OIG No. 20-04: Report of Miami Beach Tennis Management, LLC Management Agreement, Preliminary ObservationsJoseph M. Centorino, Inspector General
TO:
FROM:
DATE:
PROJECT:
John Rebar, Parks and Recreati~~ent Director
Joseph Centorino, Inspector Gen ~
January 13, 2020
Miami Beach Tennis Management, LLC Management Agreement (Flamingo Park
Tennis Center) Preliminary Observations
OIG Audit No. 20-04
This report lists our preliminary observations in determining Miami Beach Tennis Management,
LLC's compliance with selected provisions in their management agreement to provide
professional tennis management and operations services at the City's Flamingo Park Tennis
Center during the designated audit period. Although an audit was started, it has not been
completed. In the interim, the Parks and Recreation Department has requested a listing of our
preliminary observations as the contractor's agreement is being considered for termination. Our
analysis has not been finished, and if continued, additional deficiencies might have been identified
that are not stated in this report. Lastly, the preliminary observations reported below have not
been presented to the contractor for his rebuttal and our consideration in arriving at a final
conclusion or recommendation, which is not presented in this report.
PRELIMINARY OBSERVATIONS
1. BUSINESS TAX RECEIPTS WERE NOT OBTAINED SINCE THE INCEPTION OF THE
MANAGEMENT AGREEMENT IN 2014 BY THE CONTRACTOR
Section 3.6 of the management agreement states "Contractor shall obtain, at its sole cost
and expense, any and all business tax receipts required by law for the proposed uses
contemplated in this Agreement.
Without limiting the generality of the foregoing, securing the requisite business tax
receipts, in addition to completing the Background Check Process in accordance with
Subsection 3. 6 hereof, shall be required and obtained for each individual professional
tennis instructor providing lessons and/or clinics at the Centers."
The contractor has operated the Flamingo Park Tennis Center continuously since June 1,
2014 and the North Shore Tennis Center from June 1, 2014 through July 2017. However,
review of the City's EnerGov System (the City's licensing and permitting system) found
that valid business tax receipts have not been issued to the contractor during their
operation of either tennis center, which was subsequently confirmed with the Finance
Department's Licensing Section via email.
Page 1 of 3
Final Audit Report
Miami Beach Tennis Management, LLC Management Agreement (Flamingo Park Tennis
Center) Preliminary Observations
Jan uary 13, 2020
Furthermore, six (6) of the 14 known tennis professionals ( 42.86%) did not appear to
obtain their business tax receipts from the City for the 2019/20 fiscal year as of November
27, 2019. The current annual fee for tennis instructors is $245 thereby possibly resulting
in $1,470 in lost fees (excluding late charges) for this fiscal year alone.
2. MONTHLY PAYMENTS WERE REMITTED AFTER THE DUE DA TE
Section 4.2.1 of the management agreement states "....the City shall, without limitation,
withdraw or be paid from the established bank account, on the last work day of each month
during the Term of this Agreement...". Office of the Inspector General (OIG) staff's
corresponding review of the contractor's payments recorded in the City's Financial System
found that the contractor issued four ( 4) checks to the City for invoice numbers 14675,
16000, 21709 and 22334 that were returned by the bank due to insufficient funds (NSF).
Two (2) of these NSF checks were issued during the 2018 calendar year and the
remaining two (2) during 2019. The return of the checks for insufficient funds resulted in
pa y m e n ts be in g re ce iv e d by th e C ity afte r the due date for such payments.
3. SECTION 4.2.1 OF THE MANAGEMENT AGREEMENT CONCERNING THE SHARING
AND CONTROL OF BANK ACCOUNTS IS NOT BEING ENFORCED
S ection 4.2.1 of the management agreement states "All said revenues collected by the
CONTRACTOR shall be deposited into an account of the City and CONTRACTOR,
established pursuant to this Agreement, and to be maintained solely for the sole and
exclusive purpose(s) of the management, operation and maintenance of the Centers,
pursuant to this Agreement (including, without limitation, to pay for all budgeted
operational expenses arising from the management or operation of the Centers pursuant
to this Agreement). Interest accrued in the account shall be part of the operating income."
U p o n re q u e st, th e co n tra cto r's ba n k state m e nts fo r a n ac count ending in "95" were
pro v id e d fo r O ctob e r 2 0 18 thro u gh S e p te m b e r 20 19 . P e r inquiries, this JPMorgan Chase
ba n k a c co u nt is o n ly ow n e d by M ia m i B e a c h T e n n is M a n a g e m e n t, LLC and not by the
C ity . S ta te m e n ts a re m a ile d d ire c tly to th e co n ce ss io n a ire , w h ic h he fo rw a rd s m o n th ly to
th e C ity 's P a rks a n d R e cre a tio n D e p a rt m e n t.
It w a s de te rm in e d th a t th e da ily re v e n u e s a p p e a r to ha v e be e n de p o site d in to th is
JP M o rg a n C h a se ba n k a cco u n t in a d h e re n c e w ith S e ctio n 4 .2 .1. A fte rw a rd s , th e
co n tra cto r tra n sfe rre d re v e n u e s to a n o the r ba n k a c c o u n t to w h ic h th e P a rks a n d
R e c re a tio n D e p a rt m e n t d id no t ha v e a cce ss to a n d fo r w h ic h th e y d id no t re c e iv e ba n k
sta te m e n ts .
T h e m o n ie s in th is se co n d ac co u n t e n d in g in "16" w er e the n a p p a re n tly use d to pa y fo r
th e F la m in g o P a rk T e n n is C e n te r's expenses. A tennis professional who works at both
the Flamingo Park Tennis Center and another center operated by the contractor in Miami
Shores, provided copies of checks issued from this second account that she said were
payment for clinics worked at both tennis centers. If verified, it could mean that the
contractor is commingling monies from both cities' tennis centers, which is not in
ac co rd a n c e w ith S e ctio n 4 .2 .1.
Page 2 of 3
F in a l A u d it R e p o rt
M ia m i B e a c h T e n n is M a n a g e m e n t, L L C M a n a g e m e n t A g re e m e n t (F la m in g o P a rk T e n n is
C e n te r) P re lim in a ry O b s e rv a tio n s
Jan u a ry 13, 2 0 2 0
4. SEVERAL ALLEGATIONS OF WAGES EARNED BY TENNIS PROFESSIONALS THAT
WERE NOT TIMELY PAID WERE RECEIVED BY AUDITORS
In conversations with the contractor's principal, it was learned that tennis professionals
are paid twice a month, on the fifteenth and then again on the thirtieth, for services
rendered previously. Therefore, any lessons or clinics taught by tennis professionals
between the first and the fifteenth of the month were paid in the next pay period or on the
thirtieth of the month.
Several anonymous complaints were received by the City whereby tennis professionals
claimed late payment of wages and/or receipt of wage payments that were returned by
the bank due to insufficient funds. In addition, one (1) tennis professional met with OIG
staff and made similar accusations, among other claims against the contractor.
Furthermore, the tennis professional provided check #3784 dated August 22, 2019 for
$535 at this meeting, which was returned by the bank for insufficient funds.
5. RATES CHARGED FOR TENNIS LESSONS WERE NOT ALWAYS IN ACCORDANCE
WITH THE MANAGEMENT AGREEMENT'S TERMS
Section 10.3 of the management agreement states ...Initial fees for programs, clinics and
lessons are set forth in Exhibit "K" (to be provided by CONTRACTOR) attached hereto."
Furthermore, Section 10.4 states "The City shall approve in writing, in advance, any
increase in fees from those currently set forth in Exhibit "K"; provided the CONTRACTOR
shall have the right to increase fees in an amount equal to the amount of any sales and
use tax increase enacted after the effective date of such exhibit or schedule without City's
consent."
OIG staff reviewed the rates charged for all 5,864 lessons given at the Flamingo Park
Tennis Center between January 1, 2019 and November 12, 2019. It was found that 1,145
did not appear to equal any of the rates listed in Exhibit K. More specifically, 358
individuals received lessons at no charge and on e (1) individual was charged more than
the highest allowed rate of $180 ($200 per hour). No documentation was provided
showing that the City approved any of these rate differences in advance in adherence with
Section 10.3.
F:\OBPl\$01G\INTERNAL AUDIT FILES\DOC19-20\REPORTS - FINAL\MIAMI BEACH TENNIS MANAGEMENT, LLC
AGREEMENT PRELIMINARY OBSERVATIONS 01-13-20.d0cx
cc: Honorable Mayor and Members of the City Commission
Jimmy L. Morales, City Manager
John Rebar, Parks and Recreation Department Director
Cynthia Casanova, Assistant Director Parks and Recreation Department
O FFIC E O F TH E IN S P EC TO R G EN ERA L, C ity of M iam i Beach
1130 W a sh ing ton A ven ue, 6 Floor, Mi ami Bea ch , FL 33139
Tel: 305.673.7020 • Fax: 305.587.2401 • Hotline: 786.897.1111
Em ai l: C ily of Mi am i B ea chOI G @ m iam ib ea chfl.gov
W eb site: www .m b insp ect o rge ne ra l.com
Page 3 of 3