County of Sonoma Transient Occupancy Tax Agreed-Upon Procedures Report For The Year Ended December 31, 2011

Transcription

1 ATTACHMENT A-1 Agreed-Upon Procedures Report For The Year Ended

2 ATTACHMENT A-2 Agreed-Upon Procedures Report For the Year Ended Table of Contents Page Auditor-Controller s Report on Applying Agreed-upon Procedures Schedule of Operators Reviewed (January 1, 2011 to )... Appendix A - Procedures, Findings and Recommendations Appendix B - Summary of Significant Uniform Ordinance

3 DAVID E. SUNDSTROM, CPA AUDITOR-CONTROLLER TREASURER -TAX COLLECTOR 585 FISCAL DRIVE, SUITE 100 SANTA ROSA, CA PHONE (707) FAX (707) DONNA DUNK, CPA ASSISTANT AUDITOR-CONTROLLER JONATHAN KADLEC ASSISTANT TREASURER-TAX COLLECTOR Ms. Veronica Ferguson Sonoma County Administrator Santa Rosa, CA Auditor-Controller s Report on Applying Agreed-upon Procedures We have performed the procedures enumerated in Appendix A of this report, agreed to by the Sonoma County Administrator s office, solely to assist you, in evaluating Operators compliance with the terms and conditions of Sonoma County Code Article III, Uniform Transient Occupancy Tax Ordinance No during the calendar year The Operators are responsible for compliance with those requirements. The sufficiency of these procedures is solely the responsibility of the Sonoma County Administrator s Office. Consequently, we make no representation regarding the sufficiency of the procedures described in Appendix A either for the purpose for which this report has been requested or for any other purpose. The Schedule of Operators Reviewed identifies the Operators selected for annual recurring review and compares the amount of taxable receipts reported to the amount of taxable receipts reviewed and the amount of tax due based on the procedures performed. This schedule also includes the amount of tax due from delinquent Operators as identified during our analysis of the taxable receipts reviewed. The associated findings can be found in Appendix A of this report. We were not engaged to and did not conduct an examination, the objective of which would be the expression of an opinion on the accompanying Schedule of Operators Reviewed. Accordingly, we do not express such an opinion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. This report is intended solely for the information and use of the Sonoma County Administrator s Office and the Board of Supervisors and is not intended to be and should not be used by anyone other than the specified parties. August 24, 2012

4 Schedule of Operators Reviewed January 1, 2011 to ATTACHMENT A-4 Annual Recurring Review Taxable Taxable Tax Receipts Receipts Tax Tax Over (Under) Reported Per Review Paid Per Review Paid Vineyard Inn Hotel Madrona Manor, The Dutcher Creek RV Park Porto Bodega Marina & RV Park Bodega Bay Inn Avalon, A Luxury Bed & Breakfast Auberge on the Vineyard Solisombra Marta Ella Vineyards, LLC Serenity under the Sun New West Properties Prairie Sun Recording $ 198,082 $ 946,321 23, , , , , ,970 14,395 50,675 7,645 5, ,007 $ 946,311 27, , , , , ,800 11,990 50,475 7,340 7,518 17,827 $ 16,381 $ 85,169 85,169 2,112 2,519 31,744 33,183 5,948 13,593 9,374 9,247 15,755 16,645 10,257 11,142 1,296 1, , ,446 0 * (407) (1,439) (7,645) 127 ** (890) (885) 217 (3,702) * 27 ** (149) Total Annual Recurring Review $ 2,110,774 $ 2,164,845 $ 181,539 $ 194,839 $ (13,300) Delinquent Operator Review Wildwood Retreat Center Green Apple Inn Monstegur Russian River Retreat $ (22,939) (730) (4,758) (1,338) Total Delinquent Operator Review $ (29,765) Total Review Results $ (43,065) * The operator collected taxes from transients exceeding the amounts due for es and Tourism Business Improvement Area Assessments. Over collections by Madrona Manor and Serenity under the Sun totalled $1,140 and $505 respectively. These amounts were not included in "Tax Over (Under) Paid" above. ** While detailed records provided were not in compliance with the Ordinance, the Treasurer-Tax Collector has deemed it appropriate to refund amounts overpaid when less than $500 on the basis of materiality. The accompanying appendices are an integral part of this schedule

5 Appendix A ATTACHMENT A-5 Procedures, Findings and Recommendations Overview As of, there were 535 Operators, including hotels, motels, bed & breakfast, inns, recreational parks, campgrounds, vacation rentals and property management firms, in the unincorporated area of the County certified with the Tax Collector. The total collection of Transient Occupancy Tax for the 2011 calendar year was $8,793,077, an increase of 14% over A sample of 12 Operators were reviewed which represented $181,539 of the collection, or approximately 2.1% of the total collected. Procedures Applied Annual Recurring Review For each Operator listed within the Schedule of Operators Reviewed, general ledger detail and exemption forms supporting the taxable rents reported on the quarterly returns were obtained where possible. From the general ledger detail provided, we judgmentally selected individual transactions in order to insure the amounts recorded agreed to individual registration documents showing room(s) and amount(s) paid. We also reviewed the reservation systems where available, to identify room rentals that were not reported on the quarterly returns and to verify exempt stays. Associated Findings A. The following is an explanation of the tax identified as over (under) paid on the Schedule of Operators Reviewed as well as the issues of non-compliance identified during fieldwork performed for the period ended. 1. Vineyard Inn Hotel was overstated by $1,446 as a result of the operator including collected with Gross Rents for Occupancy of Rooms on their quarterly returns. Additionally, we identified record keeping issues in violation of Section of the Ordinance No (Ordinance) where, in most cases, the receipts issued did not list the tax collected separately from the charges from overnight stays. As well, based on our review we determined that the operator is not maintaining a chronological cash journal summarizing their monthly or quarterly revenues in accordance with the Ordinance. 2. Madrona Manor As a result of our procedures, we indentified taxes collected from transients exceeding the amounts due for and Tourism Business Improvement Area Assessments. Excess taxes collected, but not returned to transients or remitted to the County totaled $1,

6 Appendix A ATTACHMENT A-6 Procedures, Findings and Recommendations 3. Dutcher Creek RV Park Review procedures identified under reported revenues and an exemption claimed for occupancy over thirty days where there was no written agreement providing for the period of occupancy in accordance with Ordinance Section II. These items resulted in $407 under reported. It was also noted, during our review, that the operator was out of compliance with Ordinance section as neither their cash journal nor their receipts listed the tax collected separately from the charges for overnight stays. 4. Porto Bodega Marina and RV Park for 2011 was understated by $1,439 as a result of exemptions claimed for occupancy over thirty days where there was no written agreement providing for the period of occupancy. Absent a written agreement, the first 30 days of occupancy for these stays should have been reported as taxable. During our review we determined that registrations regularly did not capture the occupant s address or license plate in compliance with record retention requirements of Ordinance section Bodega Bay Inn The $7,645 underpaid taxes were a result of the following: - $4,715 reported on the 3 rd quarter return, but not paid. - $2,816 identified per our review for the 4th quarter for which no return was filed. - $60 resulting from miscalculation of taxable revenues based on gross collections. - $54 as a result of not including extra bed charges as taxable rents. It was also noted, during our review, that the operator was not in compliance with Ordinance section as their cash journal does not list the tax collected separately from the charges for overnight stays. 6. Avalon, A Luxury Bed and Breakfast Review procedures identified record keeping issues in violation of Section of the Ordinance where receipts issued were not pre-numbered and a chronological cash journal or other rental revenue summary reports were not maintained. Accordingly, we were not able to confirm that all rental records were provided to us. As we were not able to get assurance over the completeness of the records provided, we do not support a refund. 7. Auberge on the Vineyard Review procedures identified under reported revenues resulting in $890 under reported es. The operator disclosed that the understatements were due to cash flow problems. It was also determined, during our review, that the establishment was not in compliance with Ordinance section requiring taxes collected to be held in a separate trust account. As the operator was aware of amounts under reported, we recommend penalties and interest be applied for delinquent remittances

7 Appendix A ATTACHMENT A-7 Procedures, Findings and Recommendations 8. Solisombra Review procedures identified under reported rental and cleaning fee revenues resulting in $885 under reported es. 9. Marta Ella Vineyards was over reported by $217 as a result of including complimentary stays as taxable at their fair value. Additionally, review procedures identified record keeping issues in violation of Section of the Ordinance where receipts issued were not pre-numbered and rental revenue summary reports did not list the tax separately from the charges from overnight stays. 10. Serenity under the Sun Review procedures identified unpaid taxes from the 3 rd and 4 th quarters totaling $3,702. In addition, we identified over collected Occupancy Taxes that were not returned to transients or remitted to the County. The establishment regularly charged their renters 10% under their contract line item for Occupancy Tax resulting in $505 over collected tax. 11. New West Properties During our review we identified cleaning charges that were not being included as taxable items in accordance with Section II of the Ordinance. This resulted in $54 under reported Occupancy Taxes. As well, we identified over reported revenues resulting in $81 of over reported occupancy taxes. Review procedures also identified record keeping issues in violation of Section of the Ordinance where a chronological cash journal or other rental revenue summary reports were not maintained. Accordingly, we were not able to confirm that all rental records were provided to us. As we were not able to get assurance over the completeness of the records provided, we do not support a refund. 12. Prairie Sun Recording Review procedures identified taxable room rents and associated energy surcharges that should have been included as taxable rents. Under reported Occupancy Taxes from these items totaled $149. Review procedures identified record keeping issues in violation of Section of the Ordinance where a chronological cash journal or other rental revenue summary reports were not maintained. Procedures Applied Delinquent Operator Review In the current year we performed delinquent analysis of operators that failed to remit their quarterly returns and/or payment. For each operator discussed below, general ledger detail, daily rental folios, and proof of payment support were obtained where possible. We identified the amount of rents received by agreeing with daily rental folios to the general ledger detail. due was recalculated based on total rents identified

8 Appendix A ATTACHMENT A-8 Procedures, Findings and Recommendations Associated Findings B. The following is a description of the results from our delinquent work which identified a total of $29,765 due to the. 1. Wildwood Retreat Center We assisted with the analysis and determination of amounts due and unreported. The net amount of the Transient Occupancy Tax identified totaled $22,939 without consideration of penalties or interest. 2. Green Apple Inn We assisted with the analysis and determination of amounts due and unreported. The net amount of the Transient Occupancy Tax identified totaled $730 without consideration of penalties or interest. 3. Montsegur Vacation Rental We assisted with the analysis and determination of amounts due and unreported. The net amount of the identified totaled $4,758 without consideration of penalties or interest. 4. Russian River Retreat Vacation Rental We assisted with the Transient Occupancy Tax analysis and determination of amounts due and unreported. The net amount of the identified totaled $1,338 without consideration of penalties or interest. Procedures Applied Follow up Review of Record Keeping Issues Identified We performed procedures to ensure correction of record keeping issues identified as a result of procedures performed in the prior period. For each of the operators discussed below we performed inquiries and, if applicable, reviewed a sample of updated documentation to ensure compliance with the Ordinance. For operators that had not remedied their prior issues, recommendations were reiterated, and follow up procedures, as described above, were performed at a later date. Associated Findings C. The following is a description of the results from our review and follow up of operators who were previously identified for not being in compliance with record keeping requirements per the Ordinance. 1. Le Petites Maisons Prior year finding: Review procedures identified record keeping issues in violation of Section of the Ordinance where a chronological cash journal was not maintained nor were any other reports summarizing the Operators monthly or quarterly room revenues

9 Appendix A ATTACHMENT A-9 Procedures, Findings and Recommendations Follow up results: The operator is now using QuickBooks to capture and summarize their rental income and associated occupancy tax collections. We examined their first quarter 2012 return and supporting rental revenue report. There were differences noted which, based on inquiry with the operator, were manually reconciled in the first quarter and for which they were working on a correction for their QuickBooks accounts. 2. Petaluma Roost Vacation Rental Prior year finding: Review procedures identified record keeping issues in violation of Section of the Ordinance where guest receipts were not being issued. Follow up results: We reviewed a sample of receipts issued from July 2011 through March 2012 and determined that their compliance issues were materially remedied. 3. Petricka Vineyard Cottage Prior Year Finding: Review procedures identified record keeping issues in violation of Section of the Ordinance where a chronological cash journal was not maintained nor were any other reports summarizing the Operators monthly or quarterly room revenues. We also identified that the Operator is not collecting for stays from the transient but paying on the transient s behalf which is a violation of Section Follow up results: Prior to our follow up, the operator had not implemented recommendations of the prior audit. As a result of our follow up, the operator began complying with recordkeeping provisions of the ordinance in April of We reviewed a sample of receipts and a summary report for April to determine that their compliance issues were materially remedied. 4. Romo Vineyard Prior Year Finding: Review procedures identified record keeping issues in violation of Section of the Ordinance where a chronological cash journal was not maintained nor were any other reports summarizing the Operators monthly or quarterly room revenues. Additionally, there were no copies provided of prenumbered receipts or other supporting documents showing the name, address and license number of the transient as required by the Ordinance. Follow up results: The operator did not provide documentation to illustrate compliance with record keeping requirements. Accordingly, we were unable to determine whether the establishment remedied the previously identified noncompliance with the Ordinance

10 Appendix A ATTACHMENT A-10 Procedures, Findings and Recommendations Recommendations 5. Goltermann Gardens Prior Year Finding: Review procedures identified record keeping issues in violation of Section of the Ordinance where patron receipts were not being issued. Additionally, the Registration Certificate was not displayed in accordance with Ordinance Section Follow up results: We reviewed evidence that their registration certificate was appropriately displayed as well as an example invoice from their QuickBooks Software and were able to determine that they have a system in place to remedy the compliance issues identified in the prior year. 6. Valley Ford Hotel Prior Year Findings: Review procedures identified record keeping issues in violation of Section of the Ordinance where patron receipts were not being issued. Additionally, the Registration Certificate was not displayed in accordance with Ordinance Section Follow up results: We performed a site visit in April 2012 and reviewed a sample of updated documentation to ensure the establishment had implemented corrections for the deficiencies previously identified. Based on our procedures, we concluded that compliance issues were materially remedied. The following are a listing of recommendations for the Treasurer-Tax Collector based on our procedures applied and associated findings: 1. The Treasurer Tax-Collector should refund or collect, as appropriate, amounts over or under paid per the Schedule of Operators Reviewed. 2. The Treasurer-Tax Collector should inform the operators who did not comply with the ordinance of their specific violations and the corrective actions they are required to take. 3. To determine what responsibility, if any, he has for ensuring taxes over collected by operators are disposed properly, the Treasurer-Tax Collector should seek advice from the County Counsel. Appropriate action should be taken based on that advice

11 Appendix A ATTACHMENT A-11 Procedures, Findings and Recommendations Responses The following are planned courses of action provided by the Assistant Treasurer-Tax Collector in response to the recommendations above: 1. The Treasurer-Tax Collector has historically followed through with the collection and/or refunding of amounts identified in the report. These procedures will be followed consistent with prior years. 2. The Treasurer-Tax Collector will follow up with operators regarding the identified areas of non-compliance with the Ordinance, requiring they be remedied. Follow up procedures will be performed to determine whether the issues identified have been resolved. 3. The Treasurer-Tax Collector will communicate with Counsel to determine the appropriate handling of the situation described

12 Appendix B ATTACHMENT A-12 Summary of Significant Uniform Ordinance A. Description of Ordinance The Sonoma County Uniform Ordinance imposes a tax upon the privilege of transient occupancy. Transient occupant is defined as one who occupies a room, dwelling, recreational vehicle park space, or campground space for a period of thirty (30) days or less. The tax provides funds to support the advertisement of tourism in the unincorporated communities of the County. B. Ordinance Requirements 1. Tax Imposed For the privilege of occupancy at any lodging, each transient is subject to and shall pay a tax in the amount of nine (9) percent of the rent charged. Said tax constitutes a debt owed by the transient to the county which is extinguished only by payment to the Operator or the County. If, for any reason, the Operator fails to collect the tax due at the time the rent is collected, the Operator becomes liable for the tax due. 2. Exemptions Exemptions are granted only on a claim made at the time rent is collected using a form prescribed by the Tax Collector. Exemptions allowed include following: a. Any person as to whom, or any occupancy as to which, it is beyond the power of the county to impose the tax herein provided; b. Any federal or state officer or federal credit union employee on official business; c. Any officer or employee of a foreign government who is exempt by reason of express provision of federal law or international treaty; d. Rooms donated to or paid for by the Red Cross or other charitable organization for the express purpose of providing temporary emergency shelter. e. Complimentary stays where no Rent is received. f. The owner of a timeshare estate occupying a room or rooms in a timeshare project, as defined in Business and Professions Code section or its successor statute. g. The owner of a membership camping contract as defined in Civil Code section

13 Appendix B ATTACHMENT A-13 Summary of Significant Uniform Ordinance 3. Penalties and Interest Each Operator is required to submit a Return within the month following each quarter of the year. The Tax Collector has the authority to apply penalty and interest charges to any Operator who fails to remit the tax return within the allotted time. The penalty applied for the first delinquent quarter is 10% of the amount of the base tax in addition to the amount of the base tax. For continued delinquency, the Operator shall pay the base tax and 10% penalty previously imposed, plus a second delinquency penalty of 10% of the amount of the base tax. In addition to penalties imposed, interest at the rate of one and one half (1 ½ %) percent per month on any unpaid balance of the base tax, is charged from the date the remittance first became delinquent, until paid. The Tax Collector also has the authority to impose a penalty of 25% of the amount of the tax in cases where there is fraud. 4. Determination of Tax by Tax Collector If any Operator shall fail or refuse to collect the tax levied by this article or to make, within the time provided by this article, any report and remittance of such tax or any portion thereof required by this article, the Tax Collector shall proceed in such manner as he may deem best to obtain facts and information on which to base his estimate of the tax due. As soon as the Tax Collector shall procure such facts and information as he is able to obtain upon which to base the assessment of any tax imposed by this article and payable by any Operator, the Tax Collector shall proceed to determine and assess against such Operator the tax, interest and penalties provided by this article. In any case where determination is made, the Tax Collector shall give notice of amount so assessed. The Operator may, within ten (10) days after the serving of such notice, make application in writing to the Tax Collector for a hearing on the amount assessed. 5. Appeal Any Operator aggrieved by any decision of the Tax Collector with respect to tax, interest, and penalties has the right to appeal in writing to the Board of Supervisors. The decision of the Board on any appeal is final

14 Appendix B ATTACHMENT A-14 Summary of Significant Uniform Ordinance 6. Refund If a tax, interest or penalty imposed by this article has been overpaid or paid more than once or has been erroneously or illegally collected or received by the county, a refund may be sought by filing a claim. No claim or refund of a tax may be filed by an Operator unless it is established in the claim that the amount of the tax so collected has either been refunded to the person or entity that actually paid the tax, or has been credited to rent subsequently payable by such person or entity to the Operator