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AUDIT OF THE AUDIT

An audit of the City of Miami Beach’s March 2010 audit of its tennis management contractor
Green Square, Inc

Miami Beach, Florida


August 3, 2010
By David Arthur Walters

THE CITY’S AUDIT

The City’s audit of the statements of its tennis center management contractor, Green Square,
Inc., as we shall soon see, was not fully in compliance with generally accepted auditing standards
(GAAS) as set by the American Institute of Certified Public Accountants. Yet the auditor did
show some independence, which is one of the standards, and his audit not only damned Green
Square but by implication indicted the city’s administration, headed by Jorge Gonzalez, for
ineptitude and negligence so egregious that a reasonable observer is given cause to wonder if
some sort of widespread corruption might be indicated by this contract, or if the entire city
contracting process and the city itself is as badly administrated.

The financial terms of the Green Square management contract call for the contractor’s payment
to the city of a fee or ‘rent’ amounting to $3,250 per month, plus 10% of tennis revenues over
$600,000 annually or $3,250 month whichever is greater, plus 5% of concession sales. The
primary interest of the city is to make sure that the revenues are properly reported and the rents
paid in a timely fashion, and that the contractor will continue to do so as a going business.
Additionally, the city should want to be sure that the contractor does not expose it to legal
liability for accidents or misconduct, or to otherwise embarrass it in any way.

A. The auditor found that Green Square undercharged nearly ninety-percent of non-City
residents, and that all residents of neighboring cities were undercharged. Some tennis
court usage fees and instructor rates were not specified in the management agreement.
20% of food and beverage products were sold without advance approval of City
Manager, and some items were sold at higher prices than allowed for in the management
agreement. Green Square promised to make lists and get approvals for items sold and
their pricing. Even worse, there was an egregious lack of internal controls to ensure full

 
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reporting or revenues and correct appropriation of assets. An excessive number of “no
sale transactions” were entered on the cash register, which “could mean that
unscrupulous employees are not processing customer purchases and misappropriating the
received monies.” The auditor estimated that food & beverage revenues should have been
double the amount reported in 2009. The food and beverage revenue reported was below
the cost, which would normally be doubled to arrive at selling price. This would have
resulted in a $2,100 loss of income to the City in 2009 alone – the auditor did not provide
a copy of an income statement for that year with his audit. Absolutely no safeguards were
in place to protect against underreporting of revenue. Five employees had their hands in
the till in a day, and it would be impossible to say which employee(s) might have shorted
the register etc. Daily report records were either not prepared or missing. Recommended:
the cash register should be limited to only one employee instead of up to five employees
per shift; register totals should be taken daily and reconciled to cash on hand; supervision
should audit no-sale transactions etc.

Our own investigation of the apparent revenue shortages led us to a former employee who
said that the shortages occurred so that less rent would have to be paid to the city: “I know a
lot of money does not go into the register because the more revenue Green Square registers
the more money it has to pay the city. But the city lets everything happen.” (Edited for
spelling and grammar) An inquiry was made to City Attorney Jose Smith, via the City
Clerk’s office as to whether or not the allegedly intentional shortages would constitute fraud
either civil or criminal. He has not responded. We believe an auditor should also consider the
possibility that revenues might be over-reported from time to time due to money laundering
activity. Obviously, the city’s failure obtain annual independent audits as required by the
contract and to itself examine Green Square’s monthly reports and otherwise monitor its
conduct in a timely fashion puts blame not only on Green Square but squarely on the city’s
finance and parks departments, and ultimately on the city manager himself.

B. The auditor discovered that Green Square had let its liability insurance policy lapse for a
considerable period of time, putting the city at risk. Here again the city was negligent.

C. The auditor found that Green Square had not obtained valid occupation licenses/business
tax receipts since 2002. Any person doing business in Miami-Dade County must obtain a
Miami-Dade County Local Business Tax Receipt. Businesses also need to obtain a city
Business Tax Receipt from the municipality, e.g. the City of Miami Beach, where the
business is located. The Local Business Tax is imposed for the privilege of doing
business in Miami-Dade County. Persons who provide merchandise, entertainment, or

 
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services to the public, even if only a one-person company or home-based business, must
obtain a Local Business Tax Receipt before starting to operate. Local Business Tax
Receipts are valid for one year, starting October 1st and expiring September 30th of each
year. Receipts not renewed by September 30th are delinquent and subject to applicable
penalties. Additionally, any person who does not pay the required Local Business Tax
within 150 days after the initial notice of tax due, and who does not obtain the required
Local Business Tax Receipt is subject to civil actions and penalties. An occupation (of
the business premises) license is supposed to be obtained before a business tax receipts
license is issued. “A Certificate of Use (C.U.) is a pre-requisite for the issuance of a City
of Miami Beach Business Tax Receipt.” Green Square tried to obtain a premises
occupation license in 2006 but did not succeed because of the City's failure to correct
certain structural deficiencies it was responsible for, e.g. unsafe conditions in the
bathrooms. So the city designated the issue as pending. The Code Compliance Division
of the Building Department was negligent until 2009, when it finally cited Green Square
for not having a Certificate of Occupancy (now known as a Certificate of Use).
Compliance cleared the premises for occupation in March 2010, eight years after the
occupation of the premises. The Finance Department, which failed to monitor Green
Square’s Business Tax Receipts status, eventually managed to calculate the amounts
owed by Green Square so the building occupation/business tax receipts license could be
obtained. On March 23, 2010, the contractor paid $9,655.80 to make the Business Tax
Receipts current for both centers.

Again, the city was clearly at fault, as it failed to obtain the required licenses prior to occupation
and then the city failed to promptly follow up on the missing Occupation License and Business
Tax Receipts issues.

D. Most of the "contractor employed" tennis instructors (24/29) also failed to obtain
Business Tax Receipts. The fee would be $200 each tennis instructor annually, so $4,800
was lost in the 2009/2010 fiscal year. The Parks and Recreation Department promised
that it will get proof of BTR as well as USTA certifications each year in the future – 87%
of the instructors were uncertified.

Here again the city was negligent. Our own investigation obtained hearsay from tennis players
(quoting tennis center employees) that Green Square elected to treat tennis pro employees as
independent contractors in order to avoid or evade employment taxes and other labor costs
associated with employment. Further, some of the employees were not legal i.e. were
undocumented or did not have green cards. We are also informed that the employees were told
they would have the advantage of not being drug screened as independent contractors. However,
 
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they were recently informed that independents would be drug screened starting in October 2010,
giving them a chance to flush their bodies clean if they were using. Part of this hearsay was
directly corroborated by a former employee, who said, “They made the pros independent
contractors so they wouldn’t have to pay workman’s compensation premiums. “

E. The auditor said there were errors in the calculation of the 5% fee due to the city on
concession sales. And, the Finance Department mistakenly recorded monthly payments
of the fee to the wrong years. It said it will be more careful in the future to comply with
proper accounting procedures.

F. The contract provides that Green Square is responsible for adequate maintenance other
than the correction of major structural defects. There must be adequate maintenance. The
auditor found that the Parks and Recreation Department did not provide inspection
records although it said that such inspections were performed. Parks promised to keep
records in the future.

Here again we see the usual negligence on the part of the city. Maintenance has always been the
major bugaboo at the Flamingo Park Tennis Center, whether it was provided by the city or by the
current contractor. Indeed, it has been claimed that the Flamingo Park lost the world-famous
Orange Bowl Tournament because of poor maintenance of the clay courts. The complaints have
been rife during Green Square’s tenure. Tennis players report that the Parks and Recreation
Department recently stepped in to oversee and do much of the maintenance. Our query to that
department, for the disclosure of what maintenance was done and whether or not any of the
maintenance was charged to Green Square, remains unanswered despite several follow ups.
Green Square’s 2008 Profit and Loss statement, the latest statement made available by the
auditor with his audit, shows only $818 in expenses for “Maintenance Labor” and “Maintenance
Repairs.” Perhaps the maintenance labor performed by employees was lumped into the “Payroll
Expense” account, but this would be a matter for the auditor to investigate and disclose in his
discussion of maintenance.

G. The auditor noted that the contract requires that “the contractor, and its employees and/or
independent contractors shall undergo a comprehensive background check and drug
screen at the contractor's expense. The City's Parks and Recreation Department paid for
these items until April 2007 so some long term employees would already have these
procedures performed and passed.” However, the auditor’s inquiries found that “the
contractor did not perform background checks or drug screenings on any new employees
hired after 2007 as it was prohibitive due primarily to the cost involved. Instead, they
required that each candidate pass several interviews before being hired."
 
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In April 2010, after the audit was complete, a tennis player filed a complaint with city officials
including the mayor and the city attorney that one of the principals of Green Square was openly
smoking marijuana around both the Flamingo Park and North Shore tennis centers. He also
pointed out that another principal in the firm, who is originally from New York, had been
arrested and convicted in connection with a shipment of 10-pounds of cocaine from Miami
Beach to Howard Beach in Queens several years prior to the contract. He questioned a policy
that would allow such persons to be employed as instructors to children. The city did not respond
to his complaint. We filed a public documents request with the city for background checks and
drug screenings on all three Green Square principals from the inception of the contract to date.
We received copies of internal city email between the Parks and Recreation Department and
Human Resources to the effect that tests were conducted in 2002 and the three individuals were
cleared. Arguably, the felony arrest and reported conviction might have been unintentionally
missed given the multijurisdictional nature of the police reporting system. The conviction was
widespread knowledge in the local tennis community. However that may be, an argument has
been raised that an ex-convict who has paid his debt to society should not be deprived of work
unless the kind of crime is relevant to the particular line of work, which in this case it may be.
The city was queried about its policy on that point but did not respond. The issue of selective
enforcement was also raised: a city employee was fired because a misdemeanor conviction
turned up on a background check during an audit, so why should a convicted felon remain
employed? Apparently there have been no checks or screens of the three Green Square principals
since 2002, despite the fact that the contract was renewed several times and rewritten once. In
any event, one would expect that checks and tests would be routinely rendered to make sure
contract principals keep their noses clean. At least a drug screening should have been ordered
after the informant’s report. When we asked for copies of the actual background checks and drug
screen reports, the request was sent to the city attorney, who is apparently sitting on the request
pending his determination if such information can be released to the public. Subsequently, we
learned from tennis players that drug use has been common at the tennis centers for many years.
A former employee reported that all the principals smoke pot regularly, and that a pro is involved
in supplying the drug. His objection was not to the pot smoking, which is a widespread practice
in South Beach, but to the selective enforcement of the drug screening requirement. “So they all
smoke weed. That is the city’s fault. All of them should have been drug tested. It’s not fair that a
pro would lose his job because he was tested, but those guys aren’t tested. Flamingo is not a
public park. It’s their country club.”

THE UNBALANCED AUDIT

 
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Green Square is required by the contract to “maintain current, accurate, and complete financial
records on an accrual basis of accounting related to its operation….” Those records must be open
to inspection and audit, and the records “shall be maintained as would be required by an
independent CPA in order to audit a statement of annual revenues and profit and loss statement
pursuant to generally accepted accounting principles.” Emphasis added.

Furthermore, “CONTRACTOR shall submit at the end of each contract year an audited annual
statement of revenues in a form consistent with generally accepted accounting principles.”
Emphasis added.

The March 30, 2010 audit was for the latest contract period, beginning April 15, 2007, and ran
through December 31, 2009. The auditor did not provide an explanation as to why his audit did
not include the five calendar years from the inception of the contract on April 10, 2002, thru
calendar year ending December 31, 2006. The auditor’s report was not accompanied by balance
sheets or trial balances for any of the calendar years, nor did the audit report include an auditor’s
balance sheet or trial balance for the audited year ending December 31, 2009.

The report was also not accompanied by a profit and loss statement for the audited year ending
December 31, 2009. In fine, the audit report included only the following, seven documents
prepared by Green Square:

2002 spreadsheet of quarterly expenses with no revenue; 2003 spreadsheet of quarterly expenses
with no revenue; 2004 spreadsheet of monthly revenue and expenses; 2005 spreadsheet of
monthly revenues and expenses, annual totals computed manually; 2006 spreadsheet of monthly
revenues and expenses; 2007 spreadsheet of monthly revenues and expenses; 2008 Quicken
profit and loss statement.

The Miami Mirror asked Internal Auditor James J. Sutter for the ending balance sheet and/or trial
balance that would normally accompany an audit, but he did not respond. A formal public
records request was then made asking for all income statements, balance sheets, and trial balance
statements available. Only the seven profit and loss items accompanying the audit were
provided. The other information was not immediately forthcoming.

Julio E. Magrisso of the Parks and Recreation Department, which is now responsible for
collecting and keeping Green Square’s required submissions, stated, “The profit and loss
statements you refer to were produced by Green Square and presented to Parks and Recreation
upon completion and requested by us. I understand from your email that you are also waiting for
the balance sheets. I only have the profit and loss statements already presented to you. Perhaps

 
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our finance department has requested this info from our contractor, but I have not… Maybe we
can ask finance if they happen to have the (Balance) Sheets.”

On July 22, 2010, the request for financial position documents was reiterated, with the following
explanation:

“The audit would not be in compliance with generally accepted auditing standards absent the
examination of the balance sheet accounts, which would allow the examiner to check the
balances against supporting documentation and to reference that documentation, and after
appropriate adjustments, ascertain the financial standing of the entity at a certain date, to
determine, for example, if it were financially viable or insolvent etc. Take the cash account, for
instance - one might find that there was no cash, or an overdrawn balance had been added to
current liabilities.”

In the old days, creditors were willing to receive only balance sheets because those statements
were of financial position, a snapshot of the business at a certain period of time, which the
creditor could assess as to the company’s viability as an ongoing business. With Green Square,
the stakeholders are left to speculate on that viability. For all we know, Green Square might
simply abandon the tennis centers. Noting the persistent losses on the income and expense
statements, several individuals have preoccupied themselves with conducting investigations into
the finances and real estate holdings of the Green Square principals.

According to generally accepted auditing principles, an auditor must state in the auditor's report
whether the financial statements are presented in accordance with generally accepted accounting
principles, one of the main concerns of an audit. That would require an examination of the asset,
liability, and equity accounts. The auditor must obtain sufficient appropriate audit evidence by
performing audit procedures to afford a reasonable basis for an opinion regarding the financial
statements under audit. The auditor must identify in the auditor's report those circumstances in
which such principles have not been consistently observed in the current period in relation to the
preceding period. When the auditor determines that informative disclosures are not reasonably
adequate, the auditor must so state in the auditor's report. The auditor must either express an
opinion regarding the financial statements, taken as a whole, or state that an opinion cannot be
expressed, in the auditor's report. When the auditor cannot express an overall opinion, the auditor
should state the reasons therefore in the auditor's report. In all cases where an auditor's name is
associated with financial statements, the auditor should clearly indicate the character of the
auditor's work, if any, and the degree of responsibility the auditor is taking, in the auditor's
report. We believe the auditor failed in part to comply with these principles.

 
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We recall with some bitter amusement that, when Fannie Mae released quarterly earnings
without a balance sheet, and said it did so for the purpose of “streamlining” the reporting
process, the Christian Science Monitor asked, “What’s Fannie Mae got to hide?” “How can a
business release an earnings statement without a balance sheet?” asked the Monitor, but Fannie
Mae did just that, contrary to standard business practice. And in the final months before Enron
collapsed, we remember that an analyst noted that Enron was the only firm that releases its
earnings statement without a balance sheet. Jeffrey Skilling, duly annoyed, said, “Well, Thank
you very much. We appreciate that (expletive deleted) asshole.” Now we are left to wonder what
Green Square and the city might have to hide.

That there can be no proper audit without a balance sheet is an understatement. One of the first
things an auditor should ask for is the balance sheet. The word “audit” when applied to financial
statements means that the balance sheet, statements of income and retained earnings, and
statement of cash flows are accompanied by an audit report prepared by independent public
accounts, expressing their professional opinion as to the fairness of the company's financial
statements. The goal is to determine whether these statements have been prepared in conformity
with generally accepted accounting principles (GAAP). GAAP assumes that the audited entity is
a going concern; therefore the most important if not the main concern of an auditor is the ability
of a company to continue as a going concern. Under generally accepted accounting principles,
both assets and liabilities are recorded and classified on the assumption that the company will
continue to operate.

A qualified opinion by an auditor says, in effect, that proper accounting principles appear to have
been applied consistently by management and that standard auditing procedures deemed
applicable under particular circumstances have revealed nothing which would cause him to
question the fairness of the resultant statements. An adverse opinion is the opposite of an
unqualified opinion; it is an opinion that the financial statements do not present fairly the
financial position, results of operations, and cash flows of the company, in conformity with
generally accepted accounting principles.

But this audit is of limited scope, one might object. The audit reads, “The purpose of this audit
was to determine whether the contractor remitted the correct monthly payments based upon
review of their supporting records and otherwise in compliance with selected terms listed in the
management agreement; and whether the city timely received and correctly recorded all revenues
and effectively monitored the management agreement.” Nevertheless, the auditor cannot excuse
himself by claiming that the contract strictly limited the scope of scrutiny to the firm’s revenue
and rental expense to make sure the city was paid every penny due. Even that limited scope
would be subject to generally accepted accounting principles and require an examination of
 
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balance sheet accounts. Indeed, other aspects of the contract were “selected” by the auditor for
examination to ascertain whether the city was subject to undue exposure to liability. Again, it is
the ability of the firm to operate as an ongoing business that allows one to fully assess the
exposure of the city to liability due to the firm’s activities and defaults.

On July 22, 2010, Georgina P. Echert, Assistant Finance Director, responded with, “We don’t
have balance sheets for Green Square.”

GREEN SQUARE’S 2008 PROFIT AND LOSS STATEMENT

The auditor speaks of auditing the 2009 Green Square revenue but does not include Green
Square’s Profit and Loss Statement for that year with his audit, so we will quickly scan the 2008
statement for accounts and amounts an auditor would want to question. The accountant would
then delve into the general ledger detail of the transactions, and go to the documentation for
verification.

The management contract states that the records of the contractor must be available for audit
whenever an audit is deemed necessary. It specifies that the available records “shall not be
subject to photocopying.” However, the seven records accompanying the auditor’s report, which
were admittedly prepared and supplied by Green Square, were obviously copied. In any event,
the auditor having access to the records would naturally prepare a trial balance and make
adjustments thereto to bring the final statements into compliance with generally accepted
accounting and auditing principles, and that information would be part and parcel of his or her
audit report. Without such an accounting, the city itself would be unaccountable to its electorate
and taxpayers.

The revenue and expense reports that were made available indicate that the entity has lost a
quarter million dollars since the inception of the contract. Is the firm insolvent? We cannot tell.
We have no balance sheet. Does it have sufficient capital to offset those losses and losses to
come? Does it have other sources of funding? We cannot say. Has it fallen behind in its payables
in order to fund its payroll? We cannot know without a balance sheet.

Why do we see, for example, $3,500 or around $300 a month in bank charges on the 2008 Profit
and Loss statement? Has the firm been bouncing a lot of checks? Is the account overdrawn? We
cannot know. The auditor should know, however, because the revenue is supposed to be
deposited into a joint checking account with the city, and expenses paid out of that account. He
says cash has been reconciled, but to what? Maybe the checkbook. There is no balance sheet.

 
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We see $16,495 in tax expenses on that statement – is that expense paid or should some of it be
on the balance sheet as a delinquent liability? We cannot tell. But wait a minute, should not the
sales tax expense on non-tennis pro income alone be even more than that, say $20,000? There is
no sales tax on professional tennis instruction, and that revenue should be broken out as a
separate revenue account so that the stakeholders can compare the sales tax expense to taxable
revenue to see if it is in the ballpark. And where are the payroll tax expenses? We cannot tell.
Were they lumped into the labor expense account? The general manager, Victor Weithorn,
knows better than that – after all, he has a BS in Accounting from Long Island City University
and should be quite capable of keeping a mean set of books or having them kept if he so
chooses..

Is this really accrual accounting as required by the contract and GAAP? No. A Suntrust loan of
$32,500 appears as other income on the 2008, offsetting a $38,221 loss. Accrual accounting
would require that the loan be posted to the appropriate liability account on the balance sheet, not
to an income account. But here we see an expense account called “Loans” with a deduction from
income of $22,389. Is that all interest, and on what loan? Or does it include principal payments,
which would properly be deducted from the loans payable account on the non-existent balance
sheet?

And here is a charge against income for “Pro-Shop Inventory.” Is that the true cost of goods sold,
or should some of that expense be posted to the inventory asset on the balance sheet, reflecting
inventory still on hand? How would we know? The same goes for the Food & Beverage expense
account.

Here is the Credit Card Fee expense of $11,575, apparently payments to credit card companies
not broken down by expense categories. Is that all, or are their outstanding balances on credit
cards, perhaps some of the delinquent, which would appear on a balance sheet? We can not
know.

Now we see the largest expense, Payroll Expense of $412,260. Have the payroll taxes all been
paid, or are their outstanding balances? Who knows? Maybe the auditor, but we don’t know he
knows without a balance sheet examined by him.

And we understand that tennis instructors were taken off the payroll and turned into independent
contractors to avoid or evade taxes. If that were the case, there should be separate accounts for
payroll and independent contractors – is anything owed to employees and contractors, or to any
vendors for that matter? We cannot tell without the proper classification of expense accounts and
a balance sheet.

 
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Now here is the total Rent Expense to the city, of $30,815 for that year. But $3,750 a month
alone would be $45,000, and then there would be 5% on food and beverage sales, so what
happened? We don’t know. From the looks of this 2008 statement, it is not prepared on an
accrual basis hence it is not in accordance with GAAP for that reason alone, and that alone
would require some rather strong negative statements from the auditor.

What we do see here in sum is what many accountants normally receive from small business
clients who are not accountants like Green Square’s general manager, and who do not employ
professional bookkeepers: insufficient statements representing postings to a bookkeeping
program, in this case QuickBooks, made by mom and pop or another employee doubling as
bookkeeper. The accountant in turn would ask for the balance sheet and trial balance, along with
a general ledger of the detailed transactions on all the accounts, and a copy of the check book
stubs, together with relevant documents such as bank statements, loan statements, payroll
summary records and the like. The accountant would make the adjustments necessary to provide
a fair view of the standing of the firm and its profit or loss for each period. That would not quite
be an audited statement, and the accountant’s fee might be around $1,000 per year for the service
for this kind of business. In retrospect, the principals of Green Square would believe that the
service would have been worth the fee. The 2008 income statement gives total professional
accounting expense as $710, for what we cannot say.

The auditor said that Green Square "prepared bank reconciliations" and "essentially completed
and organized documentation" even though there were no balance sheets, and the revenue and
expense accounts listed were insufficient for proper classification of transactions. We are
unwilling to take his word for it.

We note that the surety Green Square gave for the performance of its obligations was reduced
from $100,000 in the first contract to $25,000 in the second contract, which the city has now
audited. Given the firm’s losses and liabilities, why?

Now, given the damning facts that were in fact presented by the auditor, along with our own
concerns about the viability of Green Square as an ongoing concern and a history of business
incompetence and neglect augmented by the city’s negligence, we recommend that immediate
steps be taken to protect the community, not only from Green Square but from the current city
administration.

THE CITY’S FORGONE CONCLUSION

That is why Miami Beach Mayor Matti Bower was asked to place an item on the City
Commission’s agenda for discussion, as to whether or not an independent outside investigator
 
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should be appointed to conduct an inquiry into the Green Square contract, and, if the
management of that contract is a bad as it seems, to make a broader inquisition into the city’s
administration with a view to firing the City Manager if other instances of maladministration
were found. The Mayor’s Office responded inanely, that it was willing to answer any questions,
period. It refused to answer the question as to whether or not Mayor Bower would comply with
the request for the appointment of an independent investigator, and, if not, why not.

The city has a weak mayor and strong city manager system. Jorge Gonzalez has been city
manager for ten years. He is gaining notoriety for his lax and/or selective enforcement of the
laws in South Beach, purportedly in order to advance South Beach’s reputation as a raucous and
relatively lawless party town. He recently said that he enjoys Miami Beach, and suggested that
people who do not enjoy it should relocate. He has complained about complainers who complain
about the one blade of bad grass in his great lawn. The motto of his Leadership Academy is, Be
Nice – Don’t Complain. Mayor Bower happens to be his dear friend. He approved of her
candidacy and ushered her in on the coattails of the popular former mayor, David Dermer, and
anti-high rise activist who, after becoming mayor, approved of high rises and was largely thought
to be in the pockets of real estate developers. Now questions are being asked about an extensive
trip Mayor Bower and the city manager took to Peru together most recently. As if it matters, and
it may not matter at all, both Mayor Matti Bower and City Manager Jorge Gonzalez are Cuban-
Americans, and that alone has given some wary residents cause to stereotypically think that Mr.
Gonzalez’ performance will never be seriously questioned on her watch, not while she presides
over the City Commission. But her watch is almost over, and it is believed that there are only
two commission votes short of firing Mr. Gonzalez.

Recently arrived Miami Beach political analyst Jay Falconer has noted that, “It is not easy to get
at the power behind Gonzalez’ throne, because most of the electorate do not know who the local
power elite are and how they work, and most people don’t care, but around 7,000 votes will do
the trick once people wise up to the corruption.”

Mr. Gonzalez supported the awarding of the management contract to Green Square in 2002.
Green Square was actually ranked second among the bidders, but the ranking system was nicely
modified to reposition Green Square as the leading bidder. All the other bidders complained that
Green Square had underbid the contract and could not perform as bid. Shortly after the contract
was awarded, Mr. Gonzalez came to the Commission on behalf of Green Square seeking
$50,000. Since then Green Square had not been audited as required by the contract, and Mr.
Gonzalez has supported renewals of the contract despite the complaints of tennis players who use
the tennis centers at Flamingo Park and North Shore as well as employees.

 
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Green Square, named after the square of green lawn that tennis was reportedly first played on in
America, was firmly ensconced by virtue of the strong city boss and his elder colleagues, the
city’s so-called good old boys. Green Square Inc literature, by the way, refers to the organization
as “GSI Bollettieri” because Nick Bollettieri’s coaching principles are employed by its academic
division. Nick Bollettieri is, of course, reputedly the best tennis coach in the world. His son
Jimmy is a principal in Green Square, Inc.

Notwithstanding the world-wide Bollettieri fame, there have been longstanding complaints about
poor maintenance, inept management, rude and/or non-English speaking employees, violation of
employment, immigration and narcotics laws, homosexual misconduct and prostitution in the
men’s restroom, biased customer surveys, and so on, with the maintenance issue naturally being
the greatest cause of dissatisfaction. The complaints came to a head in 2009 with the plan to
replace five of Flamingo Park Tennis Center’s clay or soft courts with hard courts against the
wishes of an overwhelming majority of local tennis players. Hard tennis courts are easier and
cheaper to maintain in the short run but cause more injuries. Playing on clay or soft courts
allegedly produces better tennis players who can win over seasoned hard court players in hard
court tournaments after briefly warming up on the faster, hard courts.

The local tennis players formed an association, headed by Rebecca Boyce, to represent the
interests of tennis players, and their association was then treated by Green Square as its arch
enemy despite the fact that it represents most of its customers. Naturally, given Green Square’s
adamant position on the hard court issue, along with persistent complaints about maintenance
and other factors, hard questions started being asked, one being, Where is the audit?

The March 2010 audit is so damning that a reasonable business person would expect the city to
summarily declare the contract breached and to immediately make arrangements to replace
Green Square management with its own personnel pending the award of the contract to a
qualified contractor or the complete takeover and operation of the facilities at Flamingo Park and
North Short by the city itself.

Instead, the release of the audit was delayed a few days and the contract renewal item absent the
audit was buried in a blanket-approved consent agenda and thus surreptitiously renewed. The
renewal was obviously a foregone conclusion. At its meeting on March 10, 2010, the City
Commission referred the contract renewal issue to the Finance and Citywide Projects
Committee. On March 25, 2010 the Finance Committee voted unanimously to renew the contact
after Assistant City Manager Hilda Fernandez urged it to do so even though the city auditor’s
report criticizing the contractor was not made available to the city manager’s office until March
30, 2010 – the audit was apparently released after the meeting so it would not have to be attached

 
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to the renewal proposal and reviewed by the Commission. The Finance Committee’s
recommendation to approve the contract absent the auditor’s report was placed on the
Commission’s agenda with other items for consent. Commissioner Deede Weithorn made a
motion for the approval of all the items on the consent agenda that included the minutes of the
Finance committee on the Green Square contract renewal issue, although she had a conflict of
interest inasmuch as she is related to a principal and the general manager of Green Square, Inc.,
her brother-in-law, Victor Weithorn. Her motion was approved unanimously, and amounted to a
de facto approval of the Green Square, Inc. of the contract renewal buried in that consent agenda.
In fact, the approval was buried so well that the City Clerk had difficulty locating it when asked
whether or not the Green Square contract had been approved yet. In fine, the approval was a
foregone conclusion and the audit was irrelevant to that decision.

A voter might believe that a responsible commissioner with an accounting background would
certainly require into and carefully examine the Green Square audit and would want to discuss it
with fellow commissioners, especially given the fact that the Green Square affair had become so
publicly controversial. In addition to her duties as a part-time city commissioner, Deede
Weithorn is employed by Berkowitz Dick Pollack & Brant, LLP, Miami as the firm’s associate
director in attest and accounting services. “Attestation services” provide reports on certain
subject matters, attests or validates assertions about a subject that is the responsibility of another
party. For instance, Deede Weithorn might attest to a company’s statement about the adequacy of
its internal controls, say, its cash and inventory control systems. In any event, she is familiar not
only with attestation standards but with accounting principles and auditing standards. The Miami
Herald endorsed Deede Weithorn because “her financial know-how and vision of a 'livable and
sustainable community' would benefit the Beach.” Furthermore, “she is a Certified Public
Accountant who has served on numerous city and civic boards. Her contributions on the
Commission's Budget Advisory Committee helped the city manage state-mandated budget cuts
this year. She has the skills to ensure tax dollars are not wasted.” Interestingly, she has chaired a
CPA conference that addressed tax fraud.

It is with that in mind that we present this Audit of the Audit to Commissioner Deede Weithorn
for her attestation as to its veracity, to the City of Miami Beach Commission for thorough and
careful consideration, and to the grass-roots community so that it may weed out the bad blades of
grass in their great lawn.

Special Thanks To
Mark Coolidge, City of Miami Beach project auditor, for his independence.

 
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Important Note: David Arthur Walters is a journalist and is not licensed to practice any
profession including the profession of accounting. The foregoing ‘Audit of the Audit’ does not
constitute a professional audit or attestation nor does it necessarily present opinions that a
certified public accountant would make. Please contact a competent accountant for accounting
opinions and advice. The author may personally recommend several good accountants in
Downtown Miami and Coral Gables.

Contact:

davidarthurwalters@gmail.com
taxinsource@gmail.com 

Links to Miami Beach Auditor’s Documents:

The Auditor’s March 2010 Audit of Green Square, Inc.


www.scribd.com/doc/35005797/miami-beach-audit-of-tennis-management-company

The Auditor’s Accompanying Documents to 2010 Audit of Green Square, Inc.


www.scribd.com/doc/35005888/miami-beach-tennis-center-audit-documents

Miami Beach 2007 Contract with Green Square, Inc


www.scribd.com/doc/35074075/miami-beach-2007-tennis-center-contract

 
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