Auditing Tax Collectors

1. Auditing Tax Collectors Local Tax Collection Law – Act of May 25, 1945, P.L. 1050, No. 394 establishes the local tax collection law. Since then there has been numerous additions including Act 169 of 1998 which addresses auditing of tax collectors.

2. Auditing Tax Collectors Act 169 says: The Tax Collector’s final accounts and records, monthly or other periodic returns and payments and duplicates shall be audited annually by the controller or auditors of the taxing district, or, at the request of the district, by an independent certified public accountant or public accountant. If the audit is conducted by the district, the audit shall be conducted in accordance with the applicable laws of the the taxing district. If the audit is conducted by a certified public accountant, the audit shall be conducted in accordance with generally accepted auditing standards.

3. Tax Collector Responsibilities The tax collector is required to report to the district by the tenth day of each month the amount of taxes collected for the previous month providing the following information: • 1. Name of taxable • 2. Amount collected • 3. Discounts and penalties applied

4. Auditing Procedures If your district decides to audit the collector include these procedures: • Sample or trace all tax receipts to deposit slips. • Prepare a schedule to determine the length of time between the deposits to the collector’s account and the turn over date. Check for interest income. • Trace the same tax receipts to the tax duplicate. • Compare the timing of taxes received by the collector and when they are remitted.

5. Auditing Procedures • Use confirmations, if necessary, to confirm outstanding taxes turned over to tax collector; real estate taxes outstanding on tax collectors records based on previous procedures; and individual taxes paid as to the date paid and the amount of the payment. • Observe any errors in discounts taken or penalties charged. • Review the controls of the tax collector, if any.

6. Your District’s Choice Because of the large dollar value involved your district should do one of the following: • Audit the tax collector internally using district staff. • As a part of the district’s annual audit. • As an agreed upon procedure performed by outside auditors.

7. Problems Encountered Some of the problems that were encountered when auditing taxpayers include: 1. Unreconciled differences between tax assessments, adjustments, collections and uncollected taxes. 2. The monthly reports were not being submitted timely or not submitted at all. 3. Records were in disarray with missing documents. 4. Tax collector did not make timely deposits. 5. Tax collector making estimated deposits during the month and not able to reconcile at the end of the month.

8. Questions to Think About • Internally • Does the staff have the training to know what they are looking for? • What is the liability for the district or for the business manager if fraud is found later? What will the board think? • Is the savings in audit fees worth the risk?

9. Most Common Method • Many districts have joint ventured with other taxing agencies in their area to have the tax collectors audited by a third party such as a certified public accountant thereby sharing in the cost of the tax collector audit.

10. Other Requirements • As of 2001 to become a tax collector one has to pass an examination and complete a basic training program. The program shall include, but is not limited to, the following courses: • Procedures for collecting taxes • Auditing and Accounting • Ethics • Computerization • A study of recent court decisions affecting the imposition and collection of taxes

11. Other Requirements In addition to the exam the tax collector must now earn ten hours of mandatory continuing education each year. Topics include: • Accounting and Auditing • Computerization • Ethics • Procedures for collecting taxes • Recent court decisions • Local tax collection laws and other statutes

12. Jumping Through Hoops As a school official we all are required to jump through hoops at various times. The auditing of tax collectors is just another hoop that has to be tackled and accomplished.

13. The tax collector must file reports and turn over collections by the 10th of each month. By January 15th the tax collector must make settlement of all taxes with the District. An audit of the year’s tax collections to be performed either internally or externally. Continuing Professional Education courses required for collectors. Summary