140-2000 LTC
CITY OF MIAMI BEACH
CITY HALL 1700 CONVENTION CENTER DRIVE MIAMI BEACH, FLORIDA 33139
http:\\ci.miami-beach.f1.us
L.T.C. No. 140-2000
LETTER TO COMMISSION
July 25, 2000
SUBJECT:
Mayor Neisen O. Kasdin and
Members of the City Commission
LawrencyeA. LeV)\ ~~
City Mana r .
,
\
REVIEW OF ONYX'S REQUEST FOR ADDITIONAL COMPENSATION
TO:
FROM:
Attached for your information is the review of Onyx' s request for additional compensation prepared
by James Sutter, Internal Auditor.
If you need additional information, please don't hesitate to either contact me or Assistant City
Manager Mayra Diaz Buttacavoli.
LAL:MDB:lcd . ~/'I4..
Attachment ~.
c: Mayra Diu Buttacavoli
Matthew D. Schwartz
ChrislinaM.Cuel'Vo
Ronnie Singer
JamcsSutter
F:\CMGR\SALL\LTC.OO\ONYXADD,COM
DATE:
July 24, 2000
CITY OF MIAMI BEACH
INTERNAL AUDIT MEMORANDUM
FROM:
Lawrence A. Levy, City Manager
Mayra Diaz Buttacavoli, Assistant City Manager~Kfl. ~
James J. Sutter, Internal Auditor -$/
REVIEW OF ONYX'S REQUEST P, 7~/TIONAL COMPENSATION
TO:
VIA:
SUBJECT:
PERIOD:
July 1, 1999 to May 31,2000
As per your office's request, we reviewed expenses relating to Onyx's request for an additional $216,646*
for continuing to operate the stash site under changed operating terms.
BACKGROUND
Stash Site
Onyx was chosen to operate the City's stash site, located at the Bayshore Golf Course just north of the
intersection of 28th Street and Meridian, as of February 16, 1999. The agreement terminates on October
18,2000, and the City has decided to forego extending the agreement and is currently accepting bids from
other potential operators.
The stash site has, in the past, been operated as a temporary transfer station where the City, residents,
landscapers and other private contractors could take bulk items, white goods, acceptable household
generated construction debris, and yard waste. Fees charged varied, depending on the type of debris and
the entity dropping off the items. For example, residents were able to drop off moderate amounts at no
charge, but everyone else had to pay, with rates ranging from a low of$8.35 to a high of$15 per cubic yard,
all remitted to the operator of the site.
The Department of Environmental Resources Management (DERM) issued violations on January 07, 2000
because the City had not obtained a Resource Recovery and Management Facility Permit and for the
improper disposal of solid waste at the stash site. Therefore, roll off containers were installed at the site and
are being utilized to prevent trash from being dumped on the ground. However, since large trucks are
unable to dump into these roll off containers, they are forced to go directly to the Miami Dade Resources
and Recovery Center, among other places, to dispose of their loads.
· The amount in Onyx's schedule, a total of$216,648, was found to be incorrect by $2, hence the amount of $216,646
in our report.
Page 1 of 4 Pages
INTERNAL AUDIT MEMORANDUM
REVIEW OF ONYX'S REQUEST FOR
ADDITIONAL COMPENSA TlON
JUL Y 24, 2000
The DERM violations resulted in Onyx incurring additional expenses with a corresponding decrease in
revenues. Onyx illustrated this scenario through a schedule listing their income and operating expenses from
July 1999 through May 2000. The schedule revealed that Onyx had a monthly average income before taxes
of $7,782 for the months of 07/99 - 09/99, which was prior to Hurricane Irene and the DERM violations.
Onyx believes that they should continue to realize income before taxes of $7,782 as they should not be
affected by the DERM violations. Therefore, Onyx sent the City a formal invoice on June 15, 2000
requesting $216,646 to compensate them for monies lost during the months of January 2000 through May
2000.
Bulk Pick UDS
Onyx's responsibility under the residential collection services agreement to provide the City with six bulk
pickups per year at no charge to the property owner was also affected by the DERM violations. The cost
for these bulk pick ups is included in the $11.61 (single family residences) and $10.44 (per unit for multi-
unit properties) that Onyx is paid monthly for garbage services provided to residential properties. These
terms were amended to a maximum of four scheduled bulk pickups at no charge, with no reduction in the
monies paid to Onyx.
Since Onyx was having difficulty in performing the scheduled bulk pick ups in a timely manner, they
requested assistance from the City's Sanitation Department, which began picking up bulk items and
transporting them to the Miami Dade Resources and Recovery Center disposal site in the early months of
this year. Sanitation would usually receive a list faxed daily by Onyx which listed bulk items to be picked
up by the City. They began keeping the Daily Bulk Log on March 13, 2000 detailing the date, address and
amount of cubic yards picked up by the City in order to verifY the accuracy of the billings from Dade County
that have been generated by the newly instituted City bulk drop offs.
PURPOSE
The purpose of this review was threefold:
..[ To substantiate the expenses claimed by Onyx by verifYing them to the originating
documents as well as the corporate books.
..[ To separate out all expenses related to Onyx's pick up and disposal of bulk items since these
are supposed to be processed by Onyx at no cost to the City, in accordance with the
residential collection services agreement with the City.
..[ To prepare an estimate of the City's expenses incurred in collecting and disposing of bulk
items for the period March 13,2000 through May 31, 2000.
Page 2 of 4 Pages
INTERNAL AUDIT MEMORANDUM
REVIEW OF ONYX'S REQUEST FOR
ADDITIONAL COMPENSA TlON
JUL Y 24, 2000
RESULTS OF OUR REVIEW
.{ Examination of sup..porting documentation/disallowance of expenses related to bulk pick I1P and
diflPosal
Internal Audit reviewed Onyx's records supporting the line items listed in the condensed income
statement provided in their letter of June 15, 2000. The following schedule summarizes our analysis
of Onyx's documentation:
REPORTED BY AUDIT AUDITED
LINE ITEMS ONYX ADJUSTMENTS AMOUNTS
REVENUES $53,622 (a) $3,970 $57,592
OPERATING EXPENSES:
P A YROLL/BENEFITS $59,859 (b) ($6,154) $53,705
DISPOSAL COST $145,605 (c) ($72,964) $72,641
FUEL $2,357 ($507) $1,850
PHONE $2,315 ($387) $1,928
VEHICLE MAINTENANCE $8,933 ($745) $8,188
OTHER MAINTENANCE $6,634 ($305) $6,329
DEPRECIATION $5,655 $0 $5,655
TOTAL EXPENSES $231,358 $81,062 $150,296
LOSS BEFORE TAXES ($177,736) $85,032 ($92,704)
PRIOR MONTHLY INCOME (d) $38,910 $0 $38,910
TOTAL INVOICE AMOUNT $216,646 $85,032 $131,614
(a) The additional revenue is dne to an apparent under reported amount for April 2000.
(b) The difference in payroll expense is due to the overstatement of FICA expense for February 2000 as well as
the incorrect inclusion of an accrual amount in the total for May 2000.
(c) The audited amount represents rental expense for 100 cubic yard trucks - Bulk Express Transport ($70,811),
and the roll offs at the stash site ($1,830) for a total of $72,641; costs for several prior period items - Bulk
Express Transport ($24,223), bulk pick up disposal costs (approximately $27,386), and rental ofa truck for
bulk pick ups - Inter City Disposal Corp., ($21,355), for a total of $72,964, have been questioned.
Page 3 of 4 Pages
INTERNAL AUDIT MEMORANDUM
REVIEW OF ONYX'S REQUEST FOR
ADDITIONAL COMPENSA TlON
JUL Y 24, 2000
(d) Prior monthly income equals Onyx's average monthly profit for the months of July 1999 -September 1999,
of $7,782, multiplied by five, for the period ofJanuary I, 2000 through May 31, 2000.
In conclusion, a total of$85,032 of the $216,646 claimed by Onyx was found to be questionable,
due to apparently overstated expenses, understated revenues, and the improper inclusion of bulk item
expenses.
,f Expense incurred by the City in collecting and dis,posing of bulk pick up items. March 13. 2000
through May 31. 2000
The total expense incurred was estimated based upon the City's Daily Bulk Log. Included were
labor costs and disposal costs; equipment costs were not available, and so were not taken into
account.
Disposal Charges
Labor Costs
Equipment Costs (Not available)
Total Costs
$39,107
8,016
o
$47.123
It is contended tltat all costs associated witlt bulk pickups should be borne by Onyx and not tlte City.
CONCLUSION
In sum, it was found that a total of $85,032 of the compensation makeup claimed by Onyx appears
questionable; tltis, and tlte fact tltat the stash site agreement does not specifically require the City to
reimburse Onyx for any operating losses, leads us to recommend tltat the invoiced amount be subject to
negotiation if any payment is to be made.
In addition, it is recommended that tlte City consider working to obtain recovery of the estimated $47,123
in bulk processing costs from Onyx since contractually, all costs associated witlt bulk pick ups should be
borne by Onyx.
JJS:mc (audit performed by Mark Coolidge)
F:\BUDG\$AUD\DOC99-00\REPOR1\ONYXSTAS.REP
cc: Matthew Schwartz, Assistant City Manager
Robert Thomas, Director, Sanitation Department
Patricia Walker, Director, Finance Department
Bruce Henderson, Environmental Specialist, Public Works Department
Page 4 of 4 Pages