Choice Environmental Services, Inc.MIAMI BEACH
BUDGET AND PERFORMANCE IMPROVEMENT
Internal Audit Division INTERNAL AUDIT REPORT
To:
VIA:
From:
Jorge M. Gonzalez, City Manager ~
Kathie G. Brooks, Budget and Pre~. r ance Improvement Director ..
James J. Sutter, Internal AuditoV"#--
Date:
Audit:
Period:
June 29, 2009
Choice Environmental Services, Inc.
June 2006 to March 2009
This report is the result of a scheduled audit of the Roll-Off Fee Returns for Choice Environmental
Services, Inc. (Choice)
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 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 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%.
Choice has been operating in the City of Miami Beach since 2002. They offer a range of waste removal
services from commercial solid waste to construction and the rental of roll-off containers.
BACKGROUND
Previously, Internal Audit conducted an audit of Choice for the period of January 2002 to September
2005. Our audit report dated December 14, 2006 produced an audit assessment of $2,650.33 which
was paid on April4, 2007. This assessment was attributed to under reporting of roll-off revenues due.
OVERALL OPINION
Choice has not fully complied with certain provisions of the City Code's during the audit. Some gross
receipts were not reported and the franchise fees were not paid to the City. The following items were
noted during audit:
• Gross receipts in the amount of $191,774.32 were not reported resulting in $34,325.31 in
franchise fees and interest due to the City. This was attributed to taxes collected on recycled
materials for one account in the City of Miami Beach. Hence, while collecting the taxes, Choice
failed to remit the franchise fee to the City.
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Internal Audit Report
Choice Environmental Services, Inc.
June 29, 2009
• Choice has not filed a list of accounts upon renewal and the required CPA statement of gross
receipts. A listing of accounts was provided during the audit.
• Choice has submitted the certificate of liability insurance.
• Choice has not submitted a business tax receipt for Recycling waste materials.
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 Roll-off
waste contractor from Miami Beach service addresses, should be included in reported gross
receipts.
Out of $1 ,413,439.11 audited gross receipts, Choice paid the City of Miami Beach $200,800.07
in franchise fees for $1,221,664.79 in reported gross receipts. During 2008, Choice collected
an additional $191,77 4.32 in gross receipts for services within the city limits and did not report
these amounts in compliance with the City Code. This was attributed to taxes collected on
recycled materials for one account in the City of Miami Beach. Hence, while collecting the
taxes, Choice failed to remit the franchise fee to the City. Choice has changed their procedures
to prevent this type of error.
The following table summarizes the amount due from Choice for our audit period:
2006 2007 2008 2009 TOTAL
(Junto Dec) (Jan to Mar)
Audited Gross $10,854.01 $228,078.04 $1,055,711.16 $118,795.90 $1,413,439.11 Receipts
Less Report 10,854.01 228,078.04 863,936.84 118,795.90 1,221,664.79 Gross Receipt
Unreported 0.00 0.00 191,774.32 0.00 191,774.32 Revenues
Roll-off fees 0.00 0.00 32,612.68 0.00 32,612.68 due
Interest 0.00 0.00 1,212.63 0.00 1,212.63
Late fees 0.00 0.00 500.00 0.00 500.00
Total Due $0.00 $0.00 $34,325.31 0.00 $34,325.31
Page 2 of 4
Internal Audit Report
Choice Environmental Services, Inc.
June 29, 2009
Recommendation(s)
Choice should remit the amount of $34,325.31 to the City. We recommend that the company
continue to monitor the effectiveness of their procedural change to ensure the proper gross
receipts amounts are remitted to the City.
2. Finding -Required Reporting
Choice 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." Choice 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.
b. Section 90-278 (4) states "The licensee shall on or before 30 days following the close ofits
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 certified
public accountant reflecting gross receipts within the city for the preceding fiscal year".
Choice did not provide a statement of its annual gross receipts generated from accounts
within the city certified by an independent public accountant during the audit period.
c. City Code Section 90 -1961ists the insurance coverage that must be maintained by Roll-off
waste contractors. Choice provided proof of the required insurance during the audit.
d. City Code Section 90-192 states that a business tax receipts for private recycling waste
contractors is required for recycling services. Choice did not have the required business tax
receipt for the audit period.
Recommendation(s)
Effective October 1, 2008 the ordinance requires that contractors having annual gross receipts
reported to the City over $200,000 shall, on or before 60 days following the close of their fiscal
year, deliver to the Finance Department a statement of annual gross receipts generated from
accounts within the city certified by an independent certified public accountant reflecting gross
receipts within the city for the preceding fiscal year. Choice must comply with the designated
sections of the City Codes by submitting a list of accounts annually and submit certified
statement of gross receipts providing their annual returns exceed the required amount. In
addition, Choice will have to add "Recycling" to their existing business tax receipt which
requires filling out an application fee of $545.00. The City's Finance Department is currently
assessing any back recycle business tax receipt owed by Choice.
Page 3 of 4
Internal Audit Report
Choice Environmental Services, Inc.
June 29, 2009
EXIT CONFERENCE
On June 15, 2009 we met with Choice Environment regarding the audit findings. They stated that in
lieu of remitting the franchise fees to the City, they will credit the customer that was charged in error
and provide the City with proper documentation of proof payment. In addition, Choice stated that they
will pay the City the application fee and any interest and penalty for operating without a recycle
business tax receipt.
The Finance Department will issue City bills for the above items pending final resolution.
JJS: CD
Audit performed by Carmin Dufour
F:\obpi\$AUD\DOC08-09\REPORTS-\CHOICE ENVIRONMENTAL. AUDIT FINAL REPORT.doc
cc: Fred Beckmann., Public Works Director
Alberto Zamora, Sanitation Director
Patricia Walker, Chief Financial Officer
Natasha Rojas, Choice Services, Inc. (Assistant Controller)
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