LAST WEEK WE WROTE ABOUT HOW THE FLORIDA MUNICIPAL POWER AGENCY (FMPA), where Vero Beach obtains roughly 40% of its electric power, lost $ 247 million from 2003 – 2004.
We also wrote about how in March, 2015, the Auditor General of the State of Florida conducted an “Operational Audit” of the FMPA. This week we will provide you with a report on the FMPA’s response to the Auditor General’s 15 “findings.”
In a letter May 28,2015 letter to David W. Martin, CPA, State of Florida, from Bill Conrad, the Chairman of FMPA’s Board of Directors and Howard McKinnon, the Chairman of FMPA’s Executive Committee, FMPA provided an “Audit Response Report” providing actions as of May 28 and an anticipated timetable for addressing each of these findings.
As of May 28, 2015 FMPA’s Governing Board had completed work on three of the 15 audit recommendations (Findings No 3, 4 and 10.)
FMPA has decided to retain an independent management consulting firm to address two findings who’s recommendations may not be available until November, 2015. During the next six months FMPA Governing Boards will address the remaining 10 recommendations.
AUDIT FINDING NO. 3: INTEREST RATE SWAPS
Certain interest rate swaps were not employed consistent with industry practices utilized by other joint action agencies, which resulted in significant termination fees likely to be incurred.
FMPA SATUS REPORT: Action on this recommendation is complete. On May 21, 2015, FMPA’s Executive Committee approved amendments to its debt risk management policy that implemented two of the Auditor General’s recommendations: 1) prohibiting the employment of interest rate swaps without concurrently issuing debt, and 2) prohibiting interest rate swaps before required approvals for projects are obtained from regulatory bodies. The Auditor General’s third recommendation about developing a strategy for Taylor Swaps has been addressed. FMPA’s Executive Committee approved actions on April 16, 2015, and May 6, 2015, authorizing the permanent financing structure for the Taylor Swap termination costs. As of May 28, 2015, FMPA has terminated five of the nine Swap contracts. The remaining four Swap contracts will be terminated by July 2015.
AUDIT FINDING NO. 4: INVESTMENT POLICY
FMPA’S investment policy needs to be enhanced to clarify requirements for investors.
FMPA STATUS REPORT: Action on this recommendation is complete. On May 21, 2015 FMPA’s Board of Directors and Executive Committee approved amendments to the Agency’s Investment Policy that fully addresses all three of the Auditor General’s recommendations: 1) Clarifying the meaning of the two highest credit rating categories, 2) Clarifying that the Investment Policy applies individually to each of its Projects, and 3) Establishing an investment limit based on geographical concentration.
AUDIT FINDING 10: SELECTION OF BOND PROFESSIONALS
The FMPA has not recently used a comprehensive selection process when selecting financial advisors and bond counsel for bond issues, potentially increasing costs associated with bond issues.
FMPA STATUS REPORT: Action on this recommendation is complete. On May 21, 2015 FMPA’s governing boards approved amendments to the Agency’s Debt Bill Management Policy that add requirements for a comprehensive selection process for all professionals associated with FMPA’s debt. FMPA will issue its initial competitive request for trustee, registrar and paying agent by the end of October 2015. Additional comprehensive selection processes will be undertaken by FMPA for other bond professionals until all bond professionals have been been engaged under the amended Debt Risk Management Policy.
It’s now July 19. What do you suppose is going on?