HomeMy WebLinkAboutOIG No. 24-11 Infinite Energy, Inc. – Public Service Tax AuditJoseph M. Centorino, Inspector General
TO:
FROM:
DATE:
PROJECT:
PERIOD:
Honorable Mayor and Members of the City Commission
Joseph M. Centorino, Inspector General
May 31, 2024
Infinite Energy, Inc. - Public Service Tax Audit
OIG No. 24-11
April 1, 2017 - June 30, 2021
INTRODUCTION
The City of Miami Beach Office of the Inspector General (OIG) performed this audit of the Public
Service Tax (also known as Utility Tax) charged, collected, reported, and remitted by Infinite
Energy, Inc. to the City Finance Department for the audit period of April 1, 2017, through June
30, 2021. Additional testing was performed to determine the gas seller's compliance with other
selected sections of the City Code and Florida Statutes.
Article Ill of the City Code, entitled "Public Service Tax," details the terms and conditions related
to the charging, collecting, and remitting of Public Service Tax on all applicable purchases of
electricity, metered gas, bottled gas, and fuel oil within the corporate limits of the City of Miami
Beach. Section 102-152 requires the seller to collect and remit ten percent, exclusive of
governmental charges and taxes, of the total amount shown on such bill on account of the
purchase of electricity, metered gas, and bottled gas and four cents per gallon on fuel oil. The tax
is due on all purchases within Miami Beach except those performed by an agency or
instrumentality of the United States Government, the state, the county, or a municipality (Section
102-151).
SCOPE
The scope of the audit was to evaluate whether Infinite Energy, lnc./Gas South LLC complied with
selected sections of the City Code and Florida Statutes and whether all Public Service Tax monies
due to the City were timely and accurately paid. The audit period was April 1, 2017, through June
30, 2021, and selected transactions before and after this period were examined.
METHODOLOGY
• Reviewed applicable provisions of the City Code of Ordinances and Florida Statutes.
• Interviewed and made staff inquiries to understand the internal controls, assess control
risk, and plan audit procedures.
Page 1 of 6
Joseph M. Centorino, Inspector General
TO:
FROM:
DATE:
PROJECT:
PERIOD:
Honorable Mayor and Members of the City Commission
Joseph M. Centorino, Inspector General
May 31, 2024
Infinite Energy, Inc. - Public Service Tax Audit
OIG No. 24-11
April 1, 2017 - June 30, 2021
INTRODUCTION
The City of Miami Beach Office of the Inspector General (OIG) performed this audit of the Public
Service Tax (also known as Utility Tax) charged, collected, reported, and remitted by Infinite
Energy, Inc. to the City Finance Department for the audit period of April 1, 2017, through June
30, 2021. Additional testing was performed to determine the gas seller's compliance with other
selected sections of the City Code and Florida Statutes.
Article Ill of the City Code, entitled "Public Service Tax," details the terms and conditions related
to the charging, collecting, and remitting of Public Service Tax on all applicable purchases of
electricity, metered gas, bottled gas, and fuel oil within the corporate limits of the City of Miami
Beach. Section 102-152 requires the seller to collect and remit ten percent, exclusive of
governmental charges and taxes, of the total amount shown on such bill on account of the
purchase of electricity, metered gas, and bottled gas and four cents per gallon on fuel oil. The tax
is due on all purchases within Miami Beach except those performed by an agency or
instrumentality of the United States Government, the state, the county, or a municipality (Section
102-151).
SCOPE
The scope of the audit was to evaluate whether Infinite Energy, lnc./Gas South LLC complied with
selected sections of the City Code and Florida Statutes and whether all Public Service Tax monies
due to the City were timely and accurately paid. The audit period was April 1, 2017, through June
30, 2021, and selected transactions before and after this period were examined.
METHODOLOGY
• Reviewed applicable provisions of the City Code of Ordinances and Florida Statutes.
• Interviewed and made staff inquiries to understand the internal controls, assess control
risk, and plan audit procedures.
Page 1 of 6
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• Performed substantive testing consistent with the audit objectives, including, but not
limited to, examination of appropriate transactions and records.
• Drew conclusions based on the results of testing, made corresponding recommendations,
and obtained auditee responses and corrective action plans.
• Consulted with legal counsel in the Office of the City Attorney regarding any legal issues
presented during the audit.
• Performed other audit procedures as deemed necessary.
FINDINGS, RECOMMENDATIONS, AND RESPONSES
1. Finding: No Assessment Was Levied Against Infinite Energy, lnc./Gas South, LLC
In Relation To Its Reported Exemptions Of Fuel Adjustment Charges on Miami
Beach Transactions As It Was Deemed Compliant With Florida Statute
166.231(1)(b).
Infinite Energy, lnc./Gas South LLC consistently reported and remitted Public Service Tax
monthly during the audit period to the City Finance Department. The table below
summarizes the total Public Service Tax paid for each of the stated periods.
Period Public Service Tax Paid
04/01/17 -- 09/30/17 $6,293.80
10/01/17 - 09/30/18 $14,641.47
10/01/18 - 09/30/19 $14,485.16
10/01/19 - 09/30/20 $11,254.86
10/01/20 - 06/30/21 $2,409.84
Total $49,085.13
The gas seller fully cooperated with the OIG Auditors and provided the records and
information needed to determine the accuracy and completeness of its reported filings.
Multiple meetings were held during the audit process with its representatives to discuss
the gas seller's recordkeeping and reporting process, as well as the methodology used to
determine the validity of any claimed exemptions, and to calculate the Public Service Tax
due to the City.
An examination of Infinite Energy, lnc./Gas South LLC's furnished system reports
determined that the gas seller claimed an average of 88.21 % of its Miami Beach gross
revenues during the audit period were exempt from Public Service Tax (see the table
below).
Period GAS Charges Claimed Exempt Exempt
Revenues Percentage
04/01 /17 - 09/30/17 $ 480,406.17 $ 417,468.10 86.90%
10/01 /17- 09/30/18 $ 1,153,334.69 $ 1,006,920.00 87.31%
10/01 /18- 09/30/19 $ 1,114,086.91 $ 969,235.44 87.00%
10/01 /19- 09/30/20 $ 881,805.66 $ 769,257.27 87.24%
10/01 /20 - 06/30/21 $ 543,771.37 $ 518,272.39 95.31%
Total $ 4,173,404.80 $ 3,681,153.20 88.21%
Page 2 of 6
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Gas Charges vs Claimed Exempt Revenues
$1,400,000.00
$1,200,000.00
$1,000,000.00
$800,000.00
$600,000.00
$400,000.00
$200,000.00
$- lI I I
04/01/17- 10/01/17- 10/01/18- 10/01/19- 10/01/20-
09/30/17 09/30/18 09/30/19 09/30/20 06/30/21
■GAS Charges ■Claimed Exempt Revenues
Infinite Energy, lnc./Gas South LLC representatives claimed its exempted revenues
stemmed from the fuel adjustment charge provision addressed in Florida Statute
166.231(1)b), which states, "The tax [Public Service Tax] imposed by paragraph (a) shall
not be applied against any fuel adjustment charge, and such charge shall be separately
stated on each bill. The term "fuel adjustment charge" means all increases in the cost of
utility services to the ultimate consumer resulting from an increase in the cost of fuel to the
utility after October 1, 1973."
Infinite Energy, lnc./Gas South LLC representatives explained their methodology to
calculate the fuel adjustment charge, which seemed reasonable to the OIG Audit Division
staff. However, the fuel adjustment charge was not separately stated on each invoice, as
required under Florida Statute 166.231(1)(b), which may lead to disallowance of any
claimed exemption from the Public Service Tax on transactions stemming from those
deficient invoices.
The Office of the City Attorney initially opined that the claimed exemptions should be
disallowed if the fuel adjustment charge is not separately listed on the gas seller's invoices.
A 1975 Florida Attorney General Opinion supported this position in stating the following:
"Any fuel adjustment charge" is defined to mean all increases in the cost of utility services
to the ultimate consumer that result from an increase in the cost of fuel to the utility. Also,
s. 2, Ch. 74-109, supra, requires that the exempt fuel adjustment charge be separately
stated on each bill.
While OIG management was reviewing the work performed by its assigned Auditor, the
Finance Department created invoice #36903, billing Infinite Energy, lnc./Gas South LLC
$378,045.21 as a placeholder. Interest was calculated at a 10% rate per annum pursuant
to City Code Section 102-157(b). The invoice was created at the request of the OIG to
enable the City to pursue collection from transactions deemed non-exempt and occurring
during the beginning months of the audit period within the applicable five-year statute of
limitations, based on the advice of the Office of the City Attorney.
OIG staff also identified audits conducted by the Clerk & Comptroller, Palm Beach County,
Division of Inspector General, in which significant assessments were levied against
another gas seller, not Gas South, LLC. The Palm Beach County assessments were due
to several identified deficiencies, including the disallowance of claimed exemptions related
to fuel adjustment charges not separately stated on customer invoices. The case was not
Page 3 of 6
Gas Charges vs Claimed Exempt Revenues
$1,400,000.00
$1,200,000.00
$1,000,000.00
$800,000.00
$600,000.00
$400,000.00
$200,000.00
$- lI I I
04/01/17- 10/01/17- 10/01/18- 10/01/19- 10/01/20-
09/30/17 09/30/18 09/30/19 09/30/20 06/30/21
■GAS Charges ■Claimed Exempt Revenues
Infinite Energy, lnc./Gas South LLC representatives claimed its exempted revenues
stemmed from the fuel adjustment charge provision addressed in Florida Statute
166.231(1)b), which states, "The tax [Public Service Tax] imposed by paragraph (a) shall
not be applied against any fuel adjustment charge, and such charge shall be separately
stated on each bill. The term "fuel adjustment charge" means all increases in the cost of
utility services to the ultimate consumer resulting from an increase in the cost of fuel to the
utility after October 1, 1973."
Infinite Energy, lnc./Gas South LLC representatives explained their methodology to
calculate the fuel adjustment charge, which seemed reasonable to the OIG Audit Division
staff. However, the fuel adjustment charge was not separately stated on each invoice, as
required under Florida Statute 166.231(1)(b), which may lead to disallowance of any
claimed exemption from the Public Service Tax on transactions stemming from those
deficient invoices.
The Office of the City Attorney initially opined that the claimed exemptions should be
disallowed if the fuel adjustment charge is not separately listed on the gas seller's invoices.
A 1975 Florida Attorney General Opinion supported this position in stating the following:
"Any fuel adjustment charge" is defined to mean all increases in the cost of utility services
to the ultimate consumer that result from an increase in the cost of fuel to the utility. Also,
s. 2, Ch. 74-109, supra, requires that the exempt fuel adjustment charge be separately
stated on each bill.
While OIG management was reviewing the work performed by its assigned Auditor, the
Finance Department created invoice #36903, billing Infinite Energy, lnc./Gas South LLC
$378,045.21 as a placeholder. Interest was calculated at a 10% rate per annum pursuant
to City Code Section 102-157(b). The invoice was created at the request of the OIG to
enable the City to pursue collection from transactions deemed non-exempt and occurring
during the beginning months of the audit period within the applicable five-year statute of
limitations, based on the advice of the Office of the City Attorney.
OIG staff also identified audits conducted by the Clerk & Comptroller, Palm Beach County,
Division of Inspector General, in which significant assessments were levied against
another gas seller, not Gas South, LLC. The Palm Beach County assessments were due
to several identified deficiencies, including the disallowance of claimed exemptions related
to fuel adjustment charges not separately stated on customer invoices. The case was not
Page 3 of 6
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litigated as the gas seller opted to pay a reduced assessment, primarily due to several
inadvertent duplicated invoices.
After analyzing all records and information furnished by Infinite Energy, lnc./Gas South,
LLC, the OIG Auditor calculated that the City is due $368,255.35 in Public Service Tax
plus $145,977.20 in interest as of April 18, 2023 (see the table below).
Interest on
balance due
as of
Period Utility Tax Due 4/18/2023 Total
04/01 /17 - 09/30/17 $ 41,746.82 $ 23,716.40 $ 65,478.61
10/01 /17-- 09/30/18 $ 100,692.00 $ 49,847.33 $ 150,567.15
10/01 /18 - 09/30/19 $ 96,923.53 $ 38,444.69 $ 135,408.80
10/01/19 - 09/30/20 $ 76,925.71 $ 23,115.32 $ 100,069.57
10/01 /20 - 06/30/21 $ 51,967.30 $ 10,853.45 $ 62,825.36
Grand total $ 368,255.35 $ 145,977.20 $ 514,349.49
The above amounts listed for each period comprising the subtotal represent taxable Miami
Beach transactions included in the system reports initially provided to the OIG Auditor.
The figures in the "additional invoices provided" line item were identified through review
of the furnished invoices, as they were not recorded in the system reports. These taxable
transactions occurred throughout the audit period and were intentionally reported
separately above due to their different origins.
After several meetings between OIG staff and the Office of the City Attorney regarding the
possible disallowance of the fuel adjustment charge exemptions taken, a preliminary draft
audit report was finalized and sent to the attorney representing the gas seller, who was
given time to provide the company's legal position regarding the exemption issue.
The attorney representing Gas South, LLC, arguing against the imposition of the draft
assessment based on disallowance of the claimed exemption, provided a Florida 5"
Circuit Court decision, issued in 2000, ruled in favor of a gas seller, not Gas South, LLC,
involving another governmental agency where the company similarly did not include the
fuel adjustment surcharge on each customer invoice. The court decision allowed for the
exemption, stating, "Although we agree that stating the state fee separately would make
for an easier audit and is a justified requirement, we do not read into the state policy behind
the 'separately stated' requirement an intent to forfeit monies collected for a similar
purpose but included within the same heading on the invoice.", allowed the exemption.
In response to the attorney's position and provided legal authority, the OIG and Office of
the City Attorney staff met to discuss the new information and its impact on invoice #36897
and the audit. Upon consideration of all the available information, the Office of the City
Attorney recommended that the exempted amounts related to the fuel adjustment charges
be allowed and that the assessment be eliminated from the audit. Based on this decision,
the OIG finalized the audit with no corresponding assessment levied against the gas seller.
Recommendation(s):
The City Finance Department should void invoice #36903 issued against Infinite Energy,
lnc./Gas South, LLC for $378,045.21 as a placeholder. The OIG recommends that Infinite
Page 4 of 6
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Energy, lnc./Gas South, LLC should prospectively include the fuel adjustment surcharge
as a separate line item on all its invoices issued to Miami Beach customers, to better
ensure that it is compliant with the related requirements of Florida Statute 166.231(1)b).
Infinite Energy, lnc./Gas South, LLC Response:
Gas South accepts this finding and agrees with the OIG's recommendation that the City
Finance Department should void Invoice #36903 issued against Infinite Energy, Inc. on
May 11, 2022 for $378,045.21. Gas South will continue to comply with all requirements of
Florida Statute 166.231.
City Finance Department Response:
Once the OIG audit report is finalized, the Finance Department will void invoice # 36903
for $378,045.21 generated for Infinite Energy, lnc./Gas South.
2. Finding: Infinite Energy, lnc./Gas South, LLC Remitted The Public Service Tax Due
For 45 Of The 50 Examined Months (90.00%) After The Dates Specified In City Code
Section 102-155(b) But Was Not Charged $116.94 In Accumulated Interest By The
City Finance Department.
City Code Section 102-155(b) states, "Every seller [Infinite Energy, lnc./Gas South, LLC]
is hereby required to execute and file no later than the 20" day of each month at the office
of the finance department a statement setting forth the amount of such public service tax
to which the city became entitled under the provisions of this section on account of bills
paid by purchasers during the preceding month, and contemporaneously with the filing of
such statements, shall pay the amount of public service tax to the finance department." In
addition, section 102-157(b) states, "...any seller who fails to remit or is delinquent in
remitting tax due under this article shall pay interest at the rate of ten percent per annum
or the rate specified by F.S. 687 .01, whichever is higher, on the unpaid amount of tax from
the date on which the tax first became delinquent until paid."
Infinite Energy, lnc./Gas South, LLC remitted 45 of the 50 examined monthly Public
Service Tax payments (90.00%) to the City Finance Department after the due dates
specified in City Code Section 102-155(b). The late payments ranged from a low of 2 days
to a high of 125 days, resulting in accumulated interest due to the City of $116.94. Interest
was charged at a rate of 10% per annum pursuant to City Code Section 102-157(b).
Interest due on late
Period payments
04/01/17-09/30/17 $ 15.39
10/01/17-09/30/18 $ 27.82
10/01/18- 09/30/19 $ 40.57
10/01/19-09/30/20 $ 28.54
10/01/20- 06/30/21 $ 4.61
Grand total $ 116.94
Recommendation(s):
City Finance Department staff should invoice Infinite Energy, lnc./Gas South, LLC $116.94
in accumulated interest related to the examined payments that were remitted after the due
dates specified in City Code Section 102-155(b). In addition, City Finance Department
Page 5 of 6
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staff should determine the timeliness of Gas South, LLC payments remitted after June 30,
2021, and prepare an invoice, if needed, to bill the gas seller interest on any late payments.
Infinite Energy, lnc./Gas South, LLC Response:
Gas South accepts this finding and will remit payment to the City in the amount of $116.94
once the audit report is finalized and the City Finance Department invoices Gas South
accordingly.
City Finance Department Response:
Once the OIG audit report is finalized, the Finance Department will invoice Infinite Energy,
lnc./Gas South, LLC for the accumulated interest related to the examined payments that
were remitted after the due dates specified in City Code Section 102-155(b). This invoicing
will cover the period from April 2017 to June 2021.
There were no remissions by Infinite Energy, Inc after June 2021. Remissions after June
2021 were only submitted by Gas South, LLC.
II responses received pursuant to City Code Section 2-256(h) were included in this final report.
espectfully submitted,
Mark D. Coolidge, Chief Auditor
Norman Blaiotta, Deputy Chief Auditor
Date
Date
cc: Rickelle Williams, Interim City Manager
Jason Greene, Chief Financial Office
Ric Dopico, City Attorney
Rob Rosenwald, Chief Deputy City Attorney
Steve Rothstein, Deputy City Attorney
Warren Rhea, Regulatory Counsel, Gas South, LLC
Marsha Croom, Manager of Tax and Payroll, Gas South, LLC
OFFICE OF THE INSPECTOR GENERAL, City of Miami Beach
1130 Washington Avenue, 6" Floor, Miami Beach, FL 33139
Tel: 305.673.7020 • Hotline: 786.897.1111
Email: CityofMiamiBeachOIG@miamibeachfl.gov
Website: www.mbinspectorgeneral.com
Page 6 of 6
staff should determine the timeliness of Gas South, LLC payments remitted after June 30,
2021, and prepare an invoice, if needed, to bill the gas seller interest on any late payments.
Infinite Energy, lnc./Gas South, LLC Response:
Gas South accepts this finding and will remit payment to the City in the amount of $116.94
once the audit report is finalized and the City Finance Department invoices Gas South
accordingly.
City Finance Department Response:
Once the OIG audit report is finalized, the Finance Department will invoice Infinite Energy,
lnc./Gas South, LLC for the accumulated interest related to the examined payments that
were remitted after the due dates specified in City Code Section 102-155(b). This invoicing
will cover the period from April 2017 to June 2021.
There were no remissions by Infinite Energy, Inc after June 2021. Remissions after June
2021 were only submitted by Gas South, LLC.
II responses received pursuant to City Code Section 2-256(h) were included in this final report.
espectfully submitted,
Mark D. Coolidge, Chief Auditor
Norman Blaiotta, Deputy Chief Auditor
Date
Date
cc: Rickelle Williams, Interim City Manager
Jason Greene, Chief Financial Office
Ric Dopico, City Attorney
Rob Rosenwald, Chief Deputy City Attorney
Steve Rothstein, Deputy City Attorney
Warren Rhea, Regulatory Counsel, Gas South, LLC
Marsha Croom, Manager of Tax and Payroll, Gas South, LLC
OFFICE OF THE INSPECTOR GENERAL, City of Miami Beach
1130 Washington Avenue, 6" Floor, Miami Beach, FL 33139
Tel: 305.673.7020 • Hotline: 786.897.1111
Email: CityofMiamiBeachOIG@miamibeachfl.gov
Website: www.mbinspectorgeneral.com
Page 6 of 6
staff should determine the timeliness of Gas South, LLC payments remitted after June 30,
2021, and prepare an invoice, if needed, to bill the gas seller interest on any late payments.
Infinite Energy, lnc./Gas South, LLC Response:
Gas South accepts this finding and will remit payment to the City in the amount of $116.94
once the audit report is finalized and the City Finance Department invoices Gas South
accordingly.
City Finance Department Response:
Once the OIG audit report is finalized, the Finance Department will invoice Infinite Energy,
lnc./Gas South, LLC for the accumulated interest related to the examined payments that
were remitted after the due dates specified in City Code Section 102-155(b). This invoicing
will cover the period from April 2017 to June 2021.
There were no remissions by Infinite Energy, Inc after June 2021. Remissions after June
2021 were only submitted by Gas South, LLC.
II responses received pursuant to City Code Section 2-256(h) were included in this final report.
espectfully submitted,
Mark D. Coolidge, Chief Auditor
Norman Blaiotta, Deputy Chief Auditor
Date
Date
cc: Rickelle Williams, Interim City Manager
Jason Greene, Chief Financial Office
Ric Dopico, City Attorney
Rob Rosenwald, Chief Deputy City Attorney
Steve Rothstein, Deputy City Attorney
Warren Rhea, Regulatory Counsel, Gas South, LLC
Marsha Croom, Manager of Tax and Payroll, Gas South, LLC
OFFICE OF THE INSPECTOR GENERAL, City of Miami Beach
1130 Washington Avenue, 6" Floor, Miami Beach, FL 33139
Tel: 305.673.7020 • Hotline: 786.897.1111
Email: CityofMiamiBeachOIG@miamibeachfl.gov
Website: www.mbinspectorgeneral.com
Page 6 of 6
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Joseph M. Centorino, Inspector General
TO:
FROM:
DATE:
PROJECT:
PERIOD:
Honorable Mayor and Members of the City Commission
Joseph Centorino, Inspector General
May 31, 2024
Gas South, LLC- Public Service Tax Audit
OIG No. 24-10
April 1, 2017 - April 30, 2022
INTRODUCTION
The City of Miami Beach Office of the Inspector General (OIG) performed this audit of the Public
Service Tax (also known as Utility Tax) charged, collected, reported, and remitted by Gas South,
LLC, to the City Finance Department for the audit period of April 1, 2017, through April 30, 2022.
Additional testing was performed to determine the gas seller's compliance with other selected
sections of the City Code and Florida Statutes.
Article Ill of the City Code, entitled "Public Service Tax," details the terms and conditions related
to the charging, collecting, and remitting of Public Service Tax on all applicable purchases of
electricity, metered gas, bottled gas, and fuel oil within the corporate limits of the City of Miami
Beach. Section 102-152 requires the seller to collect and remit ten percent, exclusive of
governmental charges and taxes, of the total amount shown on such bill on account of the
purchase of electricity, metered gas, and bottled gas and four cents per gallon on fuel oil. The tax
is due on all purchases within Miami Beach except those performed by an agency or
instrumentality of the United States Government, the state, the county, or a municipality (Section
102-151).
SCOPE
The scope of the audit was to evaluate whether Gas South, LLC complied with selected sections
of the City Code and Florida Statutes and whether all Public Service Tax monies due to the City
of Miami Beach were timely and accurately paid. The audit period was April 1, 2017, through April
30, 2022, and selected transactions before and after this period were also examined.
METHODOLOGY
• Reviewed applicable provisions of the City Code of Ordinances and Florida Statutes.
• Interviewed and made staff inquiries to understand the internal controls, assess control
risk, and plan audit procedures.
Page 1 of 6
Joseph M. Centorino, Inspector General
TO:
FROM:
DATE:
PROJECT:
PERIOD:
Honorable Mayor and Members of the City Commission
Joseph Centorino, Inspector General
May 31, 2024
Gas South, LLC- Public Service Tax Audit
OIG No. 24-10
April 1, 2017 - April 30, 2022
INTRODUCTION
The City of Miami Beach Office of the Inspector General (OIG) performed this audit of the Public
Service Tax (also known as Utility Tax) charged, collected, reported, and remitted by Gas South,
LLC, to the City Finance Department for the audit period of April 1, 2017, through April 30, 2022.
Additional testing was performed to determine the gas seller's compliance with other selected
sections of the City Code and Florida Statutes.
Article Ill of the City Code, entitled "Public Service Tax," details the terms and conditions related
to the charging, collecting, and remitting of Public Service Tax on all applicable purchases of
electricity, metered gas, bottled gas, and fuel oil within the corporate limits of the City of Miami
Beach. Section 102-152 requires the seller to collect and remit ten percent, exclusive of
governmental charges and taxes, of the total amount shown on such bill on account of the
purchase of electricity, metered gas, and bottled gas and four cents per gallon on fuel oil. The tax
is due on all purchases within Miami Beach except those performed by an agency or
instrumentality of the United States Government, the state, the county, or a municipality (Section
102-151).
SCOPE
The scope of the audit was to evaluate whether Gas South, LLC complied with selected sections
of the City Code and Florida Statutes and whether all Public Service Tax monies due to the City
of Miami Beach were timely and accurately paid. The audit period was April 1, 2017, through April
30, 2022, and selected transactions before and after this period were also examined.
METHODOLOGY
• Reviewed applicable provisions of the City Code of Ordinances and Florida Statutes.
• Interviewed and made staff inquiries to understand the internal controls, assess control
risk, and plan audit procedures.
Page 1 of 6
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• Performed substantive testing consistent with the audit objectives, including, but not
limited to, examination of appropriate transactions and records.
• Drew conclusions based on the results of testing, made corresponding recommendations,
and obtained auditee responses and corrective action plans.
• Consulted with legal counsel in the Office of the City Attorney regarding any legal issues
presented during the audit.
• Performed other audit procedures as deemed necessary.
FINDINGS, RECOMMENDATIONS, AND RESPONSES
1. Finding: No Assessment Was Levied Against Gas South, LLC In Relation To Its
Reported Exemptions of Fuel Adjustment Charges on Miami Beach Transactions
As It Was Deemed Compliant With Florida Statute 166.231(1)(b).
Gas South, LLC consistently reported and remitted Public Service Tax monthly during the
audit period to the City Finance Department. The table below summarizes the total Public
Service Tax paid for each of the stated periods.
Period Public Service Tax Paid
04/01/17 - 09/30/17 2,917.90
10/01 /17 - 09/30/18 6,037.49
10/01/18- 09/30/19 7,275.14
10/01 /19 - 09/30/20 10,582.69
10/01/20 - 09/30/21 9,415.76
10/01 /21 - 04/30/22 4,153.77
Total 40,382.75
The gas seller fully cooperated with the OIG Auditors and provided the records and
information needed to determine the accuracy and completeness of its reported filings.
Multiple meetings were held during the audit process with its representatives to discuss
the company's recordkeeping and reporting process, as well as the methodology used to
determine the validity of any claimed exemptions, and to calculate the Public Service Tax
due to the City.
An examination of Gas South, LLC's furnished system reports determined that the gas
seller claimed that an average of 86.37% of its Miami Beach gross revenues during the
audit period were exempt from Public Service Tax (see the table below).
Period GAS Charges Claimed Exempt Exempt Percentage Revenues
04/01/17 -- 09/30/17 $ 89,129.39 $ 59,951.68 67.26%
10/01/17 - 09/30/18 $ 214,927.82 $ 154,553.65 71.91%
10/01/18 - 09/30/19 $ 281,546.73 $ 208,797.20 74.16%
10/01 /19 - 09/30/20 $ 347,120.48 $ 241,294.29 69.51%
10/01/20 - 09/30/21 $ 826,563.85 $ 732,414.40 88.61%
10/01 /21 - 04/30/22 $ 1,248,189.74 $ 1,200,504.27 96.18%
Total $ 3,007,478.01 $ 2,597,515.49 86.37%
Page 2 of 6
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Gas Charges vs Claimed Exempt Revenues
$1,400,000.00
$1,200,000.00
S 1,000,000.00
$800,000.00 II $600,000.00
$ 400,000.00
$200,000.00 lu l lu $ ·- 04/01/17- 10/01/17- 10/01/18- 10/01/19- 10/01/20- 10/01/21-
09/30/17 09/30/18 09/30/19 09/30/20 09/30/21 04/30/22
GAS Charges Claimed Exempt Revenues
Gas South, LLC representatives claimed its exempted gross receipts stemmed from the
fuel adjustment charge provision addressed in Florida Statute 166.231(1)(b). Florida
Statute 166.231(1 )(b) states, "The tax [Public Service Tax] imposed by paragraph (a) shall
not be applied against any fuel adjustment charge, and such charge shall be separately
stated on each bill. The term "fuel adjustment charge" means all increases in the cost of
utility services to the ultimate consumer resulting from an increase in the cost of fuel to the
utility after October 1, 1973."
Gas South, LLC representatives explained their methodology to calculate the fuel
adjustment charge, which seemed reasonable to OIG Audit Division staff. However, the
fuel adjustment charge was not separately stated on each invoice, as required under
Florida Statute 166.231(1)(b), which could have led to disallowance of the claimed
exemption from the Public Service Tax on transactions stemming from those deficient
invoices.
The Office of the City Attorney initially opined that the claimed exemptions should be
disallowed if the fuel adjustment charge is not separately listed on the gas seller's invoices.
A 1975 Florida Attorney General Opinion supported this position in stating the following:
"Any fuel adjustment charge" is defined to mean all increases in the cost of utility services
to the ultimate consumer that result from an increase in the cost of fuel to the utility. Also,
s. 2, Ch. 74-109, supra, requires that the exempt fuel adjustment charge be separately
stated on each bill.
While OIG management was reviewing the work performed by its assigned Auditor, the
Finance Department created invoice #36897, billing Gas South, LLC $169,428.83 as a
placeholder. Interest was calculated at a 10% rate per annum pursuant to City Code
Section 102-157(b). The invoice was created at the request of the OIG to enable the City
to pursue collections from transactions deemed non-exempt and occurring during the
beginning months of the audit period within the applicable five-year statute of limitations,
based on the advice of the Office of the City Attorney.
OIG staff also identified audits conducted by the Clerk & Comptroller, Palm Beach County,
Division of Inspector General, in which significant assessments were levied against
another gas seller, not Gas South, LLC. The Palm Beach County assessments were due
to several identified deficiencies, including the disallowance of claimed exemptions related
to fuel adjustment charges not separately stated on customer invoices. The case was not
litigated as the gas seller opted to pay a reduced assessment, primarily due to several
inadvertent duplicated invoices.
Page 3 of 6
Gas Charges vs Claimed Exempt Revenues
$1,400,000.00
$1,200,000.00
S 1,000,000.00
$800,000.00 II $600,000.00
$ 400,000.00
$200,000.00 lu l lu $ ·- 04/01/17- 10/01/17- 10/01/18- 10/01/19- 10/01/20- 10/01/21-
09/30/17 09/30/18 09/30/19 09/30/20 09/30/21 04/30/22
GAS Charges Claimed Exempt Revenues
Gas South, LLC representatives claimed its exempted gross receipts stemmed from the
fuel adjustment charge provision addressed in Florida Statute 166.231(1)(b). Florida
Statute 166.231(1 )(b) states, "The tax [Public Service Tax] imposed by paragraph (a) shall
not be applied against any fuel adjustment charge, and such charge shall be separately
stated on each bill. The term "fuel adjustment charge" means all increases in the cost of
utility services to the ultimate consumer resulting from an increase in the cost of fuel to the
utility after October 1, 1973."
Gas South, LLC representatives explained their methodology to calculate the fuel
adjustment charge, which seemed reasonable to OIG Audit Division staff. However, the
fuel adjustment charge was not separately stated on each invoice, as required under
Florida Statute 166.231(1)(b), which could have led to disallowance of the claimed
exemption from the Public Service Tax on transactions stemming from those deficient
invoices.
The Office of the City Attorney initially opined that the claimed exemptions should be
disallowed if the fuel adjustment charge is not separately listed on the gas seller's invoices.
A 1975 Florida Attorney General Opinion supported this position in stating the following:
"Any fuel adjustment charge" is defined to mean all increases in the cost of utility services
to the ultimate consumer that result from an increase in the cost of fuel to the utility. Also,
s. 2, Ch. 74-109, supra, requires that the exempt fuel adjustment charge be separately
stated on each bill.
While OIG management was reviewing the work performed by its assigned Auditor, the
Finance Department created invoice #36897, billing Gas South, LLC $169,428.83 as a
placeholder. Interest was calculated at a 10% rate per annum pursuant to City Code
Section 102-157(b). The invoice was created at the request of the OIG to enable the City
to pursue collections from transactions deemed non-exempt and occurring during the
beginning months of the audit period within the applicable five-year statute of limitations,
based on the advice of the Office of the City Attorney.
OIG staff also identified audits conducted by the Clerk & Comptroller, Palm Beach County,
Division of Inspector General, in which significant assessments were levied against
another gas seller, not Gas South, LLC. The Palm Beach County assessments were due
to several identified deficiencies, including the disallowance of claimed exemptions related
to fuel adjustment charges not separately stated on customer invoices. The case was not
litigated as the gas seller opted to pay a reduced assessment, primarily due to several
inadvertent duplicated invoices.
Page 3 of 6
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After analyzing all records and information furnished by Gas South, LLC, the OIG Auditor
calculated that the City was due a total of $325,660.92 comprised of $271,857.39 in Public
Service Tax plus $53,803.53 in interest as of April 18, 2023 (see the table below).
Interest on
balance due
as of
Period Utility Tax Due 4/18/2023 Total
04/01 /1 7- 09/30/1 7 $ 5,995.04 $ 3,394.76 $ 9,389.80
10/01 /1 7-- 09/30/1 8 $ 15,455.29 $ 7,617.96 $ 23,073.25
10/01 /18 - 09/30/1 9 $ 20,879.53 $ 8,226.39 $ 29,105.92
10/01/19 -- 09/30/20 $ 24,129.36 $ 7,298.36 $ 31,427.72
10/01/20- 09/30/21 $ 73,240.63 $ 12,704.84 $ 85,945.47
10/01 /21-- 04/30/22 $ 120,665.20 $ 13,819.29 $ 134,484.50
Total $ 260,365.05 $ 53,061.60 $ 313,426.65
Additional Invoices
provided $ 11,492.34 $ 741.93 $ 12,234.26
Grand total $ 271,857.39 $ 53,803.53 $ 325,660.92
The above amounts listed for each period comprising the subtotal represent taxable Miami
Beach transactions included in the system reports initially provided to the OIG Auditor.
The figures in the "additional invoices provided" line item were identified through review
of the furnished invoices, as they were not recorded in the system reports. These taxable
transactions occurred throughout the audit period and were intentionally reported
separately above due to their different origins.
After several meetings between OIG staff and the Office of the City Attorney regarding the
possible disallowance of the fuel adjustment charge exemptions taken, a preliminary draft
audit report was finalized and sent to the attorney representing the gas seller, who was
given time in which to provide the company's legal position regarding the exemption issue.
The attorney representing Gas South, LLC, arguing against the imposition of the draft
assessment based on disallowance of the claimed exemption, provided a Florida 5"
Circuit Court decision, issued in 2000, ruled in favor of a gas seller, not Gas South, LLC,
involving another governmental agency where the company similarly did not include the
fuel adjustment surcharge on each customer invoice. The court decision allowed for the
exemption, stating, "Although we agree that stating the state fee separately would make
for an easier audit and is a justified requirement, we do not read into the state policy behind
the 'separately stated' requirement an intent to forfeit monies collected for a similar
purpose but included within the same heading on the invoice."
In response to the attorney's position and provided legal authority, the OIG and Office of
the City Attorney staff met to discuss the new information and its impact on invoice #36897
and the audit. Upon consideration of all the available information, the Office of the City
Attorney recommended that the exempted amounts related to the fuel adjustment charges
be allowed and that the assessment be eliminated from the audit. Based on this decision,
the OIG finalized the audit with no corresponding assessment levied against the gas seller.
Page 4 of 6
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Recommendation(s):
The City Finance Department should void invoice #36897 issued against Gas South, LLC
for $169,428.83 as a placeholder. The OIG recommends that Gas South, LLC should
prospectively include the fuel adjustment surcharge as a separate line item on all its
invoices issued to Miami Beach customers, to better ensure that it is compliant with the
related requirements of Florida Statute 166.231(1)(b).
Gas South, LLC Response:
Gas South accepts this finding and agrees with the OIG's recommendation that the City
Finance Department should void Invoice #36897 issued against Gas South, LLC on May
11, 2022 for $169,428.83. Gas South will continue to comply with all requirements of
Florida Statute 166.231.
City Finance Department Response:
Once the OIG audit report is finalized, the Finance Department will void invoice # 36897
for $169,428.83 generated for Gas South LLC.
2. Finding: Gas South, LLC Remitted The Public Service Tax Due For 58 Of The 60
Reviewed Months (96.67%) After The Dates Specified In City Code Section 102-
155(b) But Was Not Charged $126.28 In Accumulated Interest By The City Finance
Department.
City Code Section 102-155(b) states, "Every seller [Gas South, LLC] is hereby required to
execute and file no later than the 20" day of each month at the office of the finance
department a statement setting forth the amount of such public service tax to which the
city became entitled under the provisions of this section on account of bills paid by
purchasers during the preceding month, and contemporaneously with the filing of such
statements, shall pay the amount of public service tax to the finance department." In
addition, section 102-157(b) states, "...any seller who fails to remit or is delinquent in
remitting tax due under this article shall pay interest at the rate of ten percent per annum
or the rate specified by F.S. 687.01, whichever is higher, on the unpaid amount of tax from
the date on which the tax first became delinquent until paid."
Gas South, LLC remitted 58 of the 60 reviewed monthly Public Service Tax payments
(96.67%) to the City Finance Department after the due dates specified in City Code
Section 102-155(b ). Only the payments for October 2018 and March 2022 were received
timely, with late payments ranging from a low of two days to a high of 125 days, resulting
in accumulated interest due to the City of $126.28. Interest was charged at a rate of 10%
per annum according to City Code Section 102-157(b ).
Interest due on
Period late payments
04/01 /17 -- 09/30/17 $ 7.30
10/01 /17 - 09/30/18 $ 24.46
10/01 /18 -- 09/30/19 $ 15.14
10/01 /19- 09/30/20 $ 51.44
10/01 /20 - 09/30/21 $ 20.58
10/01 /21 - 04/30/22 $ 7.36
Total $ 126.28
Recommendation(s):
City Finance Department staff should invoice Gas South, LLC $126.28 in accumulated
Page 5 of 6
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interest related to the examined payments that were remitted after the due dates specified
in City Code Section 102-155(b). In addition, City Finance Department staff should
determine the timeliness of Gas South, LLC payments remitted after April 2022, and
prepare an invoice, if needed, to bill the gas seller interest on any late payments.
Gas South, LLC Response:
Gas South accepts this finding and will remit payment to the City in the amount of $126.28
once the audit report is finalized and the City Finance Department invoices Gas South
accordingly.
City Finance Department Response:
Once the OIG audit report is finalized, the Finance Department will invoice Gas South,
LLC for the accumulated interest related to the examined payments that were remitted
after the due dates specified in City Code Section 102-155(b). This invoicing will cover the
period from April 2017 to April 2022.
Upon examination of remissions by Gas South, LLC after April 2022, the Finance
Department has determined that three reports were submitted late. The reports for May
2022 and August 2022 were both 1 day late while the submission of the November 2022
report was 10 days late. The total interest expense for these three reporting periods is
$2.70. Once the OIG audit report is finalized, the City will invoice Gas South, LLC for
interest expense due to late reporting.
All responses received pursuant to City Code Section 2-256(h) were included in this final report.
sep M. Centorino, Inspector General ±de.±.2
,y
Date
0/3l/ «al
Date 1
eputy Chief Auditor
s/a)/22, Et.7
cc: Rickelle Williams, Interim City Manager
Jason Greene, Chief Financial Officer
Ric Dopico, City Attorney
Rob Rosenwald, Chief Deputy City Attorney
Steve Rothstein, Deputy City Attorney
Warren Rhea, Regulatory Counsel, Gas South, LLC
Marsha Croom, Manager of Tax and Payroll, Gas South, LLC
OFFICE OF THE INSPECTOR GENERAL, City of Miami Beach
1130 Washington Avenue, 6 Floor, Miami Beach, FL 33139
Tel: 305.673.7020 • Hotline: 786.897.1111
Email: CityofMiamiBeachOIG@miamibeachfl.gov
Website: www.mbinspectorgeneral.com
Page 6 of 6
interest related to the examined payments that were remitted after the due dates specified
in City Code Section 102-155(b). In addition, City Finance Department staff should
determine the timeliness of Gas South, LLC payments remitted after April 2022, and
prepare an invoice, if needed, to bill the gas seller interest on any late payments.
Gas South, LLC Response:
Gas South accepts this finding and will remit payment to the City in the amount of $126.28
once the audit report is finalized and the City Finance Department invoices Gas South
accordingly.
City Finance Department Response:
Once the OIG audit report is finalized, the Finance Department will invoice Gas South,
LLC for the accumulated interest related to the examined payments that were remitted
after the due dates specified in City Code Section 102-155(b). This invoicing will cover the
period from April 2017 to April 2022.
Upon examination of remissions by Gas South, LLC after April 2022, the Finance
Department has determined that three reports were submitted late. The reports for May
2022 and August 2022 were both 1 day late while the submission of the November 2022
report was 10 days late. The total interest expense for these three reporting periods is
$2.70. Once the OIG audit report is finalized, the City will invoice Gas South, LLC for
interest expense due to late reporting.
All responses received pursuant to City Code Section 2-256(h) were included in this final report.
sep M. Centorino, Inspector General ±de.±.2
,y
Date
0/3l/ «al
Date 1
eputy Chief Auditor
s/a)/22, Et.7
cc: Rickelle Williams, Interim City Manager
Jason Greene, Chief Financial Officer
Ric Dopico, City Attorney
Rob Rosenwald, Chief Deputy City Attorney
Steve Rothstein, Deputy City Attorney
Warren Rhea, Regulatory Counsel, Gas South, LLC
Marsha Croom, Manager of Tax and Payroll, Gas South, LLC
OFFICE OF THE INSPECTOR GENERAL, City of Miami Beach
1130 Washington Avenue, 6 Floor, Miami Beach, FL 33139
Tel: 305.673.7020 • Hotline: 786.897.1111
Email: CityofMiamiBeachOIG@miamibeachfl.gov
Website: www.mbinspectorgeneral.com
Page 6 of 6
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