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HomeMy WebLinkAboutReimbursement to Operators for Overpayment of T.O.T. in 2003CITY OF PALM DESERT FINANCE DEPARTMENT STAFF REPORT REQUEST: Approve reimbursement to operators for overpayment of Transient Occupancy Tax in calendar year 2003 totaling $2,751.51. SUBMITTED BY: Paul S. Gibson, Director of Finance DATE: January 27, 2005 Recommendation: Approve reimbursement to operators for overpayment of Transient Occupancy Tax in calendar year 2003 totaling $2,751.51. Background: The City of Palm Desert annually hires the CPA firm of Lance Soil & Lunghard, LLP to conduct audits on our Transient Occupancy Tax. This last year, five operators were audited; two entities resulted in overpayment to the city for calendar year 2003. Attached are the five reports and a summary of the auditor's findings. Original copies have been provided to City Attorney's Office. Submitted by: Paul S. Gibson, Director of Finance PSG:JLE:hc Approval: Carlos L. Ortega, Manager T.O.T. AUDIT FINDINGS Period = January 1 2003 — December 31, 2003 Operator #1 = None found Operator #2 = City of Palm Desert owes $2,034.70 Operator #3 = City of Palm Desert owes $716.81 Operator #4 = None Operator #5 = Owed to City of Palm Desert $59.28 CITY OF PALM DESERT LIMITED PROCEDURES REVIEW OF Operectbr .Z , PALM DESERT FOR COMPLIANCE WITH TRANSIENT OCCUPANCY TAX ORDINANCE FOR THE PERIOD FROM JANUARY 1, 2003 THROUGH DECEMBER 31, 2003 CITY OF PALM DESERT JANUARY 1, 2003 THROUGH DECEMBER 31, 2003 TABLE OF CONTENTS Page Number INDEPENDENT ACCOUNTANTS' REPORT ON APPLYING AGREED -UPON PROCEDURES 1 SUMMARY OF PROCEDURES 2 SUMMARY OF FINDINGS 3 Lan SoH &ce Lunghard LLP Certified Public Accountants INDEPENDENT ACCOUNTANTS' REPORT ON APPLYING AGREED -UPON PROCEDURES Brandon W. Burrows Donald L. Parker Michael K. Chu David E. Hale A Professional corporation Donald G. Slater Richard K. Kikuchi Retired Robert C. Lance 1914.1994 Richard C. Soil Fred J. Lunghard, Jr. 1928.1999 To the Honorable Mayor and Members of the City Council City of Palm Desert, California We have performed the procedures enumerated herein, which were agreed to by the management of the City of Palm Desert, California (the City), solely to assist the City in verifying the accuracy of the transient occupancy tax returns submitted by Operq -#.4 Palm Desert (the Hotel) to the City for the period January 1, 2003 through December 31, 2003. The engagement to apply agreed -upon procedures 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 management of the City of Palm Desert. Consequently, we make no representations regarding the sufficiency of the procedures described herein, either for the purpose for which this report has been requested or for any other purpose. We were not engaged to, and did not, perform an audit of the transient occupancy tax returns of the Hotel, the objective of which would be the expression of a certified opinion on the transient occupancy tax payments made by the Hotel to the City. 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 the City. This report is intended solely for the use of the City and should not be used by those who have not agreed to the procedures and taken responsibility for the sufficiency of the procedures. However, if this report is made a matter of public record, its distribution will not be limited. Although defalcations and similar irregularities may occasionally be disclosed by this type of engagement, it is not designed for such purpose and should not be relied upon to disclose fraud, should any exist. 0,?aft, „lee -.-414,2,e, ee/46' July21, 2004 75 Years 1929 2004 of Excellence 203 N. Brea Blvd. • Suite 203 • Brea, CA 92821-4056 • (714) 672-0022 • Fax (714) 672-0331 • wwwislcpas.com I erQ{ar*.Z PALM DESERT SUMMARY OF PROCEDURES (Unaudited) We performed the following procedures on the books and records of ©ppr� Palm Desert (the Hotel), as agreed upon by the management of the City of Paim Desert: 1. We reviewed the City Municipal Code and related ordinances and resolutions related to transient occupancy tax. 2. We verified the mathematical accuracy and timeliness of transient occupancy reports filed with the City for the calendar year 2003. 3. We traced the gross revenues reported on the transient occupancy tax returns prepared by the hotel to gross revenues recorded in the hotel's accounting records and verified that these were in accordance with the City's ordinance. 4. We selected a sample of rental transactions during the review period, and for each transaction selected, we verified tax computations and traced the amounts of rental revenues and transient occupancy tax collected to the books and records of the Hotel 5. We reviewed the internal control procedures of the Hotel to determine the following: a. How "gross rents" and "uncollected rents" were accounted for and reported to the City. b. What procedures were in place to identify transient and non -transient guests. c. How exemptions, including complimentary rooms, were documented and reported to the City. 6. We reviewed the supporting documentation for exemptions claimed on the transient occupancy tax returns. 7. We examined the Hotel's "Transient Occupancy Registration Permit" and determined whether it was posted in a conspicuous place. 8. We performed additional procedures that we considered necessary to verify the reasonableness of reported revenues of the hotel operator. See Independent Accountants' Report on Applying Agreed -Upon Procedures 2 rod r PALM DESERT SUMMARY OF FINDINGS (Unaudited) 1. The Transient Occupancy Registration Permit was not obtained by -A4o 4'1- for the period under review as required by the City of Palm Desert Muni ipal Co a Section 3.28.060. 2. Based on the procedures performed, Q p e agar 7_t appears to have reported and paid the correct amount of transient occupancy tax to the City of Palm Desert, in all material respects, for the period under review. See Independent Accountants' Report on Applying Agreed -Upon Procedures 3 CITY OF PALM DESERT LIMITED PROCEDURES REVIEW OF ®perafhc Y#"Z PALM DESERT FOR COMPLIANCE WITH TRANSIENT OCCUPANCY TAX ORDINANCE FOR THE PERIOD FROM JANUARY 1, 2003 THROUGH DECEMBER 31, 2003 CITY OF PALM DESERT JANUARY 1, 2003 THROUGH DECEMBER 31, 2003 TABLE OF CONTENTS INDEPENDENT ACCOUNTANTS' REPORT ON APPLYING AGREED -UPON PROCEDURES SUMMARY OF PROCEDURES SUMMARY OF FINDINGS SCHEDULE OF FINDINGS Page Number 3 4 Lance SLunoll& ghard LLP Certified Public Accountants INDEPENDENT ACCOUNTANTS' REPORT ON APPLYING AGREED -UPON PROCEDURES To the Honorable Mayor and Members of the City Council City of Palm Desert, California Brandon W. Burrows Donald L. Parker Michael K. Chu David E. Hale A Professional Corporation Donald G. Slater Richard K. Kikuchi Retired Robert C. Lance 1914-1994 Richard C. Soli Fred J. Lunghard, Jr. 1928-1999 We have performed the procedures enumerated herein, which were agreed to by the management of the City of Palm Desert, California (the City), solely to assist the City in verifying the accuracy of the transient occupancy tax returns submitted by' Operator 2- Palm Desert (the Hotel) to the City for the period January 1, 2003 through December 31, 2003. The engagement to apply agreed -upon procedures 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 management of the City of Palm Desert. Consequently, we make no representations regarding the sufficiency of the procedures described herein, either for the purpose for which this report has been requested or for any other purpose. We were not engaged to, and did not, perform an audit of the transient occupancy tax returns of the Hotel, the objective of which would be the expression of a certified opinion on the transient occupancy tax payments made by the Hotel to the City. 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 the City. This report is intended solely for the use of the City and should not be used by those who have not agreed to the procedures and taken responsibility for the sufficiency of the procedures. However, if this report is made a matter of public record, its distribution will not be limited. Although defalcations and similar irregularities may occasionally be disclosed by this type of engagement, it is not designed for such purpose and should not be relied upon to disclose fraud, should any exist. oeme,Jeeece.44,24e,e.40 July21, 2004 75 Years 1929 `'\'' 2004 of Excellence 203 N. Brea Blvd. • Suite 203 • Brea, CA 92821-4056 • (714) 672-0022 • Fax (714) 672-0331 • www.Islcpas.com , PALM DESERT SUMMARY OF PROCEDURES (Unaudited) We performed the following procedures on the books and records of f.rotar--Z Desert (the Hotel), as agreed upon by the management of the City of Palm Desert: 1. We reviewed the City Municipal Code and related ordinances and resolutions related to transient occupancy tax. Palm 2. We verified the mathematical accuracy and timeliness of Transient Occupancy Reports filed with the City for the calendar year 2003. 3. We traced the gross revenues reported on the Transient Occupancy Tax returns prepared by the Hotel to gross revenues recorded in the Hotel's accounting records and verified that these were in accordance with the City's ordinance. 4. We selected a sample of rental transactions during the review period, and for each transaction selected, we verified tax computations and traced the amounts of rental revenues and Transient Occupancy Tax collected to the books and records of the Hotel. 5. We reviewed the internal control procedures of the Hotel to determine the following: a. How "gross rents" and "uncollected rents" were accounted for and reported to the City. b. What procedures were in place to identify transient and non -transient guests. c. How exemptions, including complimentary rooms, were documented and reported to the City. 6. We reviewed the supporting documentation for exemptions claimed on the Transient Occupancy Tax returns. 7. We examined the Hotel's "Transient Occupancy Registration Permit" and determined whether it was posted in a conspicuous place. 8. We performed additional procedures that we considered necessary to verify the reasonableness of reported revenues of the Hotel operator. See Independent Accountants' Report on Applying Agreed -Upon Procedures 2 mien# , PALM DESERT SUMMARY OF FINDINGS (Unaudited) Finding 1: The Transient Occupancy Registration Permit was not placed in a conspicuous place as required by the City of Palm Desert Municipal Code Section 3.28.060. Finding 2: For the month of April, O r4- s v t z . ; failed to remit its monthly transient occupancy tax on the first day of the second month after the close of the calendar month, thus becoming delinquent. Payment was made on June 19, 2003, but should have been made by June 1 in order to avoid penalties and interest. Finding 3: For the months of June through December, ©pen gross revenue reported to the City on Line 1 of the Return of Transient Occupancy Tax included the tax collected from occupants and the revenue collected for storage. This resulted in an over reported rental revenue totaling $43,796.47 and an overpayment of $3,941.57 of the transient occupancy tax. The net effect of Finding 2 and Finding 3 is an overpayment of the transient occupancy tax by' Dpered-Ok- Z ° ., Palm Desert of $2,034.70 for the calendar year 2003. (See schedule of the computation of underpayment/(overpayment) of the transient occupancy tax.) NOTES TO SUMMARY OF FINDINGS Note A: The City of Palm Desert Municipal Code Section 3.28.080A establishes a 10% penalty plus interest at the rate of 1 % per month for failing to remit any tax owed on or before the last day of the month following the close of each calendar month in which the tax liability occurred. If that tax is not paid on or before 30 days following the date on which the tax became delinquent, the operator shall pay accumulative penalties and interest compounded on a monthly basis until the delinquent amount has been paid in full. The amount of penalty that we calculated has been assessed on the amount of tax still owed as determined by our review. Note B: The City of Palm Desert Municipal Code Section 3.28.080B states that an operator who fails to remit any delinquent remittance on or before a period of 30 days following the date on which the remittance first became delinquent shall pay accumulative penalties and interest compounded on a monthly basis, until the delinquent remittance or payment is paid in full, provided the amount of such penalties shall in no event exceed 50% of the amount of tax due, and interest shall not exceed 12% of the tax due. See Independent Accountants' Report on Applying Agreed -Upon Procedures 3 LL f- 0 ce W 2Q > N O Q Z iW- W r+ 1V ° 3 ri d W O Wa� 2' 0 L1. 0!- N 0. 2 0 y 0 z z EC 0 W J W 0 d d 0 —p am D > P a 0 m co H z 0 2 b�? 69 MCOMMO4NO d'NcoaOO)t(ioOT COO)COOOCn0r.(ON E N O CD CA CD M y O r rCar 004101P-0)0)41OO CD0)000Ou)0)N- I ry-e4 66CA M r T r CO N 4N(0 0uN y ' cioOicocouioiti ' u)TNC))0)0)CD M T r a m CO CO CO m CO CO 000OOou)coa,o CD CD CD CD CD 41 Y.- CD-cyN.:rn OOOOOOOstoo r-N QD OD ) CO C4 O N- EA T CO COO ThCMru)M CA M r` (O t• M Li, 0) 0 0) N LC) ram- CO IV f: r c6 Lo CD NNOMNtCal CDNCOCDO Nor CI CO CV_ r r� CO � T r CO COrtCDa-rtr- 'NY Cr; NLC) '- r' N T T T E,9 COCOO I`�MN f•ti0u) 0) M ti � t` � 'ct d' h CO NNCCOOMd~'CN3-OMO0 N17 r- N 0 N. LO CO CO ti d' CO �t T r CO-• d COTNI: T T N T T T CO O O u) CO T o n. O 00oi-M00I0 o co cci ui of oo r: OM op FCOOCO NO41ts0CDM a- OO O CO T T T(OOrnoCOooaDCD 41 Cn CO d; 0) O O O O CO O) N 0)L)uiOr CYicir:l(iMCA OOct u)f�rrCOy �t O r d' OO Q) CD T Ti;ISO CV 3-7. 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Hale A Professional corporation Donald G. Slater Richard K. Kikuchi Certified Public Accountants INDEPENDENT ACCOUNTANTS' REPORT ON APPLYING AGREED -UPON PROCEDURES To the Honorable Mayor and Members of the City Council City of Palm Desert, California Retired Robert C. Lance 1914-1994 Richard C. SoII Fred J. Lunghard, Jr. 1928-1999 We have performed the procedures enumerated herein, which were agreed to by the management of the City of Palm Desert, California (the City), solely to assist the City in verifying the accuracy of the transient occupancy tax returns submitted by'' Opera-Fr,r- Palm Desert (the Hotel) to the City for the period January 1, 2003 througn December 31, 2003. The engagement to apply agreed -upon procedures 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 management of the City of Palm Desert. Consequently, we make no representations regarding the sufficiency of the procedures described herein, either for the purpose for which this report has been requested or for any other purpose. We were not engaged to, and did not, perform an audit of the transient occupancy tax returns of the Hotel, the objective of which would be the expression of a certified opinion on the transient occupancy tax payments made by the Hotel to the City. 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 the City. This report is intended solely for the use of the City and should not be used by those who have not agreed to the procedures and taken responsibility for the sufficiency of the procedures. However, if this report is made a matter of public record, its distribution will not be limited. Although defalcations and similar irregularities may occasionally be disclosed by this type of engagement, it is not designed for such purpose and should not be relied upon to disclose fraud, should any exist. July 20, 2004 75 Years 1929' ' ' 2004 of Excellence 203 N. Brea Blvd. • Suite 203 • Brea, CA 92821-4056 • (714) 672-0022 • Fax (714) 672-0331 • www.IsIcpas.com Opei'Cc+er , PALMDESERT SUMMARY OF PROCEDURES (Unaudited) We performed the following procedures on the books and records of . 8PerQfdt'-#.3 Palm Desert (the Hotel), as agreed upon by the management or the City of Palm Desert: 1. We reviewed the City Municipal Code and related ordinances and resolutions related to Transient Occupancy Tax. We verified the mathematical accuracy and timeliness of Transient Occupancy Reports filed with the City for the calendar year 2003. 3. We traced the gross revenues reported on the Transient Occupancy Tax returns prepared by the Hotel to gross revenues recorded in the Hotel's accounting records and verified that these were in accordance with the City's ordinance. 4. We selected a sample of rental transactions during the review period, and for each transaction selected, we verified tax computations and traced the amounts of rental revenues and Transient Occupancy Tax collected to the books and records of the Hotel. 5. We reviewed the internal control procedures of the Hotel to determine the following: a. How "gross rents" and "uncollected rents" were accounted for and reported to the City. b. What procedures were in place to identify transient and non -transient guests. c. How exemptions, including complimentary rooms, were documented and reported to the City. 6. We reviewed the supporting documentation for exemptions claimed on the Transient Occupancy Tax returns. 7. We examined the Hotel's "Transient Occupancy Registration Permit" and determined whether it was posted in a conspicuous place. 8. We performed additional procedures that we considered necessary to verify the reasonableness of reported revenues of the Hotel operator. See Independent Accountants' Report on Applying Agreed -Upon Procedures 2 eYQ..TOV 3 _, PALM DESERT SUMMARY OF FINDINGS (Unaudited) Finding #1: For February 2003 and April 2003, Opera -fa Palm Desert over reported its gross rent for occupancy of all rooms on line 1 of the Return of the Transient Occupancy Tax by $2,112.43 and $7,561.10, respectively, resulting in an overpayment of its transient occupancy tax of $190.12 for the month of February 2003 and $680.50 for the month of April 2003. Finding #2: For March 2003, OpeY&r'v Palm Desert over - reported its allowable deductions on line 2.a of the Return of Transient Occupancy Tax by $414.01, resulting in an undelrp�ay�ment of the transient occupancy tax of $37.26. 2003, Finding #3: its allowable or deductions b $1? 9 0 on hie 2.a of the Return ur Transient lDesert overreported Occupancy Tax and overreported its gross revenue for occupancy of all rooms by $37.25 on line 1, resulting in a net underpayment of the transient occupancy tax of $113.20 for the month of May 2003. Finding #4: For June 2003, (9Wr4frr 3 Palm Desert under- reported its gross rent for occupancy of all rooms by $37.25 to correct the overreporting of the same amount in May 2003, resulting in an underpayment of its transient occupancy tax of $3.35 for the June 2003 rental activity. Finding #5: The Transient Occupancy Registration permit was not placed in a conspicuous place as required by the City of Palm Desert Municipal Code section 3.28.060. The net effect of Finding #1 through Finding #4 is an overpayment of the transient occupancy tax by: QPa,Olr 3 Palm Desert of $716.81 for the calendar year 2003. (See schedule of the computation of overNayment/(underpayment) of the transient occupancy tax.) See Independent Accountants' Report on Applying Agreed -Upon Procedures 3 efCil. _✓qt .3 PALM DESERT COMPUTATION OF OVERPAYMENT/(UNDERPAYMENT) OF TRANSIENT OCCUPANCY TAX FOR THE CALENDAR YEAR 2003 (Unaudited) Taxable Amount Reporting Period Per Audit January 2003 $ 55,394.88 February 2003 129,225.90 March 2003 354,479.23 April 2003 231,244.60 May 2003 131,402.30 June 2003 26,249.20 July 2003 24,298.40 August 2003 27,691.53 September 2003 16,214.00 October 2003 26,162.30 November 2003 119,327.75 December 2003 185,357.90 Taxable Amount Reported on Return Amount Over/(Under) Reported $ 55,394.88 $ 131,338.33 354,065.22 238,805.70 130,144.55 26,211.95 24,298.40 27,691.53 16,214.00 26,162.30 119,327.75 185,357.90 2,112.43 (414.01) 7,561.10 (1,257.75) (37.25) Transient Occupancy Tax Over/(Under) Paid 190.12 (37.26) 680.50 (113.20) (3.35) Since the balance was a refund to the hotel for every month, computation of penalty and interest was not applicable. Balance Due to City/ (To Be Refunded to Hotel) (190.12) (152.86) (833.36) (720.16) (716.81) (716.81) (716.81) (716.81) (716.81) (716.81) (716.81) See Independent Accountants' Report on Applying Agreed -Upon Procedures 4 CITY OF PALM DESERT LIMITED PROCEDURES REVIEW OF FOR COMPLIANct wi rH TRANSIENT PALM DESERT OCCUPANCY TAX ORDINANCE FOR THE PERIOD FROM JANUARY 1, 2003 THROUGH DECEMBER 31, 2003 CITY OF PALM DESERT JANUARY 1, 2003 THROUGH DECEMBER 31, 2003 TABLE OF CONTENTS Page Number INDEPENDENT ACCOUNTANTS' REPORT ON APPLYING AGREED -UPON PROCEDURES 1 SUMMARY OF PROCEDURES 2 SUMMARY OF FINDINGS Lance Soli & Lunghard LLP Brandon W. Burrows Donald L. Parker Michael K. Chu David E. Hale A Professional Caparaton Donald G. Slater Richard K. Kikuchi Certified Public Accountants INDEPENDENT ACCOUNTANTS' REPORT ON APPLYING AGREED -UPON PROCEDURES To the Honorable Mayor and Members of the City Council City of Palm Desert, California Retired Robert C. Lance 1914-1994 Richard C. Soil Fred J. Lunghard, Jr. 1928-1999 We have performed the procedures enumerated herein, which were agreed to by the management of the City of Palm Desert, California (the City), solely to assist the City in verifying the accuracy of the transient occupancy tax returns submitted by O f rq. ©r # Palm Desert (the Hotel) to the City for the period January 1, 2003 through December 31, 2003. The engagement to apply agreed -upon procedures 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 management of the City of Palm Desert. Consequently, we make no representations regarding the sufficiency of the procedures described herein, either for the purpose for which this report has been requested or for any other purpose. We were not engaged to, and did not, perform an audit of the transient occupancy tax returns of the Hotel, the objective of which would be the expression of a certified opinion on the transient occupancy tax payments made by the Hotel to the City. 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 the City. This report is intended solely for the use of the City and should not be used by those who have not agreed to the procedures and taken responsibility for the sufficiency of the procedures. However, if this report is made a matter of public record, its distribution will not be limited Although defalcations and similar irregularities may occasionally be disclosed by this type of engagement, it is not designed for such purpose and should not be relied upon to disclose fraud, should any exist. Jee ;g- 4/1444:e/ 44re July 22, 2004 75 Years 1929 7' 2004 of Excellence 203 N. Brea Blvd. • Suite 203 • Brea, CA 92821-4056 • (714) 672-0022 • Fax (714) 672-0331 • www.lslcpas.com C4er0.ter * , PALM DESERT SUMMARY OF PROCEDURES (Unaudited) We performed the following procedures on the books and records of COmrciter#y Palm Desert (the Hotel), as agreed upon by the management of the City of Palm Desert: 1. We reviewed the City Municipal Code and related ordinances and resolutions related to transient occupancy tax. 2. We verified the mathematical accuracy and timeliness of transient occupancy reports filed with the City for the calendar year 2003. 3. We traced the gross revenues reported on the transient occupancy tax returns prepared by the Hotel to gross revenues recorded in the Hotel's accounting records and verified that these were in accordance with the City's ordinance. 4. We selected a sample of rental transactions during the review period, and for each transaction selected, we verified tax computations and traced the amounts of rental revenues and transient occupancy tax collected to the books and records of the hotel. 5. We reviewed the internal control procedures of the Hotel to determine the following: a. How "gross rents" and "uncollected rents" were accounted for and reported to the City. b. What procedures were in place to identify transient and non -transient guests. c. How exemptions, including complimentary rooms, were documented and reported to the City. 6. We reviewed the supporting documentation for exemptions claimed on the transient occupancy tax returns. 7. We examined the Hotel's "Transient Occupancy Registration Permit" and determined whether it was posted in a conspicuous place. 8. We performed additional procedures that we considered necessary to verify the reasonableness of reported revenues of the Hotel operator. See Independent Accountants' Report on Applying Agreed -Upon Procedures 2 ©pty tc...J`z , PALM DESERT SUMMARY OF FINDINGS (Unaudited) * None Noted * See Independent Accountants' Report on Applying Agreed -Upon Procedures 3 CITY OF PALM DESERT, CALIFORNIA LIMITED PROCEDURES REVIEW OF °per-et-Few-4s PALM DESERT FOR COMPLIANCE WITH TRANSIENT OCCUPANCY TAX ORDINANCE FOR THE PERIOD FROM JANUARY 1, 2003 THROUGH DECEMBER 31, 2003 CITY OF PALM DESERT JANUARY 1, 2003 THROUGH DECEMBER 31, 2003 TABLE OF CONTENTS INDEPENDENT ACCOUNTANTS' REPORT ON APPLYING AGREED -UPON PROCEDURES SUMMARY OF PROCEDURES SUMMARY OF FINDINGS SCHEDULE OF FINDINGS Page Number 3 4 Lance Soll & Lunghard LLP Certified Public Accountants INDEPENDENT ACCOUNTANTS' REPORT ON APPLYING AGREED -UPON PROCEDURES To the Honorable Mayor and Members of the City Council City of Palm Desert, California Brandon W. Burrows Donald L. Parker Michael K. Chu David E. Hale A professional copauon Donald G. Slater Richard K. Kikuchi Retired Robert C. Lance 1914-1994 Richard C. Soll Fred J. Lunghard, Jr. 1928-1999 We have performed the procedures enumerated herein, which were agreed to by the management of the City of Palm Desert, California (the City), solely to assist the City in verifying the accuracy of the transient occupancy tax returns submitted by Op yct44�- ' 5 Palm Desert (the Hotel) to the City for the period January 1, 2003 through December 31, 2003. The engagement to apply agreed -upon procedures 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 management of the City of Palm Desert. Consequently, we make no representations regarding the sufficiency of the procedures described herein, either for the purpose for which this report has been requested or for any other purpose. We were not engaged to, and did not, perform an audit of the transient occupancy tax returns of the Hotel, the objective of which would be the expression of a certified opinion on the transient occupancy tax payments made by the Hotel to the City. 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 the City. This report is intended solely for the use of the City and should not be used by those who have not agreed to the procedures and taken responsibility for the sufficiency of the procedures. However, if this report is made a matter of public record, its distribution will not be limited. Although defalcations and similar irregularities may occasionally be disclosed by this type of engagement, it is not designed for such purpose and should not be relied upon to disclose fraud, should any exist. ,e„,„ „lee pe-44,,e, .4re/6' July 20, 2004 75 Years 1929 '' 2004 of Excellence 203 N. Brea Blvd. • Suite 203 • Brea, CA 92821-4056 • (714) 672-0022 • Fax (714) 672-0331 • www.Islcpas.com 1 eretfor-# ' PALM DESERT SUMMARY OF PROCEDURES (Unaudited) We performed the following procedures on the books and records of _ 'Qpeta.46 Palm Desert (the Hotel), as agreed upon by the management of the City of Palm Desert: 1. We reviewed the City Municipal Code and related ordinances and resolutions related to transient occupancy tax. 2. We verified the mathematical accuracy and timeliness of transient occupancy reports filed with the City for the calendar year 2003. 3. We traced the gross revenues reported on the transient occupancy tax returns prepared by the Hotel to gross revenues recorded in the Hotel's accounting records and verified that these were in accordance with the City's ordinance. 4. We selected a sample of rental transactions during the review period, and for each transaction selected, we verified tax computations and traced the amounts of rental revenues and transient occupancy tax collected to the books and records of the Hotel. 5. We reviewed the internal control procedures of the Hotel to determine the following: a. How "gross rents" and "uncollected rents" were accounted for and reported to the City. b. What procedures were in place to identify transient and non -transient guests. c. How exemptions, including complimentary rooms, were documented and reported to the City. 6. We reviewed the supporting documentation for exemptions claimed on the transient occupancy tax returns. 7. We examined the Hotel's "Transient Occupancy Registration Permit" and determined whether it was posted in a conspicuous place. 8. We performed additional procedures that we considered necessary to verify the reasonableness of reported revenues of the Hotel operator. See Independent Accountants' Report on Applying Agreed -Upon Procedures 2 Qper r , PALM DESERT SUMMARY OF FINDINGS (Unaudited) 1. For the month of February, ( E?ta l*$ underreported its "rental receipts previously reported :...... :. . as transients" on Line 6 of the return by $75.00, resulting in an overpayment of $6.75 of its transient occupancy tax. 2. For the months of September and December, Qper 01. . over reported its "rental receipts previously reported as transients" on Line 6 of the return by $441.50 and $40.00, respectively, resulting in underpayments of $39.74 and $3.60, respectively, of its transient occupancy tax. NOTES TO SUMMARY OF FINDINGS Note A The City of Palm Desert Municipal Code Section 3.28.080A establishes a 10% penalty plus interest at the rate of 1% per month for failing to remit any tax owed on or before the last day of the month following the close of each calendar month in which the tax liability occurred. If that tax is not paid on or before 30 days following the date on which the tax became delinquent, the operator shall pay accumulative penalties and interest compounded on a monthly basis until the delinquent amount has been paid in full. The amount of penalty that we calculated has been assessed on the amount of tax still owed as determined by our review. Note B The City of Palm Desert Municipal Code Section 3.28.080B states that an operator who fails to remit any delinquent remittanceon or before a period of 30 days following the date on which the remittance first became delinquent shall pay accumulative penalties and interest compounded on a monthly basis, until the delinquent remittance or payment is paid in full, provided the amount of such penalties shall in no event exceed 50% of the amount of tax due, and interest shall not exceed 12% of the tax due. See Independent Accountants' Report on Applying Agreed -Upon Procedures 3 Finding Number s PALM DESERT SCHEDULE OF FINDINGS (Unaudited) Description 1. Rental Receipts Previously Reported as Transients (Line 6 of the Return) Under reported - February 2003 2. Rental Receipts Previously Reported as Transients (Line 6 of the Return) Over reported - September 2003 - December 2003 Total Underpaid Tax Penalty due as of September 1, 2004 Interest due as of September 1, 2004 Tax Underpaid/ (Overpaid) (75.00) $ (6.75) 441.50 39.74 40.00 3.60 36.59 18.30 4.39 Payment due as of September 1, 2004 $ 59.28 See Independent Accountants' Report on Applying Agreed -Upon Procedures 4