HomeMy WebLinkAboutAudit of Administrative Towing Fees01.11-ti'i
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THEODORE P. GUBA, CPA, CIA, CFE
Telephone (305) 416-2044
INDEPENDENT AUDITOR GENERALY
OF E-Mail: tguba@miamigov.com
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September
17, 2015
Honorable Members of the City Commission
City of Miami
3500 Pan American Drive
Coconut Grove, FL 33133-5504
Re: Audit of Administrative Towing Fees for the period October 1, 2009 through September 30, 2014
Audit 915-012
Executive Summary
We have completed an audit of selected towing fee collections and administrative towing fee payments made to
the City of Miami (City) by towing companies contracted to do business in the City. Our audit covered the period
primarily from October 1, 2009 through September 30, 2014.
The audit was performed to determine whether the City is collecting accurate administrative towing fees from
contracted towing companies and whether the companies were properly charging vehicle owners and operating in
compliance with written agreements and the City Code (Code). We also conducted an examination of the
existence and/or effectiveness of internal control policies and procedures within the Miami Police Department
(MPD) with regards to its responsibility for ensuring Code and contractual compliance by towing companies.
During the audit period noted above, annual administrative towing fees collected from towing companies averaged
approximately $279,000. During our audit fieldwork, we examined the propriety of one month of towing invoices
charged to vehicle owners totaling $69,813 from four judgmentally selected towing companies.
Based on the results of our audit, we have concluded that MPD's procedures and controls over the towing
companies operating in the City were inadequate. Specifically, MPD personnel did not monitor towing
company operations to ensure that customers were charged the correct towing rates, and controls were not
in place to ensure that towing companies paid all of the City administrative fees owed. As such, we observed
the following:
• Signage required to display towing rates were incorrect and were not located so that rates could be easily
viewed by customers. (Schedule 1, page 4).
Towing receipts/invoices totaling $69,813, for one full month for each of four contracted towing
companies, revealed exceptions totaling $43,224 (or 62%) that included overcharges to customers
($8,281), unexplained charges ($4,358) and/or missing pickup and release times ($32,761). (See page 6
and Schedule 2).
• Controls over non -released vehicles, towing fee collection procedures, and tow activity reporting were
inadequate; consequently:
OFFICE OF INDEPENDENT AUDITOR GENERAL, 444 S.W. 2ND AVENUE, 7th Floor, MIAMI, FLORIDA 3 313 0-1910
o Nine companies potentially owe the City $51,430, of which $7,798 has already been collected as
a result of our audit (page 13 and Schedule 4 on page 13);
o Two companies owe the City $1,340 in additional administrative fees (page 9 and Schedule 3 on
page 9); and,
o Six companies have outstanding administrative fee balances totaling $16,032 that are from 22 to
933 days past due to the City (page 15 and Schedule 5 on page 15).
• Procedures need to be created to ensure that tow companies possess/renew occupational licenses.
We provided management with recommendations to correct the above deficiencies including having City
management obtain and implement a system that would not only mitigate vehicle owner overcharges, but also
facilitate accurate and timely administrative fee billings that would enhance City revenue.
We wish to express our appreciation for the cooperation and courtesies extended to us by all City personnel while
conducting this audit.
Sincerely,
Theodore P. Guba, CPA, CIA, CFE
Independent Auditor General
Office of the Independent Auditor General
cc: The Honorable Mayor Tomas Regalado
Daniel Alfonso, City Manager
Victoria Mendez, City Attorney
Todd Hannon, City Clerk
Alberto Par us, Assistant City Manager
Fernando Casamayor, Assistant City Manager/Chief Financial Officer
Nzeribe Ihekwaba, Assistant City Manager/Chief of Operations
Rodolfo Llanes, Chief, Miami Police Department
Jorge Gomez, Assistant Chief, Miami Police Department
Keith Cunningham, Major, Miami Police Department
Alberto Alberto, Jr., Major, Miami Police Department
Mario Dell Amico, Police Sergeant, Miami Police Department
Juancarlo Erigoyen, Police Officer, Miami Police Department
Michelle Choi, Budget and Finance Manager, Miami Police Department
Lidia Aguirre, Senior Accountant, Miami Police Department
Christopher Rose, Director, Office of Management and Budget
Jose Fernandez, Director, Finance Department
Armando Blanco, Treasurer, Finance Department
Demetrio Constantiny, Accounts Receivable Supervisor, Finance Department
Members of the Audit Advisory Committee
Audit Documentation File
Audit conducted by: Marcus Cabral, CPA, CISA, Senior Auditor
Paulino Garcia, Staff Auditor
Audit reviewed by: Lewis R. Blake, CPA, CIA, Audit Manager
OFFICE OF INDEPENDENT AUDITOR GENERAL, 444 S.W. 2' AVENUE, 7th Floor, NIIAMI, FLORIDA 33130-1910
AUDIT OF ADMINISTRATIVE TOWING FEES
OCTOBER 1, 2009 through September 30, 2014
Audit No. 15-012
TABLE OF CONTENTS
SCOPE, OBJECTIVES AND METHODOLOGY................................................................................................................... 1
BACKGROUND...................................................................................................................................................................... 2
AUDIT FINDINGS AND RECOMMENDATIONS............................................................................................................... 3
FINDING 1: SIGNAGE SHOULD LIST ACCURATE TOW RATES AND BE POSTED AT THE POINT OF
PAYMENT........................................................................................................................................................................... 3
FINDING 2: MONITOR TOW COMPANY OPERATIONS TO ENSURE THAT CUSTOMERS ARE NOT
OVERCHARGED................................................................................................................................................................ 5
FINDING 3: CONTROLS OVER TOWING ACTIVITY REPORTING FOR BILLING PURPOSES WERE
INADEQUATE.................................................................................................................................................................... 8
FINDING 4: CONTROLS OVER NON -RELEASED ("PENDING") VEHICLES WERE INADEQUATE ................... 12
FINDING 5: COLLECTION PROCEDURES FOR OUTSTANDING ACCOUNTS RECEIVABLE BALANCES
WEREINADEQUATE...................................................................................................................................................... 14
FINDING 6: ESTABLISH POLICIES AND PROCEDURES TO ENSURE THAT TOWING COMPANIES RENEW
BUSINESS TAX RECEIPTS ANNUALLY..................................................................................................................... 16
SCOPE, OBJECTIVES AND METHODOLOGY
The scope of the audit included an examination of the procedures and controls over the City's collection
processes of administrative towing fees and controls/oversight of towing company activities. The audit
primarily covered the period October 1, 2009 through September 30, 2014 and focused on the following
objectives:
• To determine whether towing companies, that were contracted to render towing services within the
City pursuant to the towing agreement, assessed vehicle owners' fees/charges that were in
compliance with the City Code and/or the towing agreement when applicable;
• To determine whether administrative fees owed to the City were processed and remitted to the City
as required by the towing agreement and City Code;
• To determine whether the towing companies obtained occupational licenses as stipulated in the
City Code;
• To determine whether the towing companies acquired the appropriate insurance coverage as
mandated by the towing agreement and City Code;
• To assess the effectiveness of internal control policies and procedures within the responsible
department;
• Other audit procedures as deemed necessary.
We conducted this audit in accordance with Generally Accepted Government Auditing Standards. Those
standards require that we plan and perform the audit to obtain sufficient and appropriate evidence in order
to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe
that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit
objectives. The audit methodology included the following:
• Interviews and inquiries of appropriate personnel.
• Reviews of written policies and procedures in order to gain an understanding of the internal
controls.
• Observations of current practices and processing techniques.
• Tests of applicable transactions and records.
• Other audit procedures as deemed necessary.
BACKGROUND
On December 21, 2006, the City of Miami (City) executed a Towing/Wrecker Agreement (Agreement)
with eight companies to provide Miami Police Department (MPD) dispatched towing and wrecker services
for private vehicles (e.g., for accidents, arrests, etc.). The Agreement was for the period starting July 13,
2006 through July 12, 2009, with a two year renewal option period through July 13, 2011. The contract
has continued to remain active through temporary extensions. Management plans to formalize a new
contract later this calendar year.
In addition to the contracted towing companies, there are approximately twenty towing companies that are
permitted to perform private property tows (non-consensual tows) within the City.
Contracted tow companies should provide services and charge vehicle owners fees in accordance with the
Agreement and Chapter 42 of the City Code. All other companies, that are not part of the Agreement,
should adhere to the provisions in the Code.
Each of the contracted towing companies are assigned a zone (geographic boundary within the City) in
which to operate; and, as consideration, each company is required to pay the City a monthly towing
administrative fee of $26 per tow (as of the date of our testing) within their assigned zone. Non -contracted
companies are required to pay the City an administrative fee of $16 per tow.
The MPD Wrecker Detail (Wrecker Detail) is responsible for overseeing towing companies operating in
the City; and, MPD Criminal Investigation Section (CIS) desk operators are responsible for gathering and
reporting towing activity data (e.g., address/location, case number, vehicle license plate number, etc.) that
serves as the basis for monthly billings of towing administrative fee invoices by the City's Finance
Department (FD).
Towing activity data is reported to CIS desk operators who enter the data into the Computer Automated
Dispatching system (CAD). The data is then arranged by the MPD Budget Unit (BU) into individual
"Miami Police Towing Administrative Fee Remittance Reports" that contain towing activity specific to
each tow company.
The BU forwards respective monthly reports to each company for review and reconciliation; and, upon
making revisions to their respective reports, the companies return them to the BU. Towing activity data
attributable to each company is then summarized (i.e. total tows performed; the number of released vehicles
multiplied by the applicable administrative fee; total invoice amount) and forwarded to the City's FD
Accounts Receivables Section (AR) for towing administrative fee invoicing and billing.
Total revenues generated from towing administrative fees during fiscal year 2014 (FY 2014) were $291,043
of which $206,726 or 71 percent were attributable to the eight contracted companies.
City's Administrative Towing Fee Revenue
Fiscal Year
2014
2013
2012
2011
2010
2009
Total
$291K
$304K
$265K
$261K
$252K
$300K
Average Annual Revenues: $279K
AUDIT FINDINGS AND RECOMMENDATIONS
Overall Conclusion: Based on the results of our audit, we have concluded that MPD's procedures and
controls over the towing companies operating in the City were inadequate. Specifically, MPD personnel
did not monitor towing company operations to ensure that customers were charged the correct towing rates,
and controls were not in place to ensure that towing companies paid the City administrative fees owed. As
such, we observed the following:
• Signage required to display towing rates were incorrect and were not located so that rates could be
easily viewed by customers. (Schedule 1, page 4).
• Towing receipts/invoices totaling $69,813, for one full month for each of four contracted towing
companies, revealed exceptions totaling $43,224 (or 62%) that included overcharges to customers
($8,281), unexplained charges ($4,358) and/or missing pickup and release times ($32,761). (See
page 6 and Schedule 2).
• Controls over non -released vehicles, towing fee collection procedures, and tow activity reporting
were inadequate; consequently:
o Nine companies potentially owe the City $51,430, of which $7,798 has already been
collected as a result of our audit (page 13 and Schedule 4 on page 13);
o Two companies owe the City $1,340 in additional administrative fees (page 9 and Schedule
3 on page 9); and,
o Six companies have outstanding administrative fee balances totaling $16,032 that are from
22 to 933 days past due to the City (page 15 and Schedule 5 on page 15).
• Procedures need to be created for ensuring that tow companies possess/renew occupational licenses
Details of our findings and recommendations follow:
FINDING 1: SIGNAGE SHOULD LIST ACCURATE TOW RATES AND BE POSTED AT THE
POINT OF PAYMENT
The City Code lists maximum private property towing and storage rates (see table below) which must be
posted and easily readable at the customer's point of payment. The applicable rates depend upon the
weight/size of the towed vehicle (e.g., Class A or Class B), rather than the actual wrecker equipment (i.e.
truck) utilized. Base rates shall include a "Towing Agency Fee" (e.g., $52.50 for Class A) plus the $16.00
"City Administrative Charge" payable to the City.
Class A
Base Rate — $68.00 **
Towing Agency — $52.50
City Administrative
Charge - $16.00
Class B
Base Rate — $79.00
Towing Agency — $63.00
City Administrative
Charge - $16.00
Class C
Base Rate — $105.00
Towing Agency — $89.00
City Administrative
Charge - $16.00
Class D
Base Rate — $131.00
Towing Agency — $115.50
City Administrative
Charge - $16.00
** There is an error in the City Code for the "Base Rate" for Class A tows which should equal $68.50
($52.50 Towing Agency Fee + $16.00 City Administrative Fee). However, upon audit inquiry, we were
informed that proposed revisions to the Code will rectify this error.
We also observed the signage for maximum police towing and storage rates and did not note any exceptions.
Observations:
Our walkthrough of four contracted towing company sites revealed that, in many instances, posted signs
had tow rates in excess of the maximum tow rates required by the Code. The schedule below (Schedule 1)
provides a comparison between maximum allowable charges pursuant to the Code and charges posted by
the respective towing companies.
SCHEDULE 1
COMPARISON OF MAXIMUM TOW RATES AND AMOUNTS POSTED BY TOWING COMPANIES
Tow Class/Charge
Maximum Private
King's Wrecker
Ted & Stan's
Nu -Way
Molina Towing
Type
Property Tow
(see Note 1)
(see Note 2)
Towing (see
(see Note 4)
Rates Per Code
Note 3)
Class A
$52.50
$101.00
$65.00
$68.00
Rates Not
Posted
Class B
$79.00
$165.00
$165.00
$79.00
Rates Not
Posted
Class C
$105.00
$235.00
$235.00
$105.00
Rates Not
Posted
Class D
$131.00
Rates Not
$300.00
$131.00
Rates Not
Posted
Posted
City Fee
$16.00
$16.00
$15.00
Not Posted
Rates Not
Posted
Daily storage Rate
(First 6 hours —
$12.50
$20.00
$20.00
$20.00
Rates Not
no charge)
Posted
Administrative
Services Fee (After
$10.50
$30.00
$32.00
$10.50
Rates Not
24 hours)
Posted
Note 1 - King's Wrecker:
Although the City Code requires that towing rates be posted in easily readable form at the customer's point
of payment, King's Wrecker's posted signs in two locations. One sign listed correct towing rates that were
posted in a location that was at least ten feet away from the payment window and was not "easily readable"
by customers. They also posted a sign next to the payment window that included rates that differed from
those required in the ordinance, as depicted in the chart above. Our testing disclosed that customers were
charged the rates listed on the sign that exceeded maximum amounts. However, shortly after our site visit
we informed the MPD of our observations, and the sign listing the excessive rates was removed.
4
Note 2 - Ted & Stan's Towing Service, Inc.:
In addition to posting and charging excessive rates, we noted a sign posted at the site stating that "All cash
paying customers must pay in exact change. We do not provide change at all!!! No Exceptions." This
language is a violation of the City Code (Method of Payment) which states that "persons operating or in
charge of the storage facility shall have sufficient moneys on the premises to accommodate and make
change in, a reasonable monetary transaction."
Note 3 - Nu -Way Towing Inc.:
We noted the private property tow rates were posted on the front window of the entrance of Nu -Way Towing
and stated "Private Property Tows". The signage did not state that the rates applied to City of Miami private
property tows, which differed from the County (Miami -Dade County) rates at the time of our audit.
Furthermore, the rates were not at the customer's "point of payment" location as required by the City Code.
Note 4 - Molina Towing lnc.:
Molina Towing's site did not have any signs showing the City of Miami private property tow rates as
required by the Code. However, our testing indicated that they did not charge customers in excess of the
maximum rates.
Finally, we noted that site visits were not periodically conducted by MPD personnel to ensure that towing
companies post the proper signage to inform customers of the maximum amounts that can be charged.
RECOMMENDATION 1.1: Miami Police Department (MPD)
We recommend that the MPD conduct periodic site visits to ensure that towing companies comply with all
aspects of the City Code, including the posting of maximum towing rates for private property tows.
• MPD Response:
As per our MPD Wrecker Detail Standard Operating Procedure (SOP 1, A and SOP 1, L,2), we have and
will continue to conduct "Spot-check" inspections of all tow yards to ensure the rates are correct and signage
is properly posted. Furthermore, we will be adding to SOP 1, L, 2 that wrecker detail officers will take
photographs of each tow yards signage and keeping them in the towing companies file for our records. The
procedure of the photographs will be done on every inspection.
• Implementation Date: 08-24-2015
FINDING 2: MONITOR TOW COMPANY OPERATIONS TO ENSURE THAT CUSTOMERS
ARE NOT OVERCHARGED
In addition to the maximum towing and storage rates that are required to be posted by towing companies
(base rates, towing agency rates and City administrative charges) as outlined in Finding 1, City Code also
allows towing companies to impose a $10.50 "Administrative Service Charge" on vehicle owners in order
to defray the costs of verifying vehicle ownership information and preparing other paperwork associated
with a vehicle tow that has been stored for at least 24 hours.
Once a vehicle is towed, companies may also impose "Storage Charges" of $12.50 per day if the vehicle is
stored in excess of six hours. Also, if a vehicle owner arrives at the scene subsequent to their vehicle being
connected to the tow truck, companies should release the vehicle and charge the owner one-half of the
agency rate (i.e., $52.50 - 2 or, $26.50).
Finally, the Agreement requires contracted towing companies to fully itemize all bills, which includes the
towed vehicle arrival and departure ("pick up and release") time information to be noted on standard forms
acceptable to City. This information documents and enables the calculation of accurate storage charges
and administrative service fees. If a towing company charges a vehicle owner an excessive towing or
storage charge, the company must refund the vehicle owner three times the amount of the overcharge.
Observations:
In order to review compliance with the above provisions, we examined receipts/invoices for one full month
for each of four contracted towing companies totaling $69,813. The tows were conducted between the
months of October 2014 through January 2015 and pertain to both private property and police tows. As
indicated in Schedule 2 below, our review disclosed that exceptions totaling $43,224 (or 62%) indicated
overcharges to customers totaling ($8,281), unexplained charges ($4,358) and/or missing pickup and
release times ($32,761 = $20,771 attributed to Ted & Stan's Towing + $11,990 attributed to Nu -Way
Towing). It should be noted that all of the invoices examined for Ted & Stan's Towing and Nu -Way
Towing had documentation exceptions. As a result, we were unable to ascertain if there were additional
overcharges for these two companies that related to storage/administrative service charges.
SCHEDULE 2
SUMMARY OF EXCEPTIONS: OVERCHARGES, UNEXPLAINED CHARGES AND MISSING DATA
Exceptions
Total
Exceptions:
Exceptions:
Exceptions:
Missing
Total
Overall
Towing Company
Invoices
Overcharges
Unexplained
Pickup/Release
Exceptions
Exception
Examined
Charges
Rate
King's Wrecker
$24,662
$6,105
$4,3582
$0
$10,463
42%
(Dec -2014 invoices)
Ted & Stan's Towing
$20,771
$1,766'
$0
$20,771'
520,771
100%
(Oct -2014 invoices)
Nu -Way Towing
$11,990
$410'
$0
$11,990'
511,990
100%
(Jan -2015 invoices)
Molina Towing
$12,390
$0
$0
$0
$0
0%
(Oct -2014)
L- Totals $69,813
$8,281
$4,358
Note 1
$43,224
62%
(See 91 below)
(See #2 below)
(See #3 below)
'
(1) Customer Overcharges were primarily due to charging the incorrect rates that were posted at towing
company sites as described in Finding 1 (base rates, towing agency rates and city administrative
charges). As a result, the companies overcharged customers a total amount of $8,281.
(2) The unexplained charges totaling $4,358 were noted in the "other" field of King's Wreckers
receipts and the charges ranged from $30 to $132. Five charges totaling $504 had explanations
which were inadequate, including three charges for "waiting", one charge for "extra labor" and one
charge for "clean up". The Agreement allows for extra charges on the scene and are based on 15
minute intervals. However, we were unable to determine whether the "waiting" charges were in
compliance with the Agreement as the actual waiting time was not noted on the receipt. The
Agreement does not allow for additional charges for "extra labor" or "clean up".
(3) Our review of Ted & Stan's and Nu -Way Towing's invoices totaling $32,761, for the months of
October, 2014 and January, 2015 respectively, disclosed that vehicle pickup and release times were
not recorded as required by the Agreement. Storage for the first six hours should be at no charge
as stated in the City Code. Without this information, we were unable to determine whether storage
charges and administrative service charges to customers were justified and in compliance with the
Code. We have noted that every invoice reviewed for Ted & Stan's private property tows included
one day of storage and administrative service charges to customers. These charges were
appropriate only if each car was at Ted & Stan's storage for over 24 hours. In contrast, we noted
that out of 18 tows examined, Nu -Way Towing only included administrative service fees and
storage fees on five invoices (or 28%).
Finally, we noted that site visits were not periodically conducted to ensure that towing companies complied
with contract and City Code requirements.
RECOMMENDATION 2.1: Miami Police Department (MPD)
To ensure that customers are not overcharged, we recommend that the MPD conduct periodic (quarterly or
semiannually) surprise reviews of towing company charges to customers. In addition, the MPD should
enforce City Ordinance § 42-109 part (b) which requires towing companies to refund the vehicle owner
three times the amount of the overcharge for excessive towing fees.
• MPD Response:
Since the audit, the City of Miami has adopted the same towing rates as Miami Dade County. This action
has alleviated towing companies from having two different signs posted at their lots which caused confusion
to the customers. As per MPD Wrecker Detail Standard Operating Procedure (SOP 1, R) the wrecker detail
officer will inspect the records of Towing Companies to ensure that the correct fees are being charged by
reviewing the actual customer receipts and comparing them to the fee schedule. We will also be looking
for "additional charges" and making sure they are compliant with the actual contract. If there are any
overcharges, we will enforce the city ordinance which will require the towing companies to refund the
vehicle owner three times the amount of the over charge. We are adding SOP 1, R, 1 which states that the
towing detail officer will keep a record of each overcharge occurrence in the towing companies file. We
are also currently looking into computer software that will ensure that the correct fees are being charged to
customers. The software will automatically bill the customer based on the contract and take away the ability
for towing companies to add or delete any additional charges. The customers, towing companies, and the
City of Miami would be able to see the bill online from any electronic device with internet access. This
system would almost eliminate any overcharges to the customer. The software is called TOPS Towing
Operations Software and it is currently being evaluated.
• Implementation Date: 08-24-2015
7
FINDING 3: CONTROLS OVER TOWING ACTIVITY REPORTING FOR BILLING
PURPOSES WERE INADEQUATE
The City Code requires both contracted and non -contracted towing companies to report private property
towing activity to the MPD within 30 minutes of completing a tow. In addition, the Code requires
companies to keep daily logs or "trip records" that document all tows conducted within the City (including
police -dispatched and private property tows). Towing activity reported to the MPD and included in these
records should include: the address/location of a vehicle's removal; the time (in hours and minutes) when
the vehicle was removed; storage site location; salient vehicle information (e.g., color, make, model, license
plate number); and, the name of the property owner who instructed the removal.
As described on page 2, towing activity information reported to the MPD CIS desk operators is entered into
CAD and arranged into individual reports specific to each company. The reports are then forwarded to the
companies for review and reconciliation; and, upon making revisions to their respective reports, the
companies return them to the MPD BU where respective towing activity data is summarized and forwarded
to the AR Section for towing administrative fee invoicing and billing. It should be noted that since the
City fully relies on towing companies for the performance of monthly reconciliations of towing
activity recorded by the City to towing company records, unreported tows or tows improperly
reported as not being conducted will not be detected. Consequently, there is no assurance that the
City collects all administrative fees owed by towing companies.
Observations:
In order to review compliance with the above provisions, we examined towing record reports provided by
MPD for one full month for each of four contracted towing companies (Kings Wrecker Service, Ted &
Stan's Towing, Nu -Way Towing and Molina Towing). It should be noted that FY 2014 administrative fee
revenue attributable to the selected companies totaled $80,658, or 28% of $291,043 in total administrative
fee revenues. The tows were conducted between the months of October 2014 through January 2015 and
pertain to both private property and police -dispatched tows.
During our review, we found that two companies under -reported private property and police tows to the
MPD:
King's Wrecker Service (King's) paid $1,652 in administrative fees to the City for December
2014, however, we determined they owed an additional $980 for the month tested for unreported
towing activity. We reviewed 137 tow receipts, related tow logs and monthly tow activity
reconciliation records for the month and discovered that 55 receipts, or 40%, had the following
exceptions: 42 private property tows were not reported to the City; two tows were erroneously
reported as being cancelled by MPD; three private property tows were erroneously reported as
being cancelled; and, the company claimed to have "no records" (coded as "NR") for eight police
tows that were conducted and customers were charged.
Ted & Stan's Towing paid $2,080 in administrative fees to the City for the month of October
2014, but owed an additional $360. We reviewed 110 Ted & Stan's tow receipts and monthly tow
activity reconciliation records for October 2014 and discovered that 15 receipts, or 14%, had the
following exceptions: 14 instances where the company claimed that there were no records (coded
as NR) of the tow, and an additional police tow that was not included in the monthly reconciliation.
Upon further review, it was determined that MPD never recorded this tow into its dispatch system.
However, all 15 tows were conducted and charged to customers, and were documented/supported
by receipts.
As summarized in Schedule 3 below, the two companies owe the City $1,340 in additional administrative
fees either because towing activity (primarily private property tows) was never reported to the MPD or
actual tows were reported to the City as "cancelled" or the company erroneously claimed that there were
"No Records" for a particular tow.
SCHEDULE 3
INADEQUATE TOWING ACTIVITY REPORTING FOR BILLING PURPOSES
REASONS FOR TOWS - Initially Reported
NON-PAYMENT and Under -reported
Police I $26
Private $16
Ted & Property
Stan's
Police 1 $26
0 1 10
C
C
Total
Tows
Erroneously
should've
Admin
Not
Reported as
Tow
Tow
Fee
Reported
Cancelled
Comp.
Type
Rate
for
or "No
Payment
Record"
Private
$16
42
3
FGng's
Property
Police I $26
Private $16
Ted & Property
Stan's
Police 1 $26
0 1 10
C
C
Total
Tows
Under-
should've
Initially
reported
r
been
Rate
Reported
Tows
46
48
10
34
66 82
44 1 23% 1 $260
137 1,
3 3 39 42 7% $48
12 12 56 68 18% $312
16 96 110 14% $360
Total Admin Fees Due City 1 $1,340
Finally, we noted several instances where MPD dispatchers entered data into the dispatching software
incompletely, which significantly diminishes the reliability of the data and increases the risk of loss of
administrative fee revenues.
It should be noted that we did not find exceptions in our tests of Molina's records; and Nu -Way had
insufficient documentation to adequately test their records.
RECOMMENDATION 3.1: Miami Police Department (MPD)
In order to provide accurate and reliable towing activity data for billing purposes, we recommend that MPD
eliminate the practice of allowing tow companies to reconcile towing data. Instead, the review and
verification of towing activity should be independently performed in-house by City employees.
Accordingly, each tow company should be required to maintain sequentially numbered receipts and tow
logs specifically for City of Miami tows. The tow logs, receipts and a written certification from the towing
company owner attesting to the accuracy of the information, should be submitted monthly to the MPD for
reconciliation with the CAD system data and preparation of monthly billings. Alternatively, we recommend
that MPD explore the possibility of procuring state-of-the-art software which will not only facilitate the
capture of accurate and reliable towing data, but also expedite and facilitate accurate and timely customer
charges and administrative fee billings. This process should be documented and implemented as a
departmental procedure.
Also, consideration should be given to implement a system that would enable the public to easily locate
vehicles, and determine amounts owed for towing services. In this regard, we were informed by MPD
personnel that software is available in which all tow company operators input towed vehicle information
including vehicle identification numbers, license plate numbers and the location of vehicles. Once
Z
Tows that
should've
Error
Amount
been
Rate
Due City
reported
93
1 48%
$720
44 1 23% 1 $260
137 1,
3 3 39 42 7% $48
12 12 56 68 18% $312
16 96 110 14% $360
Total Admin Fees Due City 1 $1,340
Finally, we noted several instances where MPD dispatchers entered data into the dispatching software
incompletely, which significantly diminishes the reliability of the data and increases the risk of loss of
administrative fee revenues.
It should be noted that we did not find exceptions in our tests of Molina's records; and Nu -Way had
insufficient documentation to adequately test their records.
RECOMMENDATION 3.1: Miami Police Department (MPD)
In order to provide accurate and reliable towing activity data for billing purposes, we recommend that MPD
eliminate the practice of allowing tow companies to reconcile towing data. Instead, the review and
verification of towing activity should be independently performed in-house by City employees.
Accordingly, each tow company should be required to maintain sequentially numbered receipts and tow
logs specifically for City of Miami tows. The tow logs, receipts and a written certification from the towing
company owner attesting to the accuracy of the information, should be submitted monthly to the MPD for
reconciliation with the CAD system data and preparation of monthly billings. Alternatively, we recommend
that MPD explore the possibility of procuring state-of-the-art software which will not only facilitate the
capture of accurate and reliable towing data, but also expedite and facilitate accurate and timely customer
charges and administrative fee billings. This process should be documented and implemented as a
departmental procedure.
Also, consideration should be given to implement a system that would enable the public to easily locate
vehicles, and determine amounts owed for towing services. In this regard, we were informed by MPD
personnel that software is available in which all tow company operators input towed vehicle information
including vehicle identification numbers, license plate numbers and the location of vehicles. Once
Z
information is uploaded, customers can search for towed vehicles via a City supplied public search portal.
Customers will then use vehicle identification numbers or license plate numbers to obtain information on
their vehicles including:
o Location where vehicles are stored
o Amounts owed for the towing services provided. Please note that the system should have the
correct rates preprogramed to ensure that tow company operators do not exceed maximum rates
allowable by City Code.
To ensure that all tows are reported to police, signs at tow away sites should include a police department
phone number and the web address to a centralized database where customers can obtain all information
needed to recover his/her towed vehicle.
• MPD Response•
MPD concurs with recommendation 3. 1, however, allowing the tow companies to continue to reconcile
towing data gives us insight as to their methods and charges and the time needed to implement an in-house
system so that we can verify that they are in accord with MPD Standards. A review and verification of this
data should take place by City employees to determine accuracy and completeness. Maintenance of
sequentially numbered receipts and tow logs and submission of certified copies of same to the City on a
monthly basis would provide the data necessary to review and verify the monthly reports of the tow
companies.
The recommendation that MPD alternatively explore the possibility of procuring "state-of-the-art software"
to facilitate the capture of accurate and reliable towing data and expedite and facilitate accurate and timely
customer charges and administrative billing of fees is a good one. MPD is in the process of developing the
types of reports that would need to be generated to answer these questions/needs; however, we must be
mindful of the fact that all data is currently captured or provided by the tow companies, who would then
provide it to the City electronically or upload it directly into a database for processing including location
and associated costs; and, a feasibility study would have to be conducted to determine the merits of such a
plan. The timeliness of the receipt by the City and/or uploading of this information would have a direct
bearing on its availability to the general public.
• Implementation Date:
MPD is planning to meet with the IT Department in October to discuss the current information flow, the
needs of MPD and the public and hopefully elicit some ideas as to how to accomplish our goals. A search
for appropriate "state-of-the-art software" can begin upon concurrence with this approach. However, cost,
installation and training would dictate the procurement, implementation and testing dates. A fair estimate
to research, acquire, implement and test this type of system would require approximately ninety days at the
minimum. Starting in October, we would hope to be able to test in February, 2016.
RECOMMENDATION 3.2: Miami Police Department (MPD)
We recommend that MPD CIS desk operators be trained to ensure that tow activity data is accurately and
completely entered into the CAD system. Accordingly, activity reported in CAD should be periodically
reviewed and approved. In addition, MPD should work with the City's Information and Technology
Department (ITD) in order to install input controls in the CAD software that would prevent support staff
and CIS personnel from entering incomplete data, and ensure that proper access controls are established to
assign responsibility.
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• MPD Response:
In review of the audit on towing practices, the following changes have been implemented or are projected
to occur:
o Operators assigned to CIS 24 Hour Desk will be retrained on how to properly enter the correct
towing code which details and verifies the status and applicable record code (Police, private
property, or repossession tows). Specific pertinent information will be entered accurately into the
Computer Aided Dispatch System (CAD).
o Tow slips will be retrieved from Property Unit during the midnight shift. This practice serves as a
check and balance for CIS 24 Hour Desk to verify tows which should have already been reported
by the various tow companies during the day.
o In the event of a midnight operator identifying a tow which was not entered into the system, he/she
will immediately enter the tow information. By implementing this procedure it will ensure that
both the towing companies and the City of Miami logs are accurate and consistent.
o Currently, both contracted and non -contracted tow companies will not call in private tows when
vehicles have been released to the registered owner within a short period of time after vehicle was
towed. This is a common practice which tow companies collect monies from vehicle owners,
however, the towing companies are not billed by the department's Budget Unit. I will schedule a
meeting with the supervisors of the Wrecker Detail and the Property Unit in an effort to ensure that
we are collectively working together to address these concerns and adhere to all applicable state
laws, city ordinances, and departmental policies/procedures.
o In a meeting with the Commander of the Information and Technology Section, I was advised that
in the next six months there will be controls in the new CAD system which will procure a towing
management solution to prevent CIS personnel from entering incomplete data and ensure that
proper access controls are established to assign availability.
In conclusion, by providing detailed towing data activities to the Budget Unit, we will enable Account
Receivables Section (AR) to bill towing companies' accurate administrative fees. I am confident that by
implementing these measures we will accurately regulate all authorized towing companies and CIS desk
operators to comply with mandated practices.
• Implementation Date: March 2016
RECOMMENDATION 3.3: Miami Police Department (MPD)
We recommend that companies failing to comply with towing activity reporting requirements of the City
Code be penalized in accordance with the Code, which could include possible suspension or revocation of
the license of the business enterprise. hi addition, the findings in this report concerning specific tow
companies should be considered when awarding the proposed agreement next fiscal year.
• MPD Response•
Upon confirmation by the MPD Wrecker Detail of any violations by any wrecker company of any City
Code, we will immediately enforce any penalty authorized by the Code. We have contacted the listed
companies and have given them 15 days to respond to all noted violations in this report. If the violations
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are not addressed or their outstanding balances are not paid, they will face penalties in accordance with the
City Code including suspension, revocation, and fines.
• Implementation Date: Ongoing.
FINDING 4: CONTROLS OVER NON -RELEASED ("PENDING") VEHICLES WERE
INADEQUATE
As previously described, towing activity information reported to MPD is entered into CAD and arranged
into individual reports specific to each company. The reports are then forwarded to the companies for
review and reconciliation. During this process, companies must indicate all vehicles that have not been
"released" or claimed by their owners. The status of these unclaimed vehicles is deemed to be "pending"
or "non -released".
The City Code stipulates that City "Administrative Charges" may be waived for pending/unclaimed
vehicles; however, towing companies must provide written verification of a vehicle's "pending" status by
providing a copy of the "certificate of destruction" or transfer of title. In addition, City charges can be
waived only if a company provides evidence that a vehicle's disposal did not generate revenues; and, all
waivers require written approval from the MPD.
Also, Section 713.78, Florida Statutes permits the disposal of unclaimed vehicles after 35 days if the vehicle
(or vessel) is more than three years of age or after 50 days if the vehicle is three years of age or less. The
35 or 50 day restriction period for disposal does not include the date of the towing or the date of transfer.
Observations:
Our review of information obtained from the MPD's Police Administration Division revealed that as of
12/2014, 2,054 vehicles were reported in "pending" status dating back to 2010. Since the City had not
conducted effective follow-up on these "pending" vehicles and did not execute written waivers, potential
administrative fee revenues totaling $51,430 had not been collected (see Schedule 4 Page 13). Upon audit
inquiry, two of the nine companies with vehicles in "pending" status paid -off their balances totaling $7,798
since appropriate written verification of the vehicles' pending status had not been provided. However, the
remaining seven companies continue to owe administrative towing fees totaling $43,632 to the City for
their "pending" status vehicles.
12
SCHEDULE 4
PENDING VEHICLES REPORTED AND AMOUNTS OWED
Date Range of
Number of
CalculatedAmounts
Paid to
Remaining
Towing"Pending"
Company P y
"Pending"
Amounts
the Ci Upon
Amounts Owed to
Vehicles
Vehicles
Owed to the
Audit Inquiry
the City
City
Banos Towing
10/2010 through
159
$4,134
$4,134
$0
3/2014
Midtown Towing
10/2010 through
145
$3,664
$3,664
$0
4/2013
10/2010 through
Nu -Way Towing
377
$9,424
$0
$9,424
2/2014
10/2010 through
King's Wrecker
3/2014
452
$10,472
$0
$10,472
10/2010 through
Ted & Stan's
5/2013
44
$1,134
$0
$1,134
10/2010 through
Molina Towing
176
$4,546
$0
$4,546
3/2014
10/2010 through
Downtown Towing
239
$6,174
$0
$6,174
3/2014
Freeway Towing
10/2010 through
268
$6,968
$0
$6,968
8/2013
10/2010 through
Southland Towing
2/2014
194
$4,914
$0
$4,914
Totals
2054
$51,430
$7,798
$43,632
Finally, we noted that the City does not have policies and procedures to guide staff on the proper handling
of "pending" status vehicles. In addition, there is no process in place to ensure timely follow up and
collection of administrative fees due to the City on vehicles that towing companies declare as "pending" or
not claimed by vehicle owner.
RECOMMENDATION 4.1: Miami Police Department (MPD)
The MPD BU and the Wrecker Detail should work with the FD in order to follow up and collect revenues
due to the City on "pending" status vehicles.
• MPD Response:
We agree with recommendation 4.1 and have initiated efforts to coordinate and share resources with
Wrecker Detail and the Finance Department to better collect revenues due to the City. "Pending" status
vehicles should be only those vehicles whose owners have been notified of their impounding and the owners
have attested to the fact that they are currently, financially unable to redeem the vehicle. The City of Miami,
like the State of Florida should determine and enact liquidation guidelines for vehicles that remain
unclaimed after a specified period of time. The City of Miami Municipal Code, Chapter 42, Sections
108,109, and 110, contain specific rules governing: License revocation and regulations, Penalties, and
13
Maximum allowable rates for non-consensual towing and storage for providing tow services at the request
of property owners or police agencies. The enforcement of these rules and their attendant fines would
discourage the towing companies from submitting revenues due to the City in an untimely manner. In
addition, the forthcoming Purchasing Agreement for licensed tow companies should be specific regarding
rules and procedures for reporting and payments to the City. Recommendations for such rules should be
forwarded to and discussed with the Purchasing Department for incorporation into the agreement.
• Implementation Date:
Implementation has started with our consultations with the Wrecker Detail and Purchasing and Finance
Departments. This will be an on-going effort with periodic meetings to review, discuss and solve problems
as they arise.
RECOMMENDATION 4.2: Miami Police Department (MPD)
As mentioned previously, we recommend that MPD eliminate the practice of allowing towing companies
to reconcile towing data for billing purposes. Also, periodic inspections of pending vehicles should be
conducted by designated BU staff concentrating on vehicles that have remained in pending status for more
than 50 days without executed waivers; additionally, the MPD should establish policies and procedures to
ensure that administrative fees are not waived unless the conditions are clearly met and supported by
appropriate documentation.
• MPD Response•
As we responded for recommendation 3. 1, eliminating the reconciliation by the towing companies without
having an in-house system in place would be counterproductive. We rely on their information to give us
insight into their operation. We are making plans as you can see in our responses to develop the capabilities
needed to function independently of the towing companies, but it will continue to be necessary for them to
provide information to us to appropriately manage this process and monitor their activities.
Guidelines and time frames for addressing the waiver process and expediting vehicle status updates will be
reviewed with the Wrecker Detail to determine the best policies for resolving this issue.
• Implementation Date:
We have contacted the Wrecker Detail regarding solutions to these questions and are scheduling meeting
to address outstanding issues. Meeting will begin in October and continue as an ongoing review of
"pending" status and other issues as they arise.
FINDING 5: COLLECTION PROCEDURES FOR OUTSTANDING ACCOUNTS RECEIVABLE
BALANCES WERE INADEQUATE
In order to ensure collection of the City's "Administrative Charge" on private property towing activity, the
Code requires the City to send towing companies monthly invoices which are due and payable upon receipt.
Failure to remit payment of the charge within 15 days after receiving the invoice shall result in an additional
charge of $525. Continuous failure to pay the charges after 30 days of receipt of the invoice may result in
the suspension of a towing company's business license.
According to the Agreement, monies are due from contracted tow companies by the 20' of each month. If
payment is not received by the 20', the contracted towing company is liable for a late fee penalty of 10%
14
of the outstanding balance, as well as interest of 1% for every month late; however, it should be noted that
the eight towing companies under contract are current in their payments to the City.
Observations:
We noted that the Finance Department (FD) does not have written policies and procedures that ensures the
proper handling of late or non -payments by tow companies. As a result, FD accounts receivable (AR)
personnel do not assess late payment penalties nor do they request the Wrecker Detail to suspend tow
companies that are in violation of the Code. As indicated in Schedule 5 below, our review disclosed that
six active tow companies that had outstanding balances totaling $16,032 that were 22 to 933 days past due.
It should be noted that 82%, or $31,144 of total outstanding balances ($38,178) for 29 active and inactive
tow companies were greater than 90 days past due.
SCHEDULE 5
ACCOUNTS RECEIVABLES AGING - AS OF 3/11/2015
Towing Company
15-30
Days
30-60
Days
60- 90
Days
Over 90
Days
Total
Amount Due
1
Alpine Towing
$1,824
$1,040
$1,200
-
$4,064
2
Chirino Towing
$48
$32
$16
-
$96
3
Corporate Towing
$224
$224
$176
$7,712
$8,336
4
Goodfellas Towing &
Recovery
-
$32
-
$2,896
$2,928
5
Jr Towing & Recovery
$64
$64
$160
$16
$304
6
VMC Towing & Recovery
$48
$144
$80
$32
$304
Total Outstanding Receivables
$2,208
$1,536
$1,632
$10,656
$16,032
We noted that the six tow companies continue to operate while in violation of the Code. Accordingly, the
companies should have been penalized after 15 days and suspended from operating after 30 days of non-
payment. Continuous failure to enforce penalties increases the risk of receivables becoming
uncollectable/worthless.
After our inquiry, review of recent payments received from three tow companies revealed that the
companies were able to pay significantly past due balances without being assessed any penalties as follows:
o Torres Towing paid eleven outstanding invoices totaling $8,944 (9 invoices were paid online and
2 via check) that were between 36 and 392 days past due.
o Corporate Towing paid two outstanding invoices totaling $400 (both invoices were paid via check)
that were between 50 and 89 days past due.
o Alpine Towing paid an outstanding invoice in the amount of $960 (invoice was paid online) that
was 106 days past due.
It should be noted that the FD does not have policies and procedures to guide staff on the proper and
effective handling of instances where tow companies fail to make timely payments on balances due.
Further, the City's online payment system does not automatically add penalties to tow company accounts
that are greater than 15 days past due, which allows tow companies to pay old balances at any time without
penalties.
15
RECOMMENDATION 5.1: Finance Department
We recommend that the FD:
o Establish policies and procedures based on the City Code, to guide AR/collection staff on the
handling of past due accounts. This should include communicating the status to the Wrecker Detail
for the suspension of towing companies with outstanding balances greater than 30 days past due.
o Work with the ITD to implement controls to ensure that penalties are automatically calculated on
towing company accounts that are greater than 15 days past due.
o Conduct a review of substantially aged receivables and determine whether a write-off is necessary.
• FD Response•
The FD will establish policies and procedures based on the City code. The FD provides MPD reports and
has trained individuals to run reports showing outstanding balances. The FD also provides MPD a
recommendation regarding write-offs for their approval when the aged receivables are reviewed. The FD
will work with ITD to automate the appropriate penalties.
• Implementation Date: No later than the second quarter of FY 2016.
FINDING 6: ESTABLISH POLICIES AND PROCEDURES TO ENSURE THAT TOWING
COMPANIES RENEW BUSINESS TAX RECEIPTS ANNUALLY
City Code requires towing companies located within the geographic boundaries of the City to apply for and
obtain a valid occupational license or a "Business Tax Receipt" (BTR). A BTR is valid for one year, expires
on September 30' each year, and must be renewed annually.
In addition, the Code requires private property towing companies to pass a MPD safety inspection as part
of the BTR application approval process. This includes an inspection of company towing equipment and
verification that the facility in which towed vehicles are stored is located within ten aerial miles from
respective tow sites.
Observations:
Our audit testing revealed that companies conducting private property tows in the City are operating without
meeting the requirements of the Code, which requires the companies to obtain MPD inspection approval of
their applications prior to the issuance of a BTR. Our testing revealed the following:
o Seven of ten, or 70%, of towing companies tested, had not met the MPD inspection/approval
requirement and continue to operate while a "hold" is placed on their BTR. Although each of the
seven companies paid the annual BTR fee, the lack of a safety inspection increases the risk of
equipment being operated under dangerous conditions and/or cars being towed to unapproved
locations.
o MPD does not have written policies and procedures to ensure proper handling of towing companies
that do not comply with the Code.
ICol
RECOMMENDATION 6.1: Miami Police Department (MPD)
We recommend that towing companies that had not met the MPD inspection/approval requirement yet
continue to operate while a "hold" is placed on their BTRs, be notified of their non-compliance with the
City Code, and given a deadline for compliance. Appropriate action should be taken for non -adherence to
the deadline. Going forward, we recommend that the MPD Budget Unit (BU) establish written policies
and procedures to ensure proper handling of towing companies that do not comply with the City Code.
• MPD Response:
MPD Wrecker Detail Standard Operating Procedure (SOP 1, II, D, 5.) states that after all the inspections
are done and the wrecker company owner or representative receives a signed copy of the application, it is
to be returned to the City of Miami Licensing Department to receive their license. We are adding (SOP 1,
II, D, 5, a.) which states that the wrecker detail officer will pick up a copy of each approved wrecker
companies business license (BTR) from the City of Miami Licensing Office by October 15' of every fiscal
year to ensure that wrecker companies have turned in their required inspection forms and there is no hold
on their business license (BTR). The copies will be kept in each wrecker company's file. We are also
adding (SOP 1, 11, D, 5, b.) which states that the wrecker detail officer will verify each tow company's
business license (BTR). If any wrecker company does not have the proper license or their license is on hold
status, they will be immediately suspended from towing operations in the City of Miami and the wrecker
detail officer will notify the Communications Bridge and the CIS desk of the suspension.
Implementation Date: 9/1/2015
17