Southern Waste System, LLCMIAMI BEACH
BUDGET AND PERFORMANCE IMPROVEMENT
Internal Audit Division INTERNAL AUDIT REPORT
To:
Via:
From:
Date:
Jorge M. Gonzalez, City Manager /]
Kathie G. Brooks, Budget and Ptarfo_;;ynjl~J8_jmprovement Director,··-'1)
James J. Sutter, Internal Auditor ;~.#0
October 6, 2008
Audit:
Period:
Southern Waste System, LLC Roll-Off Fees
June 2005 to June 2008
This report is the result of a scheduled audit of the Roll-Off Fee Returns for Southern Waste System,
LLC. (SWS)
INTRODUCTION
A roll-off is defined as a container with a minimum capacity of ten cubic yards designed to be
transported by a motorized vehicle. They are typically used for the purpose of removing construction
debris, which include rock, metal and other materials used in connection with a construction project or
for the removal of large quantities of trash and bulky waste.
Approximately thirty companies currently possess business tax receipts to operate roll-offs within the
City's boundaries. In return, they are required to abide by the terms outlined in the City Code. This
includes the remittance of franchise fees equaling 16% of Miami Beach gross receipts to the City's
Finance Department by the end of the subsequent month, filing various reports, maintaining sufficient
insurance, etc.
BACKGROUND
Previously, Internal Audit conducted an audit of SWS for period of October 2002 to May 2005. Our
audit report dated August 31, 2006 produced an audit assessment of $64,943.48. This assessment
was attributed to under reporting of roll-off revenues. On August 23, 2006 SWS paid the total amount
of the audit assessment.
OVERALL OPINION
SWS did not fully comply with the City Code's reporting provisions during the audit period. Gross
receipts were under reported and franchise fees were not paid to the City. The following items were
noted during our audit:
• Gross receipts in the amount of $67,193.35 were not repotied, therefore SWS owes the City
$12,394.25 in roll-off franchise fees (including interest charges).
• SWS has not filed a list of accounts and the required CPA annual statement of gross receipts.
VVe ore c.omrniflt:d io providing esceflen! public ~~::rvice onci 5cdeiy to of! \Vhc: fi\'8. vvorl:. and pioy in our '/if:w:m!, irc~p;c:oi, his!r.xir.: Ct.:Hnnwniiv.
Internal Audit Report
SWS Waste Removal, Inc. Roll-Off Fees
October 6, 2008
• SWS has submitted the certificate of liability insurance.
PURPOSE
The purpose of this audit is to determine whether all roll-off waste contractor billings were correct, and
whether all City revenues were correctly calculated, received timely and accurately recorded by the
City, and the contractor was in compliance with designated sections of the City Code and related
Ordinances.
FINDINGS, RECOMMENDATIONS AND MANAGEMENT RESPONSES
1. Finding -Unreported Gross Receipts
City Code Section 90-221 defines gross receipts as "the entire amount of the fees collected by
the licensee, exclusive of taxes as provided by law, whether wholly or partially collected, within
the city, for solid waste removal and disposal". Therefore, all monies collected by the waste
contractor for Miami Beach service addresses, including fuel surcharges and overloading fees,
should be included in reported gross receipts. During our audit period, SWS did not report all
gross receipts on returns filed with the City of Miami Beach. We noted gross receipts for fuel
surcharges in the amount of $39,235.42 that were not paid from June 2005 to June 2008. In
addition, gross receipts for dumpster/grapple, delivery, dry run, relocate, disposal, and over load
fees totaling $27,957.93 were not paid as well. Therefore, SWS owes the City of Miami Beach
franchise fees for those gross receipts for roll off waste removal services which were not
reported in compliance with the City Code. The contractor was not aware that these fees
should have been included in gross receipt reported.
In some instances, grapple services were charged at per unit pricing without franchise fee
being collected. We found that this charge is for grappling services and it is subject to the
franchise tax. We place those instances under the dumpster I grappling category in the table
below. Furthermore, some roll-off container charges contained a separate disposal fee rather
than combining the fee into one roll-off charge. SWS stated that this disposal fee is a fee to the
Miami transfer station or Miami landfill. This charge is included in the gross receipts definition
under the City's code ordinances. By separating these charges, SWS did not pay the entire
franchise fee on the total charge.
The following table summarizes the total unreported gross receipts by category:
Category 2005 2006 2007 2008 TOTAL Jun-Dec. Jan-Dec. Jan-Dec. Jan-Jun.
Fuel surcharges fees $9,115.90 $14,573.55 $8,932.98 $6,612.99 $39,235.42
Dumpster I grapple 0 5,936.18 3,200.00 5,670.00 14,806.18
Relocate, delivery and 2,975.00 5,225.00 2,400.00 1,525.00 12,125.00 Miscellaneous
DisQosal, overload fees 20.00 160.00 250.00 596.75 1,026.75
Total under reported $12,110.90 $25,894.73 $14,782.98 $14,404.74 $67,193.35
Page 2 of 4
Internal Audit Report
SWS Waste Removal, Inc. Roll-Off Fees
October 6, 2008
The following table summaries the audited gross receipts as compared to reported gross
receipts with the amount of franchise tax due:
2005 2006 2007 2008 TOTAL Jun-Dec. Jan-Dec. Jan-Dec. Jan-Jun.
Audited Recei12ts $257,910.90 $402,968.42 $255,177.23 $210,375.97 $1 '126 ,432.52
Less Reported (245,800.00) (377,073.69) (240,394.25) (195,971.23) (1 ,059,239.17) Receipts
Unreported Gross 12,110.90 25,894.73 14,782.98 14,404.74 67,193.35 ReceiQts
Roll-Off Fees Due 1,937.74 4,143.16 2,365.28 2,304.76 $10,750.94 (16%)
Interest Due 539.48 823.96 245.33 34.54 1,643.31
Total Franchise tax $2,477.22 $4,967.12 $2,610.61 $2,339.30 $12,394.25 Due
Recommendation
SWS should report all gross receipts as per the City code. This includes but is not limited to
fuel surcharges, delivery dry run, relocate, disposal, and over load fees. SWS should remit
$12,394.25 for taxes due for unreported gross receipts.
2. Finding -Required Reporting
SWS did not submit the following documents in accordance with the listed City Code sections
during the audit period:
a. Section 90-278 (3) states "The licensed roll-off waste contractor shall provide the city
manager and the sanitation director with a current list of the names and addresses of
each account, upon initial application and upon application for renewal of its business
license, the frequency of service, the permit number and capacity of each roll-off
container or construction dumpster as per account and the address serviced by each
roll-off container or construction dumpster." SWS has not provided the city manager and
the sanitation director with a current list of names and addresses of each account, upon
the initial application and upon application for renewal of its business tax receipt, the
frequency of service, the permit number and capacity of each roll off container or
construction dumpster. However, a list of accounts was provided during the audit.
b. Section 90-278 (4) states "The licensee shall on or before 30 days following the close
of its fiscal year deliver to the finance director and the city manager a statement of its
annual gross receipts generated from accounts within the city certified by an
independent celtified public accountant reflecting gross receipts within the city for the
preceding fiscal year". SWS did not provide a statement of its annual gross receipts
generated from accounts within the city certified by an independent public accountant
reflecting gross receipts within the city for the preceding fiscal year.
Recommendation
SWS must comply with the designated sections of the City Codes and submit the correct
amount of gross receipts, lists of accounts and certified annual statements of gross receipts.
Page 3 of 4
Internal Audit Report
SWS Waste Removal, Inc. Roll-Off Fees
October 6, 2008
EXIT CONFERENCE
Audit findings were e-mailed on 09/24/08 to Anthony Badala, Operations Manager for Southern Waste
Ltd. We received a response from SWS on 10/03/08 stating that a check has been made in the
amount of $12,394.25 and they have contacted a software programmer to include fuel surcharges and
other items in the calculation of gross receipts.
JJS:CD
Audit performed by Carmin Dufour
F:lobpii$AUD\DOC007-08\REPORTS-FINAL\ SWS WASTE REPORT.doc
cc: Robert Middaugh Jr., Assistant City Manager
Fred Beckmann, Public Works Director
Alberto Zamora, Sanitation Director
Patricia Walker, Chief Financial Officer
Anthony Badala, Southern Waste System LLC (Operations Manager)
Page 4 of 4