Florida Propane - Utility Tax 7-20-17MIAMI BEACH INTERNAL AUDIT REPORT
City of Miami Beach, 1700 Convention Center Drive, Miomi Beach, Florida 33139, www.miamibeachfl.gov
Office of Internal Audi t
Tel: 305-673-7020
TO :
FROM:
DATE:
AUDIT:
PERIOD :
Jimmy L. Mora les , City Manage~
James J. Sutter, Internal Auditor
July 20 , 20 17
Florida Propane Exchange Corp . -Utility Tax
March 1, 2014 to February 28, 2017
This report is the result of a scheduled audit of the Public Service Tax (Utility Tax) collected and
remitted to the City by Florida Propane
INTRODUCTION
Article Ill entitled "Public Service Tax" (Utility Tax) of the City Code details the terms and conditions
surrounding the charging, collecting and remitting of utility taxes on all purchases in the corporate limits
of the City of electricity, metered gas, bottled gas, and fuel oil. Furthermore , section 102-152 states
that the seller is to collect and remit ten (10) 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 (4) cents per gallon on fuel oil. Other terms listed include the requirement of remitting any
monies owed by the 20th day of each month for revenues incurred during the p rior month, submitting a
semiannual listing (June 30th and December 31st) of all deliveries for resale within Miami Beach, the
provision for interest on any late payments, etc .
Florida Propane Exchange Corp. (Florida Propane) is a family owned company that sells bottled gas
directly to many local restaurants and hotels for seasonal outdoor heating needs and resellers of
propane tanks such as gas stations, hardware stores, etc. that are subject to Miami Beach's utility
taxes. A review of the City's Financial System showed that Florida Propane reported and remitted the
amounts below for the stated periods:
2014 2015 2016 2017 Total Mar-Dec Jan-Dec Jan-Dec Jan-Feb
Taxable
Sales $4 ,079 .00 $7,983.10 $0 .00 $0 .00 $12 ,062.10
Reported
Utility Tax $407.90 $798 .31 $0 .00 $0 .00 $1,206.21 Paid
BACKGROUND
This is the first audit conducted of Florida Propane's utility tax collect ions and remittances. City Code
Sect ion 102-155 requires records of taxable sales transactions to be kept by the seller for inspection by
the City and allows for enforcement of rules and regu lations pertaining to Article Ill of the City Code .
We are committed to providing excellent public service and safety to all who live , work , and play in our vibrant , tropical, historic community
Internal Audit Report
Florida Propane Exchange Corp. -Utility Tax
July 20, 2017
OVERALL OPINION
Florida Propane has minimally complied with City Code provisions during the audit period. The
following deficiencies were noted during our audit:
• Florida Propane inaccurately reported taxable bottled gas sales and remitted payments based
on those amounts to the City for the period of March 2014 to September 2015 and neither
reported taxable bottled gas sales amounts nor remitted payment for the period of October
2015 to February 2017. This resulted in a utility taxes (plus interest) due to the City in the
amount of $83, 157.83.
• Florida Propane did not maintain appropriate accounts and records of all purchases of bottled
gas within the corporate limits of the City, as required in City Code Section 102-155(a)(1).
• Florida Propane did not submit reports of deliveries for resale, semiannually, as required in City
Code Section 102-156, to the City.
PURPOSE
The purpose of the audit was to determine if utility taxes paid by Florida Propane were calculated
accurately and remitted in a timely manner to the City during the audit period and to determine
compliance with the rules and regulations set forth in Article Ill, entitled "Public Service Tax", of the City
Code.
SCOPE
1. Review Florida Propane's records and documentation to confirm that utility taxes were
accurately calculated and collected.
2. Confirm that Florida Propane sent, to the City, the required semiannual listing (June 30th and
December 31st) of all deliveries for resale within Miami Beach in adherence with the terms listed
in City Code Section 102-156.
3. Confirm that all monthly utility tax collections were timely remitted and correctly recorded in the
City's Financial System.
FINDINGS, RECOMMENDATIONS AND MANAGEMENT RESPONSE
1. Finding -Florida Propane Inaccurately Reported Taxable Bottled Gas Sales and Remitted
Payments based on those Amounts to the City for the Period of March 2014 to September 2015
and neither Reported Taxable Bottled Gas Sales Amounts nor Remitted Payment for the Period
of October 2015 to February 2017.
City Code Section 102-152 requires Florida Propane to bill a ten (10) percent tax, exclusive of
governmental charges and taxes, on the total amount shown on such bill as due and payable
on account of the purchase of bottled gas made within the jurisdictional boundaries the City of
Page 2 of 5
Internal Audit Report
Florida Propane Exchange Corp. -Utility Tax
July 20, 2017
Miami Beach. Furthermore, City Code Section 102-155(a)(1) requires Florida Propane to
establish and maintain appropriate accounts and records of all purchases of bottled gas made
in the City of Miami Beach. The purpose of the latter requirement (City Code Section 102-
155(a)(1 )) is to ensure the adequacy of records kept for inspection and audit by authorized
officers or agents of the City in order to determine compliance with City Code Section 102-152.
Florida Propane's compliance with City Code Section 102-155(a)(1) is discussed further in
finding 2.
Internal Audit visited Florida Propane's Miami office on May 9, 2017 and reviewed a provided
detailed listing of all taxable sales made within the City between January 1, 2016 and February
28, 2017. Florida Propane stated that a detailed listing of all taxable sales made within the City
between March 1, 2014 and December31, 2015 did not exist and provided customer invoices,
for review only, to substantiate transactions that occurred during this period of time.
During this review, it was determined that Florida Propane inaccurately reported taxable bottled
gas sales and remitted payments based on those amounts to the City for the period of March
2014 to September 2015 and neither reported taxable bottled gas sales amounts nor remitted
payment for the period of October 2015 to February 2017. Additionally, this review showed that
utility taxes were charged and collected for 15 out of the 36 months, or 41.67%, of the audit
period for Miami Beach transactions.
Florida Propane maintains that a change in their accounting management personnel in early
2016 and a lack of knowledge of municipal public service tax requirements caused the
deficiencies detected by Internal Audit in reporting accurate taxable bottled gas sales amounts
and remitting payments based on those amounts. Despite the reasons cited above, Florida
Propane's non-compliance with City Code Section 102-152 resulted in $83, 157.83 in
outstanding utility tax payments and interest owed to the City.
The table below shows the actual taxable sales amount collected during the audit period,
corresponding utility tax amounts owed based on Florida Propane's provided documentation,
utility taxes paid by Florida Propane throughout the audit period, interest calculated in
accordance with City code Section 102-157(b), and the total amount due:
2014 2015 2016 2017 Total Mar-Dec Jan-Dec Jan-Dec Jan-Feb
Actual Taxable $132,508.00 $231,561.42 $283, 169.83 $101,585.00 $748,824.25 Sales
Actual Utility Tax $13,250.80 $23,156.14 $28,316.98 $10,158.50 $74,882.42 Owed
Utility Tax Paid ($407.90) ($798.31) ($0.00) ($0.00) ($1,206.21)
Utility Tax Due $12,842.90 $22,357.83 $23,316.98 $10,158.50 $73,676.21
Interest $2,886.86 $4,224.49 $2,364.40 $5.87 $9,481.62
Total Due $15,729.76 $26,582.32 $30,681.38 $10,164.37 $83,157.83
Recommendation(s)
Florida Propane must comply with City Code Section 102-152 by accurately reporting and
Page 3 of 5
Internal Audit Report
Florida Propane Exchange Corp. -Utility Tax
July 20, 2017
remitting all utility tax payments collected from City customers to the City. The City's Finance
Department should create an invoice and bill Florida Propane for the $83, 157 .83 in outstanding
utility tax payments and interest owed to the City.
2. Finding -Florida Propane did not Maintain Appropriate Accounts and Records of All Purchases
of Bottled Gas within the Corporate Limits of the City, as Required in City Code Section 102-
155(a)(1 ).
City Code Section 102-155(a)(1) entitled "Records required to be kept" requires Florida
Propane "to establish and maintain appropriate accounts and records of all purchases of
electricity, metered gas, bottled gas, and fuel oil within the corporate limits of the city, which
records shall show the price charged upon each purchase, the period of time covered thereby,
the amount of tax levied and imposed under this section, and the date of payment thereof
These records shall be kept open for inspection by the duly authorized officers or agents of the
city during business hours on all business days upon 60 days' notice, and these duly authorized
officers or agents of the city shall have the right, power and authority to make such transcripts
therefrom during such times as they may desire."
Florida Propane did provide access to records of taxable sales transactions for inspection by
the City and a report of taxable sales transactions that occurred within the City for all months in
2016, January 2017, and February 2017. However, Florida Propane did not provide a taxable
sales report for the remaining audit period of March 2014 through December 2015. Florida
Propane did provide manually prepared sales invoices for those months mentioned above;
however, the absence of annual and monthly taxable sales reports represents an internal
control deficiency where the integrity of financial and accounting information cannot be ensured.
Internal Audit identified one hundred-two (102) customer accounts, however ninety-two (92)
customer account files were provided for review and the remaining ten (10) customer account
files could not be located. We were tasked with calculating monthly sales totals, using the
manually prepared invoices from the ninety-two (92) customer account files, to identify the utility
tax amounts owed to the City. The results of this analysis identified additional taxes due and are
reflected in finding 1.
Recommendation(s)
Florida Propane must maintain appropriate and adequate records as required by City code
section 102-155(a)(1 ).
3. Finding -Florida Propane did not Submit Reports of Deliveries for Resale, Semiannually, as
required in City Code Section 102-156, to the City.
Section 102-156 states "Every manufacturer, distributor, wholesaler or seller who shall deliver
electricity, metered gas, bottled gas or fuel oil service to any seller or other person having a
place of business in the corporation limits of the city, or licensed to do business therein, to be
sold or resold to ultimate purchasers, shall report to the city finance department semiannually,
as of June 30 and December 31, the names and addresses of such sellers or other persons,
and the quantities received by each of them during the preceding six months, such reports to
be fifed not later than one month after the close of each semiannual period''.
Internal Audit requested reports of deliveries for resale from Florida Propane, however, the
reports were never created nor sent to the City's Finance Department for review during the
audit period.
Page 4 of 5
Internal Audit Report
Florida Propane Exchange Corp. -Utility Tax
July 20, 2017
Additionally, an analysis of Florida Propane Exchange Corp's Miami Beach customers, located
within the City, revealed that nine (9) customers are reselling bottled gas, with only one (1)
remitting utility tax collection payments to the City, and none possessing the required business
tax receipt category authorizing them to sell bottled gas.
The City's Code Compliance Department was subsequently notified by the Finance
Department's Customer Service Section of the business tax receipt category deficiencies and
code warnings were issued to all nine (9) customers on June 17th, June 20th, and June 251h. The
intent of the warnings was to give the resellers the opportunity to comply with the business tax
receipt requirement. As of July 5, 2017, 4 out of 9 vendors cited by Code Compliance have
taken the initial steps to add the bottled gas category to their business tax receipt. ,
Florida Propane cited a lack of familiarity with the requirements of City Code Section 102-156
as the cause for not remitting the required reports of deliveries for resale.
Recommendation(s)
Florida Propane must submit reports of deliveries for resale, semiannually, as required in City
Code Section 102-156, to the City.
EXIT CONFERENCE
Audit findings were emailed to Florida Propane on July 7, 2017. The company initially agreed with the
findings on July 10, 2017. However, on July 11, 2017, Florida Propane subsequently requested to
retroactively apply a fuel adjustment charge tax exemption to their taxable sales for the audit period in
an effort to reduce the outstanding amount owed to the City in unpaid utility taxes.
JJS:LM
Audit performed by Auditor Luis E. Medina
F:\OBPl\$AUD\INTERNAL AUDIT FILES\DOC16-17\REPORTS -FINAL\Florida Propane Exchange Corp.doc
cc: John Woodruff, Finance Director
Angel Fernandez Jr., President, Florida Propane Exchange Corp.
Carlos J. Fernandez, Controller, Florida Propane Exchange Corp.
Page 5 of 5