Phase 2 Agency Audit Planning and Risk Assessment

Process-Risk-Control Matrix

PROCESS-RISK-CONTROL MATRIX
Agency:
Audit Period:
Office:

City of San Juan

CY 2015

Prepared by:
Reviewed by:
Approved by:

SUNSHINE GALOLO-ENOSA
GERARDA O. PILIPINA
ARLENE C. PIRA

Date:
Date:
Date:

a. Critical path of the process:

ASSESSMENT AND COLLECTION OF BUSINESS TAXES

1. Business Permit Licensing Office (BPLO)
Assessment of Business Taxes- New and Renewal
Process
1. Assessment of
Business Taxes by
BPLO

2. Assessment of new
applications

The BPLO assessed the taxes due and

demandable to the business establishments
by verifying the amount of gross sales or
receipts for the year based only on the
submitted BIR tax returns and/or other
supporting documents.

Assessment of requirements for the newly

applicant of business permit were approved
despite mere declaration or zero declaration
of capital contribution or investments.

Conditions
During the peak season, the BPLO
just received the documents
submitted by the taxpayer and
approved by the Chief if reasonably
found correct the same.

The BPLO allowed the application

of business taxes despite nonsubmission of the necessary
documents that will prove such
declaration of capital contribution or
investments.

Even there are checklist given

on the documentary
requirements, and application
form required to be filled by
the taxpayers, however, some
business establishments still
applied and renewed business
permits despite nonsubmission of complete
documents, as required by the
BPLO.

Effects
The veracity of the
documents submitted cannot
be determined because the
Application Form for
New/Renewal of Business
Permits were not properly
filled up with the required
information such as the
gross receipts/sales for the
year, with breakdown of its
monthly/ quarterly
sales/receipts/ sales.

Despite the lacking of the

necessary documents, BPLO
can still process the
application for business
permit.

Declaration may be
unrealistic or
unconscionable. Hence,
assessment is also
unrealistic and unreliable.

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3. Assessment of
renewal applications
with zero/unreliable
declaration of gross
sales/receipts
(GS/GR)

Assessment of requirements for the renewal

of business permits were made despite
zero/unreliable declaration of GS/GR for the
year.

The BPLO processed and approved

the declaration despite
zero/unreliable declaration of
GS/GR just to accommodate the
taxpayers.

Computation of tax due shall

be computed by the City
Treasurers Office based on
what they called presumptive
method of computation,
wherein discretionary/estimate
takes place due to the
absence of standard that can
be the threshold or guide of
the person in-charged with the
assessment.

Unreliable tax due because

no standard was followed in
the assessment. It may also
be discretionary on the part
of the person in-charge to be
subjective. Also,
discretionary is subject to
abuse.

4. Comparison of
GS/GR per
community tax
certificate (CTC) v.
BPLO application
form

Assessment of documents can still be made

by the BPLO despite non-payment of CTC
by the taxpayers

Assessment of documents was

made despite non-securing of CTC
for them to determine the
consistency in declaration of GS/GR
by the taxpayers itself or
representative.

BPLO and Licensing OfficerCTD are lenient by

disregarding the procedures
and non-observance of the
consistency in declaration by
taxpayers of the true GR/GS.

Assessment and
computation of tax due are
unreliable.

5. Re-assessment of
GR/GS of taxpayers

Re-assessment of GR/GS were based only

on the submitted documents by the
taxpayers.

BPLO made recommendation with

the CTD-Licensing Division to
compute the tax due deficiency of
the taxpayers based on the GR/GS
declared on prior year, as stated in
the previous business permit.

CTD-License Division
recomputed the tax due based
on the recommendation of the
BPLO. No further inspection
was made by the Licensing
Division to determine the
veracity of the amount.

The computed tax due

deficiency will be limited only
to the recommendation of
the BPLO, based on the prior
years GR/GS declaration. A
higher tax due deficiency can
be collected if there are
inspection that can be made
by the CTD.

6. Release of Business
Permit

Business Permit for the CY is released

without securing a true copy of BIR Returns
and other documents submitted by taxpayers
to support their declarations and approval by
BPLO for future references.

The declarations made by

the taxpayer and the
approval of BPLO of the
declaration can be hardly
determine if there are no

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documents to be referred to.

2. Licensing Division- City Treasurer Department (CTD)
Process
1. No inspection was
made by the
Licensing DivisionCTD

Collection of Business Taxes

Conditions
City Treasurer or its deputy does not inspect
the business establishments within the City
to determine whether or not the taxpayers
declared and paid their taxes fairly/truthfully.

Failure to comply with the

provisions stated in RA 7160,
as one of the duty of the City
Treasurer.

Effects
Unreliable determination of
true GR/GS declared by the
taxpayers. There may be a
greater loss in the realization
of income of the City.

Violation of the provisions in

the RA 7160 wherein the
general revisions shall be
made at least every 3 years
from the last revision.

Effects
Unfavorable to the
government; there is a big
amount of RPT that will be
gone when the Approved
Revised FMV were not
applied.

ASSESSMENT AND COLLECTION OF REAL PROPERTY TAXES

3. City Assessors Office
Process
1. Assessment of RPTBasic and SEF were
still based on the
1997 Fair Market
Value

Assessment of Real Property Taxes

Conditions
The Assessment value of Real Property
The Revised RPT made by the City
Taxes (RPT) was still based on the unrevised Assessor has been approved by the
fair market value. It is not yet revised from
BLGF. However, it is not yet
the year 1997 or 18 years from the date of
implemented because of the failure
the last revision.
to have a public hearing, the
preparation of ordinance and
publication of the same.

2. Non-submission of
the Abstract of
Registry by the
Registrar of Deeds
(RD) to the City
Assessor

To ascertain whether or not any real property

entered in the Registry of Property has
escaped discovery and listing for the
purpose of taxation, the RD is required to
submit to the City Assessor (CA) the Abstract
of Registry.

3. Validation of the
information from the

Validation of information submitted by

different department and sectors were not

Change/s in the Assessment Roll

was limited only to those presented
in the Office of the CA.

Violation of the provisions in

the RA 7160, where RD is
mandated to submit an
Abstract of Registry to the CA.

Unreliable/ incomplete
update of the taxpayers
information.

There may be a nonappreciation of the

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reports of the
Building Officials and
plans from Geodetic
Engineers who
furnishes CA the
plans

yet determined if it has been validated by

personnel/staff fit to the work.

information stated in the

documents by the CA and/or
staffs-in-charge

4. Land Tax Division- City Treasurers Office (LTD-CTO)

Collection of Real Property Taxes
Conditions

Process
1.Post-dated checks
that were dishonored
by the bank were not
yet cancelled in the
system (both RPTAS
and GAAMS)

Effects
Taxpayers account is
understated because
payment made in PDC that
were dishonored has been
deducted despite notice of its
dishonored by the bank.

b. Identify Process-level Risks and Relevant Controls

Impact
Process Risks

Accounts Affected
(including assertions)

BPLO
Assessment of Business Taxes
1.Assessment of
Asset and Revenue
Business Taxes
accounts-completeness,
2.Assessment of new
accuracy and valuation,
applications
classification,
3.Assessment of
consistency and rights
renewal applications
and obligations
with zero/unreliable
declaration of gross

Risk to PAPs

Existing Controls

Control Design
Assessment

Reason if inadequate

Risk that the programs, Assessment has been Application for business Lack
of
coordination
the
two
activities and projects
done based on the
permits
shall
be between
may
not
be
documents submitted by
processed in the same departments.
implemented because
the taxpayers. However,
way. However, certified
of the failure to meet
there are times that the
copy
of
documents
the estimated revenue
required
documents
submitted
by
the
for the year.
were
not
submitted
taxpayers
upon

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Phase 2 Agency Audit Planning and Risk Assessment

Process-Risk-Control Matrix

Impact
Process Risks

Accounts Affected
(including assertions)

Risk to PAPs

sales/receipts
(GS/GR)
4.Comparison of
GS/GR per
community tax
certificate (CTC) v.
BPLO application
form
5.Re-assessment of
GR/GS of taxpayers
6.Release of Business
Permit

Licensing Division- CTD

Collection of Business Taxes
1.
No inspection
was made by the
Licensing Division
-CTD

Existing Controls

Control Design
Assessment

Reason if inadequate

completely but still, the

application
shall
be
business permits has
retained
for
rebeen processed and
assessment purposes by
released
to
the
the same office and for
taxpayers. No copy of
audit purposes, too.
the
monthly/quarterly
BIR returns or its
summary
has
been
retained in the office.
Inspections of business Inspection of business
establishments
were
establishments shall be
also done by this Office,
in coordination with the
nevertheless, they are
staff of the CTD for a
limited only to the
more
extensive
determination
of
inspection.
City
whether or not the
Treasurer and its duly
businesses secured and
appointed deputy is the
comply
with
the
only authorized officer to
business
permit
open the books.
requirements.

-SAME-

Risk that the programs,

activities and projects may
not be implemented
because of the failure to
meet the estimated
revenue for the year.

No inspection was made Inspection of books shall Assignment of duties and

by the City Treasurer or
be made to determine responsibilities to the staff
its
duly
authorized
the
veracity
of of CTD-License Division.
personnel
on
the
documents
submitted
business establishments
and declared during the
of taxpayers, neither
given period to secure
opening of books were
the necessary business
not made.
permits.

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Phase 2 Agency Audit Planning and Risk Assessment

Process-Risk-Control Matrix

Impact
Process Risks

Accounts Affected
(including assertions)

City Assessors Office

Assessment of Real Property Taxes
1.Assessment of RPT-SAMEBasic and SEF were
still based on the
1997 Fair Market
Value
2.Non-submission of
the Abstract of
Registry by the
Registrar of Deeds
(RD) to the City
Assessor

Risk to PAPs

Existing Controls

Control Design
Assessment

Reason if inadequate

-SAME-

Since no report was

submitted by the RD,
changes were made based
on
the
documents
submitted by the taxpayer
applicant itself. No action
was made to compel the
compliance of the RD of
the required submission.

Take an action to compel

the RD in complying with
the mandate of RA 7160 in
submission of reports to
the CA for reconciliation
purposes; prevent escape
from discovery and listing
for the purpose of taxation.

Due to the non-submission

of the required Abstract of
Registry by the Registrar of
Deeds

According to the CA, they

used the reports from the
Building Officials for the
update of records in the
system and to determine
the amount of assessment
to be imposed.

There should be an
officer/s skilled or have an
expertise who shall
validate the information
recorded appeared in the
report and in the taxpayers
records.

Determination by the
experts or personnel skilled
in the work.

Upon notice of dishonor,

Upon notice, the LTD-CTD

3.Validation of the
information from the
reports of the
Building Officials and
plans from Geodetic
Engineers who
furnishes CA the
plans
LTD-CTO
Collection of Real Property Taxes
1.Post-dated checks
Assets- cash and

-SAME-

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Phase 2 Agency Audit Planning and Risk Assessment

Process-Risk-Control Matrix

Impact
Process Risks
that were dishonored
by the bank were not
yet cancelled in the
system (both RPTAS
and GAAMS

Accounts Affected
(including assertions)
receivables; LiabilitiesDeferred Real
Property/Special Education
Tax Income and Revenue
accounts- RPT/SET
Income
-completeness, accuracy
and valuation,
classification, consistency
and rights and obligations

Risk to PAPs

Existing Controls

Control Design
Assessment

the LTD-CTD informed the

taxpayers on the matter
and to take necessary
steps to make good of the
dishonored checks.
However, proper
procedures to adjust the
entry posted in the system
as well as the cancellation
of the payments made in
the system were not done.

shall take the necessary

action to inform the City
Accounting Department of
the adjustments needed to
revert the accounts
previously
recorded/posted. The
necessary cancellation of
the payments made shall
be made in the system of
RPTAS.

Reason if inadequate

Summary
Key Observation

Recommendation

AOM Ref. No.

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