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Commercial Solid Waste Franchise Audit Presented to:

Marion County

Marion County Solid Waste Department 5601 Southeast 66th Street Ocala, Florida 34480-9501 Presented by: SCS ENGINEERS 4041 Park Oaks Boulevard Suite 100 Tampa, Florida 33610 (813) 621-0080 August 31, 2007 File No. 09205006.05 Offices Nationwide www.scsengineers.com


Marion County, Commercial Solid Waste Franchise Audit

Commercial Solid Waste Franchise Audit

Presented To: Marion County Marion County Solid Waste Department 5601 Southeast 66th Street Ocala, Florida 34480-9501 Presented From: SCS ENGINEERS 4041 Park Oaks Boulevard Suite 100 Tampa, Florida 33610 (813) 621-0080

August 31, 2007 File No. 09205006.05


Marion County, Commercial Solid Waste Franchise Audit

Table of Contents Section 1

2

3

4

Page

Introduction.............................................................................................................................................. 1 Purpose .....................................................................................................................................................1 Project Understanding............................................................................................................................1 Limitations.................................................................................................................................................2 Financial and Operating Background ............................................................................................... 3 Overview..................................................................................................................................................3 Reported Franchise Fees .......................................................................................................................3 Customer Records and Business Practices...........................................................................................7 Findings.................................................................................................................................................... 8 Records Review .......................................................................................................................................8 Alternative Waste Service .........................................................................................................8 Andy’s Disposal Service........................................................................................................... 10 A+ American Disposal Company........................................................................................... 10 Busy Bee Waste Services ........................................................................................................ 11 Circle D Services, Inc. ............................................................................................................... 11 Coastal Carting, LLC ................................................................................................................ 12 Consolidated Waste Services, Inc. ........................................................................................ 12 Florida Express Shavings, LLC ................................................................................................ 13 Goodfella’s Roll Off and Waste Disposal, Inc.................................................................... 13 Hewitt Environmental Systems................................................................................................. 14 Job Site Services, Inc. ............................................................................................................... 15 Lyons Hoe Excavating, Inc. ...................................................................................................... 15 Personalized Waste Management........................................................................................ 16 Sandland Rolloffs, L.P. ............................................................................................................. 16 Superior/Hall Industries, LLC .................................................................................................. 17 Tri-County Waste Solutions, LLC ............................................................................................ 17 Veolia Environmental Service ................................................................................................. 18 Waste Management of Central Florida............................................................................... 20 Waste Pro of Florida, Inc. ....................................................................................................... 20 Watson C&D, Inc....................................................................................................................... 20 Young’s Garbage Service....................................................................................................... 21 Field Review ......................................................................................................................................... 21 Findings and Recommendations ........................................................................................................22 Findings.................................................................................................................................................. 22 Recommendations ................................................................................................................................ 23

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Marion County, Commercial Solid Waste Franchise Audit

List of Figures No. Figure 1.

Page Corporate Office Locations of Marion County Commercial and C&D Waste Franchisees ................................................................................................................................... 4 List of Tables

No. Table 1. Table 2. Table 3. Table 4. Table 5. Table 6. Table 7. Table 8. Table 9. Table 10. Table 11. Table 12. Table 13. Table 14. Table 15. Table 16.

Page Commercial and C&D Franchise Haulers, Marion County, Florida.................................... 5 Franchise Fees Reported Remitted to Marion County By Commercial and C&D Franchisees................................................................................................................................... 6 Commercial Franchise Fees, Alternative Waste Service (AWS) FY03-07...................... 9 Commercial Franchise Fees, Andy’s Garbage Service, FY 05/06 ................................10 Commercial Franchise Fees, Busy Bee, FY 05/06...............................................................11 Commercial Franchise Fees, Circle D Services, Inc, LLC, FY 05/06................................12 Commercial Franchise Fees, Florida Express, FY 05/06 ...................................................13 Commercial Franchise Fees, Goodfella’s Roll Off and Waste Disposal, Inc., FY 05/06 ............................................................................................14 Commercial Franchise Fees, Hewitt, FY 05/06 ...................................................................15 Commercial Franchise Fees, Job Site Services, Inc., FY 05/06........................................15 Commercial Franchise Fees, Sandland, L.P., FY 05/06.....................................................16 Commercial Franchise Fees, Superior/Hall Industries, LLC, FY 05/06 ...........................17 Commercial Franchise Fees, Tri-County, FY 05/06............................................................18 Commercial Franchise Fees, Veolia, LLC, FY 05/06 ..........................................................19 Commercial Franchise Fees, Waste Pro of Florida, Inc, FY 05/06.................................20 Summary of Commercial and C&D Franchise Fees Owed to Marion County, FY 05/06 ......................................................................................................22

Appendices Appendix A

Field Survey

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Marion County, Commercial Solid Waste Franchise Audit

1

INTRODUCTION

Marion County (the County) has issued franchise agreements, pursuant to Marion County Code (County Code), with solid waste haulers, which includes the collection of commercial, and construction and demolition (C&D) debris materials. Each commercial solid waste franchisee is required to remit a franchise fee of 10% of gross receipts to the County at least quarterly for the services provided pursuant to the franchise. Further, each franchisee is required to provide an annual financial statement to the County demonstrating that the franchisee has fully paid the applicable franchise fee. Section 16-33 of the County Code provides specific statutory requirements for recordkeeping enabling the County to audit, inspect, and examine the franchisee’s fiscal books and records as they relate to the County accounts. These include, but are not limited to, the following: billing rates, billing amounts, accounts receivable, federal and state tax records, and list of accounts. The County reserves the right to communicate directly to the customers of the franchisee for confirming compliance with the requirements of the franchise and the County Code.

PURPOSE Pursuant to Project Amendment No. 5, the County engaged the service of SCS Engineers (“SCS”) to conduct an audit of the County’s commercial and C&D solid waste franchisees. The overall purpose of this Project Amendment was to help the County to ensure that the solid waste franchisees of the County are complying with the requirements of their franchise and the County Code, and most importantly remitting the proper solid waste franchise fee to the County for the services rendered in the unincorporated areas of the County. As such, the principal objective of this study was to apply the agreed-upon procedures outlined in the tasks noted below to the quarterly fee payments for fiscal year 2005/06 (12 months ended September 30, 2006) submitted by respective the solid waste franchisees, currently operating in the unincorporated areas of the County.

PROJECT UNDERSTANDING In conducting the audit, SCS performed the following tasks: •

Reviewed pertinent background material relative to the operation of the County’s solid waste system, including, but not limited to, the existing and proposed revisions to the County Code, commercial franchise agreements, historic records of franchise fees remitted to the County, and general operations at the Baseline Landfill and Transfer Station.

Met with County staff responsible for franchise fee oversight to ascertain County reporting and recordkeeping practices

Issued a subsequent request to the County’s commercial and C&D solid waste franchisees for pertinent financial and operational data and documents for the audit.

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Marion County, Commercial Solid Waste Franchise Audit

Scheduled meetings and visited the local offices of the franchisees to be briefed by key company staff on policies and procedures involving calculation, customer billing, and transmittal of the franchise fee.

Tested the mathematical accuracy of the fee payment calculations submitted by each franchisee for the most recent fiscal year (FY 2005/2006).

Tested the data used by the franchisee to report gross revenues from County customers and examine the source documents that supported this information on a sample basis.

Attempted to resolve any inconsistencies identified either during the office visit or subsequently via electronic communications.

Using the reported financial data, verified the supporting documentation and recalculated the franchise fee owed the County, if any.

Conducted a field audit of sample areas in the unincorporated areas to test franchise customer records.

Prepared this Audit Report (“the Report”) which documented our findings and recommendations.

LIMITATIONS The scope of work for this audit was limited to performing the agreed-upon procedures described in the paragraphs above. SCS completed the scope of work by reviewing the franchisees billing, service, and operating records. These procedures were performed solely for the purpose of reviewing the accuracy of the franchise fees remitted to the County. As such, the application of the agreed upon procedures did not constitute an audit in accordance with Generally Accepted Auditing Standards, but was based solely on good solid waste engineering and financial judgment commonly provided by engineering consultants on similar audits for the solid waste industry. Moreover, had we performed additional procedures, other matters may have come to our attention, and those matters may have been material. In our judgment, however, the audit will provide the County with a reasonable basis to evaluate whether or not the County’s commercial and C&D solid waste franchisees are in compliance with the mandates established under the County Code. This Report is intended for the use of Marion County, and should not be used by those who do not agree to the procedures and take responsibility for the sufficiency of the procedures for their purpose.

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Marion County, Commercial Solid Waste Franchise Audit

2

F I N A N C I A L A N D O P E R AT I N G B AC KG R O U N D

OVERVIEW At the time of our audit, 21 individual firms had been granted a five-year franchise to collect and transport commercial and C&D wastes in the unincorporated areas of the County. Table 1 lists the specific County resolution awarding the franchise, key contact information (owner, office manager, or accountant), business address, and telephone, fax, and cell phone numbers of each respective franchisee. As illustrated in Figure 1, Marion County’s commercial and C&D solid waste franchisees have their corporate offices located across a wide area in Central and Western Florida including main business offices located in Alachua, Citrus, Hernando, Hillsborough, Lake, Marion, and Sumpter Counties.

REPORTED FRANCHISE FEES Pursuant to Sections 16-33g and 16-34g of the County Code, each franchisee holding a commercial and C&D franchise is required to collect a fee equal to 10% of their gross revenues for services rendered to their customers once each quarter, and remitted to the County no later than January 15th, April 15th, July 15th, and October 15th, for the proceeding respective quarterly period. Table 2 details the franchise fees paid to the County by each respective franchisee in Fiscal Year 05/06. A review of the franchise records by SCS for this fiscal reporting period indicated the following two types of reports were submitted to the County: •

A quarterly certification of the gross receipts collected and franchise fee (10% of gross receipts) by the franchisee for the quarterly period remitted.

A quarterly certification of the gross receipts collected and franchise fee (10% of gross receipts) by the franchisee for the quarterly period remitted, along with backup copies of franchisee fees collected for each customer.

For Fiscal Year 05/06, the total franchise fees remitted to the County by these franchisees amounted to an aggregate total of $972,070.60. Lastly, as shown in Table 2, our review revealed that there were many franchisees that either did not submit a required quarterly certification, pursuant to their franchise agreement, or sent a letter to the County indicating that they had no gross receipts in the County’s unincorporated areas during that quarterly period (“No Report”). Consequently, a major objective of the franchise audit was to validate that the franchise fees remitted were either correct, based on customer records provided by the franchisees during the audit, or had mathematical errors, for which reasonable adjustments could be made by SCS based on solid waste industry standards, in the franchise fees due to the County. During the audit, we also confirmed whether or not the franchisee did indeed collect gross receipts during the reporting period, and failed, for a variety of reasons, to transmit these fees to the County, as required by their franchise agreement.

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Marion County, Commercial Solid Waste Franchise Audit

Figure 1.

Corporate Office Locations of Marion County Commercial and C&D Waste Franchisees

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Marion County, Commercial Solid Waste Franchise Audit

Table 1. Company

Resolution #

Alternative Waste Service Andy’s Garbage Service A+ American Disposal Company Busy Bee Waste Services Circle D Services, Inc. Coastal Carting LLC. Consolidated Waste Services, Inc. Florida Express Savings, LLC Hewitt Environmental Systems Goodfella’s Roll-Off & Waste Disposal, Inc. Job Site Services, Inc. Lyons Hoe Excavating, Inc. Personalized Waste Management Sandland Rolloffs, L.P. Superior / Hall Industries, LLC. Tri-County Waste Solutions, LLC Veolia Environmental Service Waste Management of Florida Waste Pro of Florida, Inc. Watson C&D, Inc. Young's Garbage Service

Commercial and C&D Franchise Haulers, Marion County, Florida

Name

06-R-114 Gerald Lourenco, Owner 06-R-169 Andy Heflin, Owner Richard L. Barner, Jr., Owner 03-R-366 Debbie Bass, Office Manager 03-R-339 Carl Zalak, Owner 06-R-332 Gerard R. Desjardins, President 06-R-495 Gerard & Patricia Lemp, Owners 05-R-329 Frank P. Zannit, Owner 05-R-507 John & Michael Paglia, Owners 03-R-340 Pat Taylor, Accountant Randy T. Messer, President 04-R-032 Voncille Love, Office Manager 03-R-339 Buddy Fowler, Sales Representative 04-R-214 Ed Lyons, President 05-R-475 Glen Fiorello, Owner 05-R-420 Lou Paveglio, Manager 05-R-121 Jonnie Hall, Managing Member 04-R-368 Melanie & Van Peavy, Owners Jeff Englehart 05-R-506 Dave Helfer, Area Comptroller 06-R-171 Doug McCoy, District Manager 07-R-222 Christine Jeffers, Office Manager 04-R-215 Larry R. Watson, President Roy Young, Owner 06-R-170 Ms. Linda King, Accountant

Address

City, State, Zip

Phone/Fax/Cell

408 Cypress Road 3672 SE 132nd Place

Ocala, FL 34472 Belleview, FL 34420

(352) 624-3100; (352) 245-4266;

Fax (352) 680-0925 Cell (352) 427-4841

4510 W Hwy 40 4421 NW Blichton Rd., Suite #307 8 4049 SE, 130th Street 21092 SW Plantation Street 6953 SW 89th Street 5111 S Pine Avenue, Suite “O” 3839 County Road 48

Ocala, FL 34482 Ocala, FL 34482 Belleview FL 34920 Dunnellon, FL 34431 Ocala, FL 34472 Ocala, FL 34480 Okahumpka, FL 34762

(352) 671-9995; (352) 307-7577; (352) 266-6500; (352) 465-5020; (352) 307-8110 (352) 369-5411, (352) 787-5651;

Fax (352) 690-2251 Fax (352) 622-4999 Fax (352) 347-4895 Fax (same as telephone) Fax: (352) 369-0757 Fax (352) 787-5199

453 County Road 489 425 S. Croft Ave. 16105 N Florida Avenue, Suite “D” 838 SE 3rd Street 5920 N Florida Avenue 4670 NE 155th Avenue 4971 CR 102 5111 S Pine Ave, Suite “M” 1964 S Orange Blossom Trail 8708 NE 44th Drive 13025 N US Hwy 441 940 NW 247th Drive 18821 W Highway 328 1401 NW 19th Avenue

Lake Panasoffkee, FL 33538 Inverness, FL 34452 Lutz, FL 33549-6161 Ocala, FL 34471 Hernando, Fl 34442 Morriston, FL 32686-0518 Oxford, FL 34484 Ocala, FL 34480 Apoka, FL Wildwood, FL 34787 Alachua, FL 32615 Newberry, FL 32669 Dunnellon, FL 34432 Ocala, FL 34489

(352) 568-0999; (352) 743-7773; (813) 664-8898; (352) 369-9989, (352) 489-6912; (352) 528-4715; (352) 267-2467; (352) 351-8886, (407) 464-0664; (352) 854-0288, (386) 462-2132; (352) 338-2779,

Fax (352) 568-0110 Fax (352) 860-1573 Fax (813) 676-0137; Cell (813) 927-7 Fax (352) 369-9445 Fax (352) 489-6930 Fax (352) 528-4044 Cell (352) 330-1330 Fax 351-8812; Cell (352) 427-0174 Fax (407) 464-0488 Fax (352) 326-4141 also 854-2791 Fax (386) 588-4269; Cell (407) 766-3 Fax (352) 338-2781

(352) 489-7940;

Cell (352) 207-6380

Source: Marion County Solid Waste Department

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Marion County, Commercial Solid Waste Franchise Audit

Table 2.

Franchise Fees Reported Remitted to Marion County By Commercial and C&D Franchisees First Quarter October - December 05 6,341.10

Customer Alternative Waste Service

Second Quarter January - March 06

1

Andy's Garbage Service A+ American Disposal Company Busy Bee Waste Services Circle D Services, Inc. Coastal Carting Consolidated Waste Services, Inc. Florida Express Shavings, LLC Hewitt Environmental Systems Goodfellas Roll-Off and Waste Disposal Job Site Services, Inc. Lyons Hoe Excavating Personalized Waste Management Sandland Rolloffs, L.P. Superior/Hall Industries, LLC Tri-County Waste Solutions, LLC Veolia Environmental Service Waste Management of Florida Waste Pro of Florida, Inc. Watson C&D, Inc. Yong's Garbage Service TOTALS

No Report No Report 7,598.56 No Report No Report No Report 59,532.48 4,162.50 619.00 No Report No Report 1,753.15 No Report No Report 3,625.82 51,997.29 86,433.47 0.00 No Report No Report $215,722.27

Fourth Quarter July - September 06

Total Per Customer

6,834.40

7,121.90

8,251.50

28,548.90

No Report No Report 9,147.68 No Report No Report No Report 76,755.99 4,752.50 1,149.00 No Report No Report 1,891.25 No Report No Report 5,042.78 59,780.64 85,212.68 No Report No Report No Report $243,732.52

No Report No Report 8,329.50 No Report No Report No Report 84,113.66 3,545.00 2,696.00 2,969.58 No Report 1,964.75 No Report No Report 4,436.12 58,059.29 82,911.51 No Report No Report No Report $249,025.41

No Report No Report 8,014.49 536.63 No Report No Report 88,687.14 3,461.50 5,410.52 9,371.64 No Report 2,173.25 No Report No Report 5,214.03 58,719.44 82,001.76 No Report No Report No Report $263,590.40

0.00 0.00 33,090.23 536.63 0.00 0.00 309,089.27 15,921.50 9,874.52 12,341.22 0.00 7,782.40 0.00 0.00 18,318.75 228,556.66 336,559.42 0.00 0.00 0.00 $972,070.60

Notes: 1

Third Quarter April - June 06

No report denotes no report transmitted or received by the Marion County Solid Waste Department.

Source: Marion County Solid Waste Department

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Marion County, Commercial Solid Waste Franchise Audit

CUSTOMER RECORDS AND BUSINESS PRACTICES Not unlike other Florida counties, the commercial and C&D waste franchisees in Marion County vary dramatically in the types of customer services provided, numbers of waste hauling vehicles which they own/lease or operate, pricing strategies, service areas, and ultimately their overall capitalization. These firms range from very small family businesses with single-owner/vehicle drivers, to subsidiaries of large construction firms, to some of the very largest waste management corporations in the solid waste industry. As expected, the typical business practices in terms of customer service, recordkeeping, billing software, and reporting also was found by SCS to vary dramatically from business to business. For example, some franchisees use tailored financial software with online web access with SQL servers for customer records and financial reporting, while other use leading accounting software programs like QuickenTM, QuickBooksTM or standard financial templates from off-the-shelf copies of Microsoft Access or Excel. Some of the very smallest hauling firms are still using manual entry bookkeeping systems to account for revenues and expenses and tracking franchise fees billed and owed the County. The variety of software and reporting systems used by these franchisees, the reports downloaded or printed and then required to be audited, and the overall lack of standardization in billing practices posed some difficulties for the SCS during the course of the audit. These will be discussed later in our findings and recommendations. Briefly, SCS’ review of the franchisee billing records revealed the following major issues and concerns: •

The billing records indicate that a “sales tax” is noted (6.5%) on customer bills and company records, rather than the 10% “franchise fee”.

The franchise fee is being billed to the customer at the local sales tax level (6.5%) rather than the mandated 10%.

The definition of “gross receipts” is being applied dramatically different from one franchisee to another. For example, some haulers are billing the County’s 10% franchise fee to all services; others are not including items such as fuel adjustment charges or replacement of a roll-off box on a job site in the company’s gross receipts and therefore in the calculation of the franchise fee.

It appears that some franchisees are remitting to the County franchise fees from only those customers paying the fee. In other words, these franchisees are writing off those customers not paying the franchise fee and then not including those fees in their definition of gross receipts.

Charging solid waste customers, which appear to be located outside the boundaries of the unincorporated areas of Marion County (e.g., City of Ocala or surrounding counties), franchise fees that they should not otherwise be responsible for paying.

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Marion County, Commercial Solid Waste Franchise Audit

3

FINDINGS

The following section briefly summarizes SCS’s audit findings for each respective franchise.

RECORDS REVIEW Alternative Waste Service Alternative Waste Service (“AWS”) provides front-end loader and roll-off collection services to commercial customers in unincorporated Marion County. Initially, SCS was unable to schedule an audit of the firm’s commercial and C&D solid waste franchise fees because of a continuing disagreement with the County regarding reimbursement of payment of tipping fees for residential garbage at the Baseline Landfill and Transfer Station. Subsequently, the County was able to secure agreement with AWS to allow SCS access to AWS’ records for commercial and C&D franchise fees. In light of the County and AWS’ need to identify the numerical value of the fees owed, SCS expanded the focus of the audit to include franchise fee records from FY03/04, 04/05, 05/06, and the first two quarters of FY06/07. Subsequent to the completion of this audit, the County and AWS negotiated a settlement agreement whereby AWS agreed to pay back franchise fees owed the County over 36 months, including interest fees. Table 3 is a summary of our review of AWS’s records and audit findings. As shown, the franchise fees were computed for each quarter over the four fiscal years for the respective frontend loader and roll-off service areas offered by AWS. Our audit team then compared the franchise fee payments remitted to the County and certified by AWS for each quarter (“Commercial Franchise Fee Payment Made By AWS to County”). These payments were then deducted from the total franchise fees (front end loader and roll-offs) to arrive at the franchise fees owed to the County (“Difference in Commercial Franchise Fees Owed to County”). For example, in FY05/06, AWS certified to the County that it had collected $28,548.90 in franchise fees. However, a review of the firm’s records indicated that the firm should have remitted $75,678.58 or a difference of $47,129.68. As of the date of this report, AWS remitted the amounts due to the County. Due to the firm’s apparent loss of business records in FY03/04 and 04/05, SCS had to make a series of estimates of the franchise fees owed based on business reports provided by AWS. These data and information provided by the franchisee appear reasonable based on solid waste industry practices. SCS is of the opinion that the audit results represented in Table 3 fairly represents the franchise fees owed by AWS to the County during these four fiscal year reporting periods.

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Marion County, Commercial Solid Waste Franchise Audit

Table 3. Commercial Franchise Fees, Alternative Waste Service (AWS) FY03-07 FY 06/07

1

Front End Loader 5,167.66 5,434.40 6,295.84 16,897.90

Roll Offs 1,930.00 1,730.00 1,490.00 5,150.00

Total 7,097.66 7,164.40 7,785.84 22,047.90

5,387.53 6,412.79 6,775.99 18,576.31

0.00 3,520.00 1,740.00 5,260.00

5,387.53 9,932.79 8,515.99 23,836.31

April May June Third Quarter

0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00

July August September Fourth Quarter

0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00

$35,474.21

$10,410.00

$45,884.21

October November December First Quarter January February March Second Quarter

TOTALS

FY 04/05 Commercial Franchise Fee Payment Made Difference in Commercial By AWS to Franchise Fees Owed to 2 County County

3

13,620.40

Roll Offs 1,355.00 1,380.00 1,330.00 4,065.00

Total 5,639.00 5,664.00 5,614.00 16,917.00

0.00

4,284.00 4,284.00 4,284.00 12,852.00

1,430.00 1,470.00 1,610.00 4,510.00

0.00

4,760.00 4,760.00 4,760.00 14,280.00

0.00 $8,427.50

8,427.50

No Report Yet

0.00

1

Front End Loader 4,047.99 4,195.19 4,483.39 12,726.57

Roll Offs 1,800.00 1,700.00 1,620.00 5,120.00

Total 5,847.99 5,895.19 6,103.39 17,846.57

January February March Second Quarter

4,463.04 4,601.64 4,743.53 13,808.21

1,500.00 1,550.00 1,710.00 4,760.00

5,963.04 6,151.64 6,453.53 18,568.21

April May June Third Quarter

5,073.23 4,834.47 4,798.80 14,706.50

1,480.00 1,550.00 1,830.00 4,860.00

6,553.23 6,384.47 6,628.80 19,566.50

July August September Fourth Quarter

4,870.95 5,071.30 4,895.05 14,837.30

1,420.00 2,010.00 1,430.00 4,860.00

6,290.95 7,081.30 6,325.05 19,697.30

$56,078.58

$19,600.00

$75,678.58

TOTALS

Difference in Commercial Franchise Fees Owed to County

6,121.40

10,795.60

5,714.00 5,754.00 5,894.00 17,362.00

6,312.00

11,050.00

1,440.00 1,300.00 1,330.00 4,070.00

6,200.00 6,060.00 6,090.00 18,350.00

6,435.50

11,914.50

0.00

4,760.00 4,760.00 3,907.15 13,427.15

1,320.00 1,490.00 1,810.00 4,620.00

6,080.00 6,250.00 5,717.15 18,047.15

5,467.20

12,579.95

$13,620.40

$53,411.15

$17,265.00

$70,676.15

$24,336.10

$46,340.05

FY 05/06

October November December First Quarter

1

Front End Loader 4,284.00 4,284.00 4,284.00 12,852.00

Commercial Franchise Fee Payment Made By AWS to 2 County

FY 03/04 Commercial Franchise Fee Payment Made Difference in Commercial By AWS to Franchise Fees Owed to 2 County County

3

1

11,505.47

Front End Loader 3,855.60 3,855.60 3,855.60 11,566.80

Roll Offs 1,300.00 1,300.00 1,300.00 3,900.00

Total 5,155.60 5,155.60 5,155.60 15,466.80

11,733.81

3,855.60 3,855.60 3,855.60 11,566.80

1,220.00 1,330.00 1,275.00 3,825.00

12,444.60

3,855.60 3,855.60 3,855.60 11,566.80

8,251.50 $28,548.90

6,341.10

6,834.40

7,121.90

Commercial Franchise Fee Payment Made By AWS to 2 County

Difference in Commercial Franchise Fees Owed to County

6,075.00

9,391.80

5,075.60 5,185.60 5,130.60 15,391.80

5,170.00

10,221.80

1,680.00 1,850.00 1,510.00 5,040.00

5,535.60 5,705.60 5,365.60 16,606.80

6,160.50

10,446.30

11,445.80

3,855.60 3,855.60 3,855.60 11,566.80

1,590.00 1,590.00 1,590.00 4,770.00

5,445.60 5,445.60 5,445.60 16,336.80

6,186.00

10,150.80

$47,129.68

$46,267.20

$17,535.00

$63,802.20

$23,591.50

$40,210.70

Sources: 1

Alternative Waste Services records of franchise fees (front end loader and roll off services) from QUICK TRASH accounting program or estimates made by SCS of available AWS records, April 2007.

2

Marion County records of quarterly AWS submittals, Commercial Waste and Construction Demolition Debris Collection Service Franchise Fee, FY03/04, 04/05, and 05/06 .

3

Franchise fees for roll offs were estimated by SCS based on historic trends in available AWS records for those months in FY 03/04 and FY04/05 with missing data (due to reported AWS loss of records resulting from hurricane damage during this time period).

4

AWS records for franchise fees from front end loader collection lost during hurricane. SCS estimated amounts due County based on Acquisition Candidate Profile - Collection Profile Onyx Waste Services, Inc., April 6, 2005, submitted by AWS.

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Marion County, Commercial Solid Waste Franchise Audit

Andy’s Disposal Service Based on SCS interviews and a review of this firm’s customer data records, which are maintained on QuickBooks software, it appears that the company has only five commercial waste collection accounts. However, the firm has not submitted quarterly reports to the County and the respective franchise fees from these accounts. Table 4 shows the results of our audit. As shown, SCS is of the opinion that the Andy’s Garbage Service needs to remit $1,787.50 in franchise fees to Marion County for FY05/06. Table 4. Commercial Franchise Fees, Andy’s Garbage Service, FY 05/06 Gross Receipts

Franchise Fees

Commercial Franchise Fees Paid By Firm to County

$17,875

$1,787.50

$0

Difference in Franchise Fees Owed By Firm to County $1,787.50

A+ American Disposal Company A+ American Disposal, Company (“AAD”) is a construction and demolition hauling firm providing roll-off collection services, primarily to residential home builders in Marion County. The company operates pursuant to a C&D franchise agreement with Marion County. SCS conducted the audit through interviews of the company’s current Office Manager, Ms. Kristen Andersen, to ascertain AAD’s business practices and to secure copies of customer and billing records. Based on our interview, it appears that customer records and financial transactions are maintained by the firm using QuickBooksTM software. Customer billing rate sheets, which were provided, indicated that the company applies both a 10% fuel surcharge and County franchise fee to all transactions, including trip, relocation, time extension (e.g., additional fee accessed on any container that has not been serviced for each 14 day period), and rental charges. Analysis of online customer records and review of the chart of accounts from AAD’s Profit and Loss Statements revealed the company’s gross receipts by each quarter of the FY05/06 reporting period. These matched the company’s certifications of gross receipts and franchise fees reported to the County during this same period. However, it should be noted that AAD did not submit copies of all its fiscal year quarterly reports to the County, pursuant to the terms of its franchise agreement, well after the end of the FY05/06 (January 25, 2007). In fact, the company was also deficient in submitting to the County its third and fourth quarter reports for the last six months of FY04/05, which was transmitted to the County along with the FY05/06 reports and franchise fees due to the County. At the initial time of our audit, AAD owed a total of $75,871.73 in franchise fees for FY 05/06. Pursuant to the terms of the County Code, the County has assessed AAD an interest penalty on these funds due the County. As of the date of this report, AAD remitted the amounts due to the County.

10


Marion County, Commercial Solid Waste Franchise Audit

Busy Bee Waste Services Busy Bee Waste Services (“Busy Bee”) holds a franchise for the collection and transportation of C&D wastes in the unincorporated areas of Marion County. Roll-off collection service is provided by Busy Bee essentially to the customers in the County’s home building industry. As part of the audit process, SCS interviewed Mr. Carl Zalak, the firm’s owner, at the offices of Busy Bee’s Certified Public Accountant, Collier & Nagin, P.A. Mr. Zalak and Ms. Deedra Swift, Senior Accountant, Collier & Nagin, P.A., provided either original customer records or reports downloaded from Busy Bee’s, QuickBooks database, which were either reviewed onsite or returned to Busy Bee via Federal Express within a week’s time. Based on an agreement with Busy Bee at the time of the interview, SCS agreed not to make Xerox copies of these customer records for its audit files. Busy Bee was concerned that these records could be subject to public release at a later date. SCS did not agree with Busy Bee’s interpretation, but to expedite our need to proceed with the audit, we reluctantly agreed to this condition. Upon further review of the audit materials provided by Busy Bee, it appears that there are a number of major inconsistencies between the detailed customer billing records and the listing of franchise fees, which was provided by the company with each quarterly report for FY05/06. Clearly, the customer records reveal that, in many cases, Busy Bee did not include the following typical work items in its calculation of gross receipts and, therefore, the customer billings of the 10% franchise fees due the County: placement of a new roll-off container, switch outs of the rolloffs, final pulls, and final pick ups. As such, SCS is of the opinion that Busy Bee has grossly underestimated franchise fees due Marion County during FY05/06. On the basis of the customer records provided by Busy Bee to SCS, as noted in the paragraphs above, SCS attempted to verify the company’s gross receipts and franchise fees for each quarter in FY05/06. Table 5 is a summary of our verification and adjustment process. As shown, SCS is of the opinion that the Busy Bee needs to remit an additional $27,177.88 in franchise fees to Marion County for FY05/06. Table 5. Reporting Period

Quarter 1 Quarter 2 Quarter 3 Quarter 4 Totals

Commercial Franchise Fees, Busy Bee, FY 05/06 Adjusted Adjusted Gross Receipts By SCS Franchise Fees By SCS $128,136.50 $169,169.30 $158,771.84 $146,603.20 $602,680.84

$12,813.65 $16,916.93 $15,877.18 $14,660.32 $60,268.08

Commercial Franchise Fees Paid By Firm to County $7,598.56 $9,147.68 $8,329.50 $8,014.49 $33,090.23

Difference in Franchise Fees Owed By Firm to County $5,215.12 $7,769.25 $7,547.68 $6,645.83 $27,177.88

Circle D Services, Inc. Circle D Services, Inc. (“Circle D”) provides roll-off collection and disposal services primarily to residential home builders in unincorporated Marion County. The company received its franchise from the County to collect C&D waste on August 15, 2006. Circle D uses QuickBooksTM to maintain customer billing records. 11


Marion County, Commercial Solid Waste Franchise Audit

SCS conducted the audit through interviews the company’s President, Mr. Gerald Desjardins and its bookkeeper. Circle D provided copies of specific invoices and several QuickBooks reports. Table 6 shows the results of our audit. On the basis of this review, SCS is of the opinion that Circle D appears to be in compliance with their franchise agreement for FY05/06. Table 6. Commercial Franchise Fees, Circle D Services, Inc, LLC, FY 05/06 Gross Receipts

Franchise Fees

Commercial Franchise Fees Paid By Firm to County

$5,366.30

$536.63

$536.63

Difference in Franchise Fees Owed By Firm to County $0

Coastal Carting, LLC Coastal Carting, LLC (“Coastal”) provides roll-off collection and disposal services in unincorporated Marion County, as well as Levy County. The firm received its franchise soon after the start of the start of FY06/07 on October 17, 2006. Consequently, for the purpose of the FY05/06 audit, Coastal generated no gross revenues and franchise fees owed the County for this reporting period. Coastal uses a manual customer billing and accounting system (e.g., manual ledgers), which is typical for the size of their business accounts. A review of these customer records revealed that while Coastal does invoice their customers for the 10% franchise fee (identified on the customer bills as a “Marion County Surcharge”) , they also appear to impose a state and local sales tax (6.5%) for services rendered. It is unclear whether these fees are remitted to the State Department of Revenue. Other than this obvious billing error, SCS is of the opinion that Coastal appears to be in compliance with their franchise agreement.

Consolidated Waste Services, Inc. Consolidated Waste Services, Inc. (“Consolidated”) provides roll-service collection and disposal services to businesses and individual homeowners who generate primarily C&D wastes. During the interview process with the owner of the firm, Mr. Frank Zanitt, SCS was able to ascertain that this franchisee conducts business throughout Marion County, including all its municipalities. In a brief written statement provided to SCS at the interview, he estimated that approximately 20% of his overall gross receipts are typically received from customers in the unincorporated area. A Profit and Loss Statement was also provided for the FY05/06 fiscal year, indicating gross receipts earned. This statement also indicated that the franchisee did not remit franchise fees to any local government during this same reporting period. As indicated in Table 2, the franchisee has also not provided the required quarterly reports to the County (e.g., “No Report”). Other than the firm’s FY05/06 Profit and Loss Statement, the franchisee was unable to provide detailed customer records, which SCS requested for auditing purposes. Consequently, as such SCS deems Consolidated not in compliance with the audit requirements of its franchise

12


Marion County, Commercial Solid Waste Franchise Audit

agreement with the County. No estimate of franchise fees owed the County during FY05/06 can be determined due to the lack of available customer records to audit. Florida Express, LLC Florida Express, LLC (“Florida Express) holds a Marion County C&D waste franchise and provides roll-off collection and disposal services in the unincorporated areas of the County. During the audit for the franchisee, SCS met with Mr. Michael Paglia, an owner of the firm, and Ms. Regina Breault, an accountant with the firm, to discuss business practices, customer and billing procedures, and to secure copies of the company’s billing and customer records for the reporting period. Recently, Florida Express has migrated to a new proprietary accounting and customer recordkeeping software system. Our review of the customer records provided and comparisons with the Florida Express’s quarterly reports, which had been submitted to the County for the reporting period, indicated a few major discrepancies; primarily in Florida Express not including fuel surcharges billed to their customers in Florida Express’s calculation of gross receipts, subject to the 10% franchise fee. We noted this obvious billing error in verbal conversations with the firm’s accounting staff. As a result, Florida Express provided an updated customer billing report for the FY05/06 reporting period that took into account the fuel surcharges billed to their customers. Table 7 is a summary of these adjustments. As shown, SCS is of the opinion that the Florida Express needs to remit an additional $36,856.98 in franchise fees to Marion County for FY05/06. Table 7.

Commercial Franchise Fees, Florida Express, FY 05/06

Adjusted Gross Receipts

Adjusted Franchise Fees

Commercial Franchise Fees Paid By Firm to County

Difference in Franchise Fees Owed By Firm to County

$3,459,462.52

$345,946.25

$309,089.27

$36,856.98

Goodfella’s Roll Off and Waste Disposal, Inc. Goodfella’s Roll Off and Waste Disposal, Inc. (“Goodfella’s”) is an owner of a construction and demolition landfill, which is located in Sumter County, Florida, near Lake Panoffskee, and provides roll-off collection and disposal services to businesses in unincorporated Marion County. Pursuant to its franchise agreement with the County, Goodfella’s is required to submit quarterly reports of gross receipts and franchise fees for each quarter. During the audit for this franchisee, SCS met with the firm’s accountant, Ms. Voncile Love, to review company’s business practices and to review customer accounts and billing records. Based on our discussions, it appears that Goodfella’s transitioned from QuickBooksTM to the Trash Flow™ software for solid waste customer billings during the second quarter of the 05/06 fiscal year. Ms Love also indicated that there was significant turnover in the firm’s accounting staff during the entire reporting period. Our review of the customer records provided, and comparisons with the Goodfella’s quarterly reports, which had been submitted to the County for the reporting period, showed serious 13


Marion County, Commercial Solid Waste Franchise Audit

discrepancies in three general areas: failure to charge a franchise fee for many Marion County customers, billing of the County’s franchise fee at rate less than the 10% rate; and not including fuel surcharges in the calculation of gross receipts subject to the franchise fee, which was then billed to the customer. We noted these obvious errors in correspondence with the firm’s accounting staff and developed an Excel spreadsheet to make adjustments in gross receipts and franchise fees for each respective quarter of the reporting period. Table 8 is a summary of these adjustments. As shown, SCS is of the opinion that the Goodfella’s needs to remit an additional $5,842.87 in franchise fees to Marion County for FY05/06. Table 8.

Commercial Franchise Fees, Goodfella’s Roll Off and Waste Disposal, Inc., FY 05/06

Reporting Period

Quarter 1 Quarter 2 Quarter 3 Quarter 4 Totals

Adjusted Gross Adjusted Receipts By SCS Franchise Fees By SCS $9,619.57 $31,855.55 $58,736.68 $56,961.98 $157,173.78

$961.96 $3,185.56 $5,873.67 $5,696.20 $15,717.39

Commercial Franchise Fees Paid By Firm to County $619.00 $1,149.00 $2,696.00 $5,410.52 $9,874.52

Difference in Franchise Fees Owed By Firm to County $342.96 $2,036.56 $3,177.67 $285.68 $5,842.87

Hewitt Environmental Systems Hewitt Environmental (“Hewitt”) is a construction firm, which is based near the City of Okahumpka in Lake County, specializing in providing roll-off collection services to businesses in Marion County and in surrounding counties and municipalities. Pursuant to its franchise agreement with the County, Hewitt is required to submit quarterly reports of gross receipts and franchise fees for each quarter. SCS interviewed the company’s accountant, Mr. Pat Taylor, to review Hewitt operations, discuss business practices, and review the company’s customer and billing records in unincorporated Marion County for the reporting period. Upon further review of the audit materials provided by Hewitt, it appears that there are a number of major inconsistencies between the detailed customer billing records and the listing of franchise fees, which was provided by the company with each quarterly report for FY05/06. Clearly, the customer records reveal that Hewitt did not include fuel surcharges, as well as delivery charges, in its calculation of gross receipts and, therefore, the customer billings of the 10% franchise fees due the County. As such, SCS is of the opinion that Hewitt has grossly underestimated franchise fees due Marion County during FY05/06. On the basis of the customer records provided by Hewitt, SCS attempted to verify the company’s gross receipts and franchise fees for each quarter in FY05/06. Table 9 is a summary of our verification and adjustment process. As shown, SCS is of the opinion that the Hewitt needs to remit an additional $15,483.44 in franchise fees to Marion County for FY05/06.

14


Marion County, Commercial Solid Waste Franchise Audit

Table 9. Reporting Period

Quarter 1 Quarter 2 Quarter 3 Quarter 4 Totals

Commercial Franchise Fees, Hewitt, FY 05/06 Adjusted Gross Adjusted Receipts By SCS Franchise Fees By SCS 76,085.33 81,789.40 76,212.69 79,661.95 $313,749.37

7,608.53 8,178.94 7,621.27 7,966.20 $31,374.94

Commercial Franchise Fees Paid By Firm to County 4,162.50 4,752.50 3,545.00 3,461.50 $15,921.50

Difference in Franchise Fees Owed By Firm to County 3,446.03 3,456.44 4,076.27 4,504.70 15,483.44

Job Site Services, Inc. Job Site Services, Inc. (“Job Site”) is a construction and demolition hauling firm providing rolloff collection services primarily homebuilders in Citrus, Lake, Marion and Sumter Counties. The firm also provides portable toilets for construction sites and special events. The firm received its Marion County C&D collection franchise near in end of the FY05/06 reporting period on July 5, 2006. SCS interviewed the company’s sales representative, Mr. Buddy Fowler and staff accountants to review Job Site operations, discuss business practices, and receive an overview of the company’s customer and billing records in unincorporated Marion County for the reporting period. Our review of the customer records provided (cash reconciliation report) and comparisons with Job Site’s quarterly reports, which had been submitted to the County for the reporting period, indicated that the firm had overpaid franchise fees to the County in the last quarter of FY05/06. We noted this obvious billing error in verbal conversations with the firm’s accounting staff. Table 10 is a summary of these adjustments. As shown, SCS is of the opinion that the County’s records should show this adjustment. It is our understanding that this adjustment has been made on Job Site’s first quarterly report for FY06/07 (October-December, 2006). Table 10. Commercial Franchise Fees, Job Site Services, Inc., FY 05/06 Reporting Period

Quarter 3 Quarter 4 Totals

Adjusted Adjusted Gross Receipts By SCS Franchise Fees By SCS 29,695.80 58,542.93 $88,238.73

2,969.58 5,854.29 $8,823.87

Commercial Franchise Fees Paid By Firm to County 2,969.58 9,371.64 $12,341.22

Difference in Franchise Fees Owed By Firm to County 0.00 (3,517.35) (3,517.35)

Lyons Hoe Excavating, Inc. Lyons Hoe Excavating (“Lyons”) is a construction firm, which is based in Hillsborough County, Florida, specializing in providing roll-off collection services to other construction firms. While it currently holds a C&D franchise in Marion County, interviews with representatives of the firm indicates that it has not done any business in the County since obtaining its franchise. It should 15


Marion County, Commercial Solid Waste Franchise Audit

be noted, however, that prior to our initial contact, the firm failed to provide the required quarterly reports detailing gross receipts and franchise fees to the County. Personalized Waste Management Personalized Waste Management (PWM) provides rear-loader collection service to commercial solid waste generators in unincorporated Marion County and the City of Belleview. PWM received its commercial franchise agreement on January 4, 2000. SCS interviewed the company’s President, Mr. Glen Fiorello to review PWM’s operations, business practices, and an overview of accounting and customer records. Customer records and financial transactions are maintained using a proprietary software program. A listing of current customer accounts, their service levels, charges, and franchise fees were provided to SCS at that time. Copies of the firm’s quarterly reports for FY05/06 were compared against customer records maintained on PWM’s computerized database. We were unable to compile reports from the firm’s database, however, to verify the firm’s gross revenues for the reporting period and ultimately the franchise fees due to the County. At the time of this writing, we have requested that PWM work with the manufacturer of its customer database program or engage the services of a reputable software consultant to develop the required reports to provide verification of gross revenues and franchise fees during FY 05/06. Sandland Rolloffs, L.P. Sandland Rolloffs, L.P. (“Sandland”) is a construction and demolition hauling firm providing roll-off collection services in Marion County. The firm operates a C&D landfill, which is located in Citrus County (Hernando, Florida). The firm received its franchise near the beginning of FY06/07 on September 20, 2005. Customer records and financial transactions are maintained by the firm using QuickBooks software. A review of current financial records and interviews with the firm’s representatives indicates that it provides service to customers in Marion County at the current time. Table 11 was constructed by SCS based on an online review of the firm’s QuickBooksTM customer accounts. As shown in Table 11, as of the date of this report, Sandland did not submit the required quarterly reports (i.e., “No Report” in Table 2) indicating gross receipts and franchise fees. On the basis of our audit, SCS is of the opinion the Sandland needs to remit $2,109.00 to Marion County for FY05/06. Table 11. Commercial Franchise Fees, Sandland, L.P., FY 05/06 Gross Receipts

Franchise Fees

Commercial Franchise Fees Paid By Firm to County

Difference in Franchise Fees Owed By Firm to County

$21,090.00

$2,109.00

$0.00

$2,109.00

16


Marion County, Commercial Solid Waste Franchise Audit

Superior/Hall Industries, LLC Superior/Hall Industries, LLC (“Superior”) is a construction and demolition hauling firm providing roll-off collection services primarily to residential home builders and horse farms in Marion County. Customer records and financial transactions are maintained by the firm using QuickBooksTM software. A review of current financial records and interviews with the firm’s representatives indicates that Superior is no longer providing roll-off services to customers in Marion County at the current time. Table 12 was constructed by SCS based on an online review of the firm’s QuickBooksTM customer accounts. As shown in Table 12, as of the date of this report, Superior did not submit the required quarterly reports (i.e., “No Report” in Table 2) indicating gross receipts and franchise fees. As of the date of this report, this account has been remitted o the County. Table 12. Commercial Franchise Fees, Superior/Hall Industries, LLC, FY 05/06 Gross Receipts

Franchise Fees

Commercial Franchise Fees Paid By Firm to County

$1,925.00

$192.50

$0

Difference in Franchise Fees Owed By Firm to County $192.50

Tri-County Waste Solutions, LLC Tri-County Waste Solutions, LLC (“Tri-County”) provides roll-off collection service to solid waste customers in Marion and adjacent counties, primarily to residential home builders. The firm also provides residential site clean up services (e.g., special clean-outs before move in by their owners), which are distinct from Tri-County’s solid waste collection and disposal operations. As such, SCS is of the opinion that gross receipts from cleanup operations are not subject to the County’s franchise fee. For the purpose of this franchise audit SCS interviewed Tri-County’s owner, Ms. Melanie Peavy to discuss business practices and gain access to its customer billing records. Customer records and financial transactions are maintained by the firm using QuickBooks software. A review of these records and comparison with the quarterly reports provided to the County by the firm show some inconsistencies, as discussed in the paragraphs below. Initially, SCS reviewed copies of the company’s customer invoices. It appears that the firm is billing the appropriate County franchise fee correctly. On the basis of the customer records provided by Tri-County, SCS attempted to verify the company’s gross receipts and franchise fees for each quarter in FY05/06. Table 13 is a summary of our verification and adjustment process. As shown, SCS is of the opinion that TriCounty needs to remit an additional $2,145.20 in franchise fees to Marion County for FY05/06.

17


Marion County, Commercial Solid Waste Franchise Audit

Table 13. Commercial Franchise Fees, Tri-County, FY 05/06 Reporting Period

Quarter 1 Quarter 2 Quarter 3 Quarter 4 Totals

Adjusted Gross Receipts By SCS

Adjusted Franchise Fees By SCS

$35,785.00 $44,735.00 $71,430.00 $52,690.00 $204,640.00

$3,578.50 $4,473.50 $7,143.00 $5,269.00 $20,464.00

Commercial Franchise Fees Paid By Firm to County $3,625.82 $5,042.78 $4,436.12 $5,214.03 $18,318.75

Difference in Franchise Fees Owed By Firm to County ($47.32) ($569.28) $2,706.88 $54.92 $2,145.20

Veolia Environmental Service Veolia Environmental Service (“Veolia”) provides front-loader and roll-off collection services to solid waste customers in unincorporated Marion County. SCS traveled to Veolia’s Southeast District Office, which is located near the City of Apopka in Orange County to interview Mr. Jeff Englehart, Marion County Manager and Mr. Dave Helfer, Veolia’s Area Controller, and to review customer records for the reporting period. Veolia was able to provide detailed billing records and quarterly franchise reports for our review. As indicated to SCS, the firm keeps separate accounting records and printed reports for roll-off and front-loader customer transactions, which are accessed on a proprietary customer/accounting software system. Our review of these submitted data indicated that Veolia is correctly billing the proper 10% Marion County franchise fee for its customers during the reporting period. However, upon further review of the reports with Mr. Helfer during our visit, it appears that additional customer transactions (e.g., dropped accounts, new accounts, etc.) were made after the end of the month reports are printed for the respective quarter. These updated reports, which could be accessed online by a company customer representative at a later date, could change the totals for gross receipts and franchise fees, that had been previously reported to the County. Mr. Helfer assured SCS that this minor “quirk” in the firm’s software has been corrected for the County’s quarterly reports for FY06/07. That is, the customer online records and printed reports transmitted with the County’s quarterly reports contain the exact same information. However, adjustments in gross receipts and franchise fees for the 1st and 4th quarters in FY 05/06 had to be made by SCS, based on the firm’s error rate (e.g., the differences shown between the company’s online and printed reports provided to the County) relative to the observed online data for gross receipts and franchise fees for the 2nd and 3rd quarters. On the basis of our audit, SCS is of the opinion the Veolia needs to remit a total of $4,380.01 in additional franchise fees to Marion County for FY05/06.

18


Marion County, Commercial Solid Waste Franchise Audit

Table 14. Commercial Franchise Fees, Veolia, LLC, FY 05/06 Reported By Company to County Quarter

Month

Month

Gross Receipts

Franchise Fees

New Franchise Fees 4 Due County

10,735.00 6,644.43 11,524.38 6,830.33

110,570.50 66,178.55 118,701.11 68,030.10

11,057.05 6,617.86 11,870.11 6,803.01

Roll-Off

118,633.65

11,863.37

122,192.66

12,219.27

Front-Loader Subtotals Roll-Off Front-Loader Roll-Off Front-Loader Roll-Off Front-Loader Subtotals Roll-Off Front-Loader Roll-Off Front-Loader

67,841.21 $543,816.30 125,094.24 67,501.59 137,656.41 68,843.58 129,675.45 69,035.10 $597,806.37 131,799.10 66,467.32

6,784.12 $51,997.29 12,509.43 6,750.16 13,765.64 6,884.36 12,967.55 6,903.51 $59,780.65 11,893.47 6,853.98

67,569.85 $553,242.77 129,356.76 67,196.69 142,242.28 68,538.68 132,527.05 68,730.20 $608,591.66 135,753.07 66,201.45

128,532.12 67,240.85

13,798.45 7,025.79

132,388.08 66,971.89

6,756.98 55,324.28 12,935.68 6,719.67 14,224.23 6,853.87 13,252.71 6,873.02 $60,859.17 13,575.31 6,620.15 13,238.81 6,697.19

Roll-Off

115,980.90 70,572.58 $580,592.87

12,293.77 6,853.98 $58,719.44

122,400.82 69,899.70 $593,615.01

6,989.97 $59,361.50

$642.06

Front-Loader Roll-Off Front-Loader Roll-Off Front-Loader Subtotals

118,934.74 68,539.77 137,984.47 70,257.91 122,937.73 68,539.77 $587,194.39

13,179.91 6,646.73 12,853.21 6,724.09 11,598.09 7,057.26 $58,059.29

$122,502.78 $68,265.61 $142,124.00 $69,976.88 $126,625.86 $68,265.61 $597,760.75

$12,250.28 $6,826.56 $14,212.40 $6,997.69 $12,662.59 $6,826.56 $59,776.07

$1,716.78

FISCAL YEAR TOTALS

$2,309,409.93

$228,556.67

$2,353,210.19

$235,321.02

$4,380.01

November Januarary

January February March

April May June

Front-Loader Subtotals Roll-Off

July Fourth

2

107,350.00 66,444.33 115,243.80 68,303.31

First

Third 3

Franchise Fees

Adjusted Totals By SCS

Roll-Off Front-Loader Roll-Off Front-Loader

October

Second 3

Gross Receipts

1

August September

From company's quaterly reports to County and backup ducmentation provided to SCS.

2

For First quarter only, less overpayment to county for fees remittted for accounts in Levy and Sumter Counties and in the city of Ocala.

3

Gross receipts for reports in 2nd and 3rd quarters were calculated to be underpaid by the company by 3%; front-end loaders overpaid by .the company .004%

4

SCS adjustments based on overpayment and underpayment errors calculated from 2nd and 3rd quarters.

19

$1,078.52

12,240.08

Notes: 1

$942.65


Marion County, Commercial Solid Waste Franchise Audit

Waste Management of Central Florida Pursuant to its commercial and C&D franchise, Waste Management of Central Florida (“WM”) provides front-loader and roll-off collection services to solid waste customers in unincorporated Marion County. SCS interviewed WM’s accountant, Ms. Natalie Marin, at the firm’s regional headquarters in Wildwood, Florida. WM was able to provide detailed billing and customer records for the reporting period. The firm keeps separate records for its front-loader, commercial and roll-off C&D accounts, which were access on a proprietary customer/accounting software system. SCS compared the records provided by WM with those submitted by the firms as part of its quarterly reports for FY05/06. On the basis of our audit, SCS is of the opinion that WMI has remitted the appropriate franchise fees to the County during FY 05/06. Waste Pro of Florida, Inc. Pursuant to its franchise agreement, Waste Pro of Florida, Inc. (Waste Pro) provides roll-off collection and disposal services for customers in Marion County. C&D wastes collected are disposed at Waste Pro’s C&D landfill, which is located near Interlachen, Florida in Lake County. SCS traveled to the firm’s main business headquarters in Alachua, Florida to interview company representatives and review business records for the fiscal reporting period. These records indicated that Waste Pro did not invoice its commercial and C&D customers for Marion County franchise fees, as required by its agreement with the County. Table 15 was constructed by SCS based on an online review of the firm’s customer accounts and printouts provided. As shown in Table 15, as of the date of this report, Waste Pro did not submit the required quarterly reports (i.e., “No Report” in Table 2) indicating gross receipts and franchise fees. On the basis of our audit, SCS is of the opinion the Waste Pro needs to remit $329.50 to Marion County for FY05/06. Table 15. Commercial Franchise Fees, Waste Pro of Florida, Inc, FY 05/06 Gross Receipts

Franchise Fees

Commercial Franchise Fees Paid By Firm to County

$3,295.00

$0.00

$0.00

Difference in Franchise Fees Owed By Firm to County $329.50

Watson C&D, Inc. Watson C&D (“Watson”) is an owner of a construction and demolition landfill, which is located in Alachua County, Florida, near the City of Newberry, and provides roll-off services to residential home builders in Marion County. Pursuant to its franchise agreement with the County, Watson is required to submit quarterly reports of gross receipts and franchise fees for each quarter. As shown in Table 2, as of the date of this report, Watson has not submitted the required reports (i.e., “No Report” in Table 2).

20


Marion County, Commercial Solid Waste Franchise Audit

During the course of the audit, SCS met with a representative of the firm and discussed obtaining customer records, which would detail gross receipts and franchise fees for the firm’s activity in unincorporated Marion County. Mr. John Colundjia, the Watson Comptroller, indicated at that time that the designer of the firm’s financial software, QuickTrax™ would have to be contacted by Watson to access and print the desired customer invoices. Although SCS was promised on many occasions full access to these reports, adequate records for auditing purposes were unfortunately not made available. The limited information and data made available (e.g., an emailed Excel spreadsheet), purporting to be the firm’s full financial records for FY05/06, did not provide backup customer invoices for auditing purposes. SCS continued to follow up with Watson during the course of writing this audit report, but was unable to secure the required data and information. As such, SCS deems Watson not in compliance with the audit requirements of their franchise agreement with the County. Young’s Garbage Service Young’s Garbage Service (“Young”) is a solid waste collection firm that holds both residential and commercial solid waste franchises in Marion County. Our audit focused solely on the gross receipts and franchise fees from commercial and C&D waste collection services for this franchisee. On the basis of onsite interviews with Young representatives and a review of their customer records, which are maintained in a Microsoft Excel database, SCS is of the opinion that Young did not collect commercial and C&D wastes in the unincorporated areas of Marion County. Consequently, Young is not required to remit franchise fees to the County for the FY05/06 reporting period.

FIELD REVIEW To test the accuracy of the franchisee’s customer data records, SCS conducted a random field audit. This audit consisted of selecting four, one-mile areas in the unincorporated areas of the County, which appeared to represent a cross-section of typical customers serviced by the franchisees. The SCS field team visited each location in each of the survey areas and recorded key information (business name, type of container (roll-off or dumpster, franchisee servicing the business, and contact information). Photographs were taken to illustrate pertinent observations. Subsequently, this data and information was compared against customer records provided by each franchisee. The results of these field audits were as follows: •

Most, if not all, of the businesses identified in the field could be verified in the franchisee customer databases.

The few outliers (new accounts) could be easily explained as neighboring accounts which were added since FY 05/06 to optimize existing commercial routes.

On the basis of the random field audit, SCS is of the opinion that the franchisee customer records appear relatively accurate.

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Marion County, Commercial Solid Waste Franchise Audit

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F I N D I N G S A N D R E C O M M E N D AT I O N S

FINDINGS Table 16 provides a summary of key franchise statistics developed on the basis of our audit for FY05/06: • • • •

Total gross receipts Franchise fees Franchise fees paid by the companies Franchise fees that need to be remitted

$10,669,612.16 $ 1,066,960.93 $ 903,153.11 $ 224,615.65

Table 16. Summary of Commercial and C&D Franchise Fees Owed to Marion County, FY 05/06

Alternative Waste Service Andy's Garbage Service A+ American Disposal Company Busy Bee Waste Services Circle D Services, Inc. Coastal Carting Consolidated Waste Services, Inc. Florida Express Shavings, LLC Hewitt Environmental Systems Goodfellas Roll-Off and Waste Disposal Job Site Services, Inc. Lyons Hoe Excavating Personalized Waste Management Sandland Rolloffs, L.P. Superior/Hall Industries, LLC Tri-County Waste Solutions, LLC Veolia Environmental Service Waste Management of Florida Waste Pro of Florida, Inc. Watson C&D, Inc. Young's Garbage Service TOTALS

Gross Receipts 756,785.00. 17,875.00 758,720.24 602,680.84 5,366.30 0.00 23,496.00 3,459,462.52 313,749.37

Franchise Fees 75,678.58.00 1,787.50 75,871.73 60,268.08 536.63 0.00 2,349.60 345,946.25 31,374.94

Commercial Franchise Fees Paid by Company 28,548.90 0.00 0.00 33,090.23 536.63 0.00 D.R. 309,089.27 15,921.50

157,173.78 88,238.73

15,717.39 8,823.87

9,874.52 12,341.22

5,842.87 -3,517.35

0.00 77,824.00 21,090.00 1,925.00 204,640.00 2,353,210.19 2,580,865.19 3,295.00 D.R. 0.00 $10,669,612.16

0.00 7,782.40 2,109.00 192.50 20,464.00 235,321.02 258,086.52 329.50 D.R 0.00 $1,066,960.93

0.00 D.R. 0.00 0.00 18,318.75 228,556.67 246,875.42 0.00 D.R 0.00 $903,153.11

0.00 D.R. 2,109.00 192.50 2,145.20 4,380.01 8,826.71 329.50 D.R. 0.00 $224,615.65

Notes: D.R. = Did not report or was unable to verify gross revenues and franchise fees

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Difference in Franchise Fees Owed by Firm to County 47,129.68 1,787.50 75,871.73 27,177.88 0.00 0.00 D.R. 36,856.98 15,483.44


Marion County, Commercial Solid Waste Franchise Audit

RECOMMENDATIONS Based on our discussions with several of the franchisees and a review of the material provided during our audit, the following changes or revisions should be made to the Section 16-33 of the County Code: •

Specific Location of Customer – Our review of the customer records of several franchisees strongly suggests that customers residing in other local government jurisdictions are being charged a 10% franchise fee. This may include commercial waste generators, which reside in the City of Ocala, for example, and are technically not subject to this fee. As was pointed out to us, many franchisees believe that many customers are unclear as to their jurisdiction, and as a consequence cannot supply this information to the franchisee when an account is opened. To clarify this situation, the County should work with the County Property Appraiser’s and Tax Collector’s Office to develop an online database to check whether or not the business or resident is located within the unincorporated area of the County.

Definition of Gross Receipts – Our review of franchisee records suggests that the franchise fee is not being imposed uniformly. That is, some franchisees are calculating the franchisee fee on all service provided, while others are excluding the fee being charged for placing a roll off dumpster on a construction job site, a rental fee for the dumpster, or the imposition of fuel adjustment charges. SCS is of the opinion that County Code requires that the franchise fees be imposed on all gross revenues received by the franchisee. To provide consistency across all franchisees, we recommend that the definition be made much clearer, such as ; “Gross receipts means any and all revenue or compensation in any form derived directly or indirectly by the franchisee, its affiliates, subsidiaries, parents or any entity which the franchisee has a financial interest in collecting, transporting, arranging, handling, and/or disposing of commercial and/or C&D wastes, exclusive of taxes as provide by law, generated in the franchise area.”

Imposition of State Sales Tax By Certain Franchisees – Our review of the franchisee records indicates that some haulers may be charging state sales taxes on customer bills. It is unclear whether these charges are being remitted to the State Department of Revenue. It is our understanding that traditional solid waste collection services are not subject to state sales taxes. What makes this troublesome is that imposing a state sales tax and including it in the franchisees gross revenues could result in some customers paying a tax on a franchise fee. At a minimum, the customer software used by commercial franchisees’ billing systems must identify the tax imposed on the commercial waste customer to be a franchise fee, not a sales tax.

Submittal of Franchise Fee Reports and Recordkeeping – Based on the results of our audit, SCS is of the opinion that effective internal control policies and procedures and external reporting to the County appear extremely limited. That is, few if any of the required annual reports, as noted in the franchise agreements, are transmitted to the

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Marion County, Commercial Solid Waste Franchise Audit

County on a quarterly basis. In fact, some haulers have historically not submitted a quarterly report to the County even when they collected gross revenues during that quarter. Further, until recently, interest payments for past due amounts owed to the County have not been imposed by the County. To clarify this situation, the County should revise the County Code to include an interest penalty (e.g., one percent per month penalty on the balance of the amount due) for failure to remit the franchise fee of the total gross receipts by the 20th of the following month the quarterly report was due. Also, there should be no exception to this policy. •

Standardization of Customer Databases – At a minimum, the County should require the use of accounting/customer billing software packages that can provide an auditable set of back-up records and reports. One of the major difficulties for the SCS team was the inability of several franchisees to provide detailed reports on gross receipts earned and franchise fees billed.

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Marion County, Commercial Solid Waste Franchise Audit

Appendix A Field Survey



Marion County Franchise Audit