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Southeastern Recycling CorpH BUDGET AND PERFORMANCE IMPROVEMENT Internal Audit Division INTERNAL AUDIT REPORT To: VIA: From: Date: Jorge M. Gonzalez, City Manager . q_, Kathie G. Brooks, Budget and P~·rform nee Improvement Directorf/1/ James J. Sutter, Internal Auditor nr May 13, 2011 , Audit: Period: Southeastern Recycling Corp. February 2008 to February 2011 This report is the result of a scheduled audit of the Roll-Off Fee Returns for Southeastern Recycling, Corp. (Southeastern Recycling) 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 receipt demonstrating that they operate roll-offs within the City's boundaries. They are required to abide by the terms outlined in the City Code. This includes the remittance of franchise fees calculated by using the applicable percentage of Miami Beach gross receipts. Reports are to be submitted to the City's Finance Department by the end of the subsequent month. Effective October 2008 the Roll-off franchise fee was increased from 16% to18%. Southeastern has been operating in the City of Miami Beach since December 2006. Their majority line of business is recycling. In addition, Southeastern Recycling provides roll-off waste service as a supplemental line of business. BACKGROUND Previously, on July 2, 2008 an audit was performed at Southeastern's establishment. A review of the company's invoices showed that franchise fees were charged and collected throughout the audit period. Southeastern's records showed that franchise fees were remitted timely to the City of Miami Beach. There was no audit assessment. OVERALL OPINION Southeastern has not fully complied with the City Codes as it relates to reporting requirements for roll-off contractors. The following items were noted during our audit: • Gross receipts in the amount of $5,737.77 were not reported resulting in the owing of $1,881.63 in roll-off franchise fees and interest to the City. Hence, Southeastern Recycling paid the audit assessment during the audit. We ore committed to providing excellent public se!Vice and safety Ia all who live, worl<, ond play in our vibronl, tropicol, historic community. Internal Audit Report Southeastern Recycling Corp. May 13, 2011 .. Southeastern Recycling has not filed a list of accounts, however a listing of customer names was provided during the audit. 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. SCOPE 1. Review waste contractor's books and records to confirm that their billings were correct; their gross receipts were correctly calculated and support the monthly franchise fee submitted to the City. 2. Confirm that the private waste contractor timely sent the City the required reports in adherence with the terms listed in the City Code. 3. Confirm that the private waste contractor is timely sending the required Monthly Report of Gross Receipts along with their remittance to the City. 4. Confirm that the private waste contractor timely obtained their required annual business tax receipt. 5. Confirm that the private waste contractor timely submitted their annual Certified Public Accountant (CPA) Statements of Gross Receipts to the City (If applicable). 6. Confirm that the private waste contractor has obtained the required insurance in adherence with Section 90-196 of the City Code. 7. Confirm that all monthly Roll-off Fee Return and were timely and correctly recorded in the City's Financial System. FINDINGS, RECOMMENDATIONS AND MANAGEMENT RESPONSE 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 roll-off waste contractor from Miami Beach service addresses, including dump fees, fuel surcharges, dry run, overload, extra month fees, relocation and waiting time charges should be included in reported gross receipts. Out of 37 months audited gross receipts, Southeastern Recycling paid the City of Miami Beach $567.00 in franchise fees for $3,150.00 in reported gross receipts. Southeastern Recycling collected an additional $5,737.77 in gross receipts but did not report these amounts in compliance with the City Code. Page 2 of 4 Internal Audit Report Southeastern Recycling Corp. May 13, 2011 The following table summarizes audited gross receipts and the amount due from Southeastern Recycling for our audit period: 2008 2009 2010 2011 Feb-Dec Jan-Dec Jan-Dec Jan-Feb Audited I Reported $832.77 $3,290.00 $4,765.00 0.00 Gross Receipts Reported Gross 0.00 0.00 3,150.00 0.00 Receipts Unreported 832.77 3,290.00 1,615.00 0.00 Revenues Roll-off fees due 149.90 592.20 290.70 0.00 Interest 34.66 95.72 68.45 0.00 Late filing 100.00 350.00 200.00 0.00 Total Due $284.56 $1,037.92 $559.15 $0.00 Footnotes: On October 2008 as required pursuant to section 90-278 of the City Code, the franchise fee paid to the city by its franchise roll-offs contractors was raised from 16% of the franchisee's total monthly gross receipts to 18% of said gross receipts. TOTAL $8,887.77 3,150.00 5,737.77 1,032.80 198.83 650.00 $1,881.63 Upon notification of our audit finding, Southeastern Recycling paid $1,881.63 for the unreported gross receipts during the audit. 2. Finding -Required Reporting Southeastern Recycling 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." Southeastern Recycling 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 license, the frequency of service, the permit number and capacity of each roll- off container. However, a listing of customer names was provided during the audit. Recommendation (s) Southeastern Recycling must comply with the designated sections of the City Codes and submit timely lists of accounts. EXIT CONFERENCE Audit findings were e-mailed on May 5, 2011 to Southeastern Recycling. Upon notification of our audit findings, Southeastern Recycling paid $1,881.63 for the unreported gross receipts during the audit. Page 3 of 4 Internal Audit Report Southeastern Recycling Corp. May 13, 2011 JJS: CD Audit performed by Carmin Dufour F:\obpi\$AUD\DOC010-11\REPORTS-\SOUTHEASTERN RECYCLING CORP. FINAL REPORT.doc cc: Duncan Ballantyne, Assistant City Manager Fred Beckmann, Public Works Director Alberto Zamora, Sanitation Director Patricia Walker, Chief Financial Officer John Szkolnik, Southeastern Recycling Corp. (CEO) Page 4 of 4