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HomeMy WebLinkAboutTransient Occupancy Tax Ordinance Limited Prodecures Rvw - T.O.T.X M CITY OF PALM DESERT FINANCE DEPARTMENT STAFF REPORT REQUEST: RECEIVE AND FILE THE LIMITED PROCEDURES REVIEW OF VARIOUS PALM DESERT OPERATORS FOR COMPLIANCE WITH THE CITY OF PALM DESERT'S TRANSIENT OCCUPANCY TAX ORDINANCE FOR THE 2005 CALENDAR YEAR, APPROVE REIMBURSEMENT TO OPERATOR FOR OVERPAYMENT OF TRANSIENT OCCUPANCY TAX TOTALING $10.38, AND AUTHORIZE THE COLLECTION OF $8,682.21 FROM OPERATORS FOR UNDERPAYMENT OF TRANSIENT OCCUPANCY TAX SUBMITTED BY: PAUL S. GIBSON, FINANCE DIRECTOR DATE: FEBRUARY 8, 2007 CONTENTS: LIMITED PROCEDURES REVIEW OF VARIOUS PALM DESERT OPERATORS FOR COMPLIANCE WITH THE CITY OF PALM DESERT'S TRANSIENT OCCUPANCY TAX ORDINANCE FOR THE 2005 CALENDAR YEAR Recommendation: That the City Council: 1. Receive and file the Limited Procedures Review of various Palm Desert operators for compliance with the City of Palm Desert's Transient Occupancy Tax ordinance for the 2005 calendar year; 2. Approve reimbursement to operator for overpayment of Transient Occupancy Tax totaling $10.38; and 3. Authorize collection from operators for underpayment of Transient Occupancy Tax totaling $8,682.21. Background: The City of Palm Desert annually hires the CPA firm of Lance, Soll & Lunghard, LLP to conduct audits on our Transient Occupancy Tax. This year, six operators were audited; one operator had an overpayment, and two had underpayments during the 2005 Staff Report Limited Procedures Review & Transient Occupany Tax Collection and Reimbursement February 8, 2007 Page 2of2 calendar year. Attached are the six reports and a summary of the auditor's findings. Original copies have been provided to the City Attorney's office. The Audit, Investment and Finance Committee received the report at their January 23, 2007 meeting, and it was recommended that it be received and filed by the City Council. Approval of staffs request will allow for reimbursement of tax overpaid to the City and collection of underpaid tax from the appropriate operators. Submitted by: aul S. Gibson, Finance Director Approval: Carlos L. Ortega, City Manager nmo CITY COUNCIL ACTION: APPROVED, DENIED RECEIVED e ri /e-d OTHER MEETING DATE - O'7 AYES: Benson, Fergucn, Finer+y 1 Spiege/, Kelly NOES: None ABSENT: N o i e. ABSTAIN: N one, VERIFIED BY: (_t klra *'riginal on File with,JCity Clerk's Office G:\Finance\Niamh Ortega\Wpdocs\PGibson\Staff Reports\Audit staff reports 2006\audit 2006 TOT report.doc T.O.T AUDIT FINDINGS Period January 1, 2005 — December 31, 2005 Operator#1 =This company owes the City of Palm Desert $1,692.15 for underpayment of Transient Occupancy Ta1c. Operator#2 =There were no Hndings. Operator#3 =There were no findings. Operator#4=The City of Palm Desert owes $10.38 for ovetpayment of Transient Occupancy Tax. Operator#5 =There were no findings. Operator#6=This company owes the City of Palm Desert$6,990.06 for underpayment of Transient Occupancy Tax. [THIS PAGE INTENTIONALLY LEI+T BLANK] CITY OF PALM DESERT LIMITED PROCEDURES REVlEW OF OPERATOR#t Pq(.,M DESERT FOR COMPLIANCE WITH TRANSIENT OCCUPANCY TAX ORDINANCE FOR THE PERIOD JANUARY 1, 2005 THROUGH DECEMBER 31, 2005 ; i I I � � CITY OF PALM DESERT JANUARY 1, 2005 THROUGH DECEMBER 31, 2005 TABLE OF CONTENTS Page Number INDEPENDENT ACCOUNTANTS' REPORT ON APPLYING AGREED-UPON PROCEDURES 1 SUMMARY OF PROCEDURES 2 SUMMARY OF FINDINGS 3 ; I � I { M Brandon W.Burrows Lance Donald L.Parker S��� � Da i E.Halt u Lunhard ��`�°~'�°�'°• g Donald G.Slrter LLP w�n�a K.Ktkuchi Certi,fied Public Accountants R�r;.�d Robert c.Lauce ����»w Richard C.Soll Fred,1.Lungbard,]r. 192L19ff INDEPENqENT ACCOUNTANTS'REPORT ON APPLYING AGREED-UPON PROCEDURES 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, Cafifomia (the City) solely to assist the City in verifying the accuracy of the transient occupancy tax retums submitteci by OPERA7oR#1 , Pa1m Desert(the Hotel)to the City for the period January 1, 2005 through December 31, 2005. The engageme�t to apply agreed-upon procedures was performed in accordance with attestation standards estab{ished by the American Institute of Certified Public Accauntants. The sufficiency of the procedures is soiely the responsibility of the management of the City of Palm Desert. Consequently, we make no representations regarding the sufflciency of the procedures described herein either for the purpose for which this report has been requested or far any other purpose. We were not engaged to,and did not perform,an audit of the transient oa:upancy tax retums of the Hotel,the objective of which would be the expression of a certffied opinion on the transient occupancy tax payments made by the Hotel to the City. Ac,�dingly,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 responsibil(ty for the sufficiency of the procedures. However,if this report is made a matter of public record, its distribution wilf not be limited. �, .�'��-� , -�� �� July 28, 2006 73 YEARS 1929r 1004 � G 203 N.Area Blvd.,Suite 203 • Brea.CA 92821-4056•(714)672-W22� Faz(7141672-0131 • www.ls�oas.com OPERATOR#1 , pqLM DESERT SUMMARY OF PROCEDURES (Unaudited) We performed the following procedures on the books and records of the OPERATOR#t ,Palm Desert(the Hotelj, as agreed upon by the management of the City of Palm Desert: 1. We reviewed the City Municipaf Code and related ordinances and resolutions related to transient occupancy tax. 2. We ver�ed the mathematical accuracy and timeliness of transient occupancy reports filed with the City for the calendar year 2005. 3. W e traced the gross revenues reported on the transie►rt occupancy tax retums prepared by the Hotel to gross revenues recorded in the Hotel's accounting records and ver'rfied that these were in acxordance with the Citys 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 intemal conVol 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 documentabon for exemptions claimed on the transient occupancy tax retums. 7. We inquired how the Hotel handles reservaUons and payments made on line through a third party such as Expedia.com and how the transient occupancy tax was collected and reported to the Ciry on these transactions. 8. We examined the Hotel's"Transient Occupancy Registration Permit"and determined whether it was posted in a conspicuous place. 9. We pertormed additional procedures that we considered necessary to verify the reasonableness of reported revenues of the Hotel operator. Ses Indepondant Accountants' Report on Applyiny AyrNd-Upon Proceduros 2 ` � OPERATOR#1 PALM DESERT SUMMARY OF F{NDINGS (Unaudited) t. The Hotel has many residents who atay over 3d consecutive days and qualify to be exempt of the transient occupancy tax.The Hotei does not have all the exemption forms to support what it repo�ted on the transient occupancy tax returns.Based on our review of the accounting records and supporting documentations of the Hotel,exemptions for occupancy by non-transient residents af 31 consecutive days or more were(under}/over reported as folfows: afowabl• Allowabl� D�ductions per Allowabl� D�ductloas our R�view of Dedudions RapoRsd by th� th�Hot�l's (Und�r)Over P�rtod Hotsl(p�r month) lrrtemal Record Reported January-05 $ 5,736.00 3 11,530.00 3 (5,794.00) February-05 18,359.00 17,101.00 1,258.00 March-05 13,153.00 9,158.00 3,995.00 AprA-05 6,997.00 6,816.00 381.00 May-05 7,548.00 4,735.00 2,813.00 June-05 3,898.00 4,452.00 (754.00) July-05 4,557.00 5,814.00 (1,257.00} August-05 11,545.00 7,981.00 3,584.00 September-05 10,736.00 9,807.00 929.00 October-05 10,774.1T 9,441.00 1,333.17 November-05 8,742.31 10,008.00 (1,283.69) December-05 8,282.93 5,679.00 2,803.93 2. Based on the above finding and our independent recomputation of the transient occupancy tax as shown on this report, Operator#1 — Palm Desert has underpaid its t�ansient occupancy taxes for the period January 2�05 through December 2005 by$1,037.38. The applicable penatty and interest computed in acco�'dance with Ordinance 3.28.080 up to August 1" 2008,amount 10 $518.69 and $136.08 respectively. The total owed to the City as of August 1'� is $1,692.15 induding the underpayment of the transient occupancy tax,the penalt�r and the interest. 3, Operator#1 does not have the capability af online reservations.Ali transient occupancy taxes are caltected through the hotef at time of reservation. SN Indep�nd�nt Aocountanb'Report on Apptyln�Agrs�d-Upon Proc�durp 3 CITY OF PALM DESERT LIMITED PROCEDURES REVIEW OF -� OPERATOR#2 , PALM DESERT FOR COMPLIANCE WITH TRANSIENT OCCUPANCY TAX ORDlNANCE FOR THE PERIOD JANUARY 1, 2005 THROUGH DECEMBER 31,2005 CITY OF PALM DESERT JANUARY 1, 2005 THROUGH DECEMBER 31, 2005 TABLE OF CONTENTS Page Num r INDEPENDENT ACCOUNTANTS'REPORT ON APPLYING AGREED-UPON PROCEDURES 1 SUMMARY OF PROCEDURES 2 SUMMARY OF FINDINGS 3 Brandon W.Burrows Lance Don�1d L.Parker htkhael K.Cfiu soir � Davtd E.Hale Lunghard ��s;;� LLP Rlcdard K.Klkuc6i Certifced Public Accauntants Retired Robert C.Lance »�t»w Richard C.5011 Fred J.Lunghud.Jr. wiai+w INDEPENDENT ACCOUNTANTS'REPORT ON APPLYING AGREED-UPON PROCEOURES To the Honorabie Mayor and Members of the City Council City of Palm Qesert, California We have performed the procedures enumerated herein,which were agreed to bythe management of the City of Palm Desert, Califomia (the City), solely to assist the City in verifying the accuracy of the transient occupancy tax retums submitted by the Operator#2 to the City for the period January 1, 2005 through Oec�mber 31, 2005. The engagement to apply agreed-upon p�ocedures was performed in accordance with attestation standards established by the American Institute of Cert�ed Public Accountants.7he sufficiency of the procedures is solely the responsibilily of the management of the Ciry 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 ar for any other purpose. We were not engaged to,and did not, perform an audit of the transient occupancy tax returns of the Resort, the objective of which would be the expression of a certlf'red opinion on the ttansient occupancy tax payments made by the Resort 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 Ci1y and shouid 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 ot pubiic record, its distribution wifl not be limited. �, �?��� , ��� ��� July 26, zoos 7S YEARS 19Z9 lOd4 Q� F �03 N. Brea Blvd..Suite 203 • Brea.CA 92821-�56•(714)672-0022• Fax(71d)672-0331 • wwtvJsleQu.�om OPERATOR#2 , PALM DESERT SUMMARY OF PROCEDURES (Unaudited) We performed the following procedures on the books and records of the OPERATOR#2 , Palm Desert(the Resort), 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 2005. 3. We traced the gross revenues reported on the transient occupancy tax retums prepared by the Resort to gross revenues recorded in the Resort's accounting records and verified that these w�ere in • accordance with the Citys ordinance. 4. We selected a sample of rental transactions during the review period and for each transacCwn selected, we verified tax computations and traced the amounts of rental revenues and transient occupancy tax collected to the books and records of the resort. 5. We reviewed the intemal control procedures of the Resort to determine the following: a. How"gross rents"and"uncollected rents"were accounted for and repoRed 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. 8. We reviewed the supporting documentation for exemptions Gaimed on the transient occupancy tax retums. 7. We inquired how the Resort handles reservations and payments made on line through a third party such as Expedia.com and how the transient occupancy tax was coltected and reported to the City on these transactions. 8. We examined the Resort's"Transient Occupancy Registration Permit"and determined whether itwas posted in a conspicuous piace. 9. We performed addftional procedures that we considered necessary to verify the reasonableness of reported revenues of the Resort operator. S�e Ind��dwtt Accountsnts' Report on Applyinq Aqrs�d-Upon Procedures 2 OPERATOR#2 , PALM DESERT SUMMARY OF FINDINGS (Unaudited) 1. The Operator#2 management company, Operator#2 Parent Co. . (the Company),prepares the transient occupancy tax retum and the paymerrt each month. The Company receives a detailed report of ali the registrations for the month from the Resort which includes each guest's arrival and departure dates, number of days stayed, name of the guest, rent charged, Vansient occupancy tax charged, and total amount charged. The Company reviews the report to come up with the allowabfe deductions amount for the month. The taxable rent amount is taken from the Compan�s general ledger. The Company calculates the gross rent by adding the allowable deductions and the taxable rent amounts. We traced and agreed the taxable rent amount to the Compan�s general ledger for each month. Also, for every month, we selected a sample of registration transactions to verify that the tax computation was properly charged when applicable and property not charged when the guest stayed over 30days. Based on the test wo�lc performed,we have no findings. 2. Per our inquiry with the Company,the Resort does not take any reservations on line. 3N Ind�pend�nt Accountants'R�pon on Applying Agreed-Upon Procedura 3 I CI7Y OF PALM DESERT LIMITED PROCEDURES REVIEW OF Of�RATOR#3 PALM DESERT F-UR COMPLIANCE WI7H TRANSIENT OCCUPANCY TAX ORDINANCE FOR THE PERIOD JANUARY 1,2005 THROUGH DECEMBER 31, 2005 i CITY OF PALM DESERT JANUARY 1, 2005 THROUGH DECEM6ER 31, 2005 TABLE OF CONTENTS Page Num r INDEPENDENT ACCOUNTANTS' REPORT ON APPLYING AGREEQ-UPON PROCEDURES 1 SUMMARY OF PROCEDURES 2 SUMMARY OF FINDINGS 3 Bryndon W.Burrows Lance Donald L.!'arker !likhxel K.C6u SOII � David E.Hale Lunghard �al G Sla� LLP x��.ra x.��� Certifted Public Accountants R«� rton«e c.�� 19��19f1 RlCiltrd C.SOU Fred J.Lun�hard,Jr. i�i� INDEPENDENT ACCOUNTANTS'REPORT ON APPLYING AGREED-UPON PROCEDURES To the Honorable May�or and Members of the City Council City of Palm Desert, Calffomia We have performed the procedures enumerated herein, which were agreed to by the management of the Ciry of Palm Desert, Califomia (the City), solely to assist the City in verifjring the accuracy of the transient occupancy tax retums submitted by the aperator#3 , Palm Desert (the Hotel), to the City for the period January 1, 2005 through Oecember 31, 2005. The engagement to apply agreed-upon procedures was performed in accordance with attestation standards established by the American Institute of Certified Public Acxountants. The sufficiency of the procedu�es 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 fw which this report has been requested or for any other purpose. We were not engaged to,and did not,perfortn an audit of the transient occupancy tax retums of the Hotel,the objective of which would be the expression of a cert�ed opinion on the transient occupancy tax payments made by the Hotel to the City. Accofdingly,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. ��, .���� , �� �y,�°'Q July 25, 2006 7S YEARS 1929 2004 �6 FX�Kl.i'C 203 N. Brea Blvd..Suite 203 •Brea.CA 92821-4056�(714)672-0022 •Fax(714)672-0331 • www �l �s.com i OPERATOFI#3 , PALM DESERT 5UMMARY OF PROCEDURES (Unaudited) We pe�iormed the following procedures on ihe books and records of the Operator#3 Palm Desert(the Hotel), as agreed upon by the management of the City of Palm Desert: 1. We reviewed tfie City Municipaf Code and related ordinances and resoiutions related to transient occupancytax. 2. We verified the mathematical accuracy and timeliness of Vansient occupancy reports fifed with the Ciry for the calendar year 2005. 3. W e traced the gross revenues reported on the transient occupancy tax retums prepared by the Hotel to gross revenues recorded in the Hotel's accounting records and verified that these were in accordance with the Citys ordinance. 4. We selected a sample of rental transactions during the review period and for each transaction selected, we verified tax computations and Vaced the amounts of rental revenues anci transient occupancy tax collected to the books and records of the hotel. 5. We reviewed the intemal contra!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 Ciry. 6. We reviewed the supporting documentation for exemptions claimed on the transient occupancy tax retums. 7. We inquired how the Hotel handles reservations and payments made on line through a third party such as Expedia.com and how the transient occupancy tax was collected and reported to the City on these transactions. 8. We examined the Hotel's"Transient Occupancy Registration Permft"and determined whether it was posted in a conspicuous place. 9. We performed additional procedures that we consfdered necessary to veriy the reasonableness of reported revenues of the Hotel operator. S�fndep�ndent Accountants' RepoK on Applying Agresd-Upon Proc�dures 2 OPERATOR#3 PALM DESERT SUMMARY OF FINDINGS (Unaudited) 1. Per our inquiry with the Hotel,revenue is collected upon guest departure whether the�est made the reservation direcUy with the hotel or on line. Revenue is collected based on occupancy and the tax is reported and paid to the City monthly based also on occupancy. Per our inquiry,online reservations are made through GDS just like any travel agent and are dropped directly into the Hotel's reservation system. The internet sites receive a commission like other travel agents that book resen►ations with the Hotef. 2. Based on test work performed,we have no find'mgs. Sse Independertt Accountants' Report on Applyin�Ayn�d-Upon Procoduros 3 CITY OF PALM DESERT LIMITED PROCEDURES REVIEW OF OPERATOR#4 , PALM DESERT FOR COMPLIANCE WITH TRANSIENT OCCUPANCY TAX ORDINANCE FOR THE PERt00 JANUARY 1, 2005 THROUGH DECEMBER 31, 2005 CITY OF PALM DESERT JANUARY 1, 2005 THROUGH DECEMBER 31, 2005 TABLE OF CONTENTS Page Number INDEPENDENT ACCOUNTANTS'REPORT ON APPLYING AGREED-UPON PROCEDURES � SUMMARY OF PROCEDURES 2 SUMMARY OF FINDINGS 3 I � Brandon W.Burrows �nCe Donald L.Parker t �lichael K.Chu SOII � David E.Hsle Lunghard �o,,�S� LLP [tkhacd K.Kikuchi Certified Public Accountants R�d Robert c.Lance in�nw Rkhard C.Soll Frcd J.Lung6ard,Jr. i�n��+ INDEPENDENT ACCOUNTANTS' REPORT ON APPLYING AGREED-UPON PROCEDURES 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, Califomia (the City) solely to assist the City in verifying the accuracy of the transient occupancy tax retums submitted by the Operator#4 , Palm Desert(the Hotel)to the City for the period January 1,2005 through December 31,2005. The engagement to apply agreed-upon procedures was performed in accordance with attestation standards established by the American Institute of Cert�ed Public Accountants. The suff'�ciency 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 efther 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 retums of the Hotel,the objective of which would be the expression of a certified opinion on the Uansient 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 Ciry. 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. �, ,�'��-� , .�'�� ��� July 24,2006 �S YEARS l929� 1004 �� F ?03 N.Brea Blvd.,Suite 203 • Brea,CA 92821-4056• (714)672-0022• Fax(71�)672-0331 • www.lslepas.cum OPERATOR#4 PALM DESERT SUMMARY OF PROCEDURES (Unaudited) We performed the foliowing procedures on the books and records of the Operator#4 ,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 t�ansient occupancy reports filed with the City for the calendar year 2�5. , 3. We traced the gross revenues reported on the transient occupancy tax retums prepared by the Hotel to gross revenues �ecorded in the Hote!'s accountlng records and ver�ed that these were in accordance with the Cit�1s ordinance. 4. We selected a sample of rental transactions during the review pa�iod and fo� each transaction selected, we verified tax computations and traced the amounts of rental revenues and transient occupancy tax coHected to the books and records of the hotel. 5. We reviewed the intemal 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 transie�t and non-transient guests. c. How exemptions, inGuding compiimentary rooms, were documented and reported to the City. 8. We reviewed the supporting documentation for exemptions claimed on the transient occupancy tax retums. 7. We inquired how the Hotel handles reservations and payments made on line through a third party such as Expedia.com a�d how the transient occupancy tax was collected and reported to the City on these transactions. 8. We examined the Hotel's"Transient Occupancy Registration PermiP and determined whether itwas posted in a conspicuous place. 9. We perFomied additional procedures that we considered necessary to verify the reasonableness of reported revenues of the Hotel operator. 2 CiTY OF PALM DESERT LIMiTED PROCEDURES REVIEW OF -OPERATOR#5 ,pALM DESERT FOR COMPl1ANCE WiTH TRANSIENT OCCUPANCY TAX ORDINANCE FOR THE PERIOD JANUARY 1, 2005 THROUGH DECEMBER 31,2005 CITY OF PALM DESERT JANUARY 1, 2005 THROUGH DECEMBER 31, 2005 TABLE OF GONTENTS Page Mfi�St iNDEPENDENT ACCOUN7ANTS'REPORT ON APPLYING AGREED-UPON PROCEDURES 1 SUMMARY OF PROCEDURES 2 SUMMARY OF FINDINGS 3 Brandon W.Burrows �nCie Doaaid I..Perker s�f' � Micbad K.Chu Lunghard a.�d E."�� �r.o,�r��„ Donald G.Slater LLP Rkhard K.KtkucW Cert�'fced Public Accvuntants Retind Robert c.Lance �s�4vx Richard C.Soll Fred].Lunghard,Jr. uze-i� INDEPENDENT ACCOUNTANTS' REPORT ON APPLYING AGREED-UPON PROCEDURES To the Honorable Mayor and Members of the City Council City of Palm Desert, Califomia We have performed the procedures enumerated herein,which were agreed to by the management of the City of Pafm Desert, Califomia {the Cityj solely to assist the City in verifying the accuracy of the transient occupancy tax retums submitted by the Operator#5 ,Palm Desert(the Hotel)to the City for the period January 1, 2005 through December 31, 2005. The engagement to apply agreed-upon procedures was perfonned in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency of the procedures is soleiy the responsibility of the management of the City of Palm Desert. Consequenby, 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 retums 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 peiformed 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 limfted. ��, -���-� �� ���2 June 9, 2006. 7S YEARS 191t9 =_-�-2_0--0-4 DO Fa� '03 N. Brea Blvd.,Suite 203 • Brea,CA 92821-4U56•(714)672-0022•Fax(714)672-Q33( • www.lsle� OPERATOR#5 PALM DESERT SUMMARY OF PROCEDURES (Unaudited) We performed the following procedures on the books and records of the Operator#5 Hotel, Palm Desert(the Hotel), as agresd upon by the management of the City of Palm Desert: 1. We reviewed the City Municipal Code and related o►dinances and resolutions related to transient occupancy ta�c. 2. We verified the mathematicat accuracy and timeliness of transient occupancy reports filsd with the City for the calendar year 2005. 3. We Vaced the gross revenues reported on the transient occupancy tax retums prepared by the Hote! to g�oss revenues recorded in the Hotel's accounling records and verified that these were in accocdance with the City's ordinance. 4. We selected a sample of rental Vansactions during the review period and for each transaction selected, we verified tax computations and Vaced the amounts of rental revenues and transient occupancy tax collected to the books and reco�ds of the hotel. 5. We reviewed the internal control procedures of the Hotel to determine the follawing: 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 Vansient occupancy tax retums. 7. We inguired how the Hote{ hand{es reservations and payments made on line through a third party such as Expedia.com and how the transient occupancy tax was collected and reported to the Ciry on these transaotions. 8. We exam ined the Hotel's"T�ansient Occupancy Registration Permit"and determined whether it was posted in a conspicuous place. 9. We performed additional procedures that we considered necessary to verify the reasonab�eness of reported revenues of the Hotel operator. Se�Indep�ndent Aacountants'Roport on Applylnq A�rNd-Upon Procsdur� 2 OPERATOR#5 PALM DESERT SUMMARY OF FINDINGS (Unaudited) 1. Per our inquiry with the corporate tax manager. regarding the Operator#5 Hotel in Pa1m Desert,any room revenuea reoeived from third party such as Expedia.00m far reservabon made on the internet is �eported ir► room revenue and it is this amount that is showr� on the transient occupancy tax retum. 2. Based on test work performed,we have no findings. S�{nd�p�nd�nt AccountaMs'Raport on Applyin�A�reod-Upon Prowdures 3 CITY OF PALM DESERT LIMfTED PROCEDURES REVIFW nF OPERATOR#6 , pq�M DESERT FOR COMPLIANCE WITH TRANSIENT OCCUPANCY TAX ORDINANCE FOR THE PERIOD JANUARY 1, 2005 THROUGH DECEMBER 31, 2005 CITY OF PALM DESERT JANUARY 1, 2005 THROUGH DECEMBER 31, 2005 TABLE OF CONTENTS Page Number fNDEPENDENT ACCOUNTANTS' REPORT ON APPLYING AGREED-UPON PROCEDURES 1 SUMMARY OF PROCEDURES 2 SUMMARY OF FINDINGS 3 Bru�don W.Burrows Lance Donaid L.Parker SQ'� � David E'Hak u Lu ng h a rd A Prafmbwd Cu9nndo� Donald G.Slater LLP w�n.ra x.�c�x�hi Certified Public Accountants R`""d Robert c.t.ena �n�uK �nua c.sou Fred J.Lunghard,Jr. t�n��� INDEPENDENT ACCOUNTANTS' REPORT ON APPLYING AGREED-UPON PROCEDURES To the Honorable Mayor and Members of the City Council City of Palm Qese�t,Califomia We have performed the procedures enumerated herein,which were agreed to by the management of the City of Palm Desert, Califomia (the City) solely to assist the City in verifying the accuracy of the transient occupancy ta�c returns submitted by the"� Operator#6 ,Palm Desert(the Hotel)to the City for the period January 1, 2005 through Uecember 31, 2005. The engagement to apply a�eed-upon procedures was perfonned in accordance with attestation standards established by the American Instftute of Certffied 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 retums af the Hotel,the objective of which would be the expression of a certrfied opinion on the transient occupancy tax payments made by the Hotel to the City. Accordingly,we do not express such an opinbn. 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 repoR is made a matter of publlc record, its distrlbution will not be limited. ��, .���-� , ,��° �� July 25, 2006 7S YEARS 1929 1004 � 203 N.B�ea Blvd.,Suite 203• Brca,CA 92821-4056� (714)672-0022•Fax(714)672-Q331 • www.lslepax.com OPERATOR#6 , PALM DESERT SUMMARY OF PROCEDURES (Unaudited) We performed the following procedures on the books and records of the Operator�6 , Palm Desert(the Hotel),as agreed upon by the management of the Ciry 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 timeltness of transient occupancy reports filed with the City for the calendar year 2005. 3. We trac�ed the gross revenues reported on the transient occupancytax returns prepared bythe Hotel to gross revenues recorded in the Hotel's accounting records and verified that these were in accordance with the Cit�s ordinance. 4. We selected a sample of rental transactions during the review period and for each transaction selected, we verfied 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 intemal contro{procedures of the Hotel to determine the following: a. How"gross rents"and"uncoltected 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 daimed on the transient occupancy tax retums. 7. We inquired how the Fiote{ handles reservations and payments made on line through a third party such as Expedia.com and how the transient occupancy tax was collected and reported to the City on these transactions. 8. We examined the Hotel's"Transient Occupancy Registration Permit"and determined whether it was posted in a conspicuous place. 9. We performed additional procedures that we considared necessary to verify the reasonableness of reported revenues of the Hotel operator. SM Independ�nt Accountants' Repo�t on APP�Y��9 A9roed-Upon Procedures 2 OPERATOR#6 PALM DESERT SUMMARY OF FINDINGS (Unaudited) 1. Based on our review of the hotel's accounting records,gross rents for occupancy of all rooms(line 1 on the retum of iransient occupancy tax)we�e over reported or(under repo�ted)as follows: Gross Rent Gross Rent p�r Gross Ront Reportlnq ou�R�vlew of p�� Reported by th• th�Hotel's (Under)Ova� H°tN lntKnal R�cord Rsported Period 1-2005 $ 3,523,613.92 $ 3,519,589.69 $ 4,024.23 Period 2-2005 4,255,091.09 4,257,585.39 (2,494.30) Period 3-2005 4,85a,991.05 4,857,107.19 (8,118.14) Period 42005 5,145,478.30 5,164,388.44 (18,910.14) Period 5-2005 3,44Q,106.26 3,449,428.82 (9,320.38) Period 6-2005 2,879,291.95 2,888,648.83 (9,354.88) Period 7-2005 2,217,851.02 2,222,408.18 (4,557.16) Periad 8-2005 2,185,035.29 2,185,035.29 - Period 9-2005 1,738,547.00 1,738,547.00 - Period 10-2005 2,95$,516.00 2,958,516.00 - Period 11-2005 3,230,842.00 3,230,842.00 - Period 12-2005 3,116,015.00 3,118,015.00 - Period 13-2005 2,238,023.00 2,239,023.00 - Period 1 -2005,started on January 1�,2005 and Period 13-2005,ended on December 31°�,2005. 2. Based on the finding above and our indapendent recomputation of the transient occupancy tax as shown on this report,the Operator#6 -palm Desert has underpaid its t�ansient occupancy taxes for the period January 2005 through December 2005 by�4,205.63. The appficable penalty and interest computed in accordance ta Ordinance 3.28.U80 up to August 1�,2008,amount to $2,102.82 and $881.61 respectively. Therefore, the total oyved to the City as of August 1� is $8,990.08 induding the underpayment, the penalty and the interest. 3. We inquired with Assistant Controller at the Operator#6 ,Palm Desert,about the collection of transient occupancy tax from reservations made online through a third party. Per the online reservation system is integrated with the hotel financial system which computes the transient occupancy tax for any hotels reservation booked online. SN Ind�pa�d�nt Accountanb'R�pott on Applyin�Aan�d-Upon Procedures 3