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HomeMy WebLinkAbout07/23/2025 Audit Monroe County Clerk of Circuit Court & Comptroller Internal Report COUR 0 � w AO fw,�y �i"wawwma'w„� Audit of Competitive Solicitation and Contract Compliance for StandGuard Aquatics, Inc . 2025-004 500 Whitehead Street, Key West, FL 33040 1 (305) 295-3130 1 Monroe-Clerk.com Report 2025-004 July 2025 Monroe County Clerk of Circuit Court& Comptroller Kevin Madok, CPA Interim Internal Audit Director Pain Radloff Auditors Noah Browning About Monroe County Clerk's Internal Audit Department As part of the Clerk's constitutional responsibilities, the Monroe County Clerk's Internal Audit Department provides independent, accurate, and timely audits of Monroe County government's business activities, operations, financial systems, and internal controls. Internal Audit's audits and consulting services are designed to add value, increase efficiency of operations, advance accountability, and improve stewardship of public resources. Monroe County's Internal Audit Department accepts confidential tips about fraud, waste, and abuse in Monroe County government or programs through its hotline (305) 292-5760 or at hLtps://monroe-clerl<-.com/fraud-waste-abuse. Kevin Madok, CPA Yp6 F �toN..... �..v Clerk of the Circuit Court&Comptroller—Monroe County, Florida July 23, 2025 The Honorable Mayor Jim Scholl Monroe County Board of County Commissioners 530 Whitehead Street Key West, FL 33040 Email: boccdis3(�monroecounty-fl.gov Dear Mayor Scholl: The Monroe County Clerk's Internal Audit Department completed an audit of the competitive solicitation performed by the Parks and Beaches Department(Parks and Beaches) for selecting StandGuard Aquatics, Inc., (SGA) as the contractor to manage and operate Jacobs Aquatic Center. We also audited SGA's compliance with the terms of its contract to operate and manage the pool. Our report details issues we found with SGA's compliance with both the competitive solicitation process and compliance with the terms and conditions of their contract with Monroe County. For example, in response to Parks and Beaches competitive solicitation, SGA submitted a proposal to operate and manage the Upper Keys aquatic center. Our audit found that the omissions and mistruths in SGA's proposal could have compromised the Selection Committee's decision-making process.We also found that SGA regularly took unfair advantage of their role as the pool operator. By first soliciting quotes from outside vendors for needed pool repair and maintenance, SGA was then allowed to prepare a competing quote at a lower price. In addition to the procurement issues, we also found that SGA failed to timely report and remit required sales tax that they collected for admissions and concessions at the aquatic center. We recommend the County take a more proactive approach to monthly confirm that SGA is properly remitting the tax to the State of Florida. We appreciate the courtesy and cooperation extended to the Clerk's Office by Board staff during the audit. Parks and Beaches responses to our audit recommendations are included in the body of the audit report. Sincerely, Kevin Madok, CPA Monroe County Clerk of Circuit Court& Comptroller Cc: Board of County Commissioners Christine Hurley, County Administrator Kevin Wilson, Assistant County Administrator Bob Shillinger, County Attorney John Allen, Director of Parks &Beaches Internal Audit KEY WEST MARATHON PLANTATION KEY 500 Whitehead Street 3117 Overseas Highway 88770 Overseas Highway Key West, Florida 33040 Marathon, Florida 33050 Plantation Key, Florida 33070 Table of Contents Audit of Competitive Solicitation and Contract Compliance For StandGuard Aquatics, Inc. ExecutiveSummary ........................................................................................I Management of Jacobs Aquatic Center........................................................3 Purpose and Scope of Internal Audit............................................................4 Review of Competitive Solicitation Process..................................................5 Omissions/1\4istruths in SGA's RFP Response............................................................................5 Overstatement of Staff Qualifications..........................................................................................7 Need for Due Diligence Research..............................................................................................10 County Contract Management and Oversight...........................................12 Organizational Conflict of Interest.............................................................................................12 Omissions/Mistruths in Filtration System Upgrade Proposal....................................................15 Work As Unlicensed Pool Contractor........................................................................................18 Non-Reporting of Sales Tax Collections ...................................................................................19 Alternative Arrangements for Pool Management .....................................21 Executive Summary The Monroe County Clerk of Circuit Court and Comptroller's Internal Audit Department recently completed an audit of the competitive solicitation performed by the Parks and Beaches Department (Parks and Beaches) for selecting StandGuard Aquatics, Inc., (SGA) as the contractor to manage and operate Jacobs Aquatic Center (JAC) located in the Upper Keys. We also audited SGA's compliance with the terms of its contract to operate and manage the pool. Parks and Beaches issued a Request for Proposals (RFP) in December 2023 to solicit proposals from vendors that possess the expertise and experience in managing and operating a community pool. The RFP identified criteria interested vendors needed to detail in their response to allow the Selection Committee to objectively review and score each proposal. We audited the RFP process Parks and Beaches followed to review and score all vendor proposals. We also reviewed the winning vendor's adherence to the RFP requirements. Our review of the competitive solicitation process found omissions and mistruths in SGA's proposal. For example, as required by Monroe County Code, the RFP required all vendors to respond to questions regarding the vendor's involvement with any lawsuits, claims, liens, and whether the vendor was ever terminated from similar aquatic operations. In their proposal, SGA responded "no" to all such questions. However, a simple Internet search revealed otherwise. It appears SGA failed to disclose its involvement in reportable lawsuits, claims, and liens. Also, SGA's RFP response appeared to provide a misleading portrayal of the company's credentials and financial situation.Had Parks and Beaches staff and/or the Selection Committee conducted similar research on the vendors submitting proposals, they could have identified issues that the Selection Committee should have considered as part of their decision-making process. In March 2024, SGA began managing and operating JAC. In accordance with the terms of the contract, Monroe County agreed to be responsible for repairs at JAC that cost over $1,000. Likewise, any repairs estimated to be over$1,000 must be accompanied by a written quote. Major repairs must be approved in writing by the Parks and Beaches Director and/or the Monroe County Board of County Commissioners, as applicable. Our review found that SGA regularly took unfair advantage of their role as the pool operator. SGA was allowed to solicit quotes from outside vendors for needed repairs and maintenance. With their competitors' quotes in hand, SGA was then allowed to submit a competing quote at a lower price which, in turn, assured SGA would win the job. Our audit report also noted other serious deficiencies with repairs and maintenance performed by SGA. One example, in response to a competitive solicitation to upgrade the pool's filtration system, SGA submitted a proposal that contained omissions and mistruths. One mistruth was SGA stating they would not use subcontractors to complete the job. However, we found evidence that — 1 — SGA did use a subcontractor to perform the work. The subcontractor was not licensed to work in the State of Florida or Monroe County. Finally, our review of contract compliance discovered that SGA has failed to report and remit sales tax they collected to the State of Florida. Such noncompliance puts the County at risk of facing substantial financial penalties from the State of Florida. The deficiencies our audit uncovered raised serious concerns about SGA's ability to effectively operate and manage JAC. We recommend for the Board of County Commissioners direct their staff to determine the impact of SGA's false statements and omitted facts may have on JAC and its operations. This includes determining the appropriate corrective action that is needed. Management of Jacobs Aquatic Center In 1997, community members in the Upper Keys organized the not-for-profit Upper Keys Community Pool, Inc. (UKCP). The entity's goal was to bring a community pool to the Upper Keys. In 2000, UKCP entered into a 20-year lease agreement with Monroe County (County) whereby the County leased UKCP a parcel of land at the Key Largo Community Park. In return, UKCP agreed to construct a swimming pool and related facilities on this land along with agreeing to operate the pool and keep the pool and facilities open daily for use by the General Public. The lease agreement allowed UKCP to retain a percentage of the pool's revenues to support the operations, upkeep, maintenance, and repair of the pool. UKCP's successful efforts resulted in the opening of the Jacobs Aquatic Center (JAC) in Key Largo. Outdoor facilities at the JAC include a competition pool, an activity pool, a dive well, and a multi-use pool. Indoor facilities include locker rooms and a multi-purpose room. The JAC operates year-round. Once JAC opened its doors,UKCP realized it would need additional financial assistance from the County for operations, maintenance, and other obligations. In response, an amendment to the lease agreement was approved in 2005 requiring the County to reimburse UKCP up to $225,000 annually for documented expenditures for the pool's operations and maintenance. The annual amount was reduced to $180,000 beginning October 1, 2008. The County and UKCP extended the original twenty-year lease through March 7,2024. At the end of the lease, the County's Parks and Beaches Department (Parks and Beaches) assumed responsibility of JAC management from UKCP. In anticipation of this change,Parks and Beaches conducted a competitive solicitation requesting proposals, referred to as a Request For Proposals (RFP) process, from qualified contractors interested in overtaking the management and maintenance of JAC. From the five vendor proposals submitted in response to the RFP, StandGuard Aquatics, Inc. (SGA) was selected as the winning proposal. Since March 8, 2024, SGA has been overseeing JAC's operations. The contract between Monroe County and SGA requires SGA to charge and retain fees for basic services. The rates for basic services must be approved by the Monroe County Board of County Commissioners (BOCC). SGA is also allowed to charge fees for enhancement programs as defined by the contract. Further, the total annual reimbursement paid to SGA under the terms of the contract shall not exceed $495,800 payable up to $41,316.66 monthly less the previous month's retained basic services revenues. The contract also requires that all revenue, including fees, be used to fund programs, repairs, maintenance, capital improvements, and services related to and arising out of JAC. — 3 — Purpose and Scope of Internal Audit The Monroe County Clerk of Circuit Court and Comptroller requested the Internal Audit Department perform an audit of the competitive solicitation process performed by Parks and Beaches for selecting SGA as the contractor to manage JAC as well as audit SGA's compliance with the terms of its contract. The audit period was from March 7, 2024, through March 31, 2025. The scope of the audit included a review of: • A review of invoices for compliance by SGA with the contract terms and conditions. • The RFP process, including the winning submission's adherence to the RFP requirements and BOCC review of bid submissions. • General compliance by SGA with terms and conditions of the contract for operations of the JAC. The audit report details the findings from our review of the County's competitive solicitation process in addition to issues found with the County's contract management and oversight. An audit memo issued to County management under separate cover communicated other audit findings related to SGA's compliance with the terms and conditions of the contract. � 4 � Review of Competitive Solicitation Process Parks and Beaches conducted a competitive RFP solicitation process to find ". . . a certified, licensed, qualified, and experienced. . ."i pool management contractor to operate, program, and manage JAC. As part of our audit procedures, we reviewed the process followed by Parks and Beaches to select a contractor to ensure it complied with Monroe County's purchasing policy. Our procedures included reviewing the steps taken by the RFP Selection Committee for evaluating and scoring proposals as well as substantiating the response submitted by the winning contractor. We found that SGA's RFP response appeared to provide a misleading portrayal of the company's credentials and financial situation.We also found that Parks and Beaches staff and/or the Selection Committee failed to conduct basic research on the vendors who submitted proposals. Such research would have identified issues that the Selection Committee should have considered as part of their decision-making process. Omissions/Mistruths in SGA's RFP Response As shown in Exhibit 1, the RFP contained a section that asks vendors to answer questions regarding lawsuits, outstanding claims, and whether the proposer has ever been terminated from similar operations. Monroe County Code (MCC) Article VI, Section 2-347(h) states that these questions are a minimum requirement. While the questions do not automatically act as a disqualifier, staff are instructed to review answers to gauge whether persons/entities submitting responses are fiscally and operationally sound. As shown in Exhibit 2, SGA replied "No" for each question. However, we found that, had Parks and Beaches staff conducted basic internet research, they likely would have discovered many of the same issues we found by doing an internet search: • SGA stated that within the last five years it was not a parry to a lawsuit related to operations of a waterpark. However, at the time SGA submitted its proposal, it was a parry to three lawsuits related to operations of aquatics parks. The lawsuits were for an injury, nonpayment of workers compensation premiums, and nonpayment for credit for concessions equipment. SGA failed to disclose these lawsuits as part of its proposal. When asked why SGA did not disclose these lawsuits, the SGA President replied that he took a narrower interpretation of what the RFP was requesting. He believed that they only needed to disclose a lawsuit between SGA and an entity that had contracted SGA for services. 'Monroe County Board of County Commissioners Request for Proposals For Operation and Management Services Jacobs Aquatic Center Key Largo,FL,issued December 2023,p.4. — 5 — Exhibit 1 Questions Required For Proposers to Answer Regarding Claims and Suits S. Litiaatroii:Aiisivers to the follo,,aina quesrioiIl rclzardi'iiz cIallrils and suns: a. Has the pert'o n..p iriclpak.entity or any entitypi'eviovidy o,,vtled.operated. or directed by any of its afflceis,major Shaiehol.dels ar directors. ever failed to complete iaonh at pi'ouidle the aoo&fon lshich it has contracted?If yes,provide details; YF', ❑ NO b. Arc there atiy)iidganc'Iits,claims,arbitration procccding or suits pending or outs,tsinding against tine person, principal of the entity. or entity. or any entity pi'eviovll5ly olvned.operated oi dlr'ected by airy of its officers.dilectoi's,.of_aellera.I partners"If yes.provide deta]Il : YES ❑ No ❑ c. Has the personi,principal of the entity, entity, or any ciitllty previously o,,vned.operated or'directed by airy of its officers.ni9jolr shareholder,of directors. l\ithin the lash five(5,)yean.been a party to ailly"Iaiv suit.arbitiatici or allediattici ,,vith r'eanu d to a cdontraet for services.good" ar'cdonittruction ser Ice'*hiiln]a.r to those regl%c tcd in tthc spccificatioiis i ith private or pitbhc entitles",If yes,prow"&dlct:ails; YES ❑ NO ❑ d. Hai the person.. pinclpal of the entity. or any entity pn"el.'noudy o7 vnedl, oper'<'lted or directed by'a'iiy of izs offtcer's.o vilcrs.parincr's.lllaJol sh91,choid'lers or dn'ecto't's.ever initiated lliti,gation 9_aiIiSt%Ionroe County ilr'beeii sued by Motlroe G oull:ty in con'nectioii ixith a.coilltt'act to provide ser4ices. goods or cori traction services?If yes provide detaills,: YES ❑ NO ❑ e. AThethei', %vithin the last five (;) years,. the of nei. in office". genera} partner.pnirueipal,coirnrollinL,shareholder ov iihajor creditor of the persoli or entity ae as an officer.director.general partiaer.principal.controlling shareholder.oa major creditor of dray-able]entity that failed to pelfornn'cr6ces or fulnish goads'1111 ar to those so tafit iin the red{iiest for colnpetitiae solicitation YES ❑ NO ❑ Exhibit 2 SGA's Formal Response to Claims and Suits Litigation Questions a.—e. Per page 13 of the RIFP,,the answer to all gp.iestoons(items a-e)is I140. TAB 3 QUALIF'ICATIONS OF STAFF Company Structure StandGward Aquatics(SGA)has 15 Mull time staff members that work in our corporate structure who will oversee and operate thus facility. Our corporate office,, ttasedl in gumming GA,Will oversee this operation directly and we will assign several) corporate staff members directly to this operation Sped6ucallily,Ibamellle Satterly will be assigned as the Facility Director for this operation. She will be placed onsite and will be responsiiblle For oversee cf sill day to day operations,. Our experience in this industry has taught us that it is not pose&hNe to hire a new person to}dill this type of posftion at the startup,. Hawing this position filled with.....a person that has a high Ravel of experience installing startup operations is the most critical key in getting this operation opened successfullly. There Will be challenges in the startup of any new operation. Danielle handled the startup operations for all of our client references listed in this krP response. - 6 - • SGA did not disclose claims against the company. We found that the Internal Revenue Service (IRS) filed a lien in Georgia on September 19, 2023, against SGA for unpaid income taxes totaling $221,210.76 for 2016, 2017, 2019, and 2023. According to SGA's President, the company was not "aware of the lien until January 2024 when they were following up on another matter with the IRS. We had hired a firm to handle several issues related to this matter. They did not perform as required and failed to provide this information to our company at the time it was filed. However,we have resolved this matter and attached the lien release."3 While SGA's President did provide a lien release, the release is dated November 15, 2024, the day that the company's response to our questions about the lien was due. • SGA did not disclose in its proposal that, on May 14, 2019, the State of Georgia's Department of Labor filed an assessment against SGA Aquatics for unpaid unemployment taxes totaling $9,028.60. SGA's President stated he "did not know anything about this matter until your email provided the information." • SGA did not disclose that Macon-Bibb County Georgia terminated its arrangement with the company to operate the Sandy Beach Water Park. SGA asserted to us that the termination was mutual due to maintenance issues beyond what the County could afford. However, newspaper articles covering the termination imply that the termination was due to non-responsiveness as they cite the company's unwillingness to provide a detail breakdown of repair costs of the maintenance issues. Various news organizations reported that SGA became non-responsive when asked for a detailed cost breakdown of the repairs. The news organizations also noted that SGA did not respond to the termination notice. Overstatement of Staff Qualifications The three members of the RFP Selection Committee (Committee) publicly met to evaluate each vendor's response based on the criteria as identified in Table 1. The County's RFP document allocated the maximum points a Committee member could score each section of a vendor's proposal. The County reserved the right to reject all proposals or any part of a proposal. Also, the County reserved the right to waive informalities, technical errors, variations, and irregularities in any or all proposals. According to the IRS,a federal tax lien is"the government's legal claim against your property when you neglect or fail to pay a tax debt." 3 Email correspondence from SGA President Matt Satterly,November 15,2024. — 7 — Table 1 RFP for Operation and Management Services Jacobs Aquatic Center Criteria and Scoring Proposal Maximum Sections Required Content for Section Points Tab 1 Business Plan Along With Proposed Costs and Services 50 Tab 2 Organization's Qualifications and Prior Monroe County 30 Experience Tab 3 Qualifications of Staff 20 Tab 4 County Forms and Licenses 0 Total 100 Our review of SGA's RFP response(dated December 13,2023)found that the company overstated its staffs' credentials. As shown in Exhibits 3 and 4,the staff biographies for the Aquatics Director and the Facilities Director listed both as having the Aquatics Facility Operator(AFO)Certification, the Certified Pool Operator(CPO) Certification, and National Aquatics Director Certification. Exhibit 3 Aquatics Director Resume In SGA's Proposal Expedennre 2017-Rrresent. StandCurard Aquatics Perris,CA. Facility Director Perris Aquatic Center/DropZone Water Park. ► provide all oversite and operational direction for this operation since hired in 2017. ► This operation grosses$1,75t,000.00 annually. • Respondblle for Mining and managing 220 staff members each year. • Develop and implement ali programs offered to custorners, including,but not limited to swim lessons,water aerobics, parties,special events at these operations. • Assist corporate office with all payroll entries and paperwork related to ernployrnent. ► provide certification training through Red Cross for LCT, CPR,Karst Aid • Operabon indLided year-round activities and prograrnming inclUding concessions and retail sales. ► Turned an operab"on that was(losing$750,0001 per year into an operation that is now profitable in all years under her direction. Her Current CeirtifiCration�s • APO Certified • CPO Certified • ILCIT Certified (ILifeguiard Instructor Trainer Certification) • ILCI Certified « ILCT,CPR/First Aid Certified • Completed INSPF Aquatic(Management Series Course • Completed National Aquatics Director Certibcation through United States Water Fitness Association. Exhibit 4 — 8 - Facilities Director Resume In SGA's Proposal Experienim 2014-Present StandGUard Aquafics Roswelil,GA Hurnan Resources DirectoryNiew Chent Startup Director • Served as startup Facility Director for the Perris Aquatic Center/DrapiZone Water park and the Jurupa Valley Aquatic Center[The Cove Water Dark in 2016. • Served as startup Fadfity Director for Long IBrannchn Lagoon in 2016. • Served as startup Facility Director for Sportspark at Roosevelt Island Responsible for hiring 400 staff mernbers;each year. Develop and implement all programs offered to customers, including,but not limited to,swim lessons,water aeroUcs, parties,special)events Assist aCCCUnfing office with aill payroll entries and paperwork related to errip1loynnent Proi certification training through Red Cross for LGT, CPR,IFiirst Aid Pespoini for all new out of state client startups. iHer Current Certilkations • APO Certified • CPO Certified • ILGIT Certified (LifegUard Instructo' Trainer Certification) • LGI Certified • ILEAC,CPR/first Aid Certified • Completed INSPF Aquatic Management Series Course • Completed National Aquatics Director Certification through United States Water PiMess Association. When we asked for copies of the certifications, SGA's President provided documentation showing that the only certification possessed by SGA staff was the Facility Director's CPO Certification. Neither possess the AFO Certification and neither possess the National Aquatics Director Certification. It should be noted that the Aquatics Director did receive the CPO Certification after the fact on January 1, 2024. As justification, SGA's President reasoned that the AFO and CPO were nearly identical in nature and that, if needed, the AFO Certification could be obtained in a day. He also stated that the RFP did not require the AFO,but he routinely included it as some entities desire both. SGA's President admitted to copying the biographies from another bid submitted to a different entity. Although the RFP did not specifically require the AFO Certification, listing fabricated credentials on staff biographies misleads Committee members when they are trying to objectively identify differences amongst the vendor proposals during their scoring. In other words, when a vendor provides false credentials, the vendor could receive an unwarranted higher score. — 9 — Need for Due Diligence Research Through our interviews with two of the three Committee members, we found that Parks and Beaches staff did not conduct sufficient background research on the contractors who submitted a proposal. Both Committee members stated that it was their understanding that it was the County Attorney Office's responsibility to conduct such research. However, when asked, the Assistant County Attorney stated that it should be the responsibility of the department staff or the County's Office of Management and Budget(OMB) to conduct due diligence on potential vendors. When we asked the Director of the Purchasing Office, she cited Monroe County Code, which states the requesting department is generally responsibly for vetting vendors. Per MCC §2-347: The department requesting the competitive solicitations must evaluate the information received and then prepare a recommendation to the board of county commissioners as to whether the lowest bidder or the highest ranked proposer is responsible in the view of the information received. In evaluating the information received,the requesting department is directed to give consideration in preparing their recommendation to the bidder's/proposer's responses to subsections (h)(5)a.i. of this section. If the department or county attorney have a reasonable belief that any information furnished by a bidder/proposer is false,misleading or omits relevant facts,the department is directed to investigate any lawfully available information resource to be able to adequately advise the board as to whether a bidder/proposer is responsible. The County's boilerplate RFP document requires a vendor submitting a proposal to also submit three years of financial statements marked "CONFIDENTIAL". This information allows the County to assess the vendor's financial health. The information is accessible by department staff who have a role in the RFP process. The department staff are responsible for determining if a bid is responsive as well as disseminating the information to all decisionmakers, including Selection Committee members. While it appears that vendors complied with the requirement for this RFP process, the vendor's financial information does not appear to have been discussed by the Committee when they met. For this RFP, a critical review of SGA's financial statements by the Committee likely would have, at a minimum, raised questions that the Committee would want SGA to address which could have impacted the scoring of the proposal. A vendor who submits a proposal with omitted facts and/or mistruths, is a serious issue that the County needs to address. In fact, Monroe County Code states, "If the misrepresentation or omission is discovered after the contract is awarded, the board of county commissioners may, at its discretion, terminate the contract with no liability to the county . . ." Omissions and misrepresentations of this nature, at a minimum, gives an appearance that the competitive solicitation was not objective. We recommend the BOCC direct staff to determine the impact of the vendor's false statements/omitted facts and determine whether corrective action needs to be taken regarding the solicitation and/or with the contract with the vendor. We also recommend OMB provide clear direction to departments on their responsibilities for managing the RFP process and the information that should be provided to a selection committee. — 10 — Management Response: The County will review StandGuard's responses to determine whether any corrective actions are necessary regarding the solicitation process and/or the contract with the vendor. Chapter 3 of the Purchasing Policy provides the departments with an outline for managing the competitive bidding process. This chapter has been expanded in recent years to provide more detailed instructions. For example, Section B.9 on page 20 lists the requirements a Department must follow when it chooses to use a selection committee to review, analyze, evaluate, and rank/rate the applicable solicitation responses received and report their findings to the BOCC for consideration and approval. The County's Office of Management and Budget("OMB") has also developed a standardized template for departments to use when submitting Requests for Proposals (RFPs) on Bonfire, along with tools to support the selection committee. We have recently begun utilizing Bonfire's evaluation features, allowing scoring to be conducted directly on the platform. The County's staff, including Parks and Beaches,will meet and train with OMB to better understand the process going forward. The Selection Committee, consisting of the Assistant County Administrator, Project Management, and Parks and Beaches Director, thoroughly evaluated all submittals, conducted reference checks, and unanimously selected StandGuard. Moving forward, additional background checks will be conducted, and a formal policy will be developed in collaboration with OMB and Administration to further strengthen the selection process. � 11 � County Contract Management and Oversight Not surprisingly, when the County contracts with a vendor to manage an operation like JAC, assigned department staff must work closely and cooperatively with the contractor. Oftentimes, given the work environment and the contractor's specialized expertise,County staff develop strong working relationships with contractors and rely on the contractors to provide guidance and recommendations on how to best manage the County's asset and business operations. However, it is critical that department staff ensure that their relationship with the contractor does not compromise the staff's ability to make independent and objective decisions that are in the best interest of the County and the County's taxpayer. The County's contract with SGA began on March 8, 2024. The terms of the contract require Monroe County to be responsible for maintenance, inspections, repair and replacement after the first $1,000 of any repair, capital improvement and maintenance is paid by the SGA, as deemed required at the County's sole discretion. The County agreed to make necessary repairs over$1,000 as determined by the County. Funds requested by SGA for additional improvements must be made in writing and approved by the Parks and Beaches Director and/or the BOCC based on the County's purchasing policy. SGA is responsible for notifying Parks and Beaches staff of any minor repairs or replacements before any repairs are performed. Any requested repairs estimated to be over$1,000 must be accompanied by a written quote for their repair including parts and labor and any major repairs must be approved in writing by the Parks and beaches Director and/or the BOCC, as applicable,prior to work commencing. Organizational Conflict of Interest Our audit included reviewing how Parks and Beaches staff managed the SGA contract to ensure compliance with contract terms and conditions as well as to ensure that SGA is held to account and is doing work that is in the best interest of the County. Our review found organizational conflicts of interest for maintenance and repair work performed by SGA. An organizational conflict of interest is when a contractor has multiple contracts with a government and the work performed under these contracts results in the contractor being: (1) Unable to render impartial assistance or advice to the government; (2) Unable to perform the contract work in an objective way; or (3) Given an unfair competitive advantage compared to other viable contractors. Organizational conflicts of interest are recognized by both the Federal government and the State of Florida as providing an unfair competitive advantage to a vendor. The State of Florida, per s. — 12 — 287.057(19)(b), F.S., prevents agencies from awarding contracts to vendors with a conflict of interest if the conflict is due to an unfair advantage, such as access to information not available to the public or source selection information. Parks and Beaches staff allowed SGA, as JAC's operator, to identify projects, suggest products, estimate costs, and then allowed SGA to submit quotes/bids that were significantly below their competitors.While it is understandable that Parks and Beaches staff would rely on SGA's expertise to identify repair and maintenance issues at JAC, staff should have prohibited SGA from bidding on performing the repairs or maintenance. For example, SGA, on behalf of Parks and Beaches, solicited a quote for pool filter tank replacement from a vendor. The quote, dated April 23, 2024, totaled $17,895 for labor, training, and warranty administration for installation of one filter.When apurchase is over$10,000,Monroe County Purchasing Policy requires the requesting department to obtain two or more documented price quotes from vendors. To comply with this requirement, on May 8, 2024, SGA submitted a quote for all labor, materials, and warranty for $12,500 for SGA to perform the work. Because of the price differential, Parks and Beaches staff selected SGA to do the repair. Given the organizational conflict of interest, Parks and Beaches staff should not have allowed SGA to both solicit quotes and compete against those quotes as this provides an unfair advantage and discourages competition. Similarly, on February 27, 2024, SGA informed Parks and Beaches that the main pool had backwashing issues. SGA's recommended solution was installation of a Defender Filter System by Neptune Benson. In notifying Parks and Beaches, SGA estimated that the cost of replacement would be"around$200,000"and that SGA would solicit a quote from the vendor Neptune Benson. In late September through early October 2024, the BOCC advertised an RFP for an upgrade of JAC's filtration system. The RFP required any interested contractor use a Benson Defender Filtration System or a Monroe County approved alternative. The County received two bids for the work: one from Electro Mechanic Industries for$303,543 and one from SGA for$199,980. Again, based on the price differential, Parks and Beaches recommended to the BOCC that SGA be selected to perform the work. The BOCC approved the SGA contract at their December 2024 meeting. Typically, an RFP should not require a vendor to use a specific name-brand product unless the situation demands that there is only a sole source that can be used. No documentation exists that the upgrade of the JAC's filtration system required a sole source. Another concern with referencing a brand-name in the RFP is that vendors may have viewed the equipment requirement as restrictive which, in turn, could have inadvertently discouraged vendors from submitting a bid for the job. While the RFP did state that a vendor would need to install a Neptune Benson Defender filtration system or a Monroe County-approved alternative, the RFP — 13 — did not provide specifics as to what the approval process would involve. Had the RFP stated the equipment requirements more broadly, such as that a successful contractor needed to install a Neptune Benson filtration system or equivalent, it is possible that more vendors may have demonstrated an interest in the project. We find it concerning that not only was SGA able to identify the need for work and specify the exact product but also suggested contract pricing well in advance of the RFP and then bid on the contract in the amount that they earlier projected. The use of an inside advantage inherently stifles competition. We recommend that Parks and Beaches staff be exclusively responsible for soliciting quotes for JAC maintenance and repair needs identified by SGA Aquatics to avoid conflicts of interest. We also recommend that the County prevent SGA Aquatics from bidding and performing work on projects they identify to avoid the appearance of impropriety. Management Response: County staff, including Parks and Beaches, have taken sole responsibility for soliciting and obtaining quotes for all maintenance and repair needs identified by StandGuard. This ensures an objective and impartial procurement process,while also aligning with the County's procurement policies and standards. To maintain the highest standards of integrity and public trust, we will exclude StandGuard from bidding on or performing maintenance or repair work derived from their own specifications. We have already implemented these changes and will ensure all relevant staff are informed and trained accordingly. A sole source was not required because the RFP allowed for an alternate Filtration System. The applicable Bonfire portal posting of the RFP stated in pertinent part: 5. Gontractor shall furnish and Instal a 1properly sized I leptuuune Benson Defender series SP-49-48-1548 Regenerative Medila IFiltration 'System,, or 1Monroe County aipproved alternative, Specifications for the Bensen Defender Regenerative Medlin IFiltration System are as tddl lows: a. Flow Rate: 1200 1400 GPIVI b. Fillter Ra;te: .99 GRIMISIF c. Filter area: 1,2111 'SF d. (Replacement parts shall be readily available - upon completion of the project, 12 months" worth of Perlite shall be supplied by Contractor. — 14 — Omissions/N%truths in Filtration System Upgrade Proposal As mentioned previously, in September 2024, the County advertised an RFP to upgrade JAC's filtration system. In response, SGA submitted a bid on October 29, 2024, to perform the upgrade. We reviewed SGA's filtration system upgrade proposal and found a number of omissions and misstatements. First, the RFP to upgrade the filtration system, like the RFP For Operation and Management Services for JAC, contained a section that asks vendors to answer questions regarding lawsuits and outstanding claims including whether the proposer has ever been terminated from similar operations. Like they did for their proposal for operating and managing JAC, SGA replied "No" for each question in their filtration system upgrade proposal which, as explained previously, was not a truthful response. Second, as shown in Exhibit 5, the RFP clearly stated that the contractor must possess all appropriate licenses and include copies of the licenses as part of the proposal. In fact, Florida statutes and Monroe County Code require pool contractors to be properly licensed in the State. The RFP further stated that "Failure to include all necessary forms and licenses will result in a non-responsive proposal." Exhibit 5 RFP Excerpts Requiring Proper Licensure by Contractors 5. Special) Provisions The following Special Provisions are intended to clarify the scope of work, or highlight features of the work,or modify, change,add to,or delete from the General Scope of this Proposal Package. 1. All licenses required in order to perform the scope of work in the specified locations, shall be procured and maintained by the Contractor and hislher subcontractors. The Contractor shall submit copies to Project(Management prior to the Notice to Proceed.The Contractor's license shall accompany proposal. 5.11.7 The Proposer is required', to submit a copy of the appropriate and current Contractor's license((Monroe County or State)as part of the Proposal. 2.3, Submitted Proposals MUST lrIrlude an IlMUrance Agent Statement and a completed Insurance Checklist, and alll forms and reguiireMein�ts as called for in the (Request fair Proposals- Failure to iinclude all necessary formis and licenses will result In a anon- reslponsive proposal.. As shown in Exhibit 5, the RFP also stated that a vendor's failure to include all necessary forms and licenses will result in a non-responsive proposal. When we contacted the Florida Department of Health, they advised us that a contractor that replaces a public pool's filtration system requires a Florida Certified Pool Contractor(CPC) license. — is — However, despite not possessing a CPC license, Project Management staff selected SGA. In their proposal, SGA wrongly asserted it submitted a certified copy of the contractor license. Before staff submitted a formal request to the BOCC to award the JAC filtration system upgrade to SGA, there was a staff email that reported the Department of Health advised them that a CPC license was required for this type of work (see Exhibit 6). Also shown in Exhibit 6 is that, the lack of a CPC license caused county staff to consider pulling the request for approval from the BOCC agenda. Ultimately, the request for approval was removed from the agenda and formally presented to the BOCC on December 11, 2024. Exhibit 6 Email Correspondence Between County Staff About Need for CPC had a conversation with the(Dept of Health,pool inspectoir lrevieweir a few moments ago.,He let us know that a Certtfiedi.Pool Installer or General Contractor's licenise would be requured along with certified engineered drawings to replace the fiilters at Jacobs Aquatic Center,We had received word from the Buulding Department that a permit was not necessary,spa I had not pursued engineered drawings. I spoke vvitlMW moment ago,copied herein,and he let me know that the has a quialllifterfor the project. He also said that the can get the engineered drawings put together under the cuirrent scope.Please let me know if you tl7 iiin kwe slhoul d pull the item,off of the agenda or if you think it wou Id be CDK to move forward.I am fine either way,but we do have to remember there is a six week lead time on the equipment.That should)be enough time to get the drawings completed,and even of we nieed to wait,funding does not run,out on this until September 30,2025. How do you feel about it? When asked why staff selected SGA even though the company was not licensed as required by both the RFP and the Department of Health, staff provided three reasons: • The second proposal was $103,000 higher than SGA and was over the SGA recommended budgeted amount; • SGA advised staff that they could provide a CPC qualifier; and • Staff considered the omission of the CPC license as "a minor irregularity." Once the filtration system upgrade was complete, we requested documentation from the Project Manager on the use of the CPC qualifier. The Project Manager informed us that the qualifier was not needed as SGA became licensed on February 12, 2025, and the Notice to Proceed was issued on March 5, 2025. Finally, in its proposal for upgrading the JAC filtration system, SGA clearly indicated that they would be using no subcontractors on this project(see Exhibit 7). It is important for a contractor to identify subcontractors so all parties are able to verify that the subcontractors are: • Properly licensed and qualified to do the work; • Authorized to do business in the State of Florida and Monroe County; • Able to provide proof of insurance; and • Comply with applicable labor laws. _ 16 — Specifically, the State of Florida and Monroe County require contractors and subcontractors working on public swimming pools to be registered with the Florida Department of State Division of Corporations (Sunbiz),possess a valid CPC license or receive a certificate of competency from the Monroe County Building Department, and have a Monroe County business tax license. Exhibit 7 SGA Proposal Response For Use of Subcontractors JACOBS AQUATIC CENTER FILTRATION SYSTEM UPGRADE SUBCONTRACTOR LISTING FORM Division Subcontraclor Contact Person Ph#Marea oode Fax: Cell: Address N p Yl t- We found that SGA misstated in their proposal how they would complete the project. As shown in Exhibit 8, we found that, SGA used a Georgia-based subcontractor to install the JAC filtration system. We found that this subcontractor is not authorized to do business in the State of Florida or in Monroe County. In addition, this subcontractor does not have a Florida CPC license and the County Building Department has not issued a certificate of competency for this subcontractor. Exhibit 8 Aquatics Consulting and Solutions, LLC Facebook Posting B and I hopped a flightX to check on sonne mrk Aquatics Consulting and Solutions did over the last 2_1�i n Key Largo,Hord a.Check out this beast of a filter installed!0—pools rrrra�; " rAr ud iii m U i"�Vtlljj � 17 � It is concerning that SGA continued to subvert the BOCC's purchasing process by openly using a subcontractor after unequivocally stating they would use no subcontractors. The use of the subcontractor highlights not only the lack of transparency on the part of SGA, but the lack of monitoring and oversight on the part of the BOCC's Project Manager. Without proper notification of the use of a subcontractor, the County does not have proper protection in place because it loses the ability to conduct thorough research about the prospective company. Moreover, SGA's and Project Management's disregard for the County's procedures increases the County's exposure to problematic issues related to performance, quality of work, reputation, and financial risk. Work As Unlicensed Pool Contractor Although SGA is the pool operator, for approximately 11 months, SGA operated JAC without a valid State of Florida Certified Pool Contractor License (CPC), or a valid Monroe County Occupational License. While the contract does not require the operator to be a licensed pool contractor, per Florida Statute, only a licensed individual may perform some of the work the company completed within the 11-month time frame. For example, we found that SGA replaced the activity pool's main drain grate as well as a filter tank and backwash assembly without being licensed as a pool contractor as required. The company performed the main drain grate replacement through a subcontractor from Georgia. We consulted both the State of Florida Department of Health and the Monroe County Department of Health to determine whether this type of work required a CPC License. While the County Department of Health stated that both projects would require a CPC, the State was not able to opine about the grate, but did confirm that the filter tank replacement would require a licensed contractor. Neither SGA, its subcontractor, nor the company president were licensed pool contractors in the State of Florida at the time of the repairs. It should also be noted that the activity pool's grate was not inspected until February 2025. When asked, SGA stated it does not believe that a CPC is needed for replacement of the main drain grate as it did not alter the structure of the pool itself. However, per the form DH4157, a pool owner/operator must detail the anti-entrapment features, which includes identifying the CPC who performed the installation.Moreover,both the County and State,who are the authorities governing public pools, unequivocally stated that the filtration system replacement required a CPC. Simply put, unlicensed work is illegal under both Florida Statute and Monroe County Code. Unlicensed pool contractors can have poor work quality, safety hazards, lack of legal recourse, and legal consequences for hiring the unlicensed contractor. — 18 — Although the work is complete, we recommend that County staff carefully review all future projects at JAC and only select qualified vendors. We also recommend Parks and Beaches work with the County Attorney's Office to review SGA's contract and clarify the licensure needed at all times to operate JAG Management Response: County staff is committed to thoroughly reviewing all future projects at JAC to ensure that only qualified and properly vetted vendors are selected. We are committed to enhancing our procurement procedures to uphold the highest standards of performance and accountability. Additionally,the County, including Parks and Beaches,will collaborate closely with the County Attorney's Office to review StandGuard's contract. This collaboration will focus on clarifying licensure requirements necessary for operating at JAC, ensuring all legal and regulatory obligations are consistently met. The County has an established process for vetting contractors and subcontractors. The County will assess whether more rigorous reviews are necessary. Non-Reporting of Sales Tax Collections As shown in Exhibit 9, the contract between the BOCC and SGA clearly states, in two separate clauses that SGA is to collect and remit sales tax to the Florida Department of Revenue. Exhibit 9 Contract Clauses For Collection of Sales Tax By SGA The l`aroatrtaaaoz sluatl.l otaaatazrau and olu ale a comrrruaily Pool,G'oudaat"011-'i,a rled am I'ltaa ceratuaaa pw'ar6o a of a.at Largo NA,a umro°mllp!kno%wii as Jacobi Acpuamou l::'vit" r`omainoc,shaml[ fi�Collect am and @H rees assuumcd tiw,ialt tlNe uivanageiuta*utt.and op ersanc u of aauo f"uumi7moum y ra7timo),lrtihap use mid okm esvi m All I'en colleded must lnu^.Ivvupefl}accaaaaar ed For and sales u)Kt°aptofleitar rh,el+lvopjlxeagdaauq,ifAppfica l p110CxrauatVMains RerjgMtoaaaudh ks Rvntal.N+1tinieptanceand'faTx„ icy V'f4eF orutm ac tuPa 17auwtl,aag wlN a c rracoroa,mau ow,mud au4Picels saullesT-axoa Ievied by any, a°a tiroturr ,am G k od"mwitlro the l,rrwroel V,VITI V(Ac atssaswoureoars Or iax s q"lat C rtlturawmr:nwm par<pand die a,''u,lws,%i1h Ow strcles max u,x!e ds N,each rcceao mla or qtamun depeoding on a'oo-mu lor's filiRg atquir uumcnn aas sal l`asrall 6n l°ama�, arlmpa r'apla)herehl atar9,ol'il'a°axp6lu.u�l'by l�aarew. When asked, SGA produced remittances for sales tax for concessions, not admissions. Even though SGA was responsible for JAC's operations since March 2024,based on the documentation — 19 — SGA provided, it appears that SGA did not remit any sales tax to the State until November 15, 2024, after we asked for copies of their remittances. When asked why they were not reporting and remitting taxes on admissions, SGA responded: ` . . .all Basic Services revenue,per the agreement,belongs to the County.The County keeps 100% of that revenue and SGA simply collects those funds on behalf of the County. Additionally, our agreement nor the pricing provided to us by the County for admissions requested that we charge sales tax on admissions. . . even if the County decided to charge patrons sales tax on admissions revenue,the County would be responsible for paying the sales tax since the revenue belongs to the County,not SGA.Also,since the revenue belongs to the County,the County is sales tax exempt,so it doesn't require sales tax to be charged according to Department of Revenue Staff . . .if Monroe County BOCC wants to charge patrons sales tax on admissions,we are happy to add it to our system, so it is charged correctly. We are happy to remit the sales tax to the Department of Revenue if the County doesn't want to handle it directly.We just need guidance if this needs to be added and how it is to be accounted for moving forward." As documented in Exhibit 9, it is clear in the contract requires SGA to collect and remit sales tax for admissions. Not only does the contract specify SGA is to collect taxes on "pool use" the contract also states that it does not relieve any entity from any obligation imposed by law. SGA's claim that they collect the funds on behalf of the County and the County keeps 100% of that revenue is incorrect. SGA retains the revenue as an offset to some of the expense associated with the monthly management fee. The contract requires SGA "to collect any and all fees...All fees collected must be properly accounted for and sales tax reported. ,4 Thus, in his response, SGA admitted collecting the fees on behalf of the County, therefore it is SGA's responsibility to remit the sales tax under the terms of the contract. We also note that SGA's assertion that because the County is sales tax exempt, it does not require sales tax to be charged is nonsensical. The County's sales tax exemption applies to purchases made by the County not to individuals purchasing admissions at the pool_ In Florida, failure to pay sales tax(or pay late)results in a minimum penalty of$50.00,with the potential fine being 10% of what is owed.Based on general admissions alone, SGA Aquatics owes $11,457.02 in sales tax for March through October 2024,plus apotential penalty of$1,145.70. We recommend that SGA collect and remit monthly sales tax on concessions and admissions. We also recommend that Parks and Beaches require SGA to provide monthly confirmation of remittances that they are collecting and remitting sales tax. Management Response: StandGuard is collecting sales tax on concession and admissions sales, remitting it to the Department of Revenue, and submitting quarterly reports to Parks and Beaches. 4 Email from SGA President Matt Satterly dated December 23,2024. — 20 — Alternative Arrangements for Pool Management The RFP for operator of the JAC only contemplated paying a company to operate the facility. This is likely because that was the arrangement with the prior operator. However, other financial arrangements exist. For example, the County could enter into a lease and revenue sharing agreement for JAC management. Of the five operations SGA provided in its RFP response,three facilities do not provide a subsidy to the operator. Rather, the County receives a percentage of revenue from the vendor, with the vendor bearing all operational costs. Stated differently, rather than paying a vendor approximately $500,000 annually, plus assuming responsibility for repairs and maintenance, the County could receive revenue. For example, SGA has earned a minimum of $450,000 in revenue as JAC manager (excluding the management fee).If the County operated under an agreement wherein SGA pays 25 percent of revenue over $225,000 and assumes all operating costs, the BOCC would have received $56,250. If the contract included an escalation, such as 50% of all revenue over $300,000, the BOCC would have received$75,000. Since the BOCC refurbished the JAC, including a new filtration system,pool liner, and diving boards, it should consider if the payment of a management fee is in the best interest of the County as opposed to a lease and revenue sharing agreement. In addition, given that the state of the facility declined over time, it may be beneficial to the County to have an operator who has more of a stake in the upkeep and use of the facility. Alternatively, the County may consider conducting a formal study to identify who is using the pool and its facilities in addition to assessing if it is feasible for the County to be able to maintain the pool over the long-term as a viable going concern. The consultant could be tasked with providing recommendations for the BOCC to consider how to best benefit the Upper Keys community with respect to this facility. We recommend the County consider possible options for the future management of JAG Management Response: JAC is more than just a facility; it's a cornerstone of our community. Offering swim lessons, diving programs,after-school programs,summer camps,fitness classes,and more,it serves as a welcoming place for residents and guests alike. Previously, after-school and summer camp programs were subsidized by Parks and Beaches through a third parry;now StandGuard fulfills this important role, which continues to meet a significant community need. In addition, StandGuard took the lead role in the Keys Kids Swim Program this year and did a tremendous job teaching swim lessons to kindergarten students at two different schools. The County's ongoing investment in JAC is crucial to provide a safe, enjoyable space that promotes water safety, offers life-saving skills through swimming programs, and supports community health and connection. The County has made necessary improvements to ensure the pool remains safe and — 21 — inviting.While we appreciate the dedication of the prior operators for over two decades, it was time for necessary updates, which we have eagerly undertaken. Pursuant to the agreement with StandGuard, the County's annual reimbursement shall not exceed $495,800.00, with monthly payments of up to $41,316.66,reduced by the prior month's Basic Services revenues. In June 2025, StandGuard submitted an invoice showing $35,232.29 in Basic Services, resulting in a County reimbursement of$6,084.37. This confirms the reimbursement structure is operating as intended. Every pool is unique, some operate seasonally, others have additional features like a water park or have larger population and these differences shape how they're best managed. We are committed to continuously seeking the best operational approach to serve our community effectively. The vendor selection process included careful consideration of many options, with the committee of Project Management Staff Member, Assistant County Administrator, and Parks and Beaches Director reaching a consensus in favor of the current operator. We will continue reviewing StandGuard and tracking industry trends to ensure we deliver the best service and value to the public. Finally, to support ongoing improvements and reduce the financial subsidy, we plan to recommend an increase in fees for non-resident visitors which will increase core services revenue, ensuring JAC's long-term sustainability and continued benefit to the community. — 22 —