities. The recommendation was made that sound work-measurement
standards and a cost per unit reporting system be implemented.
The following factors were recommended to be considered: defining measurement units like area,
quantity, time and volume; assessment of standard operational costs and/or workloads; determination
of estimated work units and costs for each activity requiring measurement; data accumulation; and
corrective action for inconsistencies. The Auditor General suggested work-unit measurements such
as; the cost per gallon of water pumped, acres of grass cut, feet of canal maintained. The district
could calibrate these figures to the output of different classes of employees and their support
resources. "These production standards could form the basis for highly effective planning, budgeting
and control processes."
Status: Improved In 1988, the district developed an annual management review process of the
units under the supervision of the Department of Resource Operations to assess unit efficiency,
effectiveness, and responsiveness; and to identify managerial deficiencies.
(7) Permitting and Enforcement.
The Auditor noted certain procedural deficiencies with district permit issuance procedures. The
district failed to cite the rule under which supplementary detail was required of permit applicants,
as specified by Section 373.107, FS. Also, the district did not always provide permit applicants the
requisite 14 day period to petition for an administrative hearing in reaction to notice of
agency/district proceedings.
The district depends upon citizen complaints, surveillance flights, correspondence with other agencies
and the observations of its own inspectors to monitor for non-compliance with regulatory issues. The
Auditor General found that the district did not utilize a standard form to document complaints

31




f.z








received and therefore there was no uniform basis available to evaluate the number of and types of
complaints. The report recommended that the district develop a standardized form to record all
complaints.
Finally, the district did not rely on available legal relief to obtain compliance with Section 373.209,
F.S., relating to penalties for unchecked, free-flowing artesian wells. The recommendation was made
that the district board review this strategy and take action to ensure the recovery of costs associated
with capping free-flowing artesian wells.
Status: Improved The district says that the procedural problems noted by the Auditor General have
been corrected and further states that a standardized "notice of complaint" form has been created in
response to the Auditor's directive.
However, the district has not acted upon the recommendation to utilize available statutory relief to
recover costs associated with enforcing Section 373.209, F.S. The district responded that it had
"made a policy decision not to utilize the full extent of its statutory power to seek reimbursement
from private land owners with regard to regulatory enforcement because of the likelihood that
landowners would no longer assist in the surveillance and reporting of these wells if they were held
liable for the total cost of cleanup." The district currently maintains the same rationale for not
relying on the full measure of the law to recover enforcement costs.
The Auditor General acknowledged that imposing such costs on land owners may negatively impact
Enforcement efforts but indicated that the statutory provisions appeared to be compulsory for all
water management districts. Given that the South Florida district currently owns two helicopters,
it would appear to have the ability to properly monitor and enforce these regulations.


1988 FINANCIAL AUDIT

Comments and Recommendations from Statutorily Required Annual Financial Audits What is the
Status? For the past 9 years the certified public accounting firm of Peat, Marwick, Main &
Company has been engaged by the SFWMD to perform its compulsory annual financial audits. The
following is a list of the comments and recommendations from the 1988 audit report with an
indication of prior years when identical or similar recommendations were made, as well as a brief
summary and status report of each finding.
(1) Formalize Account Reconciliations 1987, 85, 83. Various accounts were not reconciled at the
end of the fiscal year. Additionally, reconciliations for operating cash, accounts payable, payroll
liability and expense accounts were not reconciled to the general ledger and life insurance payable
was not reconciled. The district originally projected that by April of 1989 all balance sheet account
reconciliations would be completed and subsequently maintained on a monthly basis. The district is
planning to contract out for an additional review of the accounts payable system to determine proper
accounting controls and to correct deficiencies discovered as part of the overall reconciliation process.
Finally, it was noted by the district that some transactions are still not fully understood within the
framework of its processing system.
(2) Improve Accounting for Fixed Assets 1987. Inventory records have not been properly
maintained in order to assure accountability over fixed assets (which currently amount to over S.5
billion). The district is working to establish procedures by September, 1989 to: properly control data
entry for all fixed asset additions, sales, abandonments and transfers; post monthly reconciliations of
fixed asset ledgers to the general ledger, and establish procedures to ensure fixed assets that are
traded for new assets are properly recorded. The district is in the process of developing a new fixed
asset policy through an automated fixed asset accounting system which was installed in February of
1986, but with no changes from prior policy and procedures adopted back in January of 1983. A

32




8.^3









fixed asset clerk with an extensive background in audits and fixed assets was assigned to help
implement the system.

(3) Improve Purchase Order Procedures 1985. Regular reviews of open purchase orders are not
performed to verify the receipt of requisitioned items. Purchase order identification numbers are
voided in the system without voiding purchase order documents which increases the likelihood of
voided purchase orders being entered into the purchase order system. The review of all open
purchase orders is now the responsibility of one individual. If purchase orders are outstanding for
more than ninety days they are examined by the director of procurement and contract administration.
All four parts of the purchase order form are kept together and marked voided and are filed
numerically.

(4) Formalize Operations of Management Audit 1987, 86, 81. In 1988, this formalization process
was begun by the creation of an audit charter and plan and the hiring of an internal audit director.
In 1988, there was at least one audit performed by this department, a comprehensive audit planning
document was also developed. District management, however, stated that no audits were conducted
internally during 1988 and has since replaced the originally hired director.

The financial audits also recommended that the district establish priority areas for review by this
department with timetables for completion, and that the department write a comprehensive audit
manual. The district conducted three internal audits during 1987-88, and contracted out another five
internal audit studies which were completed by August, 1989. A newly hired director for this
department was also hired who has submitted a work plan to the district audit committee that
schedules priority areas to be audited.

(5) Improve System for Approving Budget Transfers 1987, 86. The recommendation was made to
implement control procedures for all budget transfers to decrease the potential for unapproved
transfers being presented to the board and to ensure that all such transfers are properly reviewed
and, more importantly, properly authorized before they are presented to the board. The district has
indicated its compliance with this recommendation and has developed the appropriate control
procedure.

(6) Centralize Accounting for Encumbrances/Contracts There were four instances noted where
invoices and payments were not recorded properly in the encumbrance accounting records. The
recommendation was made that contract encumbrance listings, performed by the accounting division,
be reconciled to the district's new data base on a monthly basis. Differences that appear between the
encumbrance listing and the data base should be examined and rectified immediately. Additionally,
it was recommended that all departments responsible for monitoring contracts receive a list of all
contracts with payment histories and encumbrances for their review. The district responded that a
revised contract requisition form was implemented in August, 1988 to improve recording and
processing of encumbrances. Further, an accounting division employee has been assigned to
investigate and improve encumbrance processing and recording, and an easy to read contract
encumbrance listing has been developed to provide division directors with detail about the amounts
encumbered on their monthly financial reports.

(7) Utilize Internal Service Fund An internal service fund was established for the district's self
insurance program back in 1986, but in 1987 and 1988 self insurance claims were accounted for in
the district's general fund. The audit recommended that claims and administrative costs associated
with the self insurance program be accounted for through the internal service fund, and further that
this fund be actively monitored. The district noted that this represents a low priority until
formalized account reconciliations are completed. The accounting division is currently redesigning
the accounting structures of the district and developing a new chart of accounts to provide more
efficient and reliable financial information. The self insurance program is supposed to be enhanced
through this development. It was also noted that an appropriate accounting system is needed to
properly utilize the internal service fund. The relevant district divisions are working toward an
October,1990 completion date for the new accounting structures and chart of accounts.


I r








(8) Improve Accounts Payable Record Retention System Documentation to support payments made
to vendors is not properly organized or secured. Certain documents that were requested for
examination could not be found. The recommendation was made to make one employee responsible
for maintaining these documents. The district is developing a record retention system to provide
proper maintenance of purchasing records.

(9) Utilize Special Revenue Fund The recommendation was made to account for funds and
activities related to the Surface Water Improvement and Management program (SWIM) through a
special fund rather than the district's general operating fund. It was also recommended that
expenditures charged to the SWIM program be reviewed by the relevant department director prior
to being input into the system. These recommendations have been acted upon and are reflected in
the current budget, where SWIM is designated as being funded through a special revenue fund.
(10) Establish Construction Retainage Accounting System The recommendation was made to
account for construction retainage during the life of the contract rather than at the end of the
contract. The district was going begin to account for such contracts during the life of the contract
as of June, 1989.

(11) Perform Controls Over Disbursements The district has established an invoice payment process
which includes a system to confirm that correct amounts are paid to vendors. This system includes
both automated and manual controls. However, the manual controls are not being done properly.
As a result some duplication of payments has occurred. The manual review is conducted by the same
employee who prepares invoice payments and is considered to be a possible reason for inappropriate
payments being made. The recommendation was made to ensure that this review be conducted by
someone independent of the invoice payment process. The district agreed with this recommendation
and has indicated that it was implemented during March, 1989.

Summary

The Chairman of the District Audit Committee, quoting from a review conducted by the newly hired
Director of the Management Audit Department, noted that this review "indicated a near total lack
of accounting controls at the district in the past several years". He referred to 1987 and 1988 when
over $500,000 worth of inventory items were simply written-off or adjusted by management with
no analysis as to the cause for loss and more importantly without notifying or seeking the approval
of the governing board.

The Audit Chairman also referred to the manner in which actual budgeted expenditures "budget
issues" are monitored or followed-up as another internal management weakness. The responsibility
for this follow-up has always been split between employees. He noted that one person should be
responsible for this function in order to provide better accountability and ultimately more control
over the actual uses of budget expenditures. An example of the type of problem that has occurred
because of this split in responsibility relates to fuel, oil and chemical expenditures. The actual
expenditure of funds budgeted for these items for 1987 was not reported to the individual responsible
for preparing monthly budget reports. Similarly, in 1988 these budgeted expenditures were not
reported until the last two months of the fiscal year.
This is particularly important for South Florida because these items are heavily relied upon for the
district's operation and maintenance responsibilities of structures that make-up the Central and
Southern Florida Flood Control Project. The demand for these items fluctuates according to how
dry or wet the season is. In a particularly wet season the pumps work overtime and consequently
require more fuel, etc. Fortunately the 1987 and 1988 seasons were relatively dry, so the district did
not expend more than it originally budgeted. If this were a relatively wet period the board would
not have known if actual expenditures exceeded their budgeted allotments so they would not have
been able to authorize the necessary holdbacks or budget transfers to cover the additional
expenditures and still maintain a balanced budget.











The Audit Chairman identified other internal weaknesses which he characterized as priority areas
that need to be overcome: there is no accounting manual of written policies and procedures for staff
to follow to properly account for actual budgeted expenditures (or issues); there is a lack of control
over the practice of writing-off account reconciliations; there is no adequate inventory or accounting
for fixed assets which have grown to over $500 million; there should be more contract
administration follow-up provided to ensure compliance with specific contract clauses and provisions.
Though basic internal management deficiencies still exist, there are indications the district is
attempting to strengthen its internal controls. For instance, for the first time in 17 years accounts
payable are up to date and controls are in place to limit duplicate payment of invoices a problem
which has occurred in the past Also, for the first time in over four years, the district's checkbook
has balanced although $60,000 of unaccounted for adjustments remain. Additionally, a training
plan that was implemented in 1989, aimed at improving negotiating skills of contract administrators,
saved the district over $1 million in contract costs in 1989.
Additionally, the minutes from the July 12, 1989 governing board meeting the public hearing to
adopt the 1990 tentative millage rate reveal that board members are aware of internal weaknesses
that need to be overcome. The following board member comments were exerpted from the minutes
of that public hearing, one that considered a proposed millage rate increase of 22% above the rolled-
back rate.
"I foresee great increases in the responsibilities of the district and it does not have the
fiscal controls to assure good management of funds. The district needs to hold the
millage where it is and get the accounting and fiscal controls in place."
"The organization needs to set priorities and set them in terms of what it has the
capacity to do in the most efficient and effective way. The operation is not
sufficiently tightly planned and controlled to justify an increase."
"Tm not ready to stop pushing to keep the budget at the same level as it was in the
current year. The district needs to work harder on this budget and look for areas
where it could continue to save dollars."

Recommendation
o This report identifies several internal control problems that need improvement. The district should
extend a moratorium on any future tax and spending increases until these deficiencies have been
overcome.
















35


r










SOURCE OF INFORMATION


Figure 1. "Average S&B Per FTE as Percent of SFWMD"
Source: SFWMD approved budget for Fiscal Year 1988
and information supplied by other water management
districts via phone conversations in September, 1989.

Figure 2. "SFWMD Operating and Total Budget"
Source: Florida TaxWatch and correspondence from
SFWMD.

Figure 3. "SFWMD Per Capita Budget and Taxes"
Source: Florida TaxWatch and correspondence from
SFWMD.

Figure 4. "SFWMD Budget Annual Growth Rate"
Source: Florida TaxWatch.

Figure 5. "SFWMD Actual Operating Budget"
Source: Florida TaxWatch.

Figure 6. "SFWMD 1990 Adopted Operating Budget"
Source: Compiled by Florida TaxWatch from SFWMD
budget document September 26, 1989.

Figure 7. "SFWMD Operating Budget by Expenditure"
Source: Compiled by Florida TaxWatch from SFWMD
budgets.

Figure 8. "SFWMD Avg S&B Cost per FTE Compared to 1984 Cost Adjusted for Inflation"
Source: Compiled by Florida TaxWatch using data
from SFWMD budgets.

Figure 9. "SFWMD Full Time Equivalent Employees"
Source: Florida TaxWatch and SFWMD budgets.

Table 1. "Comparison of Water Management Districts"
Source: Survey of Water Management Districts.




University of Florida Home Page
© 2004 - 2010 University of Florida George A. Smathers Libraries.
All rights reserved.

Acceptable Use, Copyright, and Disclaimer Statement
Last updated October 10, 2010 - - mvs