Audit: state denies $1,026,008.80 water-project disbursement; city must cover cost from utility reserves

Miss Pierre, the city staff member presenting the financial audit update, told the City Commission on June 11 that the Florida Department of Environmental Protection had denied a loan disbursement tied to a change order on a water-tank project. "This $1,026,008.80 is actually a 120% above the original contract," Miss Pierre said, and the change order was not competitively bid as required under the loan agreement.

The project was originally awarded in 2023 to SGS Contracting Service for $856,700. Miss Pierre said the city approved the change order under the premise that it represented an emergency — citing inoperable valves that limited the city’s ground-storage capacity — but the state did not accept that characterization and therefore denied reimbursement of the disputed amount.

If the disallowance stands, the city will have to pay the $1,026,008.80 from its utility fund contingency. "Because we're not receiving loan proceeds for that cost, it has to come from somewhere, so it's going to come from a contingency reserve balance in our utility fund," Miss Pierre said. She also told commissioners that the fund had a healthy reserve at the end of the fiscal year and that she would provide exact current-balance figures on follow up when asked.

Commissioners pressed staff for the bottom-line impact. One commissioner asked whether the denied amount would materially weaken the utility fund’s reserves; Miss Pierre said the fund had a sizable balance (she referenced a September 30, 2025 balance of $1,700,000) and that the city expects to manage the cost from that contingency, but she did not have the precise updated reserve percentage on hand and agreed to provide it to the commission.

Miss Pierre told the commission she had recommended, at the time the issue was identified, that the city request reimbursement up to the allowable amount (reported in the packet as $331,000), identify other funding sources equal to the change-order amount, and consider legal recourse. She said those recommendations were included in the email provided to commissioners and would be part of the audit finding that will appear in the city’s audit report.

Why it matters: the commission was notified that the matter will appear as an audit finding, and the disallowed amount — over $1 million — will either reduce available contingency in the utility fund or require the city to identify alternative funding. Staff said they will return with exact reserve impacts and any recommended next steps.

The commission did not take a formal vote on the audit finding at the meeting; staff said the finding will be included in the finalized audit report and that they would return with more detailed financial impacts and recommended actions.