Davis Sanitation, Inc.MIAMI BEACH
BUDGET AND PERFORMANCE IMPROVEMENT
Internal Audit Division INTERNAL AUDIT REPORT
TO:
VIA:
FROM:
DATE:
AUDIT:
PERIOD:
Jorge M. Gonzalez, City Manager 1 Q.......
Kathie G. Brooks, Budget an~ Performance Improvement Director ~""'
James J. Sutter, Internal Auditor~
June 29, 2009 /-~
Davis Sanitation, Inc. (Non-Exclusive Franchise Waste Contractor)
January 2006 to August 2008
This report is the result of a regularly scheduled audit of the Franchise Service Agreement with
Davis Sanitation, Inc. (Davis Sanitation).
INTRODUCTION
Chapter 90, Article IV Solid Waste of the City Code provides for the City to have Non-Exclusive
Franchise Waste Contractor Agreements and Service Agreements with five waste contractors.
These contractors provide waste collection and recycling services for Commercial and Residential
for multi-family residences with eight (8) or more units in the City of Miami Beach. According to the
Non-Exclusive Franchisee Waste Contractor Agreement, the waste contractor is granted the
franchise and is required to undertake and perform each and every obligation set forth in this
Agreement. The "Service Agreement" covers the provision of additional solid waste collection and
disposal and recycling services at certain City owned facilities and properties. The Service
Agreement is intended to have a term that will run concurrent with the terms of the Non-Exclusive
Franchise Waste Contractor Agreement.
The City Commission under resolution 2003-25385 renewed Davis Sanitation and the other waste
contractor's franchise service agreement on October 15, 2003 for an additional five-year term
expiring September 30, 2008. Subsequently the City Commission adopted Resolution (#2008-
26923) authorizing the further renewal of the City's existing four franchise waste contractors
including Davis Sanitation) for the collection and disposal of solid waste, to also included recycling
services. The waste contractors' renewal was for three years, commencing retroactively on October
1, 2008 and ending on September 30, 2011.
For the past several years, the City had franchise waste contractor and service agreements with four
waste contractors to provide commercial service within its boundaries. On May 25, 2009 the City
Commision by resolution 2009-27020 approved a new waste contractor to be the fifth hauler.
Section 90-221 City Code 1964, 14A-16 (a) requires each franchise waste contractor to pay the City
a franchise fee consisting of a percentage of the licensee's total monthly gross receipts established
by resolution of the City Commission. Effective October 1, 2007 as required pursuant to section 90-
278 of the City Code, the franchise fee paid to the city by its franchise waste contractors was raised
from 16% of the franchisee's total monthly gross receipts for waste removal in the city, to 18% of
said gross receipts. However, the Public Right-of-way franchise fees remained the same (2%).
Davis Sanitation does not provide roll-off services.
For the past three calendar years, Davis Sanitation reported to the City of Miami Beach
$3,508,448.17 in gross receipts. The franchise fee Davis Sanitation remitted amounted to
$593,688.48 and Public-Right-of-way totaled $70,168.96 for the services performed within the city
I'Ve are commii/C:dto providing excellent public se1vice one/ sofet7• to oil who live, work. ond plov in our vibrcmt, tropicol, historic community.
Internal Audit Report
Davis Sanitation, Inc. (Non-Exclusive Franchise Waste Contractor)
June 29, 2009
limits in compliance with the City Code. The following table summarizes the total amount of gross
receipts reported and related fees paid:
2006 2007 2008 * TOTAL
Audited Gross Receipts $1 ,026,099.07 $1 '183,808.56 $1 ,298,540.54 $3,508,448.17
16%Franchise fee paid $164,175.85 $195,775.33 $233,737.30 $593,688.48
2%Public Right-of-Way $20,521.98 $23,676.17 $25,970.81 $70,168.96
*Footnote: Amounts reported for 2008 above represent the ent1re calendar year. Audited amounts per
the audit period were $3,088,210.75 in gross receipts, representing $518,045.74 in Waste
Franchise fees and $61,764.21 in Public Right-of-way fees.
On June 3, 2009, the City Commission by resolution 2009-27084 approved the assignment of
Choice Environmental Services, Inc. to replace Davis Sanitation, as a Non-Exclusive Franchise
Waste Contractor due to Choice Environmental Services' recent purchase of Davis Sanitation.
OVERALL OPINION
Davis Sanitation remitted the correct amount of franchise and public right-of-way fees based on the
records provided in adherence to the City Code. The waste contractor properly and timely obtained
an annual business tax receipt, submitted the required certificate of liability insurance and provided
the In-Kind Services to the City. In addition, the contractor's franchise returns were timely filed and
correctly recorded in the City's Financial System. However, the following items were noted during
our audit and are in need of improvement:
• Davis Sanitation did not comply with City Code sections requ1nng monthly report of
recyclable materials, annual list of accounts and CPA annual statement of gross receipts.
• Davis Sanitation did not comply with the following sections of the Terms of Service
Agreement by not providing the City with collection route schedule, notifying the City about
complaint procedures, rates and regulations and documenting complaint procedures.
PURPOSE
The purpose of this audit is to determine whether the franchise waste contractor reported all gross
receipts to the City, 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 the private 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
and public right-of-way payments submitted to the City.
2. Confirm that the private waste contractor timely sent the City the required reports in
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Internal Audit Report
Davis Sanitation, Inc. (Non-Exclusive Franchise Waste Contractor)
June 29, 2009
adherence with the terms listed in the Service Agreement.
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 and paid their required annual City
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, and that amounts reported
therein agree with corresponding totals reported on the waste contractor's Monthly Reports
of Gross Receipts.
6. Confirm that the private waste contractor has obtained the required insurance in adherence
with Section 90-223 of the City Code and the signed service agreement.
7. Confirm that all monthly franchise and public right-of-way fee payments were timely and
correctly recorded in the City's Financial System.
FINDINGS, RECOMMENDATIONS AND MANAGEMENT RESPONSE
1. Finding -Required Reporting
Davis Sanitation did not submit the following documents in accordance with the listed City
Code sections during the audit period:
a. The City Code Section 90-308 Monthly Report, "Each recycling contractor shall deliver
monthly to the city manager an accurate report regarding the nature and disposition and
volume of Recyclable Materials collected by it from each account within the limits of the
city. Upon request by the City Manager, each contractor shall also furnish the city with
verifiable information regarding the method and place of final disposal or distribution of
said materials." Davis Sanitation did not deliver to the City Manager the required
monthly report of recyclable materials as required by the City Code.
b. Section 90-222 (a) states "The licensed contractor shall provide the City Manager (1) a
current list of names and addresses of each account, upon initial application and upon
application for renewal of its business license; (2) the frequency of service, (3) the permit
number and capacity of each dumpster and compactor as per account; and (4) the
address serviced by each dumpster and compactor." Davis Sanitation did not provide
the City Manager with a current list of 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 dumpster and compactor as per
account, and the address serviced by each dumpster and compactor.
c. Section 90-223 states "The licensee shall on or before 30 days following the close of its
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". Davis Sanitation did not provide statements of its annual gross receipts generated
from accounts within the City certified by an independent public certified public
accountant reflecting gross receipts within the city for the years 2006, 2007 and 2008.
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Internal Audit Report
Davis Sanitation, Inc. (Non-Exclusive Franchise Waste Contractor)
June 29, 2009
Recommendation(s)
Davis Sanitation must comply with the designated sections of the City Codes as follows:
a. The contractor shall deliver to the City Manager monthly report regarding the nature and
disposition, volume of recyclable materials collected from each account within the City
limits.
b. Davis Sanitation must provide 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 dumpster and compactor as per account and the address
serviced by each dumpster and compactor.
c. Davis Sanitation must submit 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 2006, 2007 and 2008 fiscal years.
2. Finding-Terms of SeNice Agreement
Davis Sanitation did not fully comply with certain sections of the Terms of Service
Agreement during the audit period:
a. Section 6. 8 "Contractor shall provide the City with schedules for all collection routes and
keep such information current. If any change in the collection routes occurs, then the
City shall be immediately notified in writing". Davis Sanitation has not provided the City
with schedules for all collection routes. If any change in the collection routes occurs,
then the City shall be immediately notified in writing.
b. Section 9.2 "Contractor shall notify the City, in writing, about complaint procedures,
rates, and regulations". Davis Sanitation did not have a control log at their establishment
and did not provide the City in writing about complaint procedures, rates, and
regulations. However, the contractor informed us that they have an excellent
relationship with their customers. When a complaint occurs and not often, it is taken
care of expeditiously. But going forward, they will notify the City in writing about
complaint procedures, rates, and regulations.
c. Section 13.1 "Contractor shall prepare and maintain a register of all complaints and
indicate the disposition of each complaint. Complaints shall be identified and such
record shall be available for City inspection at all times during business hours. All
complaints must be addressed within 24 hours". Davis Sanitation did not prepare and
maintain a register of all complaints and indicate the disposition of each complaint.
Complaints shall be identified and such record shall be available for City inspection at all
times during business hours. All complaints must be addressed within 24 hours. Davis
Sanitation stated that they will comply in the future.
Recommendation(s)
Davis Sanitation should provide the City with schedules for all collection routes and keep
such information current. If any change in the collection routes occurs, then the City shall
be immediately notified in writing. Contractor shall notify the City, in writing, about
complaint procedures, rates, and regulations. In addition, Davis Sanitation should prepare
and maintain a register of all complaints and indicate the disposition of each complaint.
Complaints shall be identified and such record shall be available for City inspection at all
times during business hours. All complaints must be addressed within 24 hours.
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Internal Audit Report
Davis Sanitation, Inc. (Non-Exclusive Franchise Waste Contractor)
June 29, 2009
EXIT CONFERENCE
Audit findings were e-mailed on June 17, 2009 to Kerry Simmons (General Manager for Davis
Sanitation). Mr. Simmons concurred with our findings and recommendations as presented. Davis
Sanitation has recently been purchased by Choice Environmental Services. Therefore, the current
contractor will be required to follow-up on the reported findings and recommendations to ensure
future compliance with the existing service agreement and sections of the City Code.
JJS: CD
Audit performed by Carmin Dufour
F:\obpi\$AUDIDOC08-9\REPORTS-\DAVIS SANITATION AUDIT FINAL REPORT.doc
cc: Fred Beckmann, Public Works Director
Alberto Zamora, Sanitation Director
Patricia Walker, Chief Financial Officer
Kerry Simmons (General Manager for Davis Sanitation)
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