By Rich Pollack
The battle between Delray Beach and Highland Beach over who owes who money in a dispute over fire service fees is heating up after a preliminary report from state auditors showed the city failed to bill the town $2.2 million, mostly for pension contributions dating back several years.
At the same time, Highland Beach leaders are sticking to their claim, made before the state’s Joint Legislative Audit Committee earlier this year, that Delray Beach owes the town money because the city used the wrong calculation to determine fire-rescue service fees.
How the two conflicting viewpoints will be resolved could end up being decided through mediation or even in a courtroom, with Highland Beach Town Manager Marshall Labadie telling commissioners on Tuesday that the town is developing a pre-litigation strategy.
“If we have to go to mediation, so be it,” he said, adding that he spoke to an attorney specializing in these types of issues within days of the preliminary audit report being made public last week. The audit was ordered by the state committee in March.
While Delray Beach officials have not come right out and said that they will seek to get the $2.2 million that they should have billed Highland Beach, City Manager Terrence Moore said that the city will be using forensic auditing services to determine the precise calculation of the balance due to the city.
“Final data analysis from this exercise will be reported to the City Commission, enabling consideration relative to mediation and/or other opportunities available to both parties,” Moore wrote in a note to his commission.
In Highland Beach, town leaders said if it turns out the state auditors are correct and the city didn’t bill the town properly, the town shouldn’t be responsible for resolving the issue.
“Because they underbilled us, doesn’t mean we should have to pay,” said Highland Beach Commissioner Evalyn David, an attorney. “There’s an argument to be made that this is on them.”
In the preliminary operational audit report, which focused on the financial processes used by Delray Beach’s Fire Rescue Department as part of its agreement with Highland Beach, the auditor listed a handful of findings that showed flaws in how numbers were calculated.
“During the period October 2019 through December 2022, the City experienced significant turnover in certain key management positions, which may have contributed to the control deficiencies and instances of noncompliance disclosed in this report,” the auditor from the State Auditor General’s Office wrote.
Among the findings were:
- Firefighter salary and benefit amounts recorded in the city’s accounting records and billed to the town did not agree with employee timekeeping records.
- City purchasing policies and procedures did not ensure that goods and services ordered, received and distributed to the town’s fire station were accurately billed to the town.
- The city didn’t perform timely collection efforts on the town’s nonpayment of billed services totaling $517,654.
The auditors also found that Delray Beach didn’t use consistent actuarial information to calculate how much Highland Beach should have contributed to the pension fund for the firefighters that were assigned to serve the town.
While some members of the Delray Beach commission have portrayed the report as a win for the city in published reports, Highland Beach leaders say it is just the opposite.
“I would be embarrassed if I was Delray,” said Town Attorney Glen Torcivia. “Delray looks like it wasn’t mismanaged, it looks like it wasn’t managed at all.”
Labadie told commissioners that Delray Beach’s financial issues and inability to provide the town with adequate records was one factor behind Highland Beach’s decision to start its own department, which will take over from Delray Beach in May.
“That’s one of the reasons we wanted to leave,” he said.
Going forward, Labadie said he and Torcivia are writing a letter to the legislative committee expressing concerns with the report, including that no one from the state auditor’s office contacted the town.
That committee is expected to review the audit at a meeting in the near future.