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HomeMy WebLinkAboutMINUTES - 09281999 - C92 m TO- BOARD OF SUPERVISORS CON TA FROM'. Kenneth J. Corcoran, Auditor-Controller 'may ::` rr,,, 'a`. rCOSTA ',\7- COUNTY 8 DATE; September 28, 1999 Y' + �i��gi•ge SUBJECT. Acknowledge Receipt of Property Tax �A Audit Report. SPECIFIC REQUEST(S) OR RECOMMENDATION(S)& BACKGROUND AND JUSTIFICATION Acknowledge receipt of the State Controller's Audit Report concerning Contra sesta County's Property Tax Apportionment and Allocation System for the three year period July 1, 1996 through June 30, 1998. BACKGROUND/REASOMSIfQR RECOMMENDATIONfSt By low, property tax apportionment and allocation is the responsibility of the Auditor-Controller's Office in each county. Thousands of local agencies count on the revenues from this process each year, and the complex laws governing these allocations are constantly changing. Daae to the complexity of this work, and the significance of the funds involved (we allocate more than $900 Million. of property taxes each year in Contra Coote County alone), California law requires the State Controller to audit the property tax apportionment and allocation system of each county on e specified schedule. In Contra Costa County, we are audited every three years. The objective of the audit is to reviews the County's apportionment and allocation of property tax revenues to local agencies and public schools within its jurisdiction in order to determine whether the County complied with Revenue and Taxation Code requirements. The scope of the audit includes interviewing staff, reviewing county work papers and reports, and testing calculations in each area of the apportionment and allocation process, The Controller concluded that, during the three year audit period, Contra Costa County complied with all requirements related to the allocation and apportionment of property taxes, property taxes allocated and apportioned during this period totaled approximately $2.7 Billion, With: respect to the calculation and apportionment of in excess of $34.8 Million of property tax administration costs; the Controller noted that an error had been made during fiscal year 1995-96, requiring a reallocation of$21,600. A copy of the edit report is attached for your information. kM € YES SIGNATURE. z _72�_RECOMIMENDATION OF COUNTY ADMINISTRATOR—RECOMMENDATION O"OARD COMMITTEE APPROVE OTHER ACTION OF BOARD ON APPROVED AS RECOMMENDED ZOTHeR € HEREBY CERTIFY FRAY THIS IS A VOTE OF SUPERVISORS TRUE AND CORRECT COPY OF AN ACTION TAKEN AND ENTERED ON MINUTES OF T BOARD OF UNANIMOUS A :m SUPERVISORS ON THE DATE SHOWN. AYES,_ NOES. ABSENT ABSTAIN- ATTESTED - a � . PHIL oHEL R,C_E THE BOARD OF SUPERVISORS AND COUNTY ADMINISTRATOR Contact; Ken Corcoran,048-1636 � �. .. DEPUTY 4 C f e i CONTRA COSTA COUNTTY Audit Report 5 PROPERTY TAX APPORTIONMENT ALLOCATION SYSTEM July 1, 1995, through June 30, 1998 THE titgbi V C 0, i KATHLEEN CON HELL Califomia State Controller August. 1999 f f � Y�Cp am4f p KATHLEEN CONNELL outran of fp tae of CITaIif0TAia---- _. 3 _i?c: _°w.,._ August 23, 1999 Honorable Kenneth.-;. Corcoran Auditor-Controller Contra Costa County Finance Bolding,Room 103 625 Court Street Martinez, California 94553 Dear Mr. Corcoran: The following is the State Controller's Office (SCCA) final audit report ori the methods employed by Contra Costa County to apportions and allocate property tax revenues for the period July 1, 1995, through June 30, 1998. '11-hank you for the courtesy and cooperation; extended to SCCA staff during the audit. you. have any questions,please contact Greg am-.els, audit manager, at(916) 322-8397. Sincerely, S i i a Patn, cia.1, Ranao hie' Compliannce A lits Bureau Division of Audits P.lR/k cc: Mat Newman,,Joint Legislative Budget Committee Peter Detwiler, Senate Housing and Land use Commit Jane Brown, Senate Local Government Comanittee Dixie Martineau-Petty,Assembly Local Government Committee Martin Hei' hike, Senate Revenue and Taxation Committee an melore Wosika,Assembly Revetrue and Taxation Committee Sana lull, Department of Finance California Special District Association Contra Costa County Property Tax Apportionment and A.flocation System udit "Ford c Summary The State controller's Office (SCO) audited the methods employed by Contra Costa County to apportion and allocate property tax revenues for the period of5uly 1, 1995,through June 30, 1998. The audit disclosed that the county did not comply with California statutes in the following instance: Th.-county did not include all of the required revenue offsets within their fiscal year(FY) 1995®96 calculations for property tax administrative cost recovery. The audit identifies procedural changes necessary to ensure that the county cornp les with the legislative requirements for the apportionment and allocation of property tax revenues. Background After the passage of Proposition 13 in 1978, the California State Legislature enacted neer methods for allocating and apportioning property tai rovenues to local government agencies and public schools. The main objective was to provide local government agencies with a property tax base that would grown as assessed property, values increase. These methods have been further refined in subsequent lawns passed by the Legislature. One key law was Assembly Bill 8, which -established the method of allocating proper `.axes for FY 1973-80 (base year) and subsequent fiscal years. The methodology is commonly referred to as the AB 8 process or the AB 8 system. The property tax revenues local governrnent agencies receive each fiscal year are based on the amount received in the prior year plus a share of the property tax growth within their boundaries. Property tax revenues are then apportioned and y allocated to local agencies and schools using prescribed formulas and methods defined in the revenue and Taxation Code. he AB 8 base process involved numerous steps, including the transfer of revenues from schools to local agencies(AB 8 shift)and the development of the tax rate area annual tax increment apportionment factors "Al' factors), which determine the amount of property tax revenues to be allocated to each jurisdiction. The total amount to be allocated to each jurisdiction is then divided by the total amount to be allocated to all entities to determine the AB 8 apportion-ment factor (percentage share)for each entity for the year. The AB 8 factors az*e computed each year for all entities using the revenue amounts established in the prior year. These y amounts are adjusted for growth annually using ATI factors. Subsequent legislation removed revenues generated by unitary and operating nonunitary property from the AB 8 system. This revenue is now allocated and apportioned under a separate system, Kathleen Connell a Cali(orma Stale Controller I 1 Contra Volta County Property Ta,:Apportionment and Aldcctaiion System Cather legislation established an Educational Revenue Augmentation Fund IERAF) in each county. Most local govern-Tient agencies are required to transfer a portion of their property tax revenues to the fund. The nand is subsequently allocated and apportioned to schools by the county auditor according to instructions received corn the local superintendent of schools or chancellor afcoe n nunity colleges. Revenues generated by the different types of property tax are apportioned and allocated to local agencies and schools using prescribed formulas and methods as defined in the Revenue and Taxation Code. Taxable property includes land, improvements, and other properties that are accounted for on the property tax rolls maintained pr:r arily by the county assessor. Tax rolls contain an. entry for each parcel of land, including parcel number, owner's name, and value. The types of property tax rolls are: 'ecured Roll— Property that, in the opinion of the assessor,has sufficient value to guarantee payment of the tax levies and that, if unpaid, can be satisfied by the sale of the property by the tax collector. Unsecured Kull—Property that, in the opinion of the assessor, does asst constitute sufficient "permanence," or have other intrinsic qualities to guarantee payment of taxes levied against it. State-Assessed Roll—Utility properties, composed of unitary and nonunitary value,assessed by the State Board of Equalization. upplemental Roll----Property that laas been reassessed due to a charge in ownership or the completion of new construction, arid. the resulting change in assessed value is-sot reflected in other tax rolls. To mitigate problems associated with the apportionment and allocation of property taxes, legislation (SB 418) was enacted in 1.985, requiring the State Controller to audit the counties' apportionment and allocation methods and report the results to the California State Legislature. J dive, The obiective of tsh-e audit was to review the county's apportionment and allocation Scope, and of property tax revenues to local government agencies and public schools within its Methodology jurisdiction in order to determine whether the county complied with Revenue and Taxation Code requirements. in order to meet the objective, the SCCA auditor reviewed the systems for apportioning and allocating property tax revenues used by the county auditor and the subsystems used by the tax collector and assessor. The SCCA auditor performed the :allowing procedures: Performed tests to determine whether there has been any incorrect apportionment and allocation of property tax, Kathleen Connell. Cciliforrxu State C'r»uroller 2 Contra Costa County Properol Tax Apportionment and Allocatzcn System Interviewed key personnel and reviewed supporting documentat:oto to gain. an understanding of the county's property tax apportionment and av ocation processes; � Reviewed apportionment and allocation reports prepared by the county f i showing the computations used to develop the property tax distribution factors; Reviewed tax rate area JR-A) reports to verify that the annual tax incren ent was computed properly; Reviewed county unitary and operating nonunitary reports and. Board of Equalization reports tracing the computations used by fhe county to develop the unitary and operating nonunitary property tax distribution factors; * reviewed RDA reports prepared by the county tracing the computations used to develop the project base amount and the tax increment distributed to the RDA; * Reviewed property tax administration cost reports prepared by the county tracing administrative costs associated with procedures used for apportioning and allocating property tax to local goverment agencies and school districts; and * Reviewed L;RAR reports prepared by the county tracing the computations used to dete€m:ne the shift of property taxes from local agencics to the ERAF and, subsequently,to public schools. The .audit was perfo<rm.ed in accordance with Government Auditing Standards, issued by the Comptroller General of the United States, and covered the period of 4 y 1, 1995, through .lune 30, 1998. However, the SCG did not audit the county's financial statements. The scope of the audit was limited to the following: * Reviewing operational procedures and significant applicable controls over the apportionment and allocation process; * Examining selected property tax apportionment and allocation records; and * Reviewing related property tax revenue data used to determine the apportionment and allocation computation process, Review of the county's management controls was limited to gaining an understanding of the transaction flow in order to develop appropriate auditing procedures. The auditor did not evaluate the effectiveness of all internal management controls. In addition, the auditor tested transactions used to apportion and allocate property taxes and any other procedures deemed necessary. This report relates solely to the method :used by the county for the apportionment and allocation of property taxes. KaMleen Con€of e Ca1Vbrnica Sz air controller 3 Contra Costa Counry Property+Tar Apportionment and Allocation System Conclusion The audit disclosed that, except for the item. discussed in the "Finding and Recommendation" section of this report, Contra Costa County corrip.fec with California statutes for tlae apportionment and allocation of property tax revenues for the period of.hilly 1, 1995, through June 30, :998. The item discussed in the "Finding and Recommendation," section must be corrected. The audit identifies procedural changes necessary to ensure that the county complies with the 'eg dative requirements for the apportionment and allocation of property tax revenues, Views of A fax copy of the draft audit report was provided to Contra Costa County or Responsible August 11, 1999The County Auditor-Controller,Kenneth Corcoran, responded by Official telephone on August 12, 1999, agreeing with the finding and again resting that orrective action had already bee n taker. 4,0CBEX. ,Chief Division of Audits March 1€, 1999 Patricia d. Samos, CPA, Bureau Chief Coreg Brummels,Audit Manager Telephone: (916)322-8397 Audit Star: Ray Blau, Audit Specialist f I Kathleen Ctrr mdl, C'califor a State controller 4 Contra Costo County Proper,'y Tax Apportionment and.41lcoation System Finding and Kecommendation FINDING— Contra Costa County did not include $69,510 in required revenue offsets in, its Propel tax FY 1995-96 cos: recovery calculations. It should be noted that this issue was administrative corrected prior to the final day of fieldwork. costs Requirements for the reimbursement of county property tax administrative casts are found. in Revenue and Taxotion Code Section 95.3. County property tax administrative oasts are incurred by the assessor, tax collector, assessment appeals board, and auditor. The county is allowed, depending on the fiscal year and any correspond ng exclusions, to be reimbursed by local agencies and public schools for these administrative assts. Recommendation Due to the corrective action taken,no recommendation is required on this issue. Kathleen C'onneu ('californica State('ontrolh?r � Contra Costa County Property Tom;Apportionment and Allocation.System servation — Prior Audit Findings Findings noted L-- the prier audit report, dated December 10, 19965 have been satisfactorily resolved by the county. Kathleen Connefl,c alivornia State Controller 6