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HomeMy WebLinkAboutCC AG PKT 2004-05-24 #V AGENDA REPORT DATE: May 24, 2004 TO: Honorable Mayor and City Council THRU: John B. Bahorski, City Manager FROM: Pamela Arends -King, Director of Administrative Services/Treasurer SUBJECT: Transient Occupancy Tax Audit SUMMARY OF REQUEST: Receive and file report. BACKGROUND: Due to members of the staff and public's concerns of how the hotels located within the City were interpreting the Municipal Code regarding Transient Occupancy Tax (TOT) especially in regards to TOT exemptions, the City Manager requested a TOT audit be conducted. This was the first TOT audit the City had ever conducted and Moreland & Associates, Inc.; Certified Public Accountants were hire to perform the services. Attached are the results of agreed -upon procedures Moreland & Associates Inc., conducted for each hotel located within the City. The results of the agreed -upon procedures were positive and there was only one significant finding. The significant finding concerned tax exempt guests with the Ayres Hotel. There were no other findings with the other hotels regarding qualifying exempt guests. FISCAL IMPACT: Total cost of the TOT audit was $10,746 and total amount due to the City from the Ayres Hotel for the overstatement of amount paid for occupancy of 31 days or more on the TOT submission form for calendar year 2003 is $21,660. The net revenue earned from the TOT audit is $10,914. Agenda Item tY RECOMMENDATION: Receive and file report. ca11 Pamela Arends -King Director of Administrative Services/Treasurer NOT ' ' 1 APPRO A D: Ara John B. t City M. . ger 1201 DOVE STREET, SUITE 680 NEWPORT BEACH, CALIFORNIA 92660 Moreland &0144.9saidexii (949) 221 -0025 CERTIFIED PUBLIC ACCOUNTANTS 570 RANCHEROS DRIVE, SUITE 260 SAN MARCOS, CA 92069 (760) 752 -3390 February 18, 2004 Mr. John B. Bahorski City Manager Ms. Pamela Arends -King Director of Administrative Services /Treasurer City of Seal Beach 211 Eighth Street Seal Beach, CA 90740 Independent Accountants' Report on Applying Agreed -Upon Procedures We have performed the procedures enumerated below related to the records supporting the Transient Occupancy Tax (TOT) Returns for the Pacific Inn (Inn) in the City of Seal Beach, California (City) for the period of January 1, 2003 to December 31, 2003. These procedures, which were agreed to by the City, were performed solely to assist management of the City in its evaluation of the City's receipt of Transient Occupancy Taxes from the Pacific Inn. This agreed -upon procedures engagement was performed in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency of the procedures is solely the responsibility of the parties specified in this report. Consequently, we make no representation regarding the sufficiency of the procedures described below either for the purpose for which this report has been requested or for any other purpose. Our procedures performed and the related results are as follows: 1. We verified, by recalculation, the mathematical accuracy of the Transient Occupancy Tax Returns for the quarter ended September 30, 2003. Finding: No exceptions were noted as a result of the procedure applied. 2. We agreed the tax rate used in calculating the Transient Occupancy Tax in the Transient Occupancy Tax Returns to the tax rate stated in the City Ordinance for the quarter ended September 30, 2003. Finding: No exceptions were noted as a result of the procedure applied. Mr. John B. Bahorski City Manager Ms. Pamela Arends -King Director of Administrative Services/Treasurer City of Seal Beach February 18, 2004 Page 2 3. We compared rental revenues from the Transient Occupancy Tax Returns to the sum of the Inn's monthly revenue summaries for the quarter ended September 30, 2003. Finding: We noted that the Inn understated total rental receipts on Transient Occupancy Tax Submission Form for the quarter ended September 30, 2003 due to the fact that the Inn did not include rollaway revenue in total rental receipts. Due to this finding, we calculate tax owed for the period of July 1 to September 30, 2003. The total amount due to the City is $16.13 ($14.40 tax plus $1.73 for penalties and interest) accumulated through March 1, 2004. 4. We selected twenty -five days from the quarter ended September 30, 2003 general ledger. For each of these days, we footed the daily guest room revenue reports and agreed the total to the monthly summary report. Finding: No exceptions were noted as a result of the procedure applied. 5. We reconciled the quarter ended September 30, 2003 bank deposits per the bank statements of the Inn to the reported revenues per the quarterly returns. Finding: No exceptions were noted as a result of the procedure applied. 6. We selected twenty -five tax exempt guests claimed throughout the year of 2003, compared data to supporting documents and compared the basis of qualifying exemptions per the supporting documents to the basis authorized by the City Ordinance. Finding: No exceptions were noted as a result of the procedure applied. 7. We compared the date the quarterly reports and payments were filed by the Inn to the due date stated in the City Ordinance for the quarter ended September 30, 2003. Finding: No exceptions were noted as a result of the procedure applied. 8. We were requested to compare total revenues for the year calendar year 2003 to the federal income tax return. Finding: The federal income tax return for 2003 has not been filed yet. Mr. John B. Bahorski City Manager Ms. Pamela Arends -King Director of Administrative Services/Treasurer City of Seal Beach February 18, 2004 Page 3 We were not engaged to and did not conduct an examination, the objective of which would be the expression of an opinion on the Transient Occupancy Tax receipts. 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 City Council and management of the City and is not intended to be and should not be used by anyone other than these specified parties. vi p .44 1 1201 DOVE STREET, SUITE 680 (f NEWPORT BEACH, CALIFORNIA 92660 Moreland & � Jim (949) 221 -0025 CERTIFIED PUBLIC ACCOUNTANTS 570 RANCHEROS DRIVE, SUITE 260 SAN MARCOS, CA 92069 (760) 752 -3390 February 20, 2004 Mr. John B. Bahorski City Manager Ms. Pamela Arends -King Director of Administrative Services /Treasurer City of Seal Beach 211 Eighth Street Seal Beach, CA 90740 Independent Accountants' Report on Applying Agreed -Upon Procedures We have performed the procedures enumerated below related to the records supporting the Transient Occupancy Tax (TOT) Returns for the Ayres Hotel (Hotel) in the City of Seal Beach, California (City) for the period of January 1, 2003 to December 31, 2003. These procedures, which were agreed to by the City, were performed solely to assist management of the City in its evaluation of the City's receipt of Transient Occupancy Taxes from the Ayres Hotel. This agreed -upon procedures engagement was performed in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency of the procedures is solely the responsibility of the parties specified in this report. Consequently, we make no representation regarding the sufficiency of the procedures described below either for the purpose for which this report has been requested or for any other purpose. Our procedures performed and the related results are as follows: 1. We verified, by recalculation, the mathematical accuracy of the Transient Occupancy Tax Returns for the quarter ended September 30, 2003. Finding: No exceptions were noted as a result of the procedure applied. 2. We agreed the tax rate used in calculating the Transient Occupancy Tax in the Transient Occupancy Tax Returns to the tax rate stated in the City Ordinance for the quarter ended September 30, 2003. Finding: No exceptions were noted as a result of the procedure applied. 3. We compared rental revenues from the Transient Occupancy Tax Returns to the sum of the Hotel's monthly revenue summaries for the quarter ended September 30, 2003. Finding: No exceptions were noted as a result of the procedure applied. Mr. John B. Bahorski City Manager Ms. Pamela Arends -King Director of Administrative Services /Treasurer City of Seal Beach February 20, 2004 Page 2 4. We selected twenty -five days from the quarter ended September 30, 2003 general ledger. For each of these days, we footed the daily guest room revenue reports and agreed the total to the monthly summary report. Finding: No exceptions were noted as a result of the procedure applied. 5. We reconciled the quarter ended September 30, 2003 bank deposits per the bank statements of the Hotel to the reported revenues per the quarterly returns. Finding: No exceptions were noted as a result of the procedure applied. 6. We selected twenty -five tax exempt guests claimed for calendar year 2003, compared data to supporting documents and compared the basis of qualifying exemptions per the supporting documents to the basis authorized by the City Ordinance. Finding: We noted that the Hotel overstated "amount paid for occupancy of 31 days or more" on the Transient Occupancy Tax Submission Form for calendar year 2003. The Hotel claimed an airline corporation as tax exempt when the crew members do not occupy hotel rooms for more than 30 consecutive days. The Hotel also does not maintain records for all guests claimed as tax exempt. Due to these findings, we calculated tax owed for calendar year 2003. The total amount due to the City is $21,660 ($19,183 tax plus $2,477 for penalties and interest) accumulated through March 1, 2004. 7. We compared the date the quarterly reports and payments were filed by the Hotel to the due date stated in the City Ordinance for the quarter ended September 30, 2003. Finding: No exceptions were noted as a result of the procedure applied. 8. We were requested to compare total revenues for the year to the 2003 federal income tax return. Finding: The federal income tax return for 2003 has not been filed yet. We were not engaged to and did not conduct an examination, the objective of which would be the expression of an opinion on the Transient Occupancy Tax receipts. 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 City Council and management of the City and is not intended to be and should not be used by anyone other than these specified parties. (i natatli -I^ M*40. 1201 DOVE STREET, SUITE 680 orel �+� ,ff (� NEWPORT BEACH, CALIFORNIA 92660 and C7 e>4G04� /� 4"rm (949) 221 -0025 CERTIFIED PUBLIC ACCOUNTANTS 570 RANCHEROS DRIVE, SUITE 260 SAN MARCOS, CA 92069 (760) 752 -3390 March 4, 2004 Mr. John B. Bahorski City Manager Ms. Pamela Arends -King Director of Administrative Services /Treasurer City of Seal Beach 211 Eighth Street Seal Beach, CA 90740 Independent Accountants' Report on Applying Agreed -Upon Procedures We have performed the procedures enumerated below related to the records supporting the Transient Occupancy Tax (TOT) Returns for the Seal Beach Inn and Gardens (Inn) in the City of Seal Beach, California (City) for the period of January 1, 2001 to December 31, 2003. These procedures, which were agreed to by the City, were performed solely to assist management of the City in its evaluation of the City's receipt of Transient Occupancy Taxes from the Seal Beach Inn and Gardens. This agreed -upon procedures engagement was performed in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency of the procedures is solely the responsibility of the parties specified in this report. Consequently, we make no representation regarding the sufficiency of the procedures described below either for the purpose for which this report has been requested or for any other purpose. Our procedures performed and the related results are as follows: 1. We verified, by recalculation, the mathematical accuracy of the Transient Occupancy Tax Returns for the quarters ended September 30, 2001, 2002 and 2003. Finding: No exceptions were noted as a result of the procedure applied. 2. We agreed the tax rate used in calculating the Transient Occupancy Tax in the Transient Occupancy Tax Returns to the tax rate stated in the City Ordinance for the quarters ended September 30, 2001, 2002 and 2003. Finding: No exceptions were noted as a result of the procedure applied. 3. We compared rental revenues from the Transient Occupancy Tax Returns to the sum of the Inn's monthly revenue summaries for the quarters ended September 30, 2001, 2002 and 2003. J Mr. John B. Bahorski City Manager Ms. Pamela Arends -King Director of Administrative Services/Treasurer City of Seal Beach March 4, 2004 Page 2 Finding: We noted that the Inn understated Total Rental Receipts on Transient Occupancy Tax Submission Form for the quarter ended September 30, 2001- 2003 due to the fact that the Inn did not include Crib/Rollaway revenue in Total Rental Receipts. Due to this finding, we calculate tax owed for the period of July 1 to September 30, 2001, 2002 and 2003. The total amount due to the City is $63.05 ($56.62 tax plus $11.43 for penalties and interest) accumulated through April 1, 2004. Per discussion with the Inn's owner on March 10, 2004, Crib/Rollaway revenue on the Inn's monthly revenue summaries is considered non -room revenue, because the Inn already includes charges for extra persons who need crib or rollaway beds in room revenue. From the Inn's perspective, Crib /Rollaway is equipment rental revenue that is not related to room revenue. 4. We selected twenty -five days from the quarters ended September 30, 2001, 2002 and 2003 general ledger. For each of these days, we footed the daily guest room revenue reports and agreed the total to the monthly summary report. Finding: No exceptions were noted as a result of the procedure applied. 5. We reconciled the quarters ended September 30, 2001, 2002 and 2003 bank deposits per the bank statements of the Inn to the reported revenues per the quarterly returns. Finding: No exceptions were noted as a result of the procedure applied. 6. We selected ten tax exempt guests claimed for calendar years 2001, 2002 and 2003, compared data to supporting documents and compared the basis of qualifying exemptions per the supporting documents to the basis authorized by the City Ordinance. Finding: No exceptions were noted as a result of the procedure applied. 7. We compared the date the quarterly reports and payments were filed by the Inn to the due date stated in the City Ordinance for the quarters ended September 30, 2001, 2002 and 2003. Finding: We noted that the Inn did not file payments in a timely manner for the quarters ended September 30, 2001 and 2003. We also noted a payment plan was established between the City and the Inn. Mr. John B. Bahorski City Manager Ms. Pamela Arends -King Director of Administrative Services/Treasurer City of Seal Beach March 4, 2004 Page 3 8. We compared year -to -date revenue and bank deposits to 2001 and 2002 federal income tax return. The federal income tax return for 2003 has not been filed yet. Finding: No exceptions were noted as a result of the procedure applied. We were not engaged to and did not conduct an examination, the objective of which would be the expression of an opinion on the Transient Occupancy Tax receipts. 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 City Council and management of the City and is not intended to be and should not be used by anyone other than these specified parties. ��� eyllitighweL V:4446.tZ) 1201 DOVE STREET, SUITE 680 • ��fj NEWPORT BEACH, CALIFORNIA 92660 Moreland &� e�t?T/. (949) 221 -0025 CERTIFIED PUBLIC ACCOUNTANTS 570 RANCHEROS DRIVE, SUITE 260 SAN MARCOS, CA 92069 (760) 752 -3390 March 26, 2004 Mr. John B. Bahorski City Manager Ms. Pamela Arends -King Director of Administrative Services /Treasurer City of Seal Beach 211 Eighth Street Seal Beach, CA 90740 Independent Accountants' Report on Applying Agreed -Upon Procedures We have performed the procedures enumerated below related to the records supporting the Transient Occupancy Tax (TOT) Returns for the Seal Beach Country Club Apartments, Dba Oakwood Apartments (Apartments) in the City of Seal Beach, California (City) for the period of January 1, 2003 to December 31, 2003. These procedures, which were agreed to by the City, were performed solely to assist management of the City in its evaluation of the City's receipt of Transient Occupancy Taxes from the Seal Beach Country Club Apartments, Dba Oakwood Apartments. This agreed -upon procedures engagement was performed in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency of the procedures is solely the responsibility of the parties specified in this report. Consequently, we make no representation regarding the sufficiency of the procedures described below either for the purpose for which this report has been requested or for any other purpose. Our procedures performed and the related results are as follows: 1. We verified, by recalculation, the mathematical accuracy of the Transient Occupancy Tax Return for the quarter ended September 30, 2003. Finding: No exceptions were noted as a result of the procedure applied. 2. We agreed the tax rate used in calculating the Transient Occupancy Tax in the Transient Occupancy Tax Returns to the tax rate stated in the City Ordinance for the quarter ended September 30, 2003. Finding: No exceptions were noted as a result of the procedure applied. 3. We compared rental revenues from the Transient Occupancy Tax Returns to the sum of the Apartments' monthly revenue summaries for the quarter ended September 30, 2003. Mr. John B. Bahorski City Manager Ms. Pamela Arends -King Director of Administrative Services/Treasurer City of Seal Beach March 26, 2004 Page 2 Finding: We noted the total rental revenues were overstated by $153,462 and the exemption were understated by the same amount. The taxable rents were correct, therefore no financial impact to the City. 4. We selected twenty -five registration cards from the quarter ended September 30, 2003. For each of these registration cards, we traced to the residence profile report. Finding: No exceptions were noted as a result of the procedure applied. 5. We reconciled the quarter ended September 30, 2003 bank deposits per the bank statements of the Apartments to the reported revenues per the quarterly returns. Finding: No exceptions were noted as a result of the procedure applied. 6. We selected twenty -five tax exempt guests claimed for calendar year 2003, compared data to supporting documents and compared the basis of qualifying exemptions per the supporting documents to the basis authorized by the City Ordinance. Finding: No exceptions were noted as a result of the procedure applied. 7. We compared the date the quarterly reports and payments were filed by the Apartments to the due date stated in the City Ordinance for the quarter ended September 30, 2003. Finding: No exceptions were noted as a result of the procedure applied. 8. We compared year -to -date revenue and bank deposits to 2003 state income tax return. Finding: No exceptions were noted as a result of the procedure applied. We were not engaged to and did not conduct an examination, the objective of which would be the expression of an opinion on the Transient Occupancy Tax receipts. 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 City Council and management of the City and is not intended to be and should not be used by anyone other than these specified parties. 14/bAsiii4/ 1