HomeMy WebLinkAboutOIG No. 24-08 G7 Holdings, Inc. dba Garbageman.com - Permit Fee Revenues AuditJoseph M. Centorino, Inspector General
TO: Honorable Mayor and Members of the City Commission
FROM: Joseph M. Centorino, Inspector General
DATE: May 29, 2024
AUDIT: G7 Holdings, Inc. d/b/a Garbageman.com Permit Fee Revenues Audit
OIG No. 24-08
PERIOD: November 1, 2017, through April 30, 2021
INTRODUCTION
This report stems from an audit of the permit fees charged, collected, and remitted by G7 Holdings, Inc.
d/b/a Garbageman.com during the period of November 1, 2017, through April 30, 2021. The City of
Miami Beach Office of the Inspector General (OIG) Sanitation Tax Auditor examined the
contractor's compliance with selected provisions in the City Code, including obtaining annual
business tax receipts (BTRs), filing required reports, and maintaining sufficient insurance
coverage. The performance of City staff responsible for monitoring G7 Holdings, Inc. and
processing all payments received from the contractor was also reviewed.
This audit took several years to complete due, among other factors, to delays in receiving
requested records leading to the issuance of an OIG subpoena1 to obtain sufficient records to
complete the audit. A substantial volume of records was subsequently furnished by the contractor
and its related franchisee (David G. Services, LLC), that created confusion and disagreement
surrounding the taxability of some of the contractor's roll-off transactions due to ambiguities in the
Miami Beach City Code.
As a result, the OIG held multiple meetings with representatives from the City Administration,
Office of the City Attorney, as well as discussions with the contractor and its legal counsel to
resolve the issues. The course of the audit changed due to the June 28, 2023, adoption by the
City Commission of Resolution No. 2023-32654, which affected the legal landscape of the audit
by directing an interpretation of the definition of a roll-off container that differed from the one
previously provided by the Office of the City Attorney. This audit and its companion audit of David
G. Services LLC should be read concurrently to better understand each contractor's compliance
with tested requirements in the City Code.
CITY CODE PROVISIONS
Refer to the Addendum located at the end of this report for further information regarding the challenges
encountered during the completion of this audit.
Page 1 of 19
A roll-off is defined as a container with a minimum capacity of ten cubic yards designed to be
transported by a motorized vehicle. Contractors use these containers to collect and dispose of
construction and demolition (C&D) debris and/or large quantities of trash and/or bulky waste, but
not garbage or commercial refuse. Bulky waste represents large items of household refuse, such
as appliances, furniture, accumulations from major tree cutbacks, large crates and like articles,
while commercial refuse consists of all solid waste produced by commercial establishments.
An examination of the EnerGov system, the City licensing and permitting system, indicated 27
roll-off contractors on September 30, 2023, with their 2022/23 fiscal year BTRs in "active" status,
and two roll-off contractors in "pending" status. "Pending" status means that the BTR is not yet
valid or active and missing needed documentation and/or payment. The City fiscal year is annually
from October 1 through September 30, so the 2022/23 fiscal year would represent October 1,
2022 , through September 30 , 2023.
Roll-off contractors operating in Miami Beach are required to follow the terms outlined in Sections
90-278 (1) and (2) of the City Code, which include the monthly remittance of roll-off fees equal to
the City Commission approved rate (18% from the beginning of the audit period through October
5, 2019 and 20% for the remainder of the audit period) multiplied by the total gross receipts for
each contractor's City operations. City Code Section 90-221 defines gross receipts as the entire
amount of fees collected by the contractor (whether wholly or partially collected) for solid waste
collection and disposal within the City, excluding any taxes, and gross receipts from servicing roll
off and portable containers.
City Code Section 90-278(3) requires that each roll-off contractor provide the City Manager with
a current list of the names and addresses of each account upon its initial application. Upon any
application for renewal of its permit, each contractor must provide the frequency of service, the
permit number and capacity of each roll-off container or dumpster for each account, and the
address serviced by each roll-off container or dumpster. This list of accounts is typically furnished
concurrently with the monthly report to the Finance Department. It is an essential document to
verify the accuracy of the roll-off contractor's filings during the audit process.
City Code Section 90-278(4) requires that monthly reports, accompanied by payment of any owed
fees, be submitted to the City Finance Department by all authorized contractors at the end of the
month after the month in which the gross receipts were generated. For example, the monthly report
and any associated permit fees owed for December 2023 are due by January 31 , 2024. Any unpaid
permit fees that are not timely received are subject to penalties of 10% per month up to a
maximum of 50%, plus the highest legal rate of interest permitted by law on the amount of the
fee, exclusive of penalties, from the date the permit fee first became delinquent until paid .
When the contractor has annual gross receipts reported to the City greater than $200,000.00, the
contractor is required to deliver to the City Finance Department a statement of annual gross
receipts generated from accounts within the City prepared by an independent Certified Public
Accountant (C.P.A.). These statements of annual gross receipts are to be furnished within sixty
days following the close of the contractor's fiscal year pursuant to City Code Section 90-278( 4 ).
G7 Holdings, Inc. exceeded this annual threshold consistently during the examined period, and,
therefore, was required to submit this statement for all three examined fiscal years.
Lastly, City Code Section 90-196 details the required insurance coverage to be maintained by
qualified licensed roll-off contractors, and Section 90-193 addresses the need to obtain permits
for all accounts serviced in the City.
OVERALL OPINION
Page 2 of 19
The OIG made multiple requests to the contractor over many months for the records needed to
perform the audit. Initially, the contractor ignored some requests or requested time extensions for
varying reasons. As a result, the OIG served subpoena number 21-17 to G7 Holdings, Inc.
representatives to obtain the records needed for the audit. In response to this subpoena and
subsequent OIG Sanitation Tax Auditor requests, the contractor provided a large volume of
documents, including most requested invoices.
The contractor did not file any Roll-Off Permit Fee returns or remit any associated monies to the
City during the period of October 1, 2020, through April 30, 2021. However, the contractor did
remit a good faith payment of $183,008.00 during the audit process for monies due on taxable
transactions occurring during the audit period, but not reported, including some occurring during
these seven months of non-filing.
The following deficiencies, separated by the deficient party(ies), were identified during the audit
process:
A. Findings pertaining solely to G7 Holdings, Inc.
1. Penalties and interest totaling $73,669.40 are due to the City related to the late
payment of permit fees after deducting the $183,008.00 voluntarily paid by the
contractor in December 2021 in anticipation of the audit findings . In addition,
associated audit costs may also be due pending further guidance received from
the Office of the City Attorney.
2. G7 Holdings, Inc. d/b/a Garbageman.com with FEIN 65-1037789 has improperly
shared its Miami Beach issued business tax receipt with David G. Services LLC
d/b/a Garbageman.com FEIN 47-1733962.
B. Findings pertaining solely to the City
3. Five customer number accounts were issued to G7 Holdings, Inc. in the City Munis
system, the City enterprise resource planning system.
4. Multiple contact numbers were issued to G7 Holdings, Inc. in the City EnerGov
system, the City licensing and permitting system.
C. Findings pertaining to both G7 Holdings, Inc. and the City
5. G7 Holdings, Inc. did not file its 2018, 2019 and 2020 annual statements of gross
receipts prepared by an independent CPA as required by City Code Section 20-
278( 4 ), and no evidence was provided by City staff indicating that any were
requested.
6. G7 Holdings, Inc. did not timely submit its lists of accounts to the City Manager
pursuant to City Code Section 90-278(3), and no evidence was provided by City
staff indicating that any were requested.
PURPOSE
The purpose of this audit was to determine whether tested required contractor filings were
complete and accurate; whether corresponding remittances were correctly calculated using the
City Commission approved permit fee rate; whether filings and monies were timely received and
correctly recorded by the City Finance Department; and whether the contractor was compliant
with other designated City Code sections .
Page 3 of 19
SCOPE
1. Determine whether the contractor maintained sufficient records to determine the taxability
of identified Miami Beach transactions.
2. Determine whether the contractor timely submitted tested monthly reports of gross receipts
and remitted full payment of any corresponding permit fees due to the City. If not,
determine whether the appropriate penalties and interest charges were assessed pursuant
to City Code Section 90-278(6)(a-d).
3. Determine whether the contractor timely obtained its required annual BTRs during the
audit period .
4. Determine whether the contractor complied with other tested reporting requirements listed
in City Code Section 90-278.
5. Determine whether the contractor maintained the required insurance coverage pursuant
to City Code Section 90-196.
6. Determine whether tested monthly permit fees remitted by the contractor were accurately
recorded in the City Financial System.
FINDINGS, RESULTS/RECOMMENDATIONS, AND RESPONSES
The findings below are separated by those pertaining solely to the contractor, those pertaining
solely to the City, and any pertaining to both the contractor and the City.
A. Findings Pertaining Solely to G7 Holdings, Inc.
1. Penalties And Interest Totaling $73,669.40 Are Due To The City Related To The Late
Payment of Permit Fees After Deducting the $183,008.00 Voluntarily Paid By The
Contractor In December 2021 In Anticipation Of The Audit Findings.
City Code Section 90-221 defines gross receipts as "the entire amount of the fees
collected by the contractor (whether wholly or partially collected) for solid waste collection
and disposal within the city and including, without limitation, but excluding any taxes, and
gross receipts from servicing roll-off and portable containers."
The OIG Sanitation Tax Auditor examined all documentation provided by the contractor to
determine that G7 Holdings, Inc. had unreported roll -off gross receipts occurring within the
City during the audit period totaling $849 ,100.22. These taxable transactions were
primarily related to permit fees separately listed on Miami Beach customer invoices that
were subsequently collected from its customers but not remitted to the City.
As of November 30, 2021, the OIG Sanitation Tax Auditor calculated that $256,677.40 in
permit fees were due to the City (including penalties and interest), as shown by period, in
the table below. During the audit process, G7 Holdings, Inc. voluntarily made a good faith
payment of $183,008.00, in anticipation of the audit findings , for unreported taxable Miami
Beach transactions occurring during the audit period . This payment remitted shortly after
the completion of a forensic audit commissioned by and paid for by the contractor from
the independent accounting firm , Berkowitz Pollack Brant. In response, the City Finance
Department issued invoice #34468 for the requested amount on December 15, 2021 ,
which was applied against the payment received from the contractor.
Page 4 of 19
Period Unreported Roll-Off Roll-Off Penalties Interest Total
Gross Fee Fees Due ** ** Amount
Receipts Rate * Due
Nov. 2017 -Dec. 2017
Jan. 2018-Dec. 2018
Jan. 2019 -October 5, 2019
October 6, 2019 -Dec. 2019
Jan. 2020 -Dec. 2020
Jan. 2021 -Apr 2021
Totals
$26,392.20
$192,997.07
$184,066.55
$30,356.76
$24,651.28
$28,840.75
$245,185.84
$116,609.77
$849,100.22
18%
18%
18%
18%***
20%
18%***
20%
20%
$4,750.55
$34,738.85
$33,131 .97
$5,464.14
$4,930.25
$5,191 .31
$49,037.16
$23,321 .94
$160,566.17
$2,375.45
$17,371 .09
$16,567.22
$2 ,732.30
$2,465.36
$427.55
$8,989.63
$11 ,661 .55
$62,590.15
$2,246.06
$14,358.67
$9,421 .98
$1 ,275.80
$1 ,115.72
$171 .86
$3,084.64
$1 ,846.35
$33,521.08
$9,372.06
$66,468.61
$59,121.17
$9,472.24
$8,511 .33
$5,790.72
$61 ,111.43
$36,829.84
$256,677.40
City Commission approved roll-off permit fees equaled 18% from the beginning of the audit period, November 1,
2017, through October 5, 2019, and 20% from October 6, 2019, through the end of the audit period, April 30,
2021.
Penalties and interest were waived and not charged for deficient payments received during the period of March
1, 2020, through November 30, 2020, pursuant to City Resolution Nos. 2020-31237 and 2020-31390.
The contractor had invoices issued prior to October 6, 2019 that were paid by its customers ( cash basis) after the
rate was increased .
Results/Recommendations:
The OIG recommends that the City Finance Department invoice G7 Holdings, Inc.
$73,669.40 ($256,677.40 due including interest and penalties -$183,008.00 paid on
December 15, 2021, by the contractor). If desired , the OIG will provide all its related
calculations to the Finance Department to determine whether it agrees with the stated
figures before creating the invoice.
The amount due was calculated as of December 15, 2021 , and stems from penalties and
interest related to permit fees collected by the contractor but not remitted during the
examined period of November 1, 2017, through April 30, 2021. Although the City
Administration may choose to update these calculations and increase the amount due, the
OIG recommends that the invoice not be updated because of the complexities associated
with this audit, not all of which were caused by the taxpayer.
Upon receipt of the invoice from the City Finance Department, the contractor should timely
remit the corresponding fees due to avoid additional penalties available under the City
Code. G7 Holdings, Inc. should also consistently and accurately file its future monthly Roll
off Permit Fee returns to the City and timely remit all associated monies due, pursuant to
City Code Section 90-278( 4 ).
Lastly, the Finance Department may also invoice the contractor for audit-related costs
under City Code Section 90-278(6), pending further guidance from the Office of the City
Attorney.
G7 Holdings, Inc. Response:
Please see Exhibits A and B located at the end of this report
City Administration Response:
The Finance Department will invoice G7 Holdings, Inc $73,669.40 for unpaid taxes,
penalties, and interest related to the permit fees still owed to the City for the audit period
of November 1, 2017, through April 30, 2021.
The Finance Department will bill the contractor for audit-related costs/fees once it receives
further recommendations/instructions to do so.
Page 5 of 19
2. G7 Holdings, Inc. Improperly Shared Its Miami Beach Issued BTR With Another
Business Entity.
City Code Section 102-371, Application procedures, provides as follows : (a) Procedures
for issuance. No license shall be issued or granted to any person to engage in any
business named, identified or encompassed by this article unless an application is filed
with the city manager or his designee on forms provided for that purpose ...
City Code Section 102-378, Lapse of insurance bond, provides as follows: (a) Those
occupations requiring insurance as a prerequisite to the issuance of a tax receipt must
submit an original certificate of insurance at the time of application, to be approved by the
risk manager. It is the taxee's responsibility to ensure that an updated original certificate
of insurance is forwarded to the city's business tax section prior to the expiration date of
the certificate currently on file . If, at any time during the tax year, a taxee fails to maintain
the insurance and/or bonds required by this article for the taxed business, the tax receipt
issued to such business shall become null and void. Such businesses that continue
operating without a valid tax receipt shall be subject to enforcement procedures set forth
in section 102-377, including business tax revocation.
The OIG Sanitation Tax Auditor determined that David G. Services LLC d/b/a
Garbageman.com with Federal Employer Identification Number or FEIN 47-1733962 has
submitted monthly Roll-off Permit Fee returns under G7 Holdings, Inc. d/b/a
Garbageman.com with FEIN 65-1037789 and Munis customer ID 17666. Despite being a
separate business entity operating on Miami Beach, David G. Services LLC had not
submitted the required BTR application or certificate of insurance to the City as of October
31, 2023.
Mr. Davis, owner of G7 Holdings, Inc. verbally informed the OIG Sanitation Tax Auditor
that he provided a franchise to David G. Services LLC. Following the OIG's report of this
situation to the City Code Compliance Department, NOVs numbered CC2021-10844
(operating without a valid BTR) and SV2021 -14636 (operating without a valid roll-off
permit) were issued to David G Services LLC.
Recommendations:
G7 Holdings, Inc. should not share its BTR with any other business entity. Each legal entity
performing roll-off services within Miami Beach should comply with all requirements in the
City Code, including, but not limited to, obtaining BTRs and permits, maintaining sufficient
insurance coverage, timely filing Roll-off Permit Fee returns and remitting all associated
monies due to the City.
The Federal Employer Identification Number (assigned by the Internal Revenue Service
IRS) should be listed for each Munis customer number account to help prevent similar
deficiencies from occurring. Adding the FEIN to each customer number account in the
Munis system should help to ensure that a unique account for each contractor is entered
into the Munis system .
G7 Holdings, Inc. Response:
Please see Exhibits A and B located at the end of this report
Page 6 of 19
B. Findings Pertaining Solely to the City
3. Five Customer Number Accounts Were Issued To G7 Holdings, Inc. In The City
Munis System.
Examination of the Munis system indicated that G7 Holdings, Inc. was assigned the
following customer numbers: 236, 2487, 17666, 27516, and 27810. This multiplicity of
customer numbers could cause confusion as City employees may inadvertently not review
each of the assigned accounts for outstanding balances due. As a result, BTRs or permits
may be mistakenly issued to contractors owing the City money. Upon further examination
of these customer numbers, the OIG Sanitation Tax Auditor determined the following:
• Customer number accounts 236, 27516, and 27810 had no associated transactions.
• Customer number account 2487 was used for a single transaction, specifically for an
off-duty police fee.
• Customer number account 17666 was used for permit fee payments made to the City
since May 2016.
Recommendations:
The Finance Department should eliminate the customer numbers associated with no
transactions. It is also recommended that each roll-off contractor only have one active
customer number and that it be linked to a unique identifier like its Federal Employer
Identification Number (FEIN) in the Munis system. If followed, it should help mitigate the
risk that prospective BTRs and/or permits are issued to contractors owing monies to the
City.
City Administration Response:
The Finance Department will eliminate the customer numbers associated with no
transactions .
The billing process for the City is decentralized which enables various departments the
ability to produce customer numbers as part of the customer set up and bill processing.
This functionality may create the opportunity for multiple customer numbers to be
generated . The Finance Department will inquire of the City's Information Technology
Department as to the ability of the City's ERP to utilize FEIN numbers to minimize
customers being assigned multiple numbers.
4. Multiple Contact Numbers Were Issued To G7 Holdings, Inc. In The City EnerGov
System.
The Tyler Technologies EnerGov system Citizen Self Services (CSS) portal is the web
based interface customers use to engage with the City. The portal allows contractors to
create password-protected contact numbers containing their relevant information.
Individuals and businesses with email accounts often create numerous contact numbers
due to insufficient internal controls to limit the number of contact numbers in the EnerGov
system . Although there may be many reasons why multiple contact numbers were issued
to the same individual or corporation, outdated numbers are often not inactivated. Some
examples are several individuals interacting separately with the City but working at the
same property address, a customer failing to remember a selected password, and a
customer acquiring a new email account. Regardless of the reason , the number of contact
Page 7 of 19
numbers has grown significantly over time, complicating the search process and the
determination of outstanding balances.
When multiple contact numbers are created in the EnerGov system, it can create confusion
as roll-off permits, Code Compliance violations, and outstanding balances may be entered
under any of the issued contact numbers. Consequently, the reviewer must be aware of
all contact numbers and examine all of them to determine the individual or company's
status accurately.
During a review of the EnerGov system, it was noted that G7 Holdings, Inc. and its officers
were issued 59 contact numbers. The contractor's issued business tax receipt, numbered
BTR000758-05-2016, was linked to the following three contact numbers: 461032,
C000049594, and ID-000003874. The other 56 contact numbers had no links to an active
BTR. All the contact information is needed to avoid duplicate contacts and to add the
respective links with the contractor's BTR ( or additional records available in EnerGov).
Results/Recommendation( s ):
The OIG recommends that only one active contact number be entered in the EnerGov
system for each address related to roll-offs to facilitate effective and accurate searches. It
is also recommended that the City Information Technology Department begin a database
debug by deleting these multiple contact numbers and transferring any corresponding
transactions to a contact number under the control of the property or business owner. The
OIG understands that this is a time-consuming and labor-intensive task but believes that
this issue needs to be addressed. Finally, Code Compliance Department information
related to violations should include a contact number linked to the customer's BTR and
any relevant permits.
City Administration Response:
The Information Technology Department has advised that multiple contact numbers
assigned to a single record are a result of duplicative contacts created within EnerGov by
manual processes. Multiple contacts for a single "contact" can be addressed by using the
merge function in EnerGov. The Finance Department will implement moving forward.
Findings Pertaining to Both G7 Holdings, Inc. and the City
5. G7 Holdings, Inc. Did Not File Its Annual Statements of Gross Receipts Certified by
an Independent Certified Public Accountant as Required by City Code Section 20-
278(4) And No Evidence Was Provided From City Staff Indicating Any Were
Requested.
City Code Section 90-278(4), Monthly report, provides as follows:
Contractors having annual gross receipts reported to the city over $200,000.00 shall, on
or before 60 days following the close of their fiscal year, deliver to the finance department
a statement of annual gross receipts (generated from the city) certified by an independent
certified public accountant, reflecting gross receipts within the city for the preceding fiscal
year.
G7 Holdings, Inc. exceeded the threshold amount for requiring certified statements of
gross receipts for the 2018, 2019, and 2020 calendar years, but the required documents
were not submitted to the City as of November 17, 2023. Furthermore, no evidence was
Page 8 of 19
presented by City staff to the OIG Sanitation Tax Auditor indicating that the contractor was
notified of this deficiency. The furnishing of these required statements, verified by an
independent certified public accountant, would allow City staff to determine the accuracy
of a contractor's reporting and lessen the City's reliance on audits performed by the OIG
Sanitation Tax Auditor.
Recommendation(s)
G7 Holdings, Inc. should comply with City Code Section 90-278(4) requirements by timely
submitting its certified annual statement of gross receipts for each year that it exceeds the
designated threshold. The Finance Department should designate employees to monitor
each contractor's annual gross receipts to ensure that all are compliant with Section 90-
278( 4 ). If the notified contractor does not take timely corrective action, then the City may
apply all disciplinary actions available under the City Code.
Furthermore, Finance Department staff should reconcile the reported revenues in the
annual statement of gross receipts with the total amount of the Roll-Off Permit Fee returns
forms filed by the contractor. Any unsubstantiated differences should result in the issuance
of an invoice for the amount of the deficiency plus interest and penalties.
The OIG also recommends that the City Code be revised to include a provision allowing
the levying of penalties, interest, and/or other actions against related non-compliant
contractors that do not timely file the required annual audited statements of gross receipts.
This would lead to greater compliance with this requirement and reduce the City's reliance
on audits for oversight of this process.
The affected City departments should examine their related internal processes and
procedures and implement internal controls aimed at timely detecting unreported permit
fee revenues, including the implementation of electronic filing (or electronic records
submission). This could produce greater efficiencies and significant City revenues,
particularly in light of the increased number of contractors obtaining BTRs.
G7 Holdings, Inc. Response:
Please see Exhibits A and B located at the end of this report
Finance Department Response:
The Finance Department has designated employees who are responsible for the
monitoring of reported and unreported roll-off customers and related filings.
In FY 2023, the Finance Department instituted an internal control process including an
analysis of reported filings which are reviewed for timeliness and accuracy. Included in
this process is a review of those customers with receipts in excess of $200,000 that are
required to comply with the submission of their annual statements of gross receipts
certified by an independent Certified Public Accountant. A comparison of total monthly
receipts and annual reported receipts is performed to ensure completeness of reported
receipts.
As part of the internal process a list of all roll-off customers who have obtained a roll -off
BTR with the City is reviewed and customers with delinquent filings are notified of
unreported filings with the City and applicable fines and fees are billing accordingly.
Page 9 of 19
In addition, the Finance Department along with the City's Information Technology
Department has initiated the process to implement an electronic filing system for monthly
roll-off submissions. This project is currently ongoing.
The Finance Department enforces compliance of code regulations related to fees, fines,
interest, and penalties.
6. G7 Holdings, Inc. Did Not Timely Submit Its Lists OfAccounts To The City Manager
Pursuant To City Code Section 90-278(3) And No Evidence Was Provided From City
Staff Indicating Any Were Requested.
City Code Section 90-278(3), List of accounts, provides as follows: Each contractor shall
provide the city manager with a current list of the names and addresses of each account,
upon initial application, and upon any application for renewal, of its permit, the frequency
of service, and the permit number and capacity ofeach roll-off container or dumpster as per
account and the address serviced by each roll-off container or dumpster. No property owner
may share an account with another property owner.
G7 Holdings, Inc. did not provide the City Manager with its required lists of accounts during
the audit period, nor was evidence found indicating that any were requested by City staff.
Upon request, the roll-off contractor provided the lists of accounts to the OIG Sanitation
Tax Auditor. These listings are essential in verifying the accuracy of the roll-off contractor's
filings during the audit process, as its customer data is subsequently reconciled with the
supporting documentation provided.
The lists of accounts furnished were used to prepare and mail positive confirmation letters
to G7 Holdings, Inc. customers, requesting a listing of all Miami Beach roll-off transactions
with the contractor during the specified period. The OIG Sanitation Tax Auditor's
corresponding reconciliation of all returned confirmation letters with the furnished list of
accounts revealed material differences.
Results/Recommendation( s ):
G7 Holdings, Inc. should prospectively comply with City Code Section 90-278(3) and
timely submit its lists of accounts to the City Manager. The OIG recommends that the City
Code be revised to establish a due date for the submittal of lists of accounts and to allow
the charging of fines or other penalties to non-compliant contractors.
G7 Holdings, Inc. Response:
Please see Exhibits A and B located at the end of this report
All auditee responses received pursuant to City Code Section 2-256(h) are included in the issued
final report. Those received via email from the City Administration were included after each
pertinent finding and recommendation in the body of this report due to its format.
Since the email received from Michael Band, Esq. submitted on behalf of G7 Holdings, Inc., and
containing its response to the draft report were not finding specific, they have been included in
their entirety in Exhibit A, located at the end of this report. The OIG has added its own reply to the
contractor's response (see Exhibit 8).
Page 10 of 19
~ •oi~ecz:r•I ~~I!<if;;__ tQ_if
Mark D. Coolidge, Chi Auditor
1f:i:/1.tt
Chief Auditor
cc: Rickelle Williams, Interim City Manager
Eric Carpenter, Deputy City Manager
Joe Gomez, Public Works Department Director
Bradford Kaine, Sanitation Division Director
Jason Greene, Chief Financial Officer
Hernan D. Cardena, Esq ., Code Compliance Department Director
Frank Quintana, Chief Information Officer, Information Technology Department
Ric Dopico, City Attorney
Rob Rosenwald, Chief Deputy City Attorney
Steven Rothstein, Deputy City Attorney
Gregory Davis, President, G? Holdings, Inc.
Michael Band, Esquire representing G7 Holdings, Inc.
OFFICE OF THE INSPECTOR GENERAL, City of Miami Beach
1130 Washington Avenue, 6th Floor, Miami Beach, FL 33139
Tel: 305.673.7020 • Hotline: 786.897.1111
Email: CityofMiamiBeachOIG@miamibeachfl.gov
Website: www.mbinspectorgeneral.com
Page 11 of 19
ADDENDUM:
The Notice of Audit letter was sent on March 17, 2020, and the contractor, G7 Holdings,
Inc., requested additional time, due to the pandemic, to provide the needed records to the
OIG Sanitation Tax Auditor. The contractor provided its General Ledger and monthly Roll
Off Permit Fee returns by March 13, 2021 , for the period of November 1, 2017, through
September 30, 2020. During examination of the General Ledger, it was noted that the
contractor was also a licensed general contractor performing demolition removal services
in the City. Questions then arose whether the associated demolition income stemming
from the removal of construction and demolition debris (C&D) was subject to taxation by
the City.
After examining the records and conducting third-party verification, it was discovered that
a related entity, David G. Services LLC d/b/a Garbageman .com , was providing similar
services within the City. This business entity shared the same d/b/a , logo, and business
address as G7 Holdings, Inc~ Consequently, a Notice of Audit letter was similarly sent to
David G. Services LLC to request its records to verify that all its taxable Miami Beach
transactions were reported to the City. The findings related to David G. Services LLC are
included in a separate audit report, as it is different business entity than G7 Holdings, Inc.
G7 Holdings, Inc. did not renew its BTR for the 2020/21 fiscal year. On April 30, 2021, the
OIG Sanitation Tax Auditor received the following email from G7 Holdings, Inc.
representatives: After seeing the work City of Miami Beach is making toward a better Roll
Off Franchise, starting May 1, 2021 my company G7 Holdings, Inc. will be active with Roll
Off permitting and dump trailers and submit monthly reports and Franchise Fees.
However, G7 Holdings, Inc. provided roll-off services on Miami Beach without a valid BTR
from October 1, 2020, through April 30, 2021 .
A third-party verification of records was performed by requesting sampled contractor
customers to provide invoices (or other records) of transactions with G7 Holdings, Inc.
During this third-party verification of records it was noted that the contractor performed
some roll-off services within the City that could not be found on its General Ledgeri causing
the OIG Sanitation Tax Auditor to question whether the contractor's accounting records
were complete.
On August 17, 2021, Michael Band, Esq. representing G7 Holdings, Inc., informed OIG
staff that the independent CPA firm of Berkowitz Pollack Brant was hired to review the
contractor's accounting records. On September 3, 2021, the OIG issued subpoena 21-17
requesting additional invoices related to known unreported transactions. On September
21, 2021 , the requested invoices were provided by Gregory Davis, owner of G7 Holdings,
Inc. Mr. Band then informed the OIG Sanitation Tax Auditor on November 22 , 2021 i that
the forensic audit conducted by Berkowitz Pollack Brant was completed. The OIG was not
provided copies by the contractor of the completed forensic audit.
Upon examining the additional financial transactions, it was determined that some
collected permit fees from Miami Beach customers had not been remitted to the City. A
thorough review of the auditee's records and furnished customer invoices showed some
inconsistencies (highlighted); while customer invoices, identified by matching invoice
numbers, presented identical total amounts with detailed breakdowns, including roll-off
fees , the records submitted by the auditee showed these totals as lump sums without
itemizing the roll-off fees. Given these findings, the OIG engaged in further investigation.
Page 12 of 19
On November 22, 2021, the contractor admitted the existence of some unreported
transactions containing permit fees collected but not remitted to the City. The contractor
emailed reports of unreported transactions to the OIG Sanitation Tax Auditor. The
contractor filed the monthly Roll-Off Permit Fee return on a cash basis of accounting.
Chapter 90 does not address whether cash or accrual basis accounting methods should
be used for reporting.
On December 13, 2021, based on a contractor inquiry, Office of the City Attorney staff
provided legal guidance related to the permit fees owed by grapple service and roll-off
contractors, indicating that the use of grapple service by a contractor to conduct
construction and debris removal, even without the use of a traditional roll-off container,
would fall within the City Code provisions for taxation.
On December 15, 2021, at the contractor's request, the Finance Department issued
invoice #34468 in the amount of $183,008.00 to the contractor to cover the amount
proffered by the contractor in anticipation of the audit findings for the unreported
transactions of permit fees collected but not remitted to the City. However, the contractor
did not fully explain or provide documentation indicating the breakdown of how the
$183,008.00 permit fees due was calculated.
On February 27, 2022, the Office of the City Attorney provided the OIG with legal guidance
related to the taxability of grapple service, the use of roll-off containers by different types
of contractors, and roll-off requirements linked to the removal of C&D. During the course
of 2023, the OIG sought detailed and specific guidance from the Office of the City Attorney
on several issues related to roll-off permits and fees.
On March 24, 2022, the contractor provided the General Ledger related to the missing
period of October 1, 2020, through April 30, 2021.
Several discussions were held with the contractor and Office of the City Attorney
representatives related to the taxability of the removal of construction and demolition
debris during the performance of demolition contracts pursuant to Section 90-280, Use
restrictions, which provides as follows: Roi/off, portable containers, or dumpsters are to be
used for the removal of construction and demolition debris or for the removal of large
quantities of bulky waste. Construction and demolition debris, and bulky waste, is never
to be stored directly on the ground, as rolloff and portable containers must be used at all
times. Roi/off and portable containers shall not be used for the removal of garbage or
commercial waste. [Emphasis added.]
On March 10, 2023, and April 11, 2023, meetings were conducted with various
representatives from the Office of the City Attorney and City Administration, whereby it
was concluded that City Code Chapter 90 needs updating and clarification. In the course
of these discussions, imposition of the City's sanitation tax on the removal of C&D by
demolition contractors without the use of roll-off containers was also deemed by the City
Administration to be infeasible given the current wording in the City Code.
On July 17, 2023, the contractor provided invoices related to the period of October 1,
2020, through April 30, 2021.
Page 13 of 19
On June 28, 2023, Resolution No. 2023-32654 was approved by the City Commission
limiting the application of roll-off fee requirements in C&D removal to a contractor's use of
a 10-yard or more metal container without wheels. This effectively removed the wheeled
containers exclusively used by G7 Holdings, Inc., from being included in taxable roll-off
transactions, despite the City Attorney's Office's prior interpretation that included them.
This limitation, based on the equipment used rather than on the nature of the transaction,
is expected to significantly decrease the future collection of roll-off fees by the Sanitation
Department. Additional guidance will be needed from the Office of the City Attorney.
During an examination of the contractor's General Ledger, it was noted that the contractor
had recorded roll-off revenues in several revenue accounts like Aggregate, Broward
County Franchise, Broward Division, Collier County Franchise, Consulting Services, Dade
County Franchise, David G Services Franchise, Demolition -Other, Dirt-Other, Disposal
Service, Dump Truck Service-Other, Franchise Fee Income, General Contracting
Services, Hauling Income, Labor, Leon County Franchise, Machine Rental, Roll-Off
Container Service, Sales-Other, Sales Tax Payable, Subcontractors-Other, Trailer
Services, Transportation Division, Undeposited Funds, and USW Demolition.
Most of the transactions found in the accounts listed above were not reported by the
contractor to the Finance Department in its filed monthly Roll-Off Permit Fee returns.
Having roll-off revenue from the same invoice or sale description split up into several
revenue accounts with other names (not related to roll-off or C&D removal) is confusing
and may result in errors in calculating the monthly permit fees due. It also significantly
increases the corresponding difficulty of performing the audit by requiring the assigned
auditor to spend additional time determining which revenue accounts are related to permit
fees and which specific transactions from each revenue account may be related to permit
fees.
G7 Holdings, Inc. failed to report roll-off transactions to the Finance Department related to
several addresses found on its General Ledger income transactions and invoices. As the
City Code Compliance Department is primarily complaint driven, and no related
complaints were known to have been received, G7 Holdings, Inc. was not issued any
Notices of Violation or NOVs regarding any unpermitted work during the audit period. On
September 2, 2021, Mr. Band also stated via email that (G7 Holdingsi Inc.) "Greg's
"accounting system" does not meet his needs nor the needs of the city" and that they were
in the process of remedying this situation.
During the audit period, G7 Holdings, Inc. filed monthly Roll-Off Permit Fee returns
resulting in an average of $1,653.74 being remitted to the City, which increased to an
average of $12,238.07 during the 2021/22 and 2022/23 fiscal years (740% average
monthly increase). However, G7 Holdings, Inc. had not filed any monthly Roll-Off Permit
Fee returns since May 2023, which corresponds with the June 28, 2023 City Commission
adoption of Resolution No. 2023-32654. If true (these months were not included in the
audit), the OIG Sanitation Tax Auditor estimates that the Sanitation Division incurred
estimated lost revenues of $146,856.84 ($12,238.07 x 12 months) for the 2023/24 fiscal
year from G7 Holdings, Inc., due to the Commission's decision to limit the interpretation
of roll-off containers to non-wheeled containers.
At the request of the OIG for an interpretation of Resolution No. 2023-32654, the Office of
the City Attorney provided an email on September 1, 2023, opining that it applied to all
OIG audits not yet finalized. Consequently, its limiting terms were extended to both current
Page 14 of 19
and prospective audits of all contractors, including those using wheeled containers, dump
trucks and grapple services and previously considered by the Office of the City Attorney
to be covered by existing City Code provisions. As a result of the adoption of Resolution
No. 2023-32654 and the received legal opinion, the OIG believes the following results are
likely to occur:
• Contractors who do not use "conventional" roll-off containers to remove
construction and demolition debris and/or bulky waste will have an unearned
competitive advantage, at least in the short term , due to their exclusion from the
roll-off container definition.
• More contractors may be expected to transition to non-taxable means to collect
construction and demolition debris and/or bulky waste instead of conventional roll
offs to avoid having to remit any related permit fees to the City.
• Fewer BTRs related to roll-off activities will be required, thereby decreasing City
regulation and oversight of the process.
• The Sanitation Division , which is funded primarily through service fees, will lose
revenue, its customer-based fees may have to be increased to offset the lost
revenue, or currently filled Sanitation employee positions may be downgraded
and/or lost.
Lastly, City Code Section 90-278(6), Failure to pay permit fee; penalties for late payment,
provides as follows: Failure to pay permit fee; penalties for late payment. If the contractor
fails to timely pay the full permit fee as set forth in subsections ( 1) and (2) of this section,
the contractor shall pay any and all of the city's expenses for collection of such fees,
including, but not limited to, court costs, audit costs and reasonable attorney fees.
Audit costs related to the completion of this audit may be due to the City pending further
guidance received from the Office of the City Attorney. At the conclusion of this process,
the Finance Department will be notified of the final determination of audit costs for billing
purposes.
During the examination, it was noted that 814 invoices included on the monthly Roll-Off
Permit Fee returns had such additional items as fuel & environmental fees and disposal
per ton that were not included and totaled $48, 194.53. Resolution No. 2023-32654
released G7 Holdings, Inc. from the requirement to file these transactions with an
additional loss to the City in the amount of $8,954.45 in permit fees excluding penalties
and interest.
Also, the effect of Resolution No . 2023-32654 excluded the contractor from having to file
all the gross receipts associated with the removal of C&D related to its demolition contracts
in the amount of $1,802,700. This resolution had a higher impact in this case related to
the contractor's significant removal of C&D debris.
Page 15 of 19
Exhibit A (Response received from G7 Holdings, Inc.)
From: michael@bandlawfirm.com <michael@bandlawfirm.com>
Sent: Monday, April 22, 2024 2:33 PM
To: Centorino, Joseph <JosephCentorino@miamibeachfl.gov>
Subject: G7 Holdings, Inc. Response to the Audit Report
[ THIS MESSAGE COMES FROM AN EXTERNAL EMAIL -USE CAUTION WHEN REPLYING AND OPENING
LINKS OR ATTACHMENTS]
Dear Mr. Centorino:
Initially, allow me to thank you for the extension of time in which to reply. I appreciated your
consideration.
I write in response to the Inspector General's Draft Audit Report relating to my client G? Holdings,
Inc. d/b/a Garbageman.com for the Audit Period of November 1, 2017 through April 30,
2021. While we dispute the findings in your Report I believe that we both can agree that the city's
confused and contradictory -and we believe wrongful -position interpreting the ordinance led to
an unfair application of said ordinance which has cost my client and his customers tens of
thousands of dollars.
It is our position that G? Holdings should never have been obligated for the payment of franchise
fees for Rolloff services while not using a Rolloff, that is, the franchise fees were never
due. Simply put, it is our position that G? Holdings should never have been obligated for the
payment of franchise fees for Rolloff use while not using a Rolloff. G? Holdings is a Certified
General Contractor (CGC1519552) that uses a fleet of Florida registered trucks and trailers to
remove construction and demolition debris from ongoing projects on Miami Beach and for select
customers. Since 2000 G? Holdings has worked on providing Rolloff alternatives. The space
requirements of a Rolloff do not fit every project. An example is the 1111 Lincoln Road parking
garage residence, where G? Holdings took a dump trailer into and up to the 6th floor to remove
garbage during the residence buildout. We provide live load service on Ocean Drive, Collins Ave,
and Lincoln Road where leaving a Rolloff is unfeasible. Live Load is where the truck and driver
stop in alleyway and allow the laborers to load out the stockpiled debris, without permanently
blocking traffic. G? Holdings has never self-performed Rolloff services, and therefore the
franchise fees were never due. Further, "garbage services" represents less than 20% of G?'s
business revenues and is not its core business.
Again, the OIG suggestion that the adoption of Resolution No. 2023-32654 in June of 2023
changed the landscape for the collection is generous but inaccurate. The adoption of the
ordinance provided a more accurate statement of the law which allowed for the collection of fees
moving forward. The collection of fees prior to the inauguration of the ordinance should be viewed
as an unlawful expropriation of funds from my client without legal authority. While my client's
payment of those fees based upon the city's muddled explanation was made, it now should be
viewed or might be considered as a charitable contribution to the city's coffers.
Page 16 of 19
G? Holdings never performed Rolloff services in the city of Miami Beach. The OIG 's
conclusion that my client exceeded the annual threshold ($200 ,000) is wrong and no amount of
fees were ever owed nor was the company required to submit a financial statement. The OIG's
finding that the company owes $160,566.17 plus interest and penalties is illogical. As the CMB
and the OIG clearly know now, G? Holdings, Inc never performed Rolloff services. In good faith,
during the audit process, G? Holdings, Inc. voluntarily made a payment of $183,008.00, in
anticipation of the audit findings, for unreported taxable Miami Beach transactions occurring
during the audit period. This payment, remitted shortly after the completion of a forensic audit
commissioned by and paid for by the contractor based upon a review from the independent
accounting firm, Berkowitz Pollack Brant. In response , the City Finance Department issued
invoice #34468 for the requested amount on December 15, 2021.
This payment and all payments and collected by the City for Rolloff Franchise Fees were made
in error by both G? Holdings, Inc and City. The Audit Report should be re-considered by the OIG
in light of the ordinance change and the tortured history of its application.
We stand willing to address any questions the OIG may have and look forward to working with
the City to update Chapter 90 so that the City can properly and legally collect the Franchise Fee
due on Rolloff from other methodology of hauling and removing garbage.
Finally, the statements contained within this response are made without waiver of any of G?
Holdings, Inc. d/b/a Garbageman.corn's rights, claims, or defenses regardless of whether they
are expressly stated herein .
Let us know your thoughts.
Regards,
Michael
Michael R. Band, P.A.
attorney and counselor at law
1224 Alfred I. duPont Building
169 East Flagler Street
Miami, Florida 33131
Please note new address
Telephone. 305 372 8500
Facsimile 305 372 8504
Cell Phone: 305 582 5751
E-Mail: michael@bandlawfirm.com
Page 17 of 19
www.bandlawfirm.com
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IRS CIRCULAR 230 Disclosure Under U S Treasury regulations we are required to inform you that any tax advice contained in this e-mail or
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Page 18 of 19
Exhibit B (OIG's Reply to Response received from G7 Holdings, Inc.)
Prior to the initiation of this audit, the contractor billed and collected the required sanitation roll-off
permit fees from its customers on its own and without any prodding from the City. It was the fact
that the contractor had not submitted the substantial fees it collected from its customers to the
City that led to its voluntary agreement in December 2021 during the course of the audit to pay
$183,008 on account to the City as an estimate of what the contractor acknowledged it owed to
the City.
The contractor has no right to keep funds paid by its Miami Beach customers to the contractor for
remission to the City for roll-off fees. The contractor's acknowledgement of the fees owed is
demonstrated by invoices issued by it for services rendered in Miami Beach, which contained a
separate line item entitled "Miami Beach Fee" charging customers an additional 18% or 20%
(depending on the date of transaction) of the applicable gross amount collected, the same
percentage as the City Commission adopted roll-off permit fee for the audit period.
The amount now due from the contractor pursuant to Finding #1 in this audit report--$73,669.40-
-stems from penalties and interest related to permit fees collected but not remitted during the audit
period. The OIG contends that the contractor charged and collected the roll-off permit fee from its
Miami Beach customers, and obviously has no intention of returning any funds to its originating
customers. Therefore, the City should retain the $183,008 paid by the contractor. In addition, the
City Finance Department should invoice the contractor for any other unremitted fees collected by
it and the associated interest and penalties specified in the City Code related to the late payment
of roll-off permit fees.
Page 19 of 19