The pot was stirred again in February last year when Mayor Dan Gelber urged a one-year renewal for the two Towing Permits versus the traditional three-year period so the City could analyze how it handled towing. More specifically, he was concerned about the location of the operations in Sunset Harbour which is one of two industrial zones in the City where the towing operations can legally be located and which has become residential over the past decade. The other industrial zone is Terminal Island.
Following the February 2018 discussion, the permits have been renewed twice on a short-term basis with the latest expiring at the end of this year.
Since then the towing permit discussion has been on low simmer as the City conducted an internal audit of the companies but, as the audit neared completion last month, the towing companies turned up the heat claiming bias and a politically motivated process.
The whole thing boiled over when City Commissioners voted 4-3 last week to stop the internal audit and conduct an outside audit by a firm chosen by the City but paid for by the towing companies.
This time the public cried foul accusing Commissioners of burying a taxpayer funded audit because the towing companies didn’t like it.
After obtaining copies of the two most recent drafts of the internal audit, an RE:MiamiBeach review indicates that there is a great deal of compliance on the part of one of the towing companies with regard to fees charged (99.61%). The problem is within the other .39% there were non-compliant situations and overcharges found that could represent a significant portion of annual revenues, in the case of Tremont 8.2%. The methodology for getting there is what the tow companies dispute and that’s what brings us to where we are with the controversy over the entire process.
Fair warning… this is a long article which can be dry at times but what follows is a detailed look at the two most recent draft audits for Tremont Towing. Specifically, RE:MiamiBeach reviewed draft audits of Tremont dated March 5 and May 3 as well as the last audit of Beach Towing which was completed in 2012; video of the April 2019 Commission Neighborhoods Committee meeting at which the most recent audit was discussed; audio of the May 29, 2019 meeting of the Audit Committee, a group of citizens who provide assistance in selecting the City’s auditor and “other audit oversight purposes”; and the June 5, 2019 City Commission meeting at which the vote was taken to hire an independent auditor to conduct the towing audit. On June 13, this reporter met with Ralph Andrade, attorney for both towing companies to review the draft audits.
In a nutshell, the controversy stems from different views of the process and, in particular, the scope, objectives, and methodology.
In the March draft of the audit, internal auditor Mark Coolidge used curb vehicle weight to determine how much should have been charged per tow. The Towing Permits are based on gross vehicle weight, the measurement the towing companies believe should be used in the audit.
At the April Neighborhoods Committee meeting, Coolidge said, “Both weights in our opinion were flawed.” He described gross vehicle weight as including the weight of occupants. “When a vehicle is towed, it does not include occupants. Curb weight is the weight of the vehicle but it excluded any additional weight that the vehicle was carrying” such as baggage.
The phrase “in our opinion” is another point of contention. Attorney Ralph Andrade says audits should be conducted using Generally Accepted Government Auditing Standards which include references to integrity, objectivity, and professional behavior. At the June Commission meeting, Andrade said Coolidge was violating those standards by imposing “personal beliefs or feelings that curb vehicle weight was a more appropriate standard than gross vehicle weight.” He argued in favor of a mutually agreed upon set of procedures and an independent outside audit.
“We are glad to open our books,” he said. “We’ve done that. We’ve given every piece of documentation that the City has asked for. You have all that. We welcome a fair and impartial audit. At this point, we don’t feel we can get that done from this particular internal auditor in this department and so we respectfully request that it be outsourced to an independent auditing firm.”
The attacks on Coolidge didn’t sit well with Gelber. “I didn’t understand why this came here and, by the way, I appreciate that you all are vigorously representing your client but it’s a little concerning when you talk about a City employee having these ethical issues when the truth of the matter is I don’t think that’s appropriate. I honestly don’t.”
Gelber said his understanding of the audit process is that once an audit is nearing completion, the auditing subject has a chance to make comments on items they disagree with. “You guys get a chance to say they’re wrong and then we look at it… I’ve never seen an audit being done where the guy’s being disregarded and saying preliminarily ‘We’re so unhappy we want a new auditor.’ It’s just, it’s weird. And frankly I don’t like the idea that somebody being audited can just… accuse the auditor of ethical mishaps which is really, I mean I’d be fine with everything if you hadn’t said that. But I feel like saying a City employee’s being less than ethical is of concern to me.”
Andrade also questioned Coolidge’s motivations in a May 21 email to City Manager Jimmy Morales. Calling out a statement in the May 3 audit which reads, “We conducted this compliance audit in accordance with the Standard Operating Procedures of the City of Miami Beach Office of Internal Audit as well as internal audit best practices,” Andrade wrote he requested a copy of the Standard Operating Procedures and Best Practices document. He includes an email from Coolidge which indicates “There is no formal document for Internal Audit Best Practices as instead it relates to the collective education, certifications and experience of our staff in performing internal audits and their usage of professional judgment.”
In his email to Morales, Andrade wrote, “To my shock and dismay, it turns out that there is no Internal Audit Best Practices and that the Standard Operating Procedures of the City of Miami Beach Office of Internal Audit [which was attached to Coolidge’s email] was revised today, May 21, 2019. Mr. Coolidge’s blatant attempt to mislead the City Commission by referencing a document that does not exist to support his judgmental and biased audit procedures is sufficient reason alone to disqualify him and farm out the audit to a professional auditing firm that follows Generally Accepted Auditing Standards.”
Andrade also objected to the initial use of judgmental (selective) versus random sampling as noted below.
Reminder: These audits are for Tremont only but contain some comparisons to Beach Towing.
Love ‘em or hate ‘em, here are the facts:
The March 5 draft used curb vehicle weight in the calculations. After meetings with the towing companies and hearing the objections at the April Neighborhoods Committee meeting, the May 3 draft used gross vehicle weight.
Regarding scope and methodology, both audits are referred to as “compliance” audits. In the May draft, the scope, objectives, and methodology section indicates the audit covers the period of October 2017 through October 31, 2018 and “focused primarily on determining Tremont Towing, Inc.’s compliance with” objectives that include “whether vehicle owners were charged in accordance with the maximum rates specified in the Towing Permits”; verifying the required annual Business Tax Receipt (business license); verifying required insurance coverage; “and other procedures as necessary.”
While the total numbers changed slightly from the March draft to the one in May, the May review shows a total of 11,294 tows by Tremont in the 13 months covered.
Class A vehicles made up the bulk of the tows, 11,250 or 99.61%. They include all vehicles up to 10,000 pounds, “a sedan to a pickup truck” according to the audit. These tows were charged at the rate of $140.
Class B, C, D vehicles are gradations of larger trucks, buses, and garbage trucks, for example. During the audit period, Tremont towed 44 of these vehicles or 00.39% of the overall sample. These fees include $145 for Class B, $175 for Class C, and $200 for Class D.
The May audit notes, “As there were no associated risks in Class A tows, no additional testing was performed in this area. Instead, Internal Audit’s focus was on the tows whereby the hook-up fees charged exceeded $140 which represented only .39% of all the reported Tremont Towing tows.”
In reviewing the Class B, C, D tows, Internal Audit used Parking Department and Police data but ended up excluding the Police tows (9% of the total) due to less robust documentation. They also made use of body cam footage from the Parking Department in determining if charges for dolly or flatbed services were warranted.
In the May summary, the internal auditors write, “Throughout the audit process, communication was maintained with the towing company’s representatives to request additional information and/or documentation. However, the received responses were not always sufficient to clarify the perceived shortcomings. Although Internal Audit did not draw conclusions on a large scale to the population, the outcomes from the audit process stated hereafter, strongly suggest that the towing companies need more robust oversight.”
“Furthermore, Internal Audit believes that the Towing Permits need revision to help improve accountability and to better ensure that individuals are being properly charged for public tows. Examples include, but are not limited to, placing the responsibility on the towing companies to justify additional charges rather than on the customer, better defining listed terms and clarifying any identified ambiguities, etc. In lieu of making these and other similar type revisions to the Towing Permits which includes clearly defining the roles of all parties involved, the deficiencies noted in this audit report will most likely continue and towing customers will have little recourse.”
Specific shortcomings noted with the 44 tows of the Class B, C, D vehicles:
Class B: 11 (39.28%) were charged correctly, 17 (60.71%) were overcharged $5 or a total of $85.
Class C: All 5 were overcharged according to the audit and should have either been in Class A or B. If all belonged in Class A (which the audit does not indicate but taking the worst case scenario), the total overcharges would be $35 x 5 for a total of $175.
Class D: The audit notes 7 of 11 tows were properly charged (63.64%). The remaining 4 (36.36%) were deemed to have been overcharged and belonged in categories from A to C. Again, taking the worst case scenario and assuming all belonged in Class A, the total overcharges would amount to $60 x 4 or $240.
In reviewing charges for hook-up fees on “the entire population of tows,” the auditors write, “[I]t was determined that eight (8) tows were assessed hook-up fees that exceeded the $200 Class D maximum allowable rate…” A “satisfactory explanation” was provided for one of the tows, leaving “seven (7) tows that were incorrectly charged ranging from a low of $300 to a high of $400.” Again, taking the worst case scenario and assuming the highest overcharge of $200 in all 7 cases, ($400 - $200 allowed), the total comes to $1,400.
The recommendations that follow this analysis in the audit are:
b. the burden of proof should be on the towing companies to prove that any charges other than the Class A hook-up $140 fee are valid rather than depending on the less knowledgeable consumers concerning towing transactions to question the charges.
Here is where Andrade objects: The March audit which was based on curb vehicle weight included an appendix of vehicles sampled with the listing of each curb vehicle weight. The May audit substitutes gross vehicle weight but the appendix in the May audit was noted as “will be sent separately.” Andrade has not seen that document and believes it may be flawed.
The March audit indicates a “judgmental” sample of 20 of 28 Class B vehicles towed versus a random sample. In a judgmental sampling a researcher chooses the sample subjects. A random sample includes subjects chosen randomly. Andrade objected to the judgmental sampling. The May audit removes “judgmental sampling” and, instead of a sampling of 20 vehicles, the review covered all 44 of the tows classified as B, C, and D.
In a March 12 email to a City official obtained by RE:MiamiBeach, Andrade wrote, “To crystallize the witch hunt nature of this judgmental sample, it is vital to note that the 28 Class B tows Tremont performed in the 13 month audit period represents less than one half of one percent of all tows performed by Tremont. 11,352 or 99.61% of Tremont’s tows were Class A tows. Tremont believes its compliance rate with 99.61% of all its Class A tows performed is 100%. When I asked Mr. Coolidge why he did not include Tremont’s 100% compliance rate with 99% of its tows, he replied that he only focuses and reports on the negative.”
As noted above, the May 3 audit corrected for the judgmental sampling and surveyed all 44 of the Class B, C, and D tows.
Dolly or Flatbed Services
The auditors write that during a 14-day sampling period of October 9 through October 22, “Twelve (12) of Eighteen (18), or 66.67% of Sampled Tremont Towing Customers were Overcharged for Dolly or Flatbed Services” based on body cam footage. These services are required for all-wheel drive vehicles to prevent transmission damage or those that do not roll properly (e.g. after an accident or other reason). The towing permits allow a $40 fee to be charged for these services. With 12 improper charges, the total equals $480.
This number is difficult to annualize as the policy changed 11 months into the audit period and there is no indication this is a “random” sampling. However, if you take the number of times these fees were charged over the 13 month period (1,106) and apply the 66.67%, you get a potential of 737 improper charges x $30 = $22,110.
Here, the audit notes one of the comparisons between Beach Towing and Tremont. “Beach Towing charged the corresponding $40 fee approximately 650% more frequently than their counterpart, Tremont Towing (7,179 compared to 1,106),” using totals for the 13 month audit period. “However, the difference became much smaller in September 2018 (34 charges for Beach Towing vs. 46 for Tremont Towing). It was also noted that the number of times that the dolly or flatbed services were charged decreased from an average of 644 times per month for October 2017 through August 2018 to 48 times per month for September and October 2018. This difference represents an estimated $258,870 [with a reference to an exhibit] additional amount in dolly or flatbed services charges when the initial eleven (11) month period (October 2017 – August 2018) is compared to the subsequent two-month period (September 2018 – October 2018).”
The audit makes note of an August 16, 2018 Miami New Times article, “Beach Towing Tacks on Bogus ‘Flatbed’ Fees, South Beach Driver Says” and a subsequent article on August 23 entitled “Miami Beach Cracks Down on Bogus Flatbed Fees” which the auditors noted included comments that “the Parking Department management informed both tow companies to only charge dolly or flatbed service fees if they were used in public view with a City agent present.”
“To determine this statement’s impact, a more detailed analysis was performed to determine the frequency of dolly or flatbed service fees charged daily,” the auditors write. They note “a decrease in charges after August 30, 2018.”
In Tremont’s case, the average monthly number of dolly or flatbed services from October 2017 to August 2018 was 94. For the months of September and October 2018, the average decreased to 38.
“Furthermore, when asked for the reasons concerning the decrease in dolly or flatbed service fees charged from mid-August 2018 through October 2018, Tremont Towing’s representatives responded as follows: ‘… on August 17, 2018 both companies voluntarily agreed not to assess flatbed/dolly fees unless a City agent is present to notate the use of such equipment at the originating site of the tow. This was a temporary and good faith proffer to avoid any confusion or misperception regarding the assessment of such fees due to inaccurate reporting by the media. It was both companies intention to address this temporary and voluntary practice with the City Commission when the towing permits were renewed in December 2018, but the opportunity did not present itself. It is both companies intention to revisit this matter with staff and/or the City Commission in the near future. In sum both companies are still using flatbeds/dollies consistent with their historical practices; however, they are voluntarily waiving the flatbed/dolly fees for tows where a City agent is not present to notate the use of such equipment.’” [Italics in audit document.]
Andrade told RE:MiamiBeach the use of the New Times articles showed the audit was not fair or impartial but created a “furtherance of the narrative to cast the industry as a negative.” When this reporter cited the lower number of tows using dollies or flatbeds in the months after the initial article, saying the context appeared to be that the auditors raised questions to see if the statements in the articles may have been true, Andrade responded that their use was “simply to influence the reader in a furtherance of the narrative to cast the industry as a negative. To me the use of the article was wholly unnecessary.”
The recommendation in this section reads, “The City Commission and City Administration should consider that the next negotiated Towing Permit contain language precluding the towing companies from billing for dolly or flatbed services unless they were used at the tow location and the Vehicle Storage Receipts are noted as such by the Parking Enforcement Specialists.”
Labor to Engage/Tow Fees
The auditors say Tremont overcharged for 18 of 28 tows (64.28%) during October 2018 for what is known as labor to engage a tow. Quoting City Code, the audit says this fee “is not an automatic fee and may only be imposed when access to enter the vehicle is required to properly engage/tow the vehicle.” [Italics in audit.] Examples include needing to “disengage the emergency brake, straighten the vehicle’s wheels, etc. to facilitate towing,” the auditors write.
Using body cam footage from both the Police and Parking Departments, the auditors came up with the 18 improper charges of $30 for a total of $540. There were two tows with labor fees ranging from $60 to $90 that the auditors believe were incorrectly billed. They found the towing company’s explanation of additional time to perform the tows was insufficient.
“Internal Audit also analyzed how often the $30 labor to engage/tow fee was charged during the thirteen (13) month audit period based on the Parking Department’s Excel spreadsheets,” the auditors write. “The results of this analysis showed that Tremont Towing charged the labor fee for 11,230 of the 11,294 test tows occurring between October 1, 2017 and October 31, 2018 (99.43%) which result in $334,477 being charged to their towing customers.”
While the audit did not extrapolate the relationship of the October 2018 sample to the 13-month total, we did the math. If the 64.28% of situations where the charges were applied when they should not have been according to the audit is applied to the 13-month total, overcharges could be $215,000.
Quoting an email to RE:MiamiBeach from Andrade in its entirety regarding these charges which is “Finding 3” in the May draft audit:
“Second, I made a PRR [Public Records Request] for the video footage alleged to have been reviewed to confirm their alleged findings, but Internal Audit refused to produce same. Thus, there is no way for me to comment on this alleged finding.
“Third, as demonstrated herein, Internal Audit does not even have the capacity to add properly, let alone review footage of a towing process they have no knowledge of and then make conclusions regarding what equipment was used or not used.
“Finally, as explained to Internal Audit, equipment is not always installed or used at the initiation of the tow. There are numerous reasons for this. Thus, it is possible the body cam footage allegedly reviewed did not capture the labor performed.
“In sum, Tremont disputes any conclusion or finding of wrongdoing in connection with Internal Audit’s flawed and biased audit and maintains that they charge only those fees that are permissible in accordance with the terms of the towing permit.”
The recommendation by the auditors in this section:
“The City Commission and City Administration should consider that the next negotiated Towing Permit include that corresponding towing companies should not invoice their customers for labor to engage/tow fees unless the tow operator needs to enter the vehicle at the tow location to help ready it for the tow. In addition, the Parking Enforcement Specialists should be required to note this fact on the Vehicle Storage Receipts to help confirm that the associated $30 charge is warranted.”
In this case, only one incorrect charge was noted for the seven-day period between October 9 and October 15, 2018, though in 22 cases there were 5 vehicles without a notation of the time they were impounded and 17 missing the time they were released to their owners.
“On average, Tremont Towing charged customers’ storage fees for only 14% of its tows as most vehicles were apparently retrieved within eight (8) hours,” the audit notes.
b. Customers should receive a copy of their Vehicle Storage Receipts, which contains the times that their vehicle was towed, so that they could accurately determine whether any storage fees charged are applicable.
Sales Taxes Collected
The auditors say Tremont charged 7% sales tax on “amounts collected for administrative and/or storage fees” which are not taxable. Noting they “did not review Tremont Towing’s monthly state sales tax returns to ensure that the correct amounts were reported as this audit report focused only on public tows and any sales tax monies paid would also include any private tow taxable amounts,” they write that Tremont collected $6,766.39 in state sales tax during the 13-month review period “which means that a substantial portion may have been unnecessarily charged and collected.”
“Tremont Towing should immediately confirm with the State of Florida before taking any definitive action; however, Internal Audit’s current position is that the 7% state sales tax should not be charged on administrative and/or storage fees for vehicles lawfully impounded for legal reasons. If subsequently confirmed by Tremont Towing, they should immediately stop charging and collecting sales tax on these tows, but until then all amounts collected should be timely remitted to the State of Florida.”
Required Insurance Coverage
The auditors write Tremont did not maintain the required insurance coverage noting deficiencies in lack of evidence on workers’ compensation (not provided), the City not being named as an additional insured in the “Description of Operations/Locations/Vehicles” section of their insurance coverage, and improperly naming the Parking Department versus the City as the named certificate holder. The recommendations were to correct the noted deficiencies.
As noted above, with the caveats that there is no indication the sampling was random and with the towing companies’ objections noted as to the methodology, here’s our summary of the amount of the potential overcharges taking a worst-case scenario approach.
Overcharges on tows for vehicles that may have potentially been misclassified:
Class B: $ 85
Class C: $175
Class D: $240
Improper hook-up fees: $1,400
Improper dolly/flatbed fees: using extrapolation, potentially $22,110.
Labor to Engage/Tow Fee Overcharges: potentially $215,000
The total for Tremont is $239,010 or 8.2% of their 13-month revenue which the auditors indicate was $2,884,738.
We did not include the sales tax number as the propriety of collection needs to be verified by the State.
The questions Andrade raised about the methodology convinced four of seven Commissioners to vote for an outside auditor.
John Alemán said, “I have enough questions that, and I’m not pointing fingers at anyone in particular, but I’m saying that I have enough questions that someone is trying to influence this audit and I just want to know what the answer is. I don’t know if they’ve done a good job, bad job, they owe people money back, they owe us money back, I don’t know, but I want a deliverable that I can believe in, that I don’t think anybody tainted because we’re going to make some decisions based on that. I don’t’ know what they’re going to be. I don’t even know what the questions are going to be. But I adamantly do not want to complete an audit that’s under so much question because whatever the conclusions are they’re already suspect so let’s just start again. Let’s get someone who doesn’t have a dog in this fight to conduct a normal, standard, free, world-class audit for us and let’s move past this.”
Joy Malakoff, a former banker, said this was the normal process and that the auditee had a chance to comment once the results were put in draft form.
Gelber responded, “I don’t know that what [Coolidge is] doing is wrong. Let’s just let him finish and, by the way, they’ll have a chance to respond and then we’ll look at it and we’ll have this discussion. That’s what audits do. It’s just sort of, it’s weird to me when the company being audited can say ‘We don’t like what’s going on right now, give us a new auditor.’ That’s not really how audits work frankly.”
Michael Góngora was on the Commission the last time an audit was conducted on the companies. (In an interview with RE:MiamiBeach Andrade said he believed the audits were not required but were a right the City could exercise.) The 2012 audit was conducted by an outside auditor.
“I don’t think this item is any reflection on how we feel about our staff,” Góngora said. “Clearly we think everybody is wonderful and capable… nobody should be coming in critical of anybody that works in our city.”
“I’m a creature of habit, I guess we all are. We kind of do what we know and… having been here before the last time this became a little controversial, as it always does, we went with an outside auditor.”
Addressing concerns raised by City Attorney Raul Aguila that this could set a precedent for other City vendors that don’t like an internal audit to request another one, Góngora said, based on his experience, “In my mind that is the precedent just ‘cause that’s what I knew. We never had our in-house people audit the towing company. We went out to a third-party professional company.”
(At the April Neighborhoods Committee meeting, now-retired Assistant City Manager Kathie Brooks said, "I believe in 2012, it was more of a resource issue at the time” to use an outside firm.)
Alemán, Góngora, Aguila, and Commissioner Mark Samuelian noted, in the future, the process would be the purview of the independent inspector general approved by voters but still to be hired.
“I think all of this will become moot in the future when an independent inspector general is working for the City,” Góngora said. “But we have to decide what we’re going to do now. This has become controversial. There’s a lot of people that are very upset whenever we talk about towing because, let’s face it, it’s an unpleasant experience. People don’t like it. They don’t like the industry. And, quite frankly, they may be right. I want to know what’s going on, the good, the bad, and the ugly. We’re not suggesting one audit or another to try to get any type of a different result. We’re trying to get to the truth. What is it that’s going on? What can we do better and what can we learn from an audit and, in my opinion, I think the best way to get to that is to hire an outside company that we’re hiring, that they’re paying for, who’s going to be separate and apart from this system, separate and apart from this Commission, and these meetings and this drama that has surrounded this item and can render that independent report to our City Manager.”
Ricky Arriola said, “It’s no secret that towing tends to be a hot button controversial issue in our city and I think if we can do it with a third party that they’ll pay for, we select, that solves everyone’s problems. I think if we were to do this completely internally and it’s a clean bill of health then some people in the public will say then you’re in cahoots with them and then if it comes in that it’s not clean then you’re out to get us. For the protection of Jimmy [Morales] and his team and us, just remove it. Give it to a third-party that we’re comfortable with. If they’re willing to pay for it then whatever comes out really is sort of above reproach.”
Samuelian echoed Gelber and Malakoff’s comments. “I, too, think this is a little bit unusual… We certainly could go out to the outside at some point but I don’t see why we would stop the process at this point. It seems a little unusual to me. So, I would be supportive of completing the audit.”
On the motion to engage an independent third-party auditor of Morales’ choice paid for by the towing companies, the vote was 4-3 in favor. Alemán, Arriola, Góngora, and Micky Steinberg voted in favor. Gelber, Malakoff, and Samuelian against.
Andrade had one more objection. In asking for agreed upon standards and procedures, he protested Coolidge’s statement at the May 29 Audit Committee meeting that he wanted to be involved in setting the scope of the audit, saying he thought it was inappropriate for him to be involved.
At that meeting of the Audit Committee, which is available by audio only so not all speakers are easily identifiable, Coolidge did say, “I would like some say in setting the scope.” His reasoning, “I don’t want a repeat of Marcum’s 2012 audit which was a very simplistic audit. It wasn’t even an audit.”
The 2012 review on file indicates it is an “Independent Accountants’ Report” and consists of a one page cover letter followed by seven pages titled “Internal Audit Procedures” and lists compliance with requirements in the Permit including having a valid Business Tax Receipt; maintaining the appropriate insurance policy/certificates; policies for dealing with nuisance issues and complaints; policies regarding police holds; maintaining the required equipment; proper notification of delays in responding to calls for service; waiving “drop frees” when an owner returns to their vehicle prior to the vehicle being lifted; towing rates; and proper maintenance of records and files.
The cover letter noted the report “relied on the sufficiency, accuracy, and reliability of information provided by the Permittee. Except as otherwise noted, we did not independently verify the information provided to us.”
It goes on to say, “Because the procedures do not constitute an audit or examination, we did not express an opinion on any of the accounts or any other items. If we were to perform additional procedures, other matters might have came [sic] to our attention that would be reported to you.”
It continues, “Our engagement cannot be relied upon to disclose errors, irregularities or illegal acts, including fraud or defalcations that may exist. Based on the procedures performed, we are not aware of any material errors, irregularities or illegal acts that came to our attention.”
It concludes, “The sufficiency of the procedures for this purpose and the contents of our work plan were solely your responsibility. Consequently, we make no representations regarding the sufficiency of the procedures either for the purpose of this engagement or for any other purpose.”
Coolidge told the Audit Committee the City paid $30,000 for the Marcum review.
In further explaining the process to the Audit Committee, Coolidge said, “We already have a great amount of time invested” including “three reports in draft form” for Tremont, Beach Towing, and the towing process from the City’s side as well as “numerous meetings… but if we get the direction to terminate the audit then so be it.”
When asked what the issues were from the towing companies, Coolidge replied, “They find anything objectionable.” He said at meetings the companies brought “two attorneys, forensic accountants and the owner of Tremont Towing. We had a full house and from the beginning they’ve been all guns on deck as the saying goes.”
Initially the Audit Committee was going to recommend the internal audits be completed while asking if the Commissioners understood that the typical audit process is to complete the draft, followed by the opportunity for the auditee to comment and raise objections. But when Coolidge said “The [City] Manager is taking the position that it should be sent out to an external auditor to conduct the audit because of accusations of bias although there’s none that anyone is aware,” the Committee recommended that if the Commission felt that was the best course of action, the auditor should be selected by the City and paid for by the towing companies and that there should be a “set of mutually agreed upon procedures” for conducting the audit. They also suggested a finite date for completion and, if not completed by that time, the internal audit would stand.
At the June Commission meeting before the vote to hire an outside auditor, City Manager Morales said, “Mr Coolidge, he’s a pretty much professional, straight by the book kind of guy… I’m quite comfortable with finishing the path of the audit and receive the comments and move it forward. That said, I realize some commissioners have raised some concerns and I never want any work product to have a bias or alleged bias or clouds over it and certainly I would not have any objection if the Commission decides that’s the best route to go.”
Andrade maintains the towing companies “welcome the audit as long as it's factual and impartial and we’ll live with the results” but he said, “There’s an overarching cloud that hangs over the entire process.”
He told RE:MiamiBeach, “There’s always going to be some human errors. I’m not suggesting human errors didn’t happen” but, he said, the auditors are “focusing on less than one half of one percent” of the tows in a 13-month period. “Failure to report the good was a furtherance of the narrative to cast the industry as a negative,” he said.
When asked what he expected from an outside audit, he said “I expect 99% plus in compliance with the towing permit. Less than one percent may have been some errors that were made.”
In a follow up email asking Andrade if he thought the recommendations in the audit might remove some of the disputes in the future, he wrote, “The ‘recommendations’ are based on a flawed analysis and manipulated data and thus do not warrant any consideration or comment. More importantly, Tremont’s 99.61% compliance rate with the towing permit regulations evidences the existing regulations are more than adequate to protect the public. Making changes based on alleged errors of less than one half of one percent of all tows (.39% or 44 out of 11,250 tows) is trying to fix something that’s not broken.”
The issue, as raised above, is what the non-compliance found in the “less than one half of one percent” means in terms of Tremont’s overall revenue. And that all depends on if you agree with the methodology and findings of the draft report.
Stay tuned. The next chapter is pending…