2700 Judge Fran Jamieson Way It Viera, FL 32940-6601 . Brian T. Binggeli, Ed.D.

, Superintendent
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School Board of Brevard County .

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October···s,···.201L··· ••

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. Via E-mail(Mark@levinestiverslaw.com} Mr. Walt Petters c/o Mark S.Levine,Esquire 245 E,Virginia ~tre~t . Tallahassee, F'Lo r i da 32301 Dear Mr. Petters:
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This is to inform you that as Superintendent .o f Schools I intend to .... .recommend the termination of your employment as Director of Plant Operat i onsandMai ntenancea tthe October11,2 011mee t ingofthe School Board of Brevard County. . Thexeasonformydecision .isthataninvestigation and internal audit 'of the Office of Plant Operations and Maintenance .has revealed·· that certain ·vehdorswi thwhom. you . have ·.a.. persoI1al relationshiphavebeenimproperlyawprded .contracts without competitivebidding;havebeenallowedtooyercharge .the District .. for se rv.ice s. .have been provided and given access. to and use of District equipment and fuel from District fuel pumps that .ot.her bidders .and vendors do notrecei ve and have been given a competitive advantage in the contract .awardand bidding process.
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A copy of the Report of the Internal Auditor dateclSeptember 23, 2011,is attached hereto and incorporated by reference . ,The investigation and report of the Internal Auditors show, t.hat; .the bi0.dingandcontract ar,yardactions ofyourdepa.rtment in the procurement of painting and electrical Gontracting seryicesfrom these favored vendors violated School ..Board Policy, Florida Department of Education.Rulesand/orFlorida Statutes .
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. Whenquestioned about these improprieties you claimed to have no knowledge of them and offered no rational explanation of·how they occurred, . As.. Director of Plant Operations and Maintenance re sppns ibJ.ef orthesupervi s ion and oversight.of a department that spends millions of dollars of public funds , youeitper knew or should have known of these flagrant violations of procurement laws and rules. ., . ... Your, actions in .facilitatirig -o r allor,ying the procurement improprieties identified in the internal audittooccurconsti t.ut.es . tni s conduct vi n office. If, as you have claimed, you were unaware of the improprieties involving these continuing contracts you are guilty of willful> neq lect;. of your dut Le s ." Lncornpet.encyie Director of Plant Operations .and Mainteri~nce. . ..
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An Equal Opportunity Employer= ADrug-Free Workplace

Mr.Wal tPet ters c/o MarkL. Levine, October 5, 2011 Page 2

Esquire

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, ,In either case your actions constitute Justcause to terminate your employment and cancel 'your annual contract under Section 1012~33(6}(b), Florida Statutes. Tfyou wish to cohtestthese charges, you have the right to request 'a hearing. To request a hearing you ,must, submit a written request to the Superintendent' sofficewi thin fifteen (15) days after "receipt of 'this, letter. ' Sincerely, .:

BrianT. Binggeli, Superintendent '' BTB/pc Enclosure cc: "School Board Members 'Debral?Pace,Associa.te Superintendent HumanResources ,Services ', "',DaneTheodore Director ,Planning and Project Management ' HaroldT . Bistline, School Board Attorney
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Brevard County School Board Internal Audit of Specific Allegations Related to Maintenance Department Personnel September 23, 2011

RSM McGladrey,

Inc.

__McGiadrev

7351 Office Pari, PI. Melbourne, FL 32940~8229 0321.751.6200 F 321.751.1385

www.mcqladrey.corn

September 23, 2011 Dr. Brian Binggeli, Superintendent Brevard Public Schools School Board of Brevard County, Florida Viera, Florida 32940-6699 We were notified by the Superintendent on August 15, 2011 that Walt Petters, the Director of Maintenance/Facilities, Jim Hudson, the Maintenance Coordinator, and Wes Fayed, the Central Services Supervisor, were to be placed on administrative leave on August 16, 2011 as a result of alleged bidding improprieties, conflicts of interest and favoritism of certain vendors. In response, we were asked to conduct an internal audit of specific allegations related to the School Board of Brevard County ("District") Maintenance Department personnel. We met with District Management, including the Superintendent and Board Attorney, to review the allegations made and the extent of the internal investigation completed. A "laundry list' of more than twenty-five (25) separate allegations were identified against various members of the Maintenance Department. These allegations came from current and former employees and vendors. Chief among the allegations were claims of conflicts of interest and favoritism in the awarding of contracts and projects to vendors, including claims that work was not competitively bid, that favored vendors were provided with a competitive advantage in the bidding process, and that favored vendors were given the use of District equipment and fuel, to the disadvantage of competing vendors. Claims were also made that Maintenance Department management made a regular practice of circumventing the permitting process and that various members of the Maintenance Department improperly used District labor and equipment and misappropriated assets of the District for personal purposes. Many of these allegations come with significant challenges to audit and prove or disprove. Our focus was on the more SUbstantial allegations that provide an audit trail. On August 16, 2011, our team, consisting of the Internal Audit Director and two Certified Fraud Examiners, began our testing. Our testing was conducted using judgmental samples of transactions. We did not test all transactions. Further testing could have led to additional observations and/or irregularities regarding the allegations. Our procedures included but were not limited to the following: • We accom panied the Attorney to the Maintenance compound on August 16, 2011 with District Educational Technology personnel to secure the computers of those put on administrative leave and properly begin 'chain of custody' protocol. We took pictures and inventoried the offices to provide us with a starting point to be able to identify if improper movement of evidence were to occur. We interviewed the Facilities Services Assistant Superintendent and current and former employees of the Maintenance and Purchasing Departments and corresponded with various third parties regarding the allegations made. We requested and received detailed reports and support from the Accounting and Purchasing Departments to assist in our analysis. We reviewed contracts and the history of awarded bids, and protests if any. We spent time in the Maintenance and Purchasing Departments and reviewed/tested files, invoices, purchase orders, requisitions, minutes of meetings, and other documentation provided by Project Managers, Maintenance Department personnel, the Secretary, and the Assistant Superintendent of Facilities. Each of the three employees put on leave were interviewed separately concerning the allegations.

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nSM International n etwcrk. a network of accounttnu, tax nud consulting firms.

September 23,2011 Page two

Observations Following is a summary of the allegations investigated and the observations and irregularities noted in our testing. More detailed information regarding each allegation can be found later in this report. Vendor Favoritism - Several individuals have made allegations that certain vendors, namely SMG Coatings, Inc. (USMG") and Sena-Tech, LLC, ("Sen a-Tech") have been given favored vendor status due to their relationship with Maintenance Department management and staff. The allegations are that these vendors have been given work without competitive bid, have been given information allowing for a competitive advantage in the bidding process, have been allowed to overcharge for services, have been given access and use of District equipment, and have been provided with fuel from District pumps, benefits that other vendors do not receive. Observations IrregularitiesSMG

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Review of the painting contract history revealed that the 2004 Award had 1 primary and 3 secondary contractors with a $5,000 bid threshold. The 2008 Award changed to have 1 primary and 1 secondary contractor and a $20,000 bid threshold. It is not customary for the District to have less than 3 contractors for a continuing contract and typical bid thresholds are between $3,000 and $5,000. When presented with this scenario, Mr. Petters and Mr. Curry were unaware of the change and did not know how that could have occurred. SMG was paid in excess of $2 million for the period December 2004 through April 2010 under the continuing contract for painting services, while Bonner Coating Systems, Inc., the only other painting contractor to receive payments under the continuing contracts for painting services, was paid $8,200. We noted no evidence that competitive bids were solicited or received for a number of projects under the 2004 Award and the 2008 Award which required competitive bids. We noted 55 instances where SMG overcharged the hourly rate for painting services during the period from February 2005 through August 2007. This resulted in overpayment of over $30,000. The District should investigate this matter further and take appropriate action to recover any funds due to the District. We validated that SMG was allowed to use District fuel totaling 359 gallons which was a benefit other contractors were not provided. We noted 4 instances where equipment including compressors, scissor lifts and trenchers were checked out of the Tool Crib for use by SMG.

Per discussion with the Board Attorney, these are violations of School Board Policy, DOE Rules and/or Florida Statute regarding competitive bidding and the terms and conditions of the contracts.

September 23, 2011 Page three

Vendor Favoritism - continued Observations IrregularitiesSena-Tech

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Review of the contract history for electrical contractor services revealed that the contract awarded in 2006 was issued in two parts (Part I - Electrical Projects and Parking Lot Lighting and Part II - Athletic Field and Outdooor Lighting Projects and On Call Service) and that the contract awarded in 2008 added a third part (Part 111- Low Voltage Cabling) SenaTech was not an awarded electrical contractor under the 2006 contract. Under the 2008 contract, Sena-Tech was a secondary awardee under Part I and a primary awardee under Part III of the contract. Sena-Tech quoted materials markup rates of 8% for Part I services and 1% for Part III services under the 2008 contract. Sena-Tech was awarded $322,288.68 in work under 78 invoices during the period from January 28, 2007 through October 7, 2008, prior to being named as a primary or secondary electrical contractor. We noted no evidence that competitive bids were solicited or received for a number of projects which required competitive bids. During the period when Sena-Tech was not an awarded electrical contractor, we noted 5 instances where Sen a-Tech performed work for the District and charged hourly rates and material markup rates in excess of rates quoted by awarded electrical contractors under the continuing contract. During the period when Sena-Tech was an awarded electrical contractor, we noted 12 instances where Sena-Tech overcharged the District by charging material markup rates of 8% or 15% instead of the 1% rate quoted in their bid for the type of service (I.e. Low Voltage Cabling) performed. We noted 1 instance where trenching equipment was checked out of the Tool Crib for use by Sena-Tech.

Per discussion with the Board Attorney, these are violations of School Board Policy, DOE Rules and/or Florida Statute regarding competitive bidding and the terms and conditions of the contracts.

September 23, 2011 Page four

Building Code Violations Allegations were made that many projects were started without proper building permits and that permits were often not received until projects were completed or were not received at all. Additional allegations were made that Mr. Petters, through his Project Managers, told contractors to perform construction, remodeling, or renovation projects without getting permits or inspections and that a building official was threatened with replacement for not being flexible.
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Observations I Irregularities Noted

We are not experts in Florida Building Code or its interpretation; therefore, we cannot make a determination as to whether a building permit was or was not required for any specific project or as to whether Florida Building Code was being followed on any specific project. We did, however, interview Project Managers and the current and former Building Official to determine the nature of the working relationship between the Maintenance Department and the Permitting Department and the veracity of the allegations. During these interviews, we noted a level of tension between the Maintenance Department and the Permitting Department that is not unexpected given the responsibilities of each department. The Maintenance Department often sees the Permitting Department as an impediment to getting projects completed in a timely and cost-effective manner, which is a primary objective of the Maintenance Department. The Permitting Department, on the other hand, is charged with the responsibility of ensuring that all projects are properly permitted and performed in accordance with building codes. Naturally, there will be many instances When these objectives and responsibilities are at odds with each other. Between 2004 and 2010, there were periods of significant building volume. We reviewed the permitting files of several specific examples described as having permitting issues by those making the allegations. Our review of files did indicate instances where building permits were obtained after the project was completed. In addition we noted instances of 'grey' areas in the interpretation of the permitting requirements. The current Building Official indicated that he regularly attends project meetings in the Maintenance Department to stay current on projects, timelines and the need for building permits and uses an EXCEL schedule to track projects through the permitting process and to monitor projects for which he expects to issue permits. Without significant additional testing, the allegations made regarding permitting on projects cannot be completely proven or dis proven.

September 23,2011 Page five

Inappropriate Use of Continuing Contracts - Allegations were made that certain non-capital projects were contracted, conducted and paid for within the Facilities Area for administrative or operations purposes using continuing contractors outside their area of approval. Observations Irregularities Noted I

Ed Curry, Assistant Superintendent of Facilities Services, requested a process analysislimprovement study be conducted to identify and develop recommendations on how to re-establish a positive working relationship between the facilities and purchasing departments. A team of maintenance staff worked with BRPH consultants to conduct the study. A full report was issued dated December 17, 2010, and Mr. Curry shared it with several members of the District. The District has certain continuing contractors approved through the Purchasing Department and the Board for specific services. BRPH is a continuing contractor that is approved for architectural engineering services for construction projects. The specific terms in the contract with BRPH dated January 1, 2008 with renewal options through December 31, 2010, (Exhibit A, Section H Additional Services) include the following among the services which could be provided under the contract: • feasibility and other special studies, • operating and maintenance manuals, and • other services not otherwise included in the Agreement or not customarily furnished in accordance with generally accepted architectural practices consistent with the terms of this Agreement. Invoices for this project were charged at a rate of $41.61 fhour under a blanket PO of $50,000 for miscellaneous consulting services. o The Board Attorney has advised us that this type of study does not fall under architectural and engineering and this project should have been competitively bid or fallen under a different contract. • Through review of invoices and P.O's this project was funded through Capital Fund dollars. Capital Fund dollars are restricted in use and do not include administrative services.

September 23, 2011 Page six

Conflict of Interest - Allegations have been made that employees of the District Maintenance Department have conflicts of interests with certain vendors. As further outlined in the background section, Chapter 112, Part III, Florida Statutes, Code of Ethics for Public Officers and Employees address conflicts of interest. Observations Irregularities Noted

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When asked, Mr. Petters readily admitted that Tim Tillotson, the co-owner of SMG, is a close personal friend, that they go to lunch often, and that Mr. Tillotson has spent time at Mr. Patters's cabin. When asked, Mr. Petters readily admitted that his step-son worked for a time at SMG. Steven Terry, owner of Sena-Tech, has been identified in various allegations as the son-in-law and nephew of Wes Fayed. Wes Fayed stated that Mr. Terry is not related to him in any way. We have not yet confirmed this statement. Wes Fayed lives at 250 Sherwood Ave., Satellite Beach, Florida. According to Florida Secretary of State records, this is also the address of a company called Competitive Irrigation, LLC, which was incorporated on March 11, 2011. Mr. Fayed is listed as a Member Manager of this organization. Jared Krell, who is Mr. Petter's stepson, is also listed as a Member Manager of Competitive Irrigation. Mr. Krell has also been an employee of SMG. Hillsborough County Public Schools' vendor list shows SMG as a vendor under the Finishes Division, with an email addressofkrelljsmg@qmail.com.Mr. Krell's employment at SMG was confirmed by Mr. Petters.

Through conversation with the Board Attorney, these allegations could serve as the basis for a formal complaint to the commission of Ethics as a misuse of a public position.

September 23, 2011 Page seven

Ineffective "Tone at the Top" within the Facilities Area - Through interviews with current and former employees, we were told of attempts in the past to bring similar allegations to the attention of the Facilities Services Assistant Superintendent and/or the Director of Maintenance. Some individuals interviewed indicated that they feared retribution or punishment if they brought issues forward. The other avenue available to employees to bring allegations forward is the Ethics Committee as formed through the Ethics Policy. These interviews also identified a general perception that the Ethics Committee is ineffective. Observations Irregularities Noted

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Documentation regarding this allegation is challenging to identify and in many instances is verbal. This barrier led our focus of testing on the Ethics Committee as it provides a documented record and audit trail. We requested documents of allegations made to the Ethics Committee from or about the Maintenance Department. We noted that the general process for items brought to the Ethics Committee regarding the Maintenance Department was as follows: • If the allegation was in writing and signed, the investigation typically began with the Ethics Committee presenting the allegations to the Facilities Services Assistant Superintendent. • It was then sent to the Director of Maintenance and addressed with staff. • A response was returned to the Ethics Committee with documentation supporting the response. We reviewed a sample of these ethics complaints. We noted that many of these complaints do appear trivial and are 'hearsay' in nature. From a holistic viewpoint, we did not note a consistent theme or pattern to the complaints that would have led the Ethics Committee to investigate further the allegations in this report. In other words, they do not lead to the conclusion that there is a systemic problem within the Maintenance Department. We did note that certain investigations were ineffective. We have provided an example in this report. We strongly recommend reviewing the processes under the ethics policy, to ensure that allegations brought forth to the Ethics Committee are appropriately vetted and investigated. A strong ethics process will have a positive impact on the "tone at the top" and act as a mitigating control for the District.

We conducted our exit conference and have discussed this report with the Chairman of the Board, Superintendent, Associate Superintendent of Human Resources and the Board Attorney. The detailed results of our testing follow. Respectfully Submitted, Internal Auditors

Cc: Dr. Barbara Murray, School Board Chairman Dr. Michael Krupp, School Board Member Amy Kneessy, School Board Member Karen Henderson, School Board Member Andy Ziegler, School Board Member Arthur Edwards, Audit Committee Chairman Tim Skeldon, Audit Committee Member Wayne Cooper, Audit Committee Member Don Lusk, Audit Committee Member Frank Zilatis, Audit Committee Member Harold Bistline, Board Attorney

Table of Contents
Background Allegations of Favoritism to Selected Vendors Allegations of Building Code Violations Allegations of Administrative Projects Inappropriately Contracted Using Continuing Contractors 1-4 5 - 15 16 17 18 19 - 20

Allegations of Conflict of lnterest... Allegations of Ineffective "Tone at the Top" within the Facilities Area

Attachment A

Organization of the Maintenance Department The Director of Maintenance and the Director of Planning and Project Management report directly to the Facilities Services Assistant Superintendent. Our review was specific to the Maintenance Department which currently has approximately 155 employees. The department is divided into 5 components: Maintenance Coordination, Project Management, Maintenance Supervision, Mechanical Engineering and Environmental Health and Safety. Each area has staff reporting directly to the Director of Maintenance. We noted that Code Enforcement staff, which includes the Building Official, report to the Director of Planning and Project Management. The activity and staffing has decreased significantly within the past several years with declining operating and capital budgets. Purchasing Rules and Regulations Source The Policy of the School Board of Brevard County as stated in the Purchasing Procedures Manual Rule "The District purchases high quality goods and services at reasonable cost. The District conducts all purchasing actions in a fair and impartial manner with no impropriety or appearance thereof. All qualified vendors have access to School District business. No offer is arbitrarily or capriciously excluded. The maximum feasible degree of competition is achieved." "Principals and department managers are responsible for their procurement activities in accordance with School Board policies, administrative rules, and statutes." Florida Statute 287.057 Procurement of commodities or contractual services provides rules for the competitive solicitation process "When the purchase price of commodities or contractual services exceeds the threshold amount provided in s.287.017 for CATEGORY TWO, no purchase of commodities or contractual services may be made without receiving competitive sealed bids, competitive sealed proposals, or competitive sealed replies unless ... " For purposes of the above rules, CATEGORY $35,000. TWO is defined as being

The Statute contains a prohibition against dividing the solicitation of commodities or contractual services so as to avoid the competitive solicitation requirements and identifies a number of exceptions to the com petitive solicitation requirements including, among others: • Immediate danger to public health, safety, or welfare or other substantial loss to the state requiring emergency action • Commodities or contractual services available only from a single source The Statute further provides that "If less than two responsive bids, proposals, or replies for commodity or contractual services purchases are received, the department or other agency may negotiate on the best terms and conditions. The department or other agency shall document the reasons that such action is in the best interest of the state in lieu of resoliciting competitive sealed bids, proposals, or replies. Each agency shall report all such actions to the department on a quarterly basis, in a manner and form prescribed by the department."

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Purchasing Rules and Regulations - continued Source Department of Education ("DOE") Rules Rule DOE Rules (Florida Administrative Code Rule 6A-1.012 Purchasing Policies) provide that each district school board is to establish purchasing rules which include but are not limited by the DOE rules. DOE rules specifically provide that: "(7) Except as authorized by law or rule, competitive solicitations shall be requested from three (3) or more sources for any authorized commodities or contractual services exceeding $50,000" ($25,000 for the period from July 17, 2000 to February 25, 2009). "Districts may not divide the procurement of commodities or contractual services so as to avoid this monetary threshold requirement. District school boards, by rule, shall set this amount or a lesser amount and shall establish purchasing policy relative to purchases of a dollar value less than this formal monetary threshold." "(8) The district school board shall have the authority to reject any or all proposals submitted in response to any competitive solicitation and request new proposals or purchase the required commodities or contractual services in any other manner authorized by this section." "(9) In acceptance of responses to invitations to bid, the district school board may accept the proposal of the lowest responsive, responsible proposer. In the alternative, the district school board may also choose to award contracts to the lowest responsive, responsible bidder as the primary awardee of a contract and to the next lowest responsible bidder(s) as alternate awardees from whom commodities or contractual services would be purchased should the primary awardee become unable to provide all of the commodities or contractual services required by the district school board during the term of the contract. Nothing herein is meant to prevent multiple awards to the lowest responsive and responsible bidders when such multiple awards are clearly stated in the bid solicitation documents." "(10) In acceptance of responses to requests for proposals, district school boards may award contracts to one or more responsive, responsible proposers in accordance with the selection criteria published in the request for proposal." Paragraphs 11 and 12 of the DOE Rules provide exemptions from the competitive solicitation requirements, including situations in which (1) competitive solicitations have been requested in a manner prescribed by DOE Rules, and (2) the district school board has made a finding that no valid or acceptable firm proposal has been received within the prescribed time.

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Purchasing Rules and Regulations - continued Source Department of Education ("DOE") Rules - continued Rule According to the DOE Rules, "(12) (b) When such a finding has been officially made, the district school board may enter into negotiations with suppliers of such commodities and contractual services and shall have the authority to execute contracts with such vendors under whatever terms and conditions as the district school board determines to be in its best interests." "(12)(c) If less than two responsive proposals for commodity or contractual services are received, the district school board may negotiate on the best terms and conditions or decide to reject all proposals. The district school board shall document the reasons that negotiating terms and conditions with the sole proposer is in the best interest of the school district in lieu of resollciting proposals. "(12)(d) Commodities or contractual services available only from a single source may be exempted from the competitive solicitation requirements." In such instances, the district school board must meet certain advertising, evaluation, and documentation requirements regarding its determination that the commodities or contractual services are available only from a single source and then may negotiate on the best terms and conditions with the single source vendor. "(12)(e) District school boards may dispense with requirements for competitive solicitations for the emergency purchase of commodities or contractual services when the superintendent determines in writing that an immediate danger to the public health, safety, or welfare or other substantial loss to the school district requires emergency action." Even in such emergency situations, DOE Rules require that pricing information be obtained from at least two prospective vendors and retained in the contract file.

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Purchasing Rules and Regulations - continued Source District Rules Rule Chapter 112, Part III, Florida Statutes, Code of Ethics for Public Officers and Employees governs ethics in procurement within the School Board of Brevard County. Included among its provisions is the following: "No School District employee having official responsibility for a procurement transaction shall knowingly falsify, conceal, or misrepresent a material fact; knowingly make any false, fictitious, or fraudulent statements or representations; or make or use any false writing or document knowing the same to contain any false, fictitious, or fraudulent statement or entry." District requires com petitive sealed bidding for purchases of goods and services estimated to cost in excess of $25,000, with award made to the lowest responsible and responsive bidder. "Exemptions to competitive solicitation requirements should only be used when fully justified. The lack of competition solicitation often can result in price and service disadvantages." "If the District has requested competitive solicitations in accordance with its Policies, and less that two responsive proposals are received, the District may negotiate on the best terms and conditions or decide to reject all proposals. The District shall document the reasons that negotiating the terms and conditions with the sole proposer is in its best interest." "Sole source purchases are used when only one source is practicably available for a needed product or service. If there is reason to believe that such a situation exists, the employee should consult with the purchasing staff in the Office of Purchasing Services. Prior to making a sole source purchase, the District shall electronically or otherwise publicly post a description of the commodities or contractual services sought for a period of at least 7 business days." ... "If the District School Board determines in writing, after reviewing any information received from potential vendors, that the commodities or contractual services are available only from a single source, the District School Board shall provide notice of its intent to enter into a single source contract in the manner specified in Section 120,57(3), Florida Statutes, and may negotiate on the best terms and conditions with the single source vendor."

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AII$9#dCln~ClfFaV~ritisrTIt()ilS~I.~(:tecl.\f~lldClrs··.·.········ ..•.•..... Several individuals have made allegations that certain vendors, namely SMG Coatings, Inc. ("SMG") and Sena-Tech, LLC, ("Sena-Tech") have been given favored vendor status due to their relationship with Maintenance Department management and staff. The allegations are that these vendors have been given work without competitive bid, have been given information allowing for a competitive advantage in the bidding process, have been allowed to overcharge for services, have been given access and use of District equipment, and have been provided with fuel from District pumps, benefits that other vendors do not receive. High Level Overview of the Bid Process for Continuing Contracts

The standard bidding process for a continuing contract can be summarized as follows: • Requesting department requests a project or a continuing contract award and prepares a scope of work or specifications statement for goods or services to be awarded through the bid process. • Purchasing department reviews the specifications for problems and uses the scope of work or specifications statement to prepare a bid requesUinvitation to bid. • Purchasing advertises the invitation to bid to current contractors for goods and services to be bid and to the public. a Purchasing opens bids and prepares a tabulation sheet based on bids received. • Purchasing sends tabulation sheet to requesting department for review and recommendation. • Requesting department reviews tabulation and makes recommendation based on tabulation, including justification for selection if selected vendor is not low bidder. • Department checks references of vendor. • Requesting department makes recommendation to the Board, as appropriate, regarding an award of primary and secondary vendor status. • The Board approves recommendation. • Vendors are notified of selection. After those contracts are awarded, the Maintenance Department handles getting the 'bids' for individual projects based on the terms of those contracts. Each project manager is responsible to competitively bid those jobs based on specific dollar amounts as outlined in the contracts and/or Board policy. Through interviews of Maintenance Department personnel, we determined that this responsibility was not clear. On one hand, Mr. Petters and others indicated to us that Mr. Petters continually told his Supervisors and Project Managers to know the terms of the contracts and make sure that the contract terms were being followed. Mr. Petters referred us to the minutes of "Supervisors' Meetings" as proof of this assertion. The minutes confirmed this as a topic of conversation at nearly every Supervisors' Meeting, held on an irregular schedule but generally about once each month, from August 2005 through January 2008. These minutes reflect strong attendance and at times included the Assistant Superintendent of Facilities. The minutes also reflected that representatives of the Purchasing Department attended meetings on March 1, 2006, and August 8, 2007, to discuss contracts and purchasing. It is clear from his assertions and the minutes of the Supervisors' Meetings that the directive of Mr. Petters was that his staff know and follow the terms of the contracts with vendors. On the other hand, nearly all of the current and former employees interviewed by us indicated that nothing happened in the Maintenance Department without Mr. Petters knowing about it. In fact, the minutes of the Supervisors' Meetings on March 1, 2006 contained the following directive: "DO NOT COMMITT FUNDS FOR CONTRACTORS See me before requesting a purchase order." WITHOUT MY PRIOR APPROVAL!

This directive was repeated regularly at the Supervisors' Meetings in 2006 and 2007.

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SMG Coatings, Inc. ("SMG")
SMG has been the awarded primary painting contractor of the District for many years. Based on the allegations made, our review focused on the time periods during which the 2004 Award and the 2008 Award were in effect. During this time period, District accounting records indicate that the District paid in excess of $2 million directly to its painting contractors for painting services under the painting contracts. Of this amount, Bonner Coating Systems, Inc., as a Secondary awardee under the 2004 Award, was paid $8,200.00. JDH, as the Secondary awardee under the 2008 Award, did not receive any payments. SMG was paid $2,018,651.50 under the 2004 Award and the 2008 Award. McDine's did receive $91,983 in fiscal 2007/2008 under two PO's issued during a period when no painting contract was in effect. These payments are not included in the payment summary below, which was prepared by the District. BIO# 05-020/BM - Painting Contractors - Maintenance Valid: 12/15/2004 - 12/14/2005 12/15/2005 - 12/14/2006 12/15/2006 - 12/14/2007 Bid Threshold: $5,000 Year 1 Year 2 Year 3 0.00 8,200.00 0.00 Bonner Coating Systems, Inc 0.00 0.00 0.00 Dane Contracting, Inc. McDine's Painting, Inc 0.00 0.00 0.00 SMG, Inc. 63,792.32 78,740.96 629,933.85 BIO# 08-031/BM - Painting Contractors - Maintenance Valid: 4/23/2008 - 4/22/2009 4/23/2009 - 4/22/2010 Bid Threshold: $20,000 Year 1 Year 2 631,365.21 614,819.16 & Maintenance

Bid Total 8,200.00 0.00 0.00 772,467.13

SMG Coatings

Bid Total 1,246,184.37 0.00

JDH Construction 0.00 0.00 BIO# 10-026/BM - Painting Contractor - Plant Operations Valid: 2/23/2011 - 2/22/2012 Bid Threshold: $3,500 Year 1 7,250.40 McDine's Painting SMG Coatings, Inc 4,730.70 Mailloux and Sons, Inc 0.00 Superior Coatings and Waterproofing, Inc 0.00

Bid Total 7,250.40 4,730.70 0.00 0.00

Per the rules and regulation outlined in the background regarding Purchasing:
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Painting services are clearly not available only from a single source and therefore are not exempted from the competitive solicitation requirements under DOE Rules. Painting services are clearly not emergency purchases that would allow the district school board to dispense with requirements for competitive solicitations.

The following is a summary of the history for awarding painting contracts at the District.

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SMG Coatings. Inc. (tlSMG") - continued 2001 Award - Painting Contractors The bid recommendation for BID #02-011/JO - Painting Contractors - Maintenance 2001/02 ("the 2001 Award"), which was approved by the Board on November 20, 2001, indicated a recommendation by Johnny Romans, Maintenance Coordinator, Plant Operations and Maintenance, and staff, that SMG be awarded primary vendor status and that five (5) other vendors be awarded secondary vendor status under that contract. The bid tabulation and other bid documents indicate that SMG was not the low bidder. The notes to the bid tabulation indicate a recommendation of SMG despite the fact that they were 3rd lowest bidder (in fact, the bid tabulation indicates that SMG was the 4th lowest bidder), citing that SMG's bid was the only complete bid at the time of opening the bids and that they "submitted the most responsive "lowest and best" bid that met all the requirements of the bid to include proof of insurance requirements, proper licensing, Workmans' Compensation, a proprietary requirement of full time staff and has an excellent historical relationship as a contractor with the District." Under the 2001 Award, SMG bid an hourly rate for a journeyman painter of $1B.OO/hour. The bid documents for the 2001 Award indicated a bid threshold of $5,000, whereby each of the four awarded contractors would be afforded the opportunity to quote as specified on any project estimated to be over $5,000. ·2004 Award - Painting Contractors The continuing contract for painting went out for bid again in October, 2004. The bid recommendation for BID #05-020/BM - Painting Contractors - Maintenance - 2004/05 ("the 2004 Award"), which was approved by the Board on December 14, 2004, indicated a recommendation by Walt Petters, Director of Maintenance and staff, that SMG be awarded primary vendor status and that three (3) other vendors be awarded secondary vendor status under that contract. Under the 2004 Award, SMG was the lowest bidder according to the bid tabulation, and bid an hourly rate for a journeyman painter of $15.1 O/hour. Bonner Coating Systems, Inc., the second-lowest bidder, bid an hourly rate for a journeyman painter of $15.71/hour. The bid documents for the 2004 Award indicated a bid threshold of $5,000, with projects under $5,000 to be quoted, approved and invoiced at the rates as bid and awarded. For projects with an estimated cost above $5,000, all Contractors were to be requested to submit competitive quotes, a walk-through was to be scheduled for the project, and the Contractor providing the lowest quote, meeting all specification was to be awarded the project. 2008 Award - Painting Contractors The continuing contract for painting went out for bid again in February, 2008. The bid recommendation for BID #08-031/BM - Painting Contractors - Maintenance ("the 2008 Award"), which was approved by the Board on April 22, 200B, indicated a recommendation by Walt Petters, Director of Plant Operations and Maintenance and staff, that SMG be awarded primary vendor status and that one (1) other vendor be awarded secondary vendor status under that contract. Under the 200B Award, SMG was the lowest bidder according to the bid tabulation, and bid an hourly rate for a journeyman painter of $12.00/hour. JDH Construction, Inc. ("JDH"), the secondary vendor under the contract, bid an hourly rate for a journeyman painter of $13.50/hour. A third bidder, McDine's Painting, Inc. ("McDine's"), who was a secondary awardee under the previous contract, bid a total amount that was $0.56/hour higher than JDH, but bid an hourly rate for a journeyman painter of $13.0B/hour, less than JDH. The rate bid for a journeyman painter is significant in that we noted by review of purchase records that the journeyman rate was the only rate charged on painting projects.

7

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SMG Coatings. Inc. ("SMG") - continued 2008 Award - Painting Contractors - continued The bid documents for the 2008 Award indicated that the bid threshold was raised from $5,000 to $20,000, with projects under $20,000 to be quoted, approved and invoiced at the rates as bid and awarded. For projects with an estimated cost above $20,000, both Contractors were to be requested to submit competitive quotes, a walk-through was to be scheduled for the project, and the Contractor providing the lowest quote, meeting all specification was to be awarded the project. The General Specifications listed in Article 3.1 of the General Specifications for Painting Contractors Hourly Rate Bid ("General Painting Specs") were identical for the 2001 Award, the 2004 Award, and the 2008 Award. In summary, the General Painting Specs provided that the District would provide the materials, and that the Contractor would furnish all labor at an hourly rate, tools, equipment, and transportation to provide the contracted painting services, unless specified in the contract documents. See excerpt of General Painting Specs attached as Attachment A. Maintenance & Purchasing Meeting - March 17. 2010 During the Purchase Order process for several large painting projects in February and March of 2010, we noted email exchanges between Purchasing staff and Maintenance staff regarding the specifics of contract estimates provided by SMG. The issue raised was rapidly elevated to Directors of both departments and a meeting was held between the two departments including both Directors, staff and the Assistant Superintendent of Facilities. We noted that, as a result of that meeting, the continuing painting contract was pulled, at the direction of Purchasing, as it was determined that the secondary contractor was not participating in the bidding process, resulting in a situation that projects were not being competitively bid.

8

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Observations and Irregularities Regarding Allegations of Favored Vendor Status - SMG

Violation of School Board Policy, DOE rule and Florida Statute regarding Competitive Bidding Ten (10) instances of projects under the 2004 Award in which Purchase Orders ("PO's") in excess of the $5,000 threshold were issued and where project files show no evidence that competitive bids were solicited or received. • Under these ten projects, SMG was paid a total of $276,614.68. • On three of these ten projects, Mr. Petters was involved in the purchasing process as evidenced by his initials on the Capital Project Worksheet, Contractor Estimate Sheet, and/or invoice. Three (3) instances of projects (Jupiter, Atlantis, and Meadowlane) under the 2008 Award in which PO's in excess of the $20,000 threshold were issued and where project flies indicate the bids were solicited from both SMG and JDH, but that JDH did not appear at the pre-bid meeting or submit a bid for the projects. • Under these three projects, SMG was paid $372,000.00. One (1) instance of a project (Central) under the 2008 Award in which PO's in excess of the $20,000 threshold were issued and where project files show no evidence that competitive bids were solicited or received. • Under this project, SMG was paid $76,500.00. Two (2) instances of projects (Suntree and Enterprise) under the 2008 Award in which quotes were obtained from both SMG and JDH, but for which the bid documents do not clearly state whether District would provide equipment or fuel to the Contractor on the projects. Under an Additional Comments section, the Bid Request - Scope of Work provided to the Contractors indicated that "All terms and conditions of Continuing Contract 08-031/BM - Painting Contractors shall apply." It also stated that "All appropriate labor, material and other costs shall be in accordance with the above referenced Continuing Contract." In JDH's bid, no reference is made to District supplying equipment or fuel. The Contractor Estimate Sheet submitted by SMG, however, indicated that "BCSB to supply paint, high reach, fuel and scissors lift." It does not appear from the documents that JDH was afforded the knowledge of this benefit during the bidding process on these two projects. Interviews of District employees have not answered this question, and we have not been able to reach JDH regarding this question. In the three (3) instances noted above where only SMG submitted a quote for the project (Jupiter, Atlantis, and Meadowlane), the bid documents do not clearly state whether District would provide equipment or fuel to the Contractor on the projects. Under an Additional Comments section, the Bid Request - Scope of Work provided to the Contractors indicated that "All terms and conditions of Continuing Contract 08-031/BM - Painting Contractors shall apply." It also stated that "All appropriate labor, material and other costs shall be in accordance with the above referenced Continuing Contract" The Contractor Estimate Sheet submitted by SMG indicated that "BCSB to supply paint, fuel and scissors lift." It is not clear from documents or through interviews whether JDH was afforded the knowledge of this benefit during the bidding process on these two projects. Interviews of District employees have not answered this question, and we have not been able to reach JDH regarding this question. Review of the painting contract history revealed that the 2004 Award had 1 primary and 3 secondary contractors with a $5,000 bid threshold. The 2008 Award changed to have 1 primary and 1 secondary contractor and a $20,000 bid threshold. It is not customary for the District to have less than 3 contractors for a continuing contract and typical ceilings are between $3,000 and $5,000. As noted above, SMG was paid in excess of $2 million while other painting contractors were paid $8,200 under the 2004 Award and the 2008 Award. When presented with this scenario, Mr. Petters claimed he was unaware of the change in the bid threshold and did not know how that could have occurred.

9

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Observations and Irregularities Regarding Allegations of Favored Vendor Status - SMG continued Violations of the Terms of the Contract We obtained a listing of invoices submitted by SMG for payment during the fiscal years from 2005/2006 through 2010/2011. To test compliance with contract terms, we selected a sample of significant painting projects paid for through capital funds. Our testing indicated irregularities, as described below, and we expanded our testing to include painting projects paid for through operating funds. • Eight (8) instances where SMG charged $18.00/hour for painting services under the 2004 Award when the contracted rate with SMG for a journeyman painter was $15.10. a Under these eight PO's, SMG charged 710 hours. a Based on a per hour overcharge of $2.90/hour (i.e. $18.00 less $15.10), SMG overcharged District by $2,059.00 on these projects. a We noted that $18.00/hour was the quoted rate by SMG under the 2001 Award. Forty-seven (47) instances where SMG charged $17 .12/hour for painting services under the 2004 Award when the contracted rate with SMG for a journeyman painter was $15.10. o Under these 47 PO's, SMG charged 14,549.50 hours. a Based on a per hour overcharge of $2.02/hour (i.e. $17.12 less $15.10), SMG overcharged District by $29,389.99 on these projects. a We noted that an overcharge on PO's related to refurbishment and painting of dumpsters was discovered in or around June 2007 by a maintenance department accounting clerk. a In August 2007, District received a refund from SMG of $2,306.84, representing a refund of the amount overcharged on nine (9) PO's issued for refurbishment and painting of dumpsters. a It does not appear that any attempts were made to recoup other amounts overcharged. The fifty-five (55) instances of overcharges in the hourly rate were noted during the period from February 2005 through August 2007. No additional instances of overcharges in the hourly rate were noted after August 2007.

..

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When presented with the PO packages reflecting the overcharges by SMG and asked about the overcharges, Mr. Petters claimed to have no recollection or knowledge of them. Mr. Petters indicated that he does not get into that much detail. When presented with the PO's on which he gave approval, Mr. Petters admitted that his signature was on the documents approving the project at the excessive rate, but could not explain how the overcharge happened. Mr. Fayed, the Central Area Supervisor, who was in charge of painting District wide, and who also approved many of the transactions containing overcharges, likewise could not explain the overcharges. .. Instances where projects were awarded under multiple PO's, each individually below the bid threshold but collectively above the bid threshold, that arguably should have been considered as a single project and competitively bid.

We interviewed current and former Maintenance Department employees regarding the allegation that certain contractors were allowed to use District equipment and were supplied with fuel from District pumps, benefits that other contractors were not provided. To corroborate information given to us through these interviews, we obtained fuel logs from the Maintenance Compound and reviewed Equipment Issue Forms from the Tool Crib to identify any instances where contractors were supplied with fuel or given use of equipment. We noted instances where SMG was given the use of District equipment and where SMG was supplied with fuel and equipment, as described below. .. We noted allowed to 50 gallons We noted equipment Equipment eight (8) instances between October 15, 2009, and April 16, 2010, where SMG was use District fuel. The number of gallons provided in each instance ranged from 30 to and totaled 359 gallons for these eight instances. four (4) instances between February 23, 2007, and December 23, 2009, where (compressors, scissors lifts, trenchers) were checked out of the Tool Crib on an Issue Form for use by SMG.

10

Allegations

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Sena-Tech, LLC (SlSena-Tech'" Florida Department of State records indicate that Sena-Tech was incorporated on January 23, 2006, with Eve Hinds and Steven Terry as its Managing Members. District records indicate that Sena-Tech began doing business with District in January, 2007. At that time, District had a continuing contract for electrical contractors, as described below. Sena- Tech was not a primary or secondary awardee under this continuing contract. Sena-Tech became an awarded vendor under a continuing contract bid out in 2008, as described below. 2006 Award - Electrical Contractors The continuing contract for electrical contractors went out for bid in December, 2005. The bid contained two parts: • Part I - Electrical Projects and Parking Lot Lighting • Part II - Athletic Field and Outdoor Lighting Projects and On Call Service The bid recommendation for BID #06-02B/BM - Electrical Contractors - Maintenance - 2005/06 ("the 2006 EC Award"), which was approved by the Board on February 14, 2006, indicated a recommendation by Walt Petters and staff that Egan Electrical Contractors, Inc. ("Egan") be awarded as the primary vendor on Part I, with four (4) other contractors named as secondary awardees. The bid documents for the 2006 EC Award indicated a bid threshold of $5,000. The Primary and Secondary Contractors were to be requested to quote as specified for each project estimated to be over $5,000, and the Contractor providing the lowest quote meeting specification was to be awarded the project. According to the bid documents, the type of work included within Part I projects included, among others the installation of conduit, pulling wire, installing circuits, main and sub-panels and switch gear. 2008 Award - Electrical Contractors The continuing contract for electrical contractors went out for bid again in May, 200B. three parts: • Part I - Electrical Projects and Parking Lot Lighting • Part II - Athletic Field and Outdoor Lighting Projects and On Call Service • Part 111 - Low Voltage Cabling The bid contained

The bid recommendation for BID #OB-044/BM - Electrical Contractors - Maintenance ("the 2008 EC Award"), which was approved by the Board on October 14, 2008, indicated a recommendation by Walt Petters and staff that Egan be awarded as the primary vendor on Part I, with three (3) other contractors, including Sena-Tech, named as secondary awardees for Part I projects and that Sena-Tech be awarded as the primary vendor on Part 111, with two (2) other contractors named as secondary awardees for Part III projects. The bid documents cal1ed for the selection of a primary and three secondary awardees for Part 111 projects. The tabulation sheet for Part III of this bid indicated that the low bidder was Mustang Communications, LLC ("Mustang"). They were not selected as the primary or as a secondary awardee on the Part III work. The bid documents indicated that Mustang's bid was rejected because they didn't meet the licensing requirements stated in the bid. Mustang filed a bid protest claiming an EC license was not necessary for this type of work. The Board Attorney has advised us that the bid protest was ultimately dismissed as Mustang did not submit the required bid protest bond. We continue to receive information and new allegations related to this issue. We have not completed a full investigation of these issues as of the date of this report. The bid documents for the 200B EC Award indicated a bid threshold of $5,000 for both Part I and Part III projects. For both Part I and Part III projects, the Primary and Secondary Contractors were to be requested to quote as specified for each project estimated to be over $5,000, and the Contractor providing the lowest quote meeting specification was to be awarded the project.

11

Sena-Tech. LLC C'Sena-Tech") - continued According to the bid documents, the type of work included within Part I projects were unchanged from the 2006 EC Award and included, among others the installation of conduit, pulling wire, installing circuits, main and sub-panels and switch gear. According to the bid documents, the type of work included within Part "' projects included, but was not limited to: • Replace, alter or change conduit o Replace fixtures, o Repair, replace or change cabling which transmit data, voice, or commands. The Contractor Qualifications in the bid documents require the same licensing for the Part I, Part II, and Part III bids and contains a requirement that the Contractor must have successfully completed within the past five (5) years a minimum of ten (10) commercial electrical projects where the contract amount was $20,000 or more. The Contractor Qualifications required completion of a questionnaire to be used to evaluate capabilities to perform the work during the contract period. We obtained the questionnaire completed by Sena-Tech as part of their bid submission and noted the following: o The questionnaire was signed by Steven Terry as President of Sena-Tech o The questionnaire consisted of 5 pages, plus attachments; we noted that page 4 of the questionnaire was missing; page 4 contained 4 of the 10 project references required in the bid o The questionnaire referenced to license number EC13003340. According to Florida Department of Business and Professional Regulation records: o The licensee under this number is David A. Brabham o Tthe address on the copy of his license submitted with the questionnaire was the same as the address of Sena-Tech at the time of the bid (the current main address of the license is 1767 S Patrick Drive Suite S, Indian Harbour Beach, FL 32937, which is the same address used by Sena-Tech) o The licensure date of this license was 8/29/06 o According to Florida Department of Business and Professional Regulation records, no complaints are listed against the license • The questionnaire lists Chris Osteen of Egan as a trade reference. • The questionnaire lists Walt Petters and Tom Fitzgerald of District as references and included project names for each, including references to projects involving antennas, security cameras, and wireless access points, among others. • The questionnaire lists several projects above $20,000 performed for District as part of the disclosures of experience in the field. According to this disclosure, these projects were performed prior to the time that Sena-Tech had a contract with District. Based on the allegations made, our review focused on the time period from Sena-Tech's inception. We obtained a listing of invoices submitted for payments by Sena-Tech during the fiscal years from 2006/2007 through 2010/2011. This listing, produced from District's Purchasing Department records, shows that Sena-Tech invoiced, and District paid, in excess of $322,000 to Sena-Tech prior to the awarding of the 2008 EC Award and in excess of $1.1 million to Sena-Tech under the 2008 EC Award in the period from October 15, 2008 through June 30, 2011.

12

Observations

and Irregularities

Regarding Allegations

of Favored Vendor Status - Sena-Tech Competitive Bidding

Violation of School Board Policy. DOE rule and Florida Statute regarding

Sena-Tech was awarded $322,288.68 in work under 78 invoices during the period from January 28, 2007 through October 7, 2008, prior to being named as a primary or secondary electrical contractor. Notwithstanding the fact that the work was given to a non-awarded contractor, we noted in testing of 11 PO's during this time period that: • For nine (9) of the PO's, Mr. Petters signed the Capital Project Worksheet, Contractor's Proposal or Contractor Estimate Sheet, andfor the invoice from Sena-Tech authorizing the terms of and payment for the project. o PO#27018700 dated 1/29/07 in the amount of $8,079.47 for installation of patch panels included a proposal from Sena-Tech that was adjusted to $8,079.47 (by crossing out amount of $8,354.00 and writing in $8,079.47). This proposal, as adjusted, and the invoice were approved by Mr. Petters. The Contractor Estimate Sheet supporting the $8,079.47 amount proposed indicated an estimate of 55 hours for the project at a rate of $70.00/hour and charged a markup of 15% on materials. At the date this estimate was approved, District had a continuing contract in place with Egan as the primary (Part I) electrical contractor, in which Egan had bid an hourly rate for a journeyman electrician of $33.00/hour. In fact, all of the primary and secondary awardees under Part I of the 2006 EC Award bid an hourly rate lower than $70.00/hour. Also, Egan bid a markup rate of 1% and two of the secondary awardees bid markup rates lower than 15%. o PO#27034551 dated 6/22/07 in the amount of $11,382.70 for purchase of cameras and accessories for the security camera system in the maintenance compound included a Contractor Estimate Sheet and invoice that were approved by Mr. Petters. The material markup was at 15%, which is higher than the markup rate bid by the awarded Part I electrical contractors. o PO#28003977 dated 8/21/07 in the amount of $5,378.50 for purchase and installation of security camera system in the maintenance compound included a Contractor Estimate Sheet and invoice that were approved by Mr. Petters. The rate quoted on the proposal and charged by Sena-Tech was $45.00/hour, which is higher than rates quoted by awarded Part I electrical contractors. The material markup was at 15%, which is higher than the markup rate bid by the awarded Part I electrical contractors. o PO#28015257 and PO#28019634 in the amounts of $1,233.50 and $2,411.87, respectively, were created for projects to Install security cameras at the maintenance compound. Both of these PO's were confirming PO's. The proposals and/or invoices were approved by Mr. Petters. The Contractor Estimate Sheets supporting the work done indicated an hourly rate of $55.00fhour and a material markup rate of 15%, both in excess of the amounts bid by awarded Part I electrical contractors. o Four (4) of the PO's related to a single project to install antennas for emergency radios at each of the District's schools. Sena-Tech provided a proposal, on a Contractor Estimate Sheet, indicating a price of $13,920.60, based on a minimum labor estimate of 160 hours at $45.00/hour for installation at 80 schools. The estimate also included a markup on materials of 15%. This estimate was approved by Mr. Petters. Sena-Tech submitted an initial pay application asking for the entire amount of $13,920.60, but indicating that only 42 of the schools had been completed. Additional pay applications were issued by Sen aTech, and approved by Mr. Petters, and two additional PO's were created, in the total amount of $17,160.25 on this project. District ultimately paid more than $30,000 for this project that was initially estimated at $13,920.60.

13

Observations and Irregularities Regarding Allegations of Favored Vendor Status - Sen a-Tech continued Violation of School Board Policy, DOE rule and Florida Statute regarding Competitive Bidding continued • PO#28005493 dated 9/5/07 was issued for labor and materials to provide voice and data communications at 12 portables at Ralph Williams Elementary School. The total amount of the PO was $44,990.04, or $3,749.17 per portable. Five pay applications were issued for this project. The dollar amount of the project was above the threshold whereby a bid process was required. There is no indication in the project files that anyone other than Sena-Tech was asked to or submitted a proposal on this project. In discussions with Maintenance Department employees, there is some confusion as to when a project is to be considered individually (i.e, each portable) or collectively (i.e. all portables) for purposes of the bid requirements. In this case, the fact that all of the portables are at one location, that the contractor bid the project as a lump sum for all of the portables, and that a single PO was issued for the work indicate that it was clear that this was a single project. PO#28015455 dated 12/20107 was issued for purchase and installation of security cameras at West Melbourne Elementary School. The total amount of the PO was $5,366.65. The dollar amount of the project was above the threshold whereby a bid process was required. There is no indication in the project files that anyone other than Sena-Tech was asked to or submitted a proposal on this project. The Contractor's Estimate Sheet and the invoice from Sena-Tech for this project were approved by Jim Hudson.

PO#29010817 dated 12/08/08 (i.e, after 2008 EC Award) in the amount of $12,420.47 was issued for IT upgrade in Maintenance Compound (l.e, equipment and installation of cat6 infrastructure and fiber). The Contractor Estimate Sheet was approved by Mr. Petters. There was no documentation in the files to support whether any competing bids were obtained, despite the fact that the dollar estimate on the project exceeded the bid threshold established in the 2008 EC award. We also noted that the invoice and the Contractor Estimate Sheet were significantly different. The Contractor's Estimate Sheet estimated 100 hours at the bid rate of $50.00/hour plus materials at $7,347.00 and a markup on materials at the bid rate of 1%. The invoice charged 199.25 hours at $50.00/hour or $9,962.50 for labor, plus $3,324.86 for materials and a markup on materials of 8%. The invoice was then adjusted by a credit of $1,132.88 to reduce the invoiced amount to $12,420.47 to match the Contractor Estimate Sheet. The hours charged matched a certified payroll report in the files. The fact that the charge for materials is so much higher than the estimated amount raised the question of whether the remaining materials were charged on another invoice. We have not as yet been able to determine the answer to this question. Six separate PO's dated 5/28/09 and totaling $34,650.72 ware issued for labor and material for AT&T/Srighthouse Conduit Installation and for labor and material to run #6 ground, demark extension, and cat6 cable at various school locations. On five of these PO's, Sen a-Tech charged a material markup of 8% and on the other PO, Sana-Tech charged a material markup of 15%. Sena-Tech quoted a material markup of 1% in its Part III bid under the 2008 EC Award.

14

.·Jl.I·lega~i()~si()fFav()riti!)rt1t()Sel~C:t~d.\f~ndClrs-Contil1l1e~i.·.·.··········· Observations continued and Irregularities Regarding Allegations of Favored Vendor Status - Sena-Tech -

Violation of Terms of Contract PO#21003155 and PO#21 003156 were issued on 8/19/09 in the amounts of $2,258.50 and $3,278.68, respectively for labor and materials related to AT&T upgrades at Endeavor Elementary. Sena-Tech charged 8% material markup instead of the 1% material markup quoted in its Part III bid under the 2008 EC Award. Mr. Petters approved the Capital Project Worksheet on this project. PO#29018932 dated 3/31/09 in the amount of $3,725.64 was issued for running conduit and cable at Endeavor Elementary. Sena-Tech charged 8% material markup instead of the 1% material markup quoted in its Part III bid under the 2008 EC Award. PO#21100876 dated 7/15/10 in the amount of $4,590.52 was issued for installation of conduit, fiber switch and phone/data lines for two portables at 520 Bus Compound. Sen a-Tech charged 8% material markup instead of the 1 % material markup quoted in its Part III bid under the 2008 EC Award. Mr. Petters also approved the Capital Project Worksheet on this project. PO#211 01764 dated 7/30/10 in the amount of $6,541.98 was issued for installation of voice and cable TV to five portables at Endeavor Elementary. Sena-Tech charged 8% material markup instead of the 1% material markup quoted in its Part III bid under the 2008 EC Award. Mr. Petters also approved the Capital Project Worksheet on this project. PO#211 05313 dated 9/23/10 in the amount of $4,494.93 was issued for installation of new fiber to three portables and 32 new phone and data lines at 520 Bus Compound. Sena-Tech charged 8% material markup instead of the 1% material markup quoted in its Part III bid under the 2008 EC Award. Mr. Petters also approved the Capital Project Worksheet on this project. We interviewed current and former Maintenance Department employees regarding the allegation that certain contractors were allowed to use District equipment, benefits that other contractors were not provided. To corroborate information given to us through these interviews, we reviewed Equipment Issue Forms from the Tool Crib to identify any instances where contractors were given use of equipment. We noted one (1) instance, on April 23, 2009, where equipment (walk behind trencher) was checked out of the Tool Crib on an Equipment Issue Form for use by Sena-Tech.

15

Allegations were made that many projects were started without proper building permits and that permits were often not received until projects were completed or were not received at all. Additional allegations were made that Mr. Petters, through his Project Managers, told contractors to perform construction, remodeling, or renovation projects without getting permits or inspections and that a building official was threatened with replacement for not being flexible. The Building Official reports directly to the Assistant Superintendent of Facilities. According to FS 468.604, "it is the responsibility of the building code administrator or building official to administrate, supervise, direct, enforce, or perform the permitting and inspection of construction, alteration, repair, remodeling, or demolition of structures and the installation of building systems within the boundaries of their governmental jurisdiction, when permitting is required, to ensure compliance with the Florida Building Code and any applicable local technical amendment to the Florida Building Code. The building code administrator or building official shall faithfully perform these responsibilities without interference from any person." We are not experts in Florida Building Code or its interpretation; therefore, we cannot make a determination as to whether a building permit was or was not required for any specific project or as to whether Florida Building Code was being followed on any specific project. We did, however, interview project managers and the current and former building official to determine the nature of the working relationship between the maintenance department and the permitting department and the veracity of the allegations. During these interviews, we noted a level of tension between the maintenance department and the permitting department that is not unexpected given the responsibilities of each department. The maintenance department often sees the permitting department as an impediment to getting projects completed in a timely and cost-effective manner, which is a primary objective of the maintenance department. The permitting department, on the other hand, is charged with the responsibility of ensuring that all projects are properly permitted and performed in accordance with building codes. Naturally, there will be many instances when these objectives and responsibilities are at odds with each other. Between 2004 and 2010, there were periods of significant building volume. We reviewed the permitting files of several specific examples described as having permitting issues by those making the allegations. Our review of files did indicate instances where Building Permits were obtained after the project was completed. In addition we noted instances of 'grey' areas in the interpretation of the permitting requirements. For instance, a project was initiated to replace forty (40) exterior doors at Harbor City in 2007. Documents in the permitting files indicate discussion between the Building Official at the time and the project manager about the need for a permit on this project. The project manager contended that no permit was required because they were merely replacing the doors (a one for one replacement). The Building Official instructed that a permit was required because the doors that were being replaced were not up to current windstorm and impact code requirements and the doors being installed as replacements were up to the current code requirements, a distinction necessitating a permit. Ultimately a permit was issued and inspections were done, but not until the project was completed. The current Building Official indicated that he regularly attends project meetings in the Maintenance Department to stay current on projects, timelines and the need for building permits and uses an EXCEL schedule to track projects through the permitting process and to monitor projects for which he expects to issue permits. Without significant additional testing, the allegations completely proven or disproven. made regarding permitting on projects cannot be

16

Allegations were made that certain non-capital projects were contracted, conducted and paid for within the Facilities Area for administrative or operations purposes using continuing contractors outside their area of approval. See results under other allegations for additional information. Ed Curry, Assistant Superintendent of Facilities Services, requested a process analysis/improvement study be conducted to identify and develop recommendations on how to re-establish a positive working relationship between the facilities and purchasing departments. A team of maintenance staff worked with BRPH consultants to conduct the study. A full report was issued dated December 17, 2010, and Mr. Curry shared it with several members of the District. A BRPH employee worked for the District as a consultant to assist with several large construction projects to avoid hiring permanent staff for a time-bound construction program. Upon discovering this consultant's talents as a Six Sigma Master Black Belt, he was asked to assist with several Facilities Services initiatives while working on the construction projects. The Purchasing Process study was one such initiative. As noted in the background section, the District has certain continuing contractors approved through the Purchasing Department and the Board for specific services. BRPH is a continuing contractor that is approved for architectural engineering services for construction projects. The specific terms in the contract with BRPH dated January 1, 2008 with renewal options through December 31, 2010, (Exhibit A, Section H Additional Services) include the following among the services to be provided under the contract: o feasibility and other special studies, o operating and maintenance manuals, and o other services not otherwise included in the Agreement or not customarily furnished in accordance with generally accepted architectural practices consistent with the terms of this Agreement. Invoices for this project were charged at a rate of $41.61/hour miscellaneous consulting services. Observations and Irregularities using Continuing Contractors Regarding Administrative under a blanket PO of $50,000 for

Projects

Inappropriately

Contracted

Violation of the Use of Continuing Contractors The Board Attorney has advised us that this type of study does not fall under architectural engineering and this project should have been competitively bid or fallen under a different contract. and

Violation of the Use of Capital Funds Through review of invoices and P.O's this project was funded through Capital Fund dollars. dollars are restricted in use and do not include administrative services. Capital Fund

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Several allegations have been made that employees of the District Maintenance Department have conflicts of interests with certain vendors. As outlined in the background section above, Chapter 112, Part III, Florida Statutes, Code of Ethics for Public Officers and Employees addresses conflicts of interest. • When asked, Mr. Petters readily admitted that Tim Tillotson, the co-owner of SMG, is a close personal friend, that they go to lunch often, and that Mr. Tilliotson has spent time at Mr. Petters' cabin. When asked, Mr. Petters readily admitted that his step-son worked for a time at SMG. Steven Terry, owner of Sena-Tech, has been identified in various allegations as the son-in-law and nephew of Wes Fayed. Wes Fayed stated that Mr. Terry is not related to him in any way. We have not yet confirmed this statement. Wes Fayed lives at 250 Sherwood Ave., Satellite Beach, Florida. According to Florida Secretary of State records, this is also the address of a company called Competitive Irrigation, LLC, which was incorporated on March 11, 2011. Mr. Fayed is listed as a Member Manager of this organization. Jared Krell, who is Mr. Petter's stepson, is also listed as a Member Manager of Competitive Irrigation, LLC. Mr. Krell has also been an employee of SMG. Hillsborough County Public Schools' vendor list shows SMG as a vendor under the Finishes Division, with an email address of krelljsmg@gmail.com. Mr. Krell's employment at SMG was confirmed by Mr. Petters.

• •

Through conversation with the Board Attorney, these allegations could serve as the basis for a formal complaint to the Commission of Ethics as a misuse of a public position.

18

Through interviews with current and former employees, we were told of attempts in the past to bring similar allegations to the attention of the Facilities Services Assistant Superintendent and/or the Director of Maintenance. Some individuals interviewed indicated that they feared retribution or punishment if they brought issues forward. The other avenue available to employees to bring allegations forward is the Ethics Committee as formed through the Ethics Policy. These interviews also identified a general perception that the Ethics Committee is ineffective. Documentation regarding this allegation is challenging to identify and in many instances is verbal. This barrier led our focus of testing on the Ethics Committee as it provides a documented record and audit trail. We requested documents of allegations made to the Ethics Committee from or about the Maintenance Department. We noted the general process for items brought to the Ethics Committee regarding the Maintenance Departments was as follows: • If the allegation was in writing and signed, the investigation typically began with the Ethics Committee presenting the allegations to the Facilities Services Assistant Superintendent. • It was then sent to the Director of Maintenance and addressed with staff. • A response was returned to the Ethics Committee with documentation supporting the response. We reviewed a sample of these ethics complaints. trivial and are 'hearsay' in nature. We noted that many of these complaints do appear

Observations and Irregularities Regarding Allegations of Ineffective "Tone at the Top" within the Facilities Area Ineffective Investigations by the Ethics Committee

An example, in one instance from 2008, an individual wrote a letter to the Ethics Committee alleging that he observed Wes Fayed filling his personal vehicle at District fuel pumps on Sunday evenings. The letter noted a particular instance as having occurred on Sunday, February io" around 7:30pm. The ethics file contained the following as documentation of the investigation into this matter: .. the original allegation, marked as having been received by the Deputy Superintendent on February 19, 2008. • a memorandum from Ed Curry to the Deputy Superintendent dated March 5, 2008 summarizing the investigation. According to the memorandum, Mr. Curry met with Wes Fayed and Walt Petters on February 27, 2008 to discuss the allegation. The memorandum further indicated that, at Mr. Curry's request, Mr. Fayed had responded to the allegations. The response, as described below, consisted of a letter and supporting document provided by Mr. Fayed, and was attached to the memorandum. The memorandum concluded with Mr. Curry's opinion that Mr. Fayed had not violated any District policies or procedures that further investigation of the situation was unwarranted, and the statement that he wished all of his Supervisors took the time on Sunday evening to prepare their vehicles for the upcoming work week on their own time. • the response letter from Mr. Fayed dated March 3, 2008. In the letter, Mr. Fayed made the following statements: o "As a Central Area Supervisor, I have a "county wide" responsibility and am on call 24/7. Like all the Maintenance Supervisors, I park my county vehicle at the closest school or compound to my home. As a matter of routine, almost every Sunday evening, I drive to the compound, fuel, wash and clean my county vehicle in preparation for the up coming week and sometimes I even wash my personal vehicle." o "Our fueling stations are equipped with electronic fob keys that are specifically coded to each vehicle and require mileage input on each fill up. If the mileage and gallons are out of sync, the pump will not dispense fuel. This system is designed to eliminate fuel theft and has been in place for years. I have included a fuel history log for my vehicle from our tracking system provided by Assistant Transportation Director, Chuck Stevenson."

19

AllegCltion~ofln~ffegti'V~·'''ol1eattheTqp"withil1the··.Faciliti~sA;'ea.·.",•• c()J1tinued.···
Ineffective Investigations by the Ethics Committee - continued D A vehicle usage log for vehicle #22309 for what appears to be the period from 9/30/07 through 2/24/08. Review of the report indicates the following: o The report lists 23 transactions during the time period of the report, with 22 of the transactions recorded as being from the site name "Satellite". o Fifteen (15) of the transactions occurred on Sundays and twelve (12) of these occurred after 7:00pm, according to the time stamp on the transaction. o The quantity of fuel pumped ranged from a low of 12.1 gallons to a high of 36.0 gallons. o The miles per gallon ("MPG") recorded for each transaction based on the odometer reading and the gallons pumped ranged from a low of 0.0 MPG to a high of 96.4 MPG. o The input odometer reading on two consecutive transactions actually decreased by 800 miles, from 16,800 miles to 16,000 miles. o On five (5) other occasions, the increase in the odometer readings on consecutive transactions was exactly 500 miles. o On three (3) occasions, the increase in odometer readings on consecutive transactions was only one (1) mile. On each of these occasions, the consecutive transactions occurred on the same date and occurred seven to twelve minutes apart, leaving open the possibility that fuel was dispensed into two different vehicles. o The time stamp on a transaction recorded as occurring on Sunday, February 10, 2008, indicates that the transaction occurred at 7:33pm, which coincides closely with specific information provided in the allegation letter. Based on our review, it does not appear that the controls over the fuel dispensing process can be relied on to control questionable transactions (e.g. allows entry of decreases in odometer readings), that the allegation was adequately answered by the response (i.e. fuel history still leaves open the possibility that the allegation is true), and that the investigation was sufficient to answer the allegation. From a holistic viewpoint, we did not note a consistent theme or pattern to the complaints that would have led the Ethics Committee to investigate further the allegations in this report. In other words, they do not lead to the conclusion that there is a systemic problem within the Maintenance Department. We did note that certain investigations were ineffective. We strongly recommend reviewing the processes under the ethics policy, to ensure that allegations brought forth to the Ethics Committee are appropriately vetted and investigated. A strong ethics process will have a positive impact on the "tone at the top" and act as a mitigating control for the District.

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ATTACHMENT A
810 #08-031IBM -Specifications 2/4/08 - Page 3 . 3. SPECIALTERMSAND CONDITIONS 3.1 GENERALSPECIFICATIONS

'iMf';1'~ The',Cohfr'8atbr shall fumishalilabol'

at an" hourly rate;' tools; equlpment,ahd transpOJ1;;ltioo"to> p(Qyide- painting 'cotiWClClr services .~t multiple facilitieswithin'·Brevardlcbunty·as'requil'Sd~by_,.tlJe" _School.St:iardf,These;setlrlC:es;§fiaUi.wlUde'smallio·fai"ge·palnting:proje¢~;: The Contractor is qualified for and responsible for the entire project contracted for and does himself or by others ., prep work and painting of interior and exterior of any school.

3.1.2

3;.1~3" ,L-aborprovided _ by~he c:onlra~tw .:shaUbe,·billed;tothe'"SChOO"B()ardllJ.IS~d on the hourly rates~bldfot'laboi' (ftemS'1"antl2 on'thabld,priee sheet). The hQQr1Yl'ate"bfdshalliifCldcfErfuil c..9,mpensation"forJ(abOi,equlpment use, travel_time and any other. CCist"(jncIUdiffg'-oVerhead}'tCi:tff9' ¢OHtfactor, -_Ib<3-,rata_- js_,stralghtftime'fOi'i all'labotc~~Thei,SdhdCigBoar~ :,sh·ani~mlypay·fait'mElr~~t ..
J

,price.$'fQ~JabOFi

-

.\:":3~1A All materials._~_re to, ~ furnished bythe'.SonboIiBoarcH:)fBre\tafd'Cdunty.':'fObls'andeqLl)pm~l'It

@reto.-befum!sheCfO}"the130ntraetor:

3~1.5

The Contractor shall superviseal1d direct the work, using his best skill and attention. He shall. be solely responsible for all construction means, methods, techniques.aequences and procedures and for coordinating all portions of the work under the contract The Contractor shall be responsible to the OWner for the acts and omissions of his employees, subcontractors, and theIr agents and employees, and other persons performing any of the work under a contract With the COntractor. Unless -otherwise provided in the project documents,the Contractor shall provideandpay-f6f;(elll labor, equipment, tools, construction equipmerlt and machinery, tratisptirtatibntahd otherAacllltle:s J'l-!JcL~ryi~S neceasary for the proper execution andcom pletion ofthe'projeci:,Whether temporary s ,,¢9rpermanent and whetherornot incorporafetnfi·iHe'projecC· The Contractor atan times shall keep the premises free from accumulation of waste materials or rubbish caused by his operations. At the -completion of the work he sh~1I remove all his waste materials and rubbish from and about the Project,as well as, all his tools, construction equipment and machinery. The Contractor shall be responsible of nOtifying the School Board in writing of any conditions detrimental to proper and timely completion of work. Do not proceed with work until unsatisfactory conditions have been corrected Ina manner acceptable to the Contractor. -

3.1.6

,;;3.1.7

3.1.8

3.1.9

4.

CONTRACTOR'SRESPONSIBILITIES 4.1 -Upoonotification froin llii§:"School'Board's-aiith-oJiZed rep'resentiitive(s), the Contractor shall prepare an :indl:lpendent writteneStirilc:ite of the estimated time and tabor required to complete the work This estimate shall provide specific information incl\ldip.g the following: hourly labor rates,as bid, for each required task and the number pf hC!urs required to complete the project, This estimate shall also fnClllde the time work will be startedand completed,

The Contractor will be provided a delailed scope of work; which identifies the specific work description,
The Contractor shall complete the total estimate to accomplish the work and will identify any additional tasks necessary to satisfactorlly accomplish the overall scope of work.

BIDDER: Retain this sheet for your files.

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