OIG No. 22-24: State Beachfront Management Agreement Audit Report - Financial» 1ORG,
Joseph M. Centorino, Inspector General
TO:
FROM:
DATE:
PROJECT:
PERIOD:
State of Florida Department of Environmental Protection
Joseph Centorino, Inspector General
February 3, 2023
State Beachfront Management Agreement (#3595) Financial Audit Report
OIG No. 22-24
October 1, 2020 through September 30, 2021
This audit report is submitted in compliance with the audit reporting requirement of subparagraph
(2) of the original State Beachfront Management Agreement No. 750-0006, dated February 3,
1982, which was subsequently assigned No. 3595 by the Florida Department of Natural
Resources. Amendment number 1, signed on August 9, 2007, extended the original terms for an
additional twenty-five years until February 7, 2032.
INTRODUCTION
State Beachfront Management Agreement No. 3595 requires the City of Miami Beach to remit to
the State of Florida Department of Environmental Protection 25% "sand tax" of any and all monies
the City collects from concessionaires for the use of State property. Also, in accordance with
Florida Statutes, the City collects 7% sales tax along with the beachfront rental revenue and remits
the same to the Florida Department of Revenue.
There are currently four related categories of beachfront property users:
• Operators of concessions seaward of Lummus Park, Ocean Terrace, North Shore Open
Space Park, 21° and 46" Streets, and Pier Park who pay for the use of the beachfront
pursuant to their respective contractual agreements with the City.
• Miami Beach hoteliers, apartments, and condominium associations located on the
beachfront pay beach "upland" fees to the City annually based on its corresponding
number of units. This category also includes "non-upland" fee properties that have
negotiated an agreement with nearby upland fee properties whereby their residents can
use the beach amenities of the upland properties.
• Special Event permits are granted to members of the public who run organized, usually
one-time only, events on the beach, such as weddings and volleyball tournaments. The
payments from these special events are remitted to the City Tourism and Culture
Department.
• Special Event and Film and Print productions requiring the parking of essential vehicles
on the beach or sand areas must purchase Vehicle Beach Access passes from the City's
Tourism and Culture Department.
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The City remitted the following four sand tax payments totaling $421,896.25 to the State of Florida
based on the revenues collected during the 2020/21 fiscal year:
Check Period Check Number Check Amount
Date
01/29/2021 Oct-Dec 2020 459352 82,185.44
04/22/2021 Jan-Mar 2021 462278 29,386.59
07/15/2021 Apr-Jun 2021 464943 181,975.21
10/19/2021 Jul-Sep 2021 468390 128,349.01
TOTAL $421,896.25
OVERALL OPINION
Based upon the City of Miami Beach Office of the Inspector General (OIG) Auditor's examination
of City records, it was determined that the City inadvertently underpaid the State of Florida by a
total of $160,927.55 during the October 1, 2020 through September 30, 2021 audit period.
PURPOSE
The purpose of this audit is to determine whether the City complied with State Beachfront
Management Agreement No. 3595's terms by accurately calculating and timely remitting all sand
tax monies due to the State of Florida Department of Environmental Protection equal to 25% of
any and all monies collected from concessionaires for the use of State property.
FINDINGS
The OIG Auditor reviewed all transactions recorded in the sand tax general ledger account during
the City's 2020/21 fiscal year and all provided departmental supporting documentation. In
addition, follow-up testing was performed on all deficiencies identified during the 2019/20 fiscal
year audit to verify that the State was accurately compensated. It was determined that the State
is due a net total of $162,541.84 ($172,151.34 total underpayment in finding #1 - $9,609.50 total
overpayment in finding #2) related to the 2020/21 fiscal year. In addition, the OIG Auditor followed
up on the findings identified in the 2019/20 fiscal year audit previously issued on May 6, 2022,
which determined a net sand tax overpayment of $1,614.29 (finding #3) still outstanding. In sum,
this audit concluded that the City underpaid the State by a net total of $160,927.55 ($162,541.84
- $1,614.29) in sand tax, as shown in the findings below.
1. Sand Tax Total Underpayment Of $172,151.34 Related To The 2020/21 Fiscal Year.
a. A sand tax underpayment of $94,976.25 occurred due to an incorrect distribution
of payments among the appropriate general ledger accounts. In some instances,
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100% of the upland fee payments were distributed to the concession's beachfront
revenue account instead of 25% being applied to the sand tax account and 75%
to the appropriate revenue account.
b. A sand tax underpayment of $77,175.09 ($308,700.37 x 25%) related to Wedding,
Ceremony, and Team Building permit fees due on transactions occurring from
October 1, 2011 through September 30, 2020. Although these transactions
occurred on State-owned property, the funds were mistakenly not allocated to the
sand tax general ledger account, and the transactions were not included in the
documentation furnished annually for audit. Tourism and Culture Department
management identified the omission, reported the deficiency to the State in a letter
dated April 30, 2021, and promptly revised its internal processes to help prevent
similar mistakes from reoccurring.
2. Sand Tax Total Overpayment Of $9,609.50 Related To The 2020/21 Fiscal Year.
a. The OIG Auditor tested the annual gross receipts of beachfront concessionaire
Boucher Brothers Miami Beach, LLC, and concession payments remitted by the
company to the City during the audit period. It was determined that the City
Facilities and Fleet Management Department Asset Management Division
overbilled the customer by $25,690.00 ($180,730.86 -$155,040.86). As a result,
the Florida Department of Environmental Protection was overpaid by $6,002.34 in
sand tax ($25,690.00 - $1,680.65 state sales tax = $24,009.35 x 25%).
b. Five identified Miami Beach businesses overpaid sand tax by a total of $2,987.16,
due to incorrect upland fee invoicing through the annual business tax receipt
process.
c. The Tourism and Culture Department Special Events Division erroneously
overpaid the State for $620.00, due to the inappropriate application of sand tax
related to Paraiso Miami Beach, permit # SPE0521-0540, receipt # 327580.
3. Follow-Up Of May 6, 2022 Audit Report Findings Related To The 2019/20 Fiscal Year
Resulting In A Net Sand Tax Overpayment of $1,614.29 Due To The State.
a. Sand Tax Overpayments totaling $2,537.25
• Two events held west of the erosion control line, which is not State-owned
property, were incorrectly charged for and paid sand tax: (1) 2019 Miami
Beach Halloween Half Marathon & Freaky 4-Miler, permit # SPE0719-
0017, receipt #228755; and (2) Milonga by KCC, permit # SPE0819-0074,
receipt #233087. Although journal entries were created to correct these
errors, as of September 23, 2022 they have not been completed, resulting
in an outstanding sand tax overpayment of $304.00 to the State.
• Four upland properties: (1) Georgian Condominium (Non-Upland
Kaskades Hotel), license number: RL-03000250; (2) King Richard
Condominium, license number: RL-03000189; (3) SoHo Beach House
Hotel, license number: RL-10003800; and (4) Fontainebleau Hilton Resort,
license number: RL-05001340; were overbilled by a net total of $4,149.00.
As a result, $1,037.25 in sand tax remains overpaid to the State.
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• The upland property: (1) Beach Hotel Associates, LLC/ Delano Hotel,
license number: RL-10005920, was overbilled $4,784.00 in upland fees as
it was not operating during the 2020/21 fiscal year. As of September 23,
2022, it has not been resolved. Consequently, $1,196.00 in sand tax
remains overpaid to the State.
b. Sand Tax Underpayments Totaling $922.96
• For B.B. Deco Productions-Cisco Beach, permit# SPE0819-0056, receipt
# 224872, the amount related to sand tax was incorrectly entered as sales
tax, resulting in an underpayment to the State of $318. 75. Although Journal
Entry #11-118 was posted on September 14, 2022, no payment has yet
been submitted to the State.
• Two events were held east of the erosion control line, but no sand tax was
applied to the (1) Kringstein and Sevin Wedding Ceremony, permit #
SPE0220-0315, invoice # 25741, and (2) Elwing Wedding, permit #
SPE0919-0083, receipt# 232534, resulting in a total underpayment to the
State of $315.00.
• The OIG auditor noted the following 15 events where the City did not
correctly invoice customers, resulting in a total sand tax underpayment to
the State of $139.21.
1. SOHO House-Pre Art Basel-Tent, permit #SPE1119-0173, receipt
# 240363;
2. SOHO House-Art Basel Tent, SPE1019-0143, receipt# 240364.
3. BB_Edition-Full moon watch party, SPE1019-0162, receipt #
231382;
4. BB_British Tobacco Beach Reception, permit # SPE1019-0128,
receipt# 231383;
5. BB_IMMUNOTECIMONDOaqluixia Beach BBQ, SPE1019-0144,
receipt# 231947;
6. Black & Decker Annual Conference, SPE1219-0210, receipt #
239308;
7. BB_Tiger Risk, SPE1219-0244, receipt# 240358;
8. BB_Patron Spirits, SPE1219-0252, receipt# 240356;
9. Hakakian And Azulay Faena Beachfront Wedding, SPE1219-0203,
receipt# 240155;
10. BB_Event Consulting INTL, SPE1219-0240, receipt# 240357;
11. BB_360 Destination FOX, SPE1219-0256, receipt# 242654;
12. BB_Akoya Beach Reception, SPE0120-0283, receipt# 244699;
13. BB_VEVO Beach Reception, SPE0120-0294, receipt# 244698;
14. BB_EPIC TRAVEL EVENT, SPE0120-0287, receipt# 244701; and
15. BB_YEXT Beach Reception, SPE0120-0282.
• Sand tax was underpaid to the State during the audit period in the amount
of $150.00 for King Richard Condominium, license number: RL-03000189
No evidence of correction was provided; therefore, $150.00 remains
underpaid to the State.
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c. In sum, the above calculations result in an outstanding net sand tax overpayment
of $1,614.29 ($2,537.25 overpayment - $922.96 underpayment) to be included in
the City's next quarterly payment to the State.
espectfully submitted,
ieneral
Mark D. Coolidge:~
cc: Alina Hudak, City Manager
Kathie Brooks, Acting Chief Financial Officer
OFFICE OF THE INSPECTOR GENERAL, City of Miami Beach
1130 Washington Avenue, 6" Floor, Miami Beach, FL 33139
Tel: 305.673.7020 • Fax: 305.206.5509 • Hotline: 786.897.111I
Email: CityofMiamiBeachOIG@miamibeachfl.gov
Website: www.mbinspectorgeneral.com
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