HomeMy WebLinkAboutRecive-File Limited Procedures Review - Transient Occupancy TaxREQUEST:
SUBMITTED BY:
DATE:
CONTENTS:
Recommendation:
iH
CITY OF PALM DESERT
FINANCE DEPARTMENT
STAFF REPORT
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 2006 CALENDAR YEAR, APPROVE
REIMBURSEMENT TO OPERATOR FOR OVERPAYMENT OF
TRANSIENT OCCUPANCY TAX TOTALING $26.66, AND
AUTHORIZE THE COLLECTION OF $3,258.25 FROM
OPERATORS FOR UNDERPAYMENT OF TRANSIENT
OCCUPANCY TAX
PAUL S. GIBSON, FINANCE DIRECTOR
MARCH 27, 2008
LIMITED PROCEDURES REVIEW OF VARIOUS PALM DESERT
OPERATORS FOR COMPLIANCE WITH THE CITY OF PALM
DESERT'S TRANSIENT OCCUPANCY TAX ORDINANCE FOR
THE 2006 CALENDAR YEAR
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 2006 calendar year;
2. Approve reimbursement to operator for overpayment of Transient
Occupancy Tax totaling $26.66; and
3. Authorize collection from operators for underpayment of Transient
Occupancy Tax totaling $3,258.25.
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, seven operators were
audited; one operator had an overpayment, and three had underpayments during the
Staff Report
Limited Procedures Review & Transient Occupancy Tax Collection and Reimbursement
March 27, 2008
Page 2 of 2
2006 calendar year. Attached are the seven reports and a summary of the auditor's
findings. One of the reports is a special audit spanning a three-year period. Original
copies have been provided to the City Attorney's office. On February 20, 2008 all
operators received a copy of their respective audits and were asked to respond with any
concerns within a thirty day period. In the interest of maintaining confidentiality among
those operators who may wish to respond, it is suggested that instead of speaking
during the public Council meeting, a separate meeting be established between the
operator, Finance Director, City Manager and two Councilmembers.
The Audit, Investment and Finance Committee received the report at their March 25
meeting, and it was recommended that it be received and filed by the City Council.
Approval of staff's request will allow for reimbursement of tax overpaid to the City and
collection of underpaid tax from the appropriate operators.
Submitted by:
Paul S. Gibson, Finance Director
Approval:
Carlos L. Orte , City Manager
nmo
CITY COUNCIL ACTION:
APPROVED ✓ DENIED
RECEIVED OTHER
MEETING DATE <3 -,A q_L
AYES: rerg uson1 r1er-Fy, 6e-1/y, LSp/iyelr Aei)scn
NOES: Mork
ABSENT: N,Dne
ABSTAIN: Non -
VERIFIED BY: i K Ira
Original on File withJCity Clerk's Office
G:\Finance\Niamh Ortega\Staff Reports\Audit staff reports 2007\Council report audit 2007 TOT report.doc
CITY OF PALM DESERT
LIMITED PROCEDURES REVIEW OF
OPERATOR #1 , PALM DESERT
FOR COMPLIANCE WITH
TRANSIENT OCCUPANCY TAX ORDINANCE
FOR THE PERIOD
JANUARY 1, 2006 THROUGH DECEMBER 31, 2006
CITY OF PALM DESERT
LIMITED PROCEDURES REVIEW OF
OPERATOR#1 PALM DESERT
FOR COMPLIANCE WITH
TRANSIENT OCCUPANCY TAX ORDINANCE
FOR THE PERIOD
JANUARY 1, 2006 THROUGH DECEMBER 31, 2006
CITY OF PALM DESERT
JANUARY 1, 2006 THROUGH DECEMBER 31, 2006
TABLE OF CONTENTS
Page
Number
INDEPENDENT ACCOUNTANTS' REPORT ON APPLYING
AGREED-UPON PROCEDURES............................................................................................................ 1
SUMMARY OF PROCEDURES..............................................................................................................2
SUMMARYOF FINDINGS......................................................................................................................3
COMPUTATION OF UNDERPAYMENT/(OVERPAYMENT)
OFTRANSIENT OCCUPANCY TAX..................................................................................................4
� � Brandon W.Burrow�
�a n ce Donald L.Parker
CQ�' Q Michael K.Chu
'7 �x David E.Hale
L��/'y�+��� A Projessinnal Corpnrafinn
J a Donald G.Slater
LLP Richard K.Kikuchi
C'ertifee�'Public Acc�or,�frtrxnts Retired
� Robert C.Lance
1914-1994
Richard C.Soll
Fred J.Lunghard,Jr
1928-1999
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, California (the City) solely to assist the City in verifying the accuracy of the transient
occupancy tax returns submitted by Operator#1 (the Hotel) to the City for the period
January 1, 2006 through December 31, 2006. 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.
.�, ��.� �,�
��
July 26, 2007
7S I�f1R�
.,�,.- ,
1929 2Q04
Q� �h�`�G'K� 203 N.Brea Blvd., Suite 203 + Brea,CA 92821-4056+ (714)672-0022 *Fax(714)672-0331 • www.lslcpas.com
OPERATOR #1 , PALM DESERT
SUMMARY OF PROCEDURES
_ (Unaudited)
We performed the following procedures on the books and records of Operator#1 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 2006.
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 rentai 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 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 Permif'and determined whether itwas
posted in a conspicuous place.
9. We performed additional procedures that we considered necessary to verify the reasonabieness of
reported revenues of the Hotel operator.
See Independent Accountants' Report
On Applying Agreed-Upon Procedures
2
OPERATOR#1 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 return of transient occupancy tax) were over/(under) reported as follows:
Gross Rent Gross Rent per Gross Rent
Reported by the our Review of the (Under) Over
Hotel Hotel s Accounting Reported
Record
January-2006 $ 45,811.43 $ 42,811.43 $ 3,000.00
February-2006 129,248.58 129,250.58 (2.00)
March-2006 179,151.30 179,076.30 75.00
April-2006 29,700.94 29,700.94 -
May-2006 14,925.00 14,925.00 -
June-2006 7,588.00 7,588.00 -
July-2006 4,192.15 4,192.15 -
August-2006 3,226.75 3,226.75 -
September-2006 4,673.00 4,673.00 -
October-2006 4,715.00 4,715.00 -
November-2006 28,501.00 28,501.00 -
December-2006 30,458.10 30,458.10 -
Total Gross Rent Over Reported $ 3,073.00
In January, a guest was erroneously claimed twice.
In February there was a mathematical error resulting in the $2.00 difference.
In March, there were various mathematical errors in the summation of the gross rent.
See Independent Accountants' Report
On Applying Agreed-Upon Procedures
3
2. Based on our review of the Hotel's accounting records, allowable deductions (line 2 on the return of
transient occupancy tax)were over/(under) reported as follows:
Allowable
Allowable Deductions per our Allowable
Deductions Review of the Deductions Rent
Reported by the (Under)Over
Hotel Hotel's Accounting Reported
Record
January-2006 $ 35,275.00 $ 32,275.00 $ 3,000.00
February-2006 100,859.00 100,859.00 -
March-2006 132,808.00 132,958.00 (150.00)
April-2006 14,593.50 14,593.50 -
May-2006 1,305.00 1,378.12 (73.12)
June-2006 3,450.00 3,450.00 -
July-2006 950.00 950.00 -
August-2006 950.00 950.00 -
September-2006 2,950.00 2,95Q.00 -
October-2006 3,549.00 3,549.00 -
November-2006 15,249.00 15,249.00 -
December-2006 14,345.00 14,345.00 -
Total Gross Rent Over Reported $ 2,776.88
In January, a guest was erroneously claimed twice.
In March, there were various mathematical errors in the summation of the allowable deductions.
In May, the amount report as allowable deductions was erroneously calculated resulting in a
variance of$73.12.
3. Based on the findings above and our independent recomputation of the transient occupancy tax as
shown on page 5 of this report, Operator#1 —Palm Desert has overpaid its transient occupancy
tax for the period January 2006 through December 2006 by$26.66.
4. Per our inquiry with Hotel Representative,Operator#1 does not take online
reservations through third parties.
See Independent Accountants' Report
On Applying Agreed-Upon Procedures
4
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CITY OF PALM DESERT
LIMITED PROCEDURES REVIEW OF
OPERATOR #2 , PALM DESERT
FOR COMPLIANCE WITH
TRANSIENT OCCUPANCY TAX ORDINANCE
FOR THE PERIOD
JANUARY 1, 2006 THROUGH DECEMBER 31, 2006
CITY OF PALM DESERT
LIMITED PROCEDURES REVIEW OF
OPERATOR#2 , PALM DESERT
FOR COMPLIANCE WITH
TRANSIENT OCCUPANCY TAX ORDINANCE
FOR THE PERIOD
JANUARY 1, 2006 THROUGH DECEMBER 31, 2006
CITY OF PALM DESERT
JANUARY 1, 2006 THROUGH DECEMBER 31, 2006
TABLE OF CONTENTS
Page
Number
INDEPENDENT ACCOUNTANTS' REPORT ON APPLYING
AGREED-UPON PROCEDURES....................................................................................................1
SUMMARYOF PROCEDURES..........................................................................................................2
SUMMARYOF FINDINGS..................................................................................................................3
COMPUTATION OF UNDERPAYMENT OF TRANSIENT OCCUPANCY TAX.................................4
• � Brandon W.Burrows
Li�n�e Donald L.Parker
5��� � Davhd E.Hale u
L u n g h a rd A Projessinnal Corpnru�inn
Donald G.Slater
LLP Richard K.Kikuchi
Certz�e�� Pr�l�lic,dc�c�au�rtrrnts Retired
Robert C.Lance
1914-1994
Richard C.Soll
Fred J.Lunghard,Jr
1928-1999
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 pertormed 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 (the Hotel)to the
City for the period January 1, 2006 through December 31, 2006. 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 ce�tified 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.
-�, .�'���"° .�.�'�'
�
July 17, 2007
i� }'�'ARS
��
15�29 2(}t?4
Q{� FXL'.eP�L�fiCG' 203 N.Brea Blvd.,Suite 203 •Brea,CA 92821-4056•(714)672-0022 • Fax(714)672-0331 +www.lslcpas.com
OPERATOR #2 , PALM DESERT
SUMMARY OF PROCEDURES
(Unaudited)
We performed the following procedures on the books and records of Operator#2
. _ _. . ;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 2006.
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 foliowing:
a. How"gross rents"and "uncollected rents"were accounted for and reported to the City.
b. What procedures were in piace 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 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 PermiY' and determined whether it was
posted in a conspicuous place.
9. 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
OPERATOR #2 PALM DESERT
SUMMARY OF FINDINGS
(Unaudited)
1. Per our inquiry with , General Manager of Operator#2 online
reservations are made through third party websites (i.e. Travelociry,com and Expedia.com). These
websites have the option of making advance payments or selectinq the direct bill option. For advance
payments,the Internet sites forward the revenue to Operator#2 prior to the guest checking in. For
the direct billing option,the Hotel bills the Internet site�he agreed-upon rate for the room and the payment
will be received at a later time.The room revenue and taxes are posted when the guests check in.At the
end of each day, the system shuts down and records the Hotel's daily revenue and automatically
computes tax for all taxable room revenues.The revenue and taxes from online reservations are reported
monthly to the City of Palm Desert along with other room revenue at the end of each period.
2. Based on our review of the Hotel's accounting records,gross rent for occupancy of all rooms(liney on the
return of transient occupancy tax) were over/(under) reported as follows:
Gross Rent per
Gross Rent our Review of the Gross Rent
Reported by Hotel's Over(Under)
the Hotel Accounting Reported
Record
January-2006 $ 282,847.21 $ 282,74028 $ 106.93
February-2006 352,014.84 352,042.36 (27.52)
March-2006 454,048.93 454,151.36 (102.43)
April-2006 414,446.66 414,145.50 301.16
May-2006 229,362.11 231,282.51 (1,920.40)
June-2006 176,679.50 173,338.55 3,340.95
July-2006 149,716.27 149,716.27 -
August-2006 138,612.71 140,906.91 (2,294.20)
September-2006 192,213.05 196,312.05 (4,099.00)
October-2006 265,435.00 268,725.43 (3,290.43)
November-2006 327,937.50 327,937.50 -
December-2006 287,855.49 292,904.54 (5,049.05)
Total Gross Rent Under Reported $ (13,033.99)
The under reporting of gross rent is the result of the Hotel not including the"Room Charge Tax ExempY'
amounts when calculating gross rent per month for all rooms.This resulted in doubling the deductions for
non-transient residents on the Transient Occupancy Tax return.
3. Based on our review of the Hotel's accounting records, allowable deductions (lines 2 a. and 2 b. on the
return of transient occupancy tax) were correctly reported for the period January 2006 through
December 2006.
4. Based on the finding above and our independent computation of the transient occupancy tax as shown on
page 4 of this report, Operator#2 has underpaid its transient occupancy taxes by
$1,173.07 for the period January 2006 through December 2006. The applicable penafty and interest
computed in accordance to Ordinance 3.28.080 up to September 1, 2007, amount to $586.54 and
$140.77 respectively. Therefore,the total owed to the Ciry as of September 1 S'is$1,900.38 including the
underpayment, the penalty and the interest.
See Independent Accountants' Report
On Applying Agreed-Upon Procedures
3
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� � ro •a � c >. m n. �, o c� � � � •a �y � o>
-�0i ti � Q � -�, -��i 4 c� O Z O � ti � Q � � ¢
CITY OF PALM DESERT
LIMITED PROCEDURES REVIEW OF
OPERATOR #3 , PALM DESERT
FOR COMPLIANCE WITH
TRANSIENT OCCUPANCY TAX ORDINANCE
FOR THE PERIOD
JANUARY 1, 2006 THROUGH DECEMBER 31, 2006
CITY OF PALM DESERT
LIMITED PROCEDURES REVIEW OF
OPERATOR#3 PALM DESERT
FOR COMPLIANCE W ITH
TRANSIENT OCCUPANCY TAX ORDINANCE
FOR THE PERIOD
JANUARY 1, 2006 THROUGH DECEMBER 31, 2006
CITY OF PALM DESERT
JANUARY 1, 2006 THROUGH DECEMBER 31, 2006
TABLE OF CONTENTS
Page
Number
INDEPENDENT ACCOUNTANTS' REPORT ON APPLYING
AGREED-UPON PROCEDURES.........................................................................................................1
SUMMARYOF PROCEDURES................................................................................................................2
SUMMARYOF FINDINGS........................................................................................................................3
COMPUTATION OF UNDERPAYMENT/(OVERPAYMENT}
OFTRANSIENT OCCUPANCY TAX....................................................................................................5
� Brandon W.Burrow�
LanCe Donald L. Parker
�7OI� � DavdE.H leu
L u n g h a rd A Prnfessinnul Corprnu[ion
Donald G.Slater
��p Richard K.Kikuchi
C�'erti�e� �'�al�lic,�1c�eour�tcxnts xer«ed
Robert C.Lance
1914-1994
Richard C.Soll
Fred J.Lunghard,Jr
1928-1999
INDEPENDENT ACCOUNTANTS' REPORT ON APPLYING
AGREED-UPON PROCEDURES
To the Honorabie 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 Operator#3 : (the Hotel) to the City for the
period January 1,2006 through December 31,2006. 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.
,�, ,,���-� , ,�•�
�
September 7, 2007
i� l'�'A R�
.,,�.
I929 . 2�04
�� F�C��C�E 203 N. Brea Blvd.,Suite 203 + Brea,CA 9282]-4056+ (714)672-0022 •Fax(714)672-0331 « www.lslcpas.com
OPERATOR#3 , PALM DESERT
SUMMARY OF PROCEDURES
(Unaudited)
We performed the following procedures on the 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 the City Municipai 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 2006.
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. W hat 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 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 Permit"and determined whether it was
posted in a conspicuous place.
9. 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
OPERATOR#3 PALM DESERT
SUMMARY OF FINDINGS
(Unaudited)
1. Based on our test work, no findings noted.
Other Information
Per our inquiry with the Hotel, online reservations are made through third party websites
(i.e. Priceline.com and Travelocity.com). These websites have the option of making advance
payments or selectinq the direct bill option. For the advance payments,the Internet sites forward the
revenue to the Operator#3 prior to the guest checking in. For the direct billing option, the
Hotel bills the Internet site the agreed-upon rate for the room and the payment will be received at a
later time.The room revenue and taxes are posted when the guests check in.At the end of each day,
the system shuts down and records the Hotel's daily revenue and automatically computes tax for all
taxable room revenues.The revenue and taxes from online reservations are reported monthly to the
City of Palm Desert along with other room revenue at the end of each period.
See Independent Accountants' Report
On Applying Agreed-Upon Procedures
3
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CITY OF PALM DESERT
LIMITED PROCEDURES REVIEW OF
OPERATOR #4 PALM DESERT
FOR COMPLIANCE WITH
TRANSIENT OCCUPANCY TAX ORDINANCE
FOR THE PERIOD
JANUARY 1, 2006 THROUGH DECEMBER 31, 2006
CITY OF PALM DESERT
LIMITED PROCEDURES REVIEW OF
OPERATOR #4 , PALM DESERT
FOR COMPLIANCE W ITH
TRANSIENT OCCUPANCY TAX ORDINANCE
FOR THE PERIOD
JANUARY 1, 2006 THROUGH DECEMBER 31, 2006
CITY OF PALM DESERT
JANUARY 1, 2006 THROUGH DECEMBER 31, 2006
TABLE OF CONTENTS
Page
Number
INDEPENDENT ACCOUNTANTS' REPORT ON APPLYING
AGREED-UPON PROCEDURES....................................................................................................1
SUMMARYOF PROCEDURES .........................................................................................................2
SUMMARYOF FINDINGS..................................................................................................................3
COMPUTATtON OF UNDERPAYMENT OF TRANSIENT OCCUPANCY TAX.................................4
� Brandon W.Burrows
Lance Donald L.Parker
�Q'� � Michael K.Chu
David E.Hale
L u n g h a rd A Projessionul Corpnration
Donald G.Slater
L�„p Richard K.Kikuchi
C.'��rtxfier� Public Accaurrtants Retired
Robert C.Lance
1914-1994
Richard C.Soll
Fred J.Lunghard,Jr
1928-1999
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, California (the City) solely to assist the City in verifying the accuracy of the transient
occupancy tax returns submitted by Operator_#4 :(the Hotel) to the City for the period
January 1, 2006 through December 31, 2006. 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.
-�, �'���' x�.�
��
July 2, 2007
iS �EAR4
,►-�;
1929 .20t)4
(��/ F���60iCE'. 203 N. Brea Blvd.,Suite 203 •Brea,CA 92821-4056 �(714)672-0022 • Fax(714)672-0331 + www.lslcpas.com
OPERATOR#4 PALM DESERT
SUMMARY OF PROCEDURES
(Unaudited)
We performed the following procedures on the books and records of 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 transient occupancy reports filed with the Cityfor
the calendar year 2006.
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 inquired how the Hotel handies 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 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
OPERATOR#4 PALM DESERT
SUMMARY OF FINDINGS
(Unaudited)
1. Based on our review of the hotel's accounting records for c�aiming exemptions for federal and state
employees,there was insufficient documentation provided for two hotel guests for the month of June and
three for the month of November to claim the exemption. Also, in the month of November, the hotel
erroneously claimed an exemption for a County of Santa Barbara employee. Per the City of Palm Desert
Municipal Code Chapter 3.28.040, an exemption can only be claimed for"any federal or state officer or
employee when on official business, provided the room is booked and paid for directly by the federal or
state government." The discrepancies were as follows:
Allowable Allowable Allowable
Deductions Deductions per our Deduction
Reported by the Review of the (Under)Over
Hotel Hotel's Accounting Reported
Record
June-2006 $ 2,867.00 $ 2,533.00 $ 334.00
November-2006 15,786.25 14,049.25 1,737.00
$ 2,071.00
2. Based on the finding above and our independent recomputation of the transient occupancy tax as shown
on page 4 of this report, Operator#4 has underpaid its transient occupancy taxes
for the period January 2006 through December 2006 by$186.39. The applicable penalty and interest
computed in accordance to Ordinance 3.28.080 up to September 1 Sl,2007,amount to$93.20 and$20.10
respectively. Therefore, the total owed to the City as of September 1 St is $299.69 inciuding the
underpayment, the penalty and the interest.
3. We inquired with Senior Sales Tax Accountant, about the collection of transient occupancy
tax from reservations made online through a third party. third party internet charges are taxed
by the hotel based on the amount of revenue received from the internet provider. The hotel has no
information on the amount being charged to the guest.
See Independent Accountants' Report
On Applying Agreed•Upon Procedures
3
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69
� � �
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Y � � � (O N O N N O O n �
C � N O � cD O N � N d p N O ^ � � �
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CITY OF PALM DESERT
LIMITED PROCEDURES REVIEW OF
OPERATOR #5 � PALM DESERT
FOR COMPLIANCE WITH
TRANSIENT OCCUPANCY TAX ORDINANCE
FOR THE PERIOD
JANUARY 1, 2006 THROUGH DECEMBER 31, 2006
CITY OF PALM DESERT
LIMITED PROCEDURES REVIEW OF
OPERATOR#5 PALM DESERT
FOR COMPLIANCE WITH
TRANSIENT OCCUPANCY TAX ORDINANCE
FOR THE PERIOD
JANUARY 1, 2006 THROUGH DECEMBER 31, 2006
CITY OF PALM DESERT
JANUARY 1, 2006 THROUGH DECEMBER 31, 2006
TABLE OF CONTENTS
Page
Number
INDEPENDENT ACCOUNTANTS' REPORT ON APPLYING
AGREED-UPON PROCEDURES ........................................................................................................... 1
SUMMARYOF PROCEDURES..............................................................................................................2
SUMMARYOF FINDINGS...................................................................................................................... 3
COMPUTATION OF UNDERPAYMENT OF TRANSIENT OCCUPANCY TAX.....................................4
Brandon W.Burrow!
L..ance Donald L.Parker
��'� � Michael K.Chu
David E.Hale
L u n h a rd A Projessinnul G�rporution
g nona�a c.s�ater
LLP Richard K.Kikuchi
C'erlifi���'Public Accocrrrttcnts eenrea
Robert C.Lance
1914-1994
Richard C.Soll
Fred J.Lunghard,Jr
1928-1999
INDEPENDENT ACCOUNTANTS' REPORT ON APPLYING
AGREED-UPONPROCEDURES
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 Operator#5 , Palm Desert(the Hotel)to the
City for the period January 1, 2006 through December 31, 2006. 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.
-�, ���° x��
��
July 9, 2007
i 7 Y�;�I�;i
. ,,�: .
1329 20C?4
(,�� FXCE���IiC� 203 N.Brea Blvd.,Suite 203 • Brea,CA 92821-4056� (714)672-0022•Fax(714)672-0331 •www.lslcpas.com
OPERATOR#5 , PALM DESERT
SUMMARY OF PROCEDURES
(Unaudited)
We performed the following procedures on the books and records of the Operator#5
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 2006.
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 rec�rds 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 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 Permit"and determined whether itwas
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.
See Independent Accountants' Report
On Applying Agreed-Upon Procedures
2
OPERATOR#5 PALM DESERT
SUMMARY OF FINDINGS
(Unaudited)
1. Based on our test work, no findings noted.
Other Information
Per inquiry with , Assistant Controller at Operator#5 ,
Palm Desert, regarding the collection of transient occupancy tax from reservations made online
through third parties, the online reservation system is integrated wlth the hotel financial system
which collects the transient occupancy tax based on the amount of revenue collected by the site.
See Independent Accountants' Report
On Applying Agreed-Upon Procedures
3
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CITY OF PALM DESERT
LIMITED PROCEDURES REVIEW OF
OPERATOR #6 , PALM DESERT
FOR COMPLIANCE WITH
TRANSIENT OCCUPANCY TAX ORDINANCE
FOR THE PERIOD
JANUARY 1, 2006 THROUGH DECEMBER 31, 2006
CITY OF PALM DESERT
LIMITED PROCEDURES REVIEW OF
OPERATOR#6 ', PALM DESERT
FOR COMPLIANCE WITH
TRANSIENT OCCUPANCY TAX ORDINANCE
FOR THE PERIOD
JANUARY 1, 2006 THROUGH DECEMBER 31, 2006
CITY OF PALM DESERT
JANUARY 1, 2006 THROUGH DECEMBER 31, 2006
TABLE OF CONTENTS
Page
Number
INDEPENDENT ACCOUNTANTS' REPORT ON APPLYING
AGREED-UPON PROCEDURES ........................................................................................................ 1
SUMMARY OF PROCEDURES..............................................................................................................2
SUMMARYOF FINDINGS ......................................................................................................................3
COMPUTATION OF UNDERPAYMENT/ (OVERPAYMENT)
OF TRANSIENT OCCUPANCY TAX...................................................................................................4
' Brandon W.Burrow�
Lance Donald L.Parker
��'� Q Michael K.Chu
�a� David E.Hale
����{.�� h a rd A Professinnal Cnrpnru[inn
� Donald C.Slater
LLP Richard K.Kikuchi
C.`c��•fified 1'ulrlic Aeeotantrr,nfs Re��red
Robert C.Lance
1914-1994
Richard C.Soll
Fred J.Lunghard,Jr
1928-1999
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, California (the City) solely to assist the City in verifying the accuracy of the transient
occupancy tax returns submitted by Operator#6 , Palm Desert(the Hotel)to the City for the
period January 1, 2006 through December 31,2006. 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.
�, ��-� .�^/"
�
September 7, 2007
r? }'�'r1 f�4S
.�,
192� : 2t)04
Q� ��.it�E 203 N.Brea Blvd.,Suite 203 • Brea,CA 92821-4056+ (714)672-0022 + Faac(714)672-0331 + www.lslcpas.com
OPERATOR#6 , PALM DESERT
SUMMARY OF PROCEDURES
(Unaudited)
We performed the foilowing procedures on the books and records of Operator#6 , 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 2006.
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 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 PermiY' and determined whether it was
posted in a conspicuous place.
9. 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
OPERATOR#6 , PALM DESERT
SUMMARY OF FINDINGS
(Unaudited)
1. Based on our test work, no findings noted.
Other Information
Per inquiry with , Assistant General Manager, regarding the collection of transient
occupancy tax from reservations made online through third parties, the online reservation system is
integrated with the hotel financial system which collects the transient occupancy tax based on the
amount of revenue collected by the site.
See Independent Accountants' Report
On Applying Agreed-Upon Procedures
3
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a a. � a a. n. a � a n. a a n.
CITY OF PALM DESERT
LIMITED PROCEDURES REVIEW OF
OPERATOR #7 , PALM DESERT
FOR COMPLIANCE WITH
TRANSIENT OCCUPANCY TAX ORDINANCE
FOR THE PERIOD
JANUARY 1, 2004 THROUGH DECEMBER 31, 2006
CITY OF PALM DESERT
LIMITED PROCEDURES REVIEW OF
OPERATOR#7 , PALM DESERT
FOR COMPLIANCE WITH
TRANSIENT OCCUPANCY TAX ORDINANCE
FOR THE PERIOD
JANUARY 1, 2004 THROUGH DECEMBER 31, 2006
CITY OF PALM DESERT
JANUARY 1, 2004 THROUGH DECEMBER 31, 2006
TABLE OF CONTENTS
Page
Number
INDEPENDENT ACCOUNTANTS' REPORT ON APPLYING
AGREED-UPON PROCEDURES............................................................................................................ 1
SUMMARYOF PROCEDURES..............................................................................................................2
SUMMARYOF FINDINGS ......................................................................................................................3
COMPUTATION OF UNDERPAYMENT OF TRANSIENT OCCUPANCY TAX.....................................4
- ' Brandon W.Burrows
LanCe Donald L.Parker
SO'� � Michael K.Chu
David E.Hale
Lu n h a rd A Professinnul Corporutinn
� Donald G.Slater
LLP Richard K.Kikuchi
C:'c?��ti frerl I'ul5lic�,9 ccountrxt�ts Retired
� Robert C.Lance
- 1914-1994
Richard C.Soll
Fred J.Lunghard,Jr,
1928-1999
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, California (the City) solely to assist the City in verifying the accuracy of the transient
occupancy tax returns submitted by Operator#7 Palm Desert(the Hotel)to the City for
the period January 1,2004 through December 31, 2006. 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.
-�, �'��►�-� x��°
��
November 9, 2007
i� 'k'l;:<<a l��ti
���
1929 20Q4
p� F14:�'1���i� 203 N.Brea Blvd.,Suite 203 • Brea,CA 92821-4056+ (714)672-0022 +r Fax(714)672-0331 •www.lslcpas.com
OPERATOR#7 , PALM DESERT
SUMMARY OF PROCEDURES
(Unaudited)
W e performed the following procedures on the books and records of Operator#7 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 2004, 2005 and 2006.
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 foliowing:
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 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 Permit"and determined whether itwas
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.
See Independent Accountants' Report
On Applying Agreed-Upon Procedures
2
OPERATOR#7 , PALM DESERT
SUMMARY OF FINDINGS
(Unaudited)
1. Operator#7 does not maintain an accounting system to summarize transactions. An electronic
receipting system is not in place and therefore our test work involved tracing manual paperwork to
monthly bank statements. Based on our review of the accounting records, gross
rents for occupancy of all rooms(line 1 on the return of transient occupancy tax)were over/(under)
reported as follows:
Gross Rent per
our Review of
Gross Rent the Hotel's Gross Rent
Reported by Accounting (Under)Over
the Hotel Record Reported
November-2004 $ 2,706.54 $ 2,707.14 $ (0.60)
December-2004 - 218.00 (218.00)
January-2005 550.00 2,071.00 (1,521.00)
February-2005 1,689.00 2,180.00 (491.00)
March-2005 4,555.00 5,268.50 (713.50)
April-2005 1,480.00 3,362.45 (1,882.45)
May-2005 272.50 545.00 (272,50)
June-2005 - 190.76 (190.76)
October-2005 940.00 940.00 -
November-2005 2,031.63 2,031.63 -
April-2006 - 1,740.00 (1,740.00)
June-2006 - 500.00 (500.00)
Total Gross Rent Under Reported $ (7,529.81)
2. In April 2006 and June 2006, Operator#7 provided plastic surgery after-care recovery to
patients. The fees charged included lodging and nursing services. We reviewed the patients invoice
and included the portion relating to the lodging in our calculation of the gross rents for the months.
3. Based on the finding above and our independent computation of the transient occupancy tax as
shown on page 4 of this report, Operator#7 has underpaid its transient occupancy
taxes by$653.20 for the period January 2004 through December 2006. The applicable penalty and
interest computed in accordance with Ordinance 3.28.080 amount to $326.60 and $78.38
respectively. The total owed to the City is$1,058.18 including the underpayment,the penalty and the
interest.
Other Information
1. Per our inquiry with Operator#7 representative, the escrow closed on the
establishment in June 2004. Revenue was first collected in November 2004.
2. In July 2005, , owner of Operator#7 ,was diagnosed with cancer.
This lead to a decrease in activity and revenue.
See Independent Accountants' Report
On Applying Agreed-Upon Procedures
3
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