Audit Report Real Property Tax

SECTION I
BACKGROUND
Introduction
Revenues of the Local Government Units are earned from their local and external sources.
One of these local sources is the Real Property Tax (RPT).RPT is a property tax that is paid
yearly. It is imposed on all types of real properties including lands, buildings, improvements,
and machinery. To avoid excessive use of such authority, limitations were established by
setting specific percentages for the ceiling and base rates.The legal basis for the law is found
in Title II of the Local Government Code (LGC), Republic Act no. 7160.Responsible for the
payment is the owner or administrator of the property.The RPT rate for the cities and
municipalities in Metro Manila is two percent (2%) while for provinces it is one percent
(1%). Thus, to compute for RPT, the RPT rate is multiplied by the assessed value of the
property.
Assessed value is the fair market value of the real property multiplied by the assessment
level. It is synonymous with taxable value. On the other hand, the assessment level is the
percentage applied to the fair market value to determine the taxable value of the property. It
shall be fixed through ordinances imposed by the city or provincial government. It can be as
high as twenty percent (20%) for residential land and fifty percent (50%) for commercial
and industrial lands.
LGUs may levy and collect an annual tax of one percent (1%) on the assessed value of the
real property which shall be in addition to the basic real property tax. The collection shall be
accrued to the Special Education Fund (SEF). Moreover, at the rate not exceeding five
percent (5%) of the assessed value of the property may be imposed annually as an
additional ad valorem tax on idle lands.
Options to pay the RPT in full or in installment, which is quarterly, can be

preferred.Taxpayers can opt to pay for one whole year. If so, the payment is due on or before
the thirty-first (31st) of January each year. However, if they decide to pay in installment, they
have to religiously remember these dates:
1st quarter: On or before March 31

2nd quarter: On or before June 30
1|Page
3rd quarter: On or before September 30
4th quarter: On or before December 31
Discounts can be availed by owners who settle their taxes in advance. You may grant a
discount not exceeding twenty percent (20%) of the annual tax due.
Failure to pay the RPT on the schedule will result in having penalties. Late payments shall
subject the taxpayers to the payment interest at the rate of two percent (2%) per month on
the unpaid amount to a maximum of seventy-two (72%) percent or thirty-six (36) months.
The Municipal Treasurers Office of the LGU is responsible for the collection of RPT.
The following are exempted from the tax:
Charitable institutions;
Charitable institutions;
Churches;
Cooperatives;
All lands that are exclusively used for religious, charitable or
educational purposes;
Those that are used by local water districts;
Government-owned or controlled corporations; and machinery and
equipment are used for pollution control and environmental
protection
Government-owned or controlled corporations; and machinery and
equipment are used for pollution control, and environmental
protection is exempted from the tax.
Machinery and equipment are used for pollution control and
environmental protection
2|Page
SECTION II
OBJECTIVES, SCOPEAND METHODOLOGY
Objective
IAS will assess the tax imposed related to the RPT and its collection in relation to the
management of Internal Revenue Allotment. The assessment will try to discover
whether the management methods, procedures, and measures will provide reasonable
assurance that the following objectives are achieved:
Promoting orderly, economical, efficient, and effective operations;
Adhering to laws, regulations, and management directives; and
Maintaining reliable financial and management data.
Scope
The evaluation deals mainly with the internal control in handling imposing RPT,
collection of the said tax and the delinquent amounts. The documents subject to
evaluation are Assessment Roll and Income Summary Reports for the year 2014-2016.
Methodology
The sequential techniques and strategies performed by the IAS Office with regards to
income generating projects were as follows:
Obtained and recorded the understanding of the ICS

The internal audit team used various techniques to become familiar with and documents the
nature of RPTs operations, the relevant laws, rules and regulations, the organizational and
functional structures, and the management philosophy of operations and related policies. The
audit team gathered important data through examination of documents and through the use
tables to illustrate computations of the transactions for the said tax.
Confirmed the understanding of the ICS policies and procedures

Upon performing the process of understanding the ICS, the audit team validated the data
gathered by performing examination of documents and recomputation.
Conducted preliminary evaluation of the ICS policies and procedures

This procedure includes identification of relevant internal control standards, ideal systems, laws,
rules, and regulations governing the area under evaluation and comparing them with the
agencys current practices to determine whether or not there are weaknesses resulting from the
absence of controls.
Preparation of formal reports

This last step includes the formal reporting to appropriate level of management of the internal
control weaknesses and breakdowns noted during the conduct of ICS evaluation as well as the
giving of recommendations for improving the system.
3|Page
SECTION III
RESULTS OF PROCEDURES
Based on the audit plan, the IAS team evaluated and examined the documents and
procedures for RPT assessment and collection. In the course of the assessment the audit
team was able to observe unsatisfactory management operation in executing RPT
collections due to lack of efforts conduct by the office in-charge in handling delinquent
RPTs.
4|Page
SECTION IV
FINDINGS AND RECOMMENDATIONS
During the conduct of inquiry to the assessors office headed by Ms. Teofista Villaranda, the
taxpayers will pay their RPT based on the Schedule provided by the Provincial Level and a
sample of order of payment. (See attachment 1).
Based in the quarterly report on Real Property Assessment and Statement of Receipts
Resources reports for the year 2013 to 2016 are summarized below. (See attachment 2)
For the year 2016:
TAX COLLECTIBLE TAX COLLECTED DIFFERENCE EFFECT
BASIC SEF BASIC SEF

44,174,398.55 44,174,398.55 31,806,429.58 31,806,429.57 12,367,968.97 UNFAVORABLE
With the total uncollected amount, 40% of which is share of the LGU amounted to
4,947,187.58. However, as per inquiry the Office of the Municipal Treasurer sets an income
target to be collected per year. The income target for the year 2016 is 8,781,193.18 thus they
collected 12,722,571.83 resulted to 45% (3,941,378.65) increase of excess over actual vs.
target.
For the year 2015:
TAX COLLECTIBLE TAX COLLECTED DIFFERENCE EFFECT
BASIC SEF BASIC SEF

35,791,290.05 35,791,290.05 30,380,313.32 30,380,313.32 5,410,976.73 UNFAVORABLE
With the total uncollected amount, 40% of which is share of the LGU amounted to
2,164,390.69. However, as per inquiry the Office of the Municipal Treasurer sets an income
target to be collected per year. The income target for the year 2015 is P11, 500,000 thus they
collected 12,152,125.33 resulted to 45% (652,125.33) increase of excess over actual vs.
target.
5|Page
Conclusion and Recommendation
On the basis of IAS procedures which intend to obtain rational assurance, it is concluded
that the RPT execution of the Municipality does not have effective program.
In order to create an efficient and effective system with regard to the Real property tax
assessment and collection execution we therefore recommend the Municipality will:
Conduct a tax mapping wherein all the properties subject to RPT will be updated
in relation to its classification.
Both offices in charge to the RPT will collaborate in imposing the RPT for them to
increase the total revenue of the Municipality.
Offers discount to those taxpayers who pay early and also the Municipality can
compromise to the taxpayers if such cannot pay its unpaid taxes.
6|Page

Audit Report Real Property Tax

Uploaded by

Copyright:

Available Formats

Audit Report Real Property Tax

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Audit Report Real Property Tax

Uploaded by

Copyright:

Available Formats

SECTION I

Options to pay the RPT in full or in installment, which is quarterly, can be

1st quarter: On or before March 31

The following are exempted from the tax:

Obtained and recorded the understanding of the ICS

Confirmed the understanding of the ICS policies and procedures

Conducted preliminary evaluation of the ICS policies and procedures

Preparation of formal reports

For the year 2016:

TAX COLLECTIBLE TAX COLLECTED DIFFERENCE EFFECT

BASIC SEF BASIC SEF

For the year 2015:

TAX COLLECTIBLE TAX COLLECTED DIFFERENCE EFFECT

BASIC SEF BASIC SEF

You might also like