State Audit Finds Slew of Irregularities and Procedural Disarray at Flagler’s Mosquito Control District, But No Fraud

A state audit prompted by what was initially feared to be the disappearance of $1.1 million in the East Flagler Mosquito Control District budget found no fraud but rather a grave accounting error–and a dozen other irregularities, violations of law, poor record keeping and lacking policies in what is now a $2.6 million operation.

In sum, the mosquito control district was in budgetary and procedural disarray by the time the accounting error was uncovered in 2017, and it had overspent money and tracked it poorly, but the audit’s findings, first reported in the Observer, did not cite more seriously incriminating or criminal issues.

More than half the findings, including the $1.1 million error, were connected to the district’s construction of its facility on the southern grounds of the county airport–a project that in part was not competitively bid out, properly insured, sited, documented or in some cases financed, as the district did not hold the contractor to account for a project completed a year late, maintain change orders or even take advantage of sales tax exemptions that could have saved money.

Though the audit does not state as much, that half of the findings helps explain why the new $2.1 million facility, completed in the spring of 2017, cost as much as it did, and why the district’s fund balance diminished to around $400,000 in 2017, from $2.9 million two years earlier.

The district’s former executive director, Joe Cash, told his staff what had gone wrong in a July 2017 memo, weeks before he ersigned: “The fund balance was incorrectly stated and by the time the error was discovered the budget was overspent by $1.1 million.” In essence, the state audit did not, on that account, differ from what the district’s own auditor had found that year.

The remaining of the findings focused on procedural issues such as lack of policies, transparency and accounting norms.

The district responded to the findings by largely agreeing with most of them and blaming the previous executive director, Joe Cash, without naming him, for most of the irregularities. Cash had started working for the district in 1978 and had already overseen two construction projects before taking on the new facility at the airport. He’d done things his way. His way unraveled by the time the million-dollar-discrepancy was uncovered, and he quickly resigned in August 2010.

“We don’t build buildings very often so I’m not surprised they’d find things related to that,” Mark Positano, who replaced Cash, said today. “We should have used a project manager rather than rely on Joe Cash.” That’s how construction will be handled next time. But, Positano said, “the whole idea of the consolidated facility was that this was a once-in-a-30-year project.” In other words, many of the audit’s findings are almost moot given the absence of any construction plans for the next many years.

The district did contest the finding that found that it violated the law by not putting out architectural services for the new facility to bid. Instead, the district “piggy-backed” on a Flagler County contract, using the county’s architectural firm: the county administration of then-Administrator Craig Coffey had either encouraged or pressured Mosquito Control to use its own architectural contractor because the county wanted to ensure that the new building would mesh with county and airport standards. The district’s attorney signed off on piggy-backing, which is done commonly by local government agencies, including Flagler County government. The district defended itself on that account but answered in its management’s response that it would “develop policies and procedures before considering any such projects in the future.”

The audit was conducted by the State Auditor General, an arm of the Legislature. It was requested by Rep. Paul Renner and Sen. Travis Hutson, who represent Palm Coast and Flagler County, after revelations of the $1.1 million discrepancy, which was first reported by FlaglerLive in August 2017–soon after Cash issued a memo to his employees that spending would have to be curtailed. Some employees were laid off. A sense of crisis fell on the agency, which is responsible for spraying Bunnell, Palm Coast and Flagler Beach to control or suppress the mosquito population.

The agency is supported by property taxes of around $32 to $35 a year on the median-valued home in the county. It has its own elected board and independent taxing authority: Palm Coast and county government are neither responsible for any of the district’s actions nor do they have any say, or authority, over how the district operates–and generally prefer that it stays that way, as the district’s operations are highly specialized and scientifically based, with little politics getting in the way.

But the district’s elected officials have tended to be less than aggressive overseers of the operation, when they’ve not been distracted by other problems: the board is currently made up of Julius Kwiatkowski, Barbara Sgroi, and Florence Fruehan, though not exactly: Gov. Ron DeSantis suspended Fruehan from the board after Fruehan was charged with a pair of felony battery counts in January. He’s not been attending meetings as a result.

Positano today said the district’s fund balance is back to a healthier $1.5 million, and its combined reserves, from three accounts, are around $650,000. “:Financially, we’re very strong right now.”

The State Audit:

Click to access east-flagler-audit.pdf