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					                         ROUND ROCK INDEPENDENT SCHOOL DISTRICT
                                                TAX OFFICE OPERATIONS
                                                         AUDIT PROGRAM

                                                                                                   W/P   AUDITOR
                                     AUDIT PROGRAM                                                 REF   INITIALS

GENERAL

Assessing and collecting property taxes is an important function of the District since 90% of
Round Rock ISD’s revenues come from local property taxes. Several entities are involved in
carrying out these responsibilities. The District’s Board of Trustees adopts a tax rate for the
upcoming fiscal year each summer, while the Williamson County Appraisal District establishes
property values for commercial and residential properties as well as personal property owned
by commercial entities. The District’s tax office then computes the tax levy by applying the
adopted tax rate to the appraised value of property for each owner. Tax statements are issued to
constituents based on these calculations.

AUDIT OBJECTIVES

1.   Comprehensive written policies and procedures governing all Department activities have
     been established;

2.   Cash on hand and deposits awaiting collection are adequately secured and properly
     maintained;

3.   Tax collections are deposited in a timely manner;

4.   Procedures are in place to accurately calculate tax levies, properly record payments, and
     follow-up on delinquent accounts;

5.   Adequate support is provided for the tax software system to ensure accurate records;

6.   Information presented to the Board of Trustees and District Management is accurate and
     timely;

7.   Initiatives have been implemented to provide services in the most cost-effective and
     efficient manner;

8.   The Department operates within budgetary constraints; and,

9.   The Department explores continual improvement opportunities and strives for Baldrige-
     based quality services.

AUDIT PROCEDURES

1) General

     a)   Obtain:
          i) Prior Audit Reports
          ii) External Auditor Management Reports
          iii) Related Information of Laws and Regulations

     b) Review prior reports and responses to determine whether corrective action has been
        implemented for noted deficiencies.

     c)   Review related laws and regulations to become familiar with requirements.




                                                                  1                                            10/24/03
                         ROUND ROCK INDEPENDENT SCHOOL DISTRICT
                                                TAX OFFICE OPERATIONS
                                                       AUDIT PROGRAM

                                                                                                    W/P   AUDITOR
                                     AUDIT PROGRAM                                                  REF   INITIALS
2) Board Approved Policies

    a)   Obtain and review legal and local policies related to tax assessments and collections.
         Perform tests to ensure the District is in compliance with policies.

    b) Develop a schedule of tax rates adopted by the Board for the past 10 years.

    c)   Determine whether early payment discounts are offered to taxpayers.            Perform
         analysis to determine whether this is a reasonable alternative.

3) Cash Controls

    a)   Determine the location and nature of all cash funds in the tax office (both during and
         after business hours). Ensure that procedures are in place to adequately secure cash.

    b) On a surprise basis, count all cash funds and tie to the cash receipt records on hand.
       Obtain explanations for any differences.

    c)   Select a sample of collections and trace to the bank statement to ensure deposits are
         made timely.

    d) Determine if the tax office has experienced any thefts or mysterious disappearances of
       cash since the prior audit. If so, obtain copies of any reports filed. Document the
       circumstances surrounding the loss and any weaknesses in control that contributed to
       the incident. Determine what action has been taken to prevent future occurrences.

4) Separation of Duties

    a)   For proper internal control, the duties of accepting cash, processing checks, preparing
         general ledger entries, and reconciling bank statements should be segregated.
         Evaluate the current division of duties and ensure that adequate separation of sensitive
         activities is enforced.

5) Distribution of Tax Statements

    a)   Determine when tax statements are distributed to taxpayers and ensure that this
         complies with laws and District policies.

    b) Ascertain the procedures for distributing tax statements.




                                                                   2                                            10/24/03
                        ROUND ROCK INDEPENDENT SCHOOL DISTRICT
                                               TAX OFFICE OPERATIONS
                                                      AUDIT PROGRAM

                                                                                                  W/P   AUDITOR
                                    AUDIT PROGRAM                                                 REF   INITIALS
6) Procedures for Receipt, Recordation, and Reconciliation

    a)   Evaluate the procedures in place for receiving tax payments. Ensure that receipts are
         provided to customers at the time of payment and adequate documentation is retained
         in the tax office to support receipts.

    b) Determine whether daily reconciling procedures are in place to ensure accurate
       recording.

    c)   Ascertain whether the tax office utilizes a lock box for receipt and automatic deposit
         by the bank. Determine how the bank communicates deposit and taxpayer information
         to the District.

    d) Evaluate the program for allowing taxpayers to pay taxes by use of a credit card.
       Obtain information on the established website for submitting such payments.

    e)   Determine which G/L accounts are affected by tax receipts. Determine how tax
         payments are allocated to the Debt Service Fund and the General Operating Fund.
         Ensure that correct accounts are used. Reconcile tax receipts account balance to the
         amount collected on the tax accounting system.

    f)   Obtain bank reconciliations for property tax accounts maintained by the District.
         Examine reconciliations and test as follows:
         i) Foot and trace balances to the bank statement
         ii) Identify and research any old or unusual outstanding items or entries
         iii) By reviewing documentation, verify the origination date indicated on each
              reconciling item
         iv) Ensure that the reconciliation has been properly reviewed and approved
         v) Ensure that the reconciliation was prepared in a timely manner
         vi) Trace a sample of outstanding items to ultimate resolution




                                                                  3                                           10/24/03
                       ROUND ROCK INDEPENDENT SCHOOL DISTRICT
                                             TAX OFFICE OPERATIONS
                                                     AUDIT PROGRAM

                                                                                                W/P   AUDITOR
                                   AUDIT PROGRAM                                                REF   INITIALS
7) Delinquent Accounts

   a)   Obtain contracts/agreements with the District’s delinquent tax attorney. Review
        contract for reasonableness. If payment is tied to performance and/or recovery of
        delinquent taxes, test a sample of payments to ensure that payment amount is
        accurately calculated. Determine whether there are any constraints imposed upon the
        attorney that inhibit the aggressive collection of taxes.

   b) Review tax revenue accounts and recalculate delinquent rates to ensure accuracy.

   c)   Review the aging of property taxes receivable and consider the adequacy of the
        uncollectible accounts.

   d) Compare delinquent tax percentages from year-to-year and in comparison to
      surrounding school districts. Evaluate fluctuations for reasonableness.

   e)   Determine how penalties and interest are calculated and ensure that these are applied
        uniformly.

   f)   Generate reports from the tax collection system which include the following:
        i) Accounts having addresses containing a PO Box number. Select a sample and
            review account activity to ensure reasonableness
        ii) All delinquent tax accounts (include the name and address). Determine whether
            any names or addresses appear suspect

   g) Select a judgmental sample of seriously delinquent accounts. Review account activity
      to ensure that no unfavorable patterns exist (i.e. lapping). Ensure that payments to
      delinquent accounts are appropriately posted.

8) Overpayments

   a)   Determine the District’s procedures for notifying taxpayers of overpayments.
        Evaluate the process to ensure conformity with District policy and governing laws.

   b) Determine whether specific policies have been established which require certain
      documentation requirements to be in place before refunds are processed.

   c)   Generate a report of all accounts having a “payable” balance. Select a sample of
        accounts and review activity to ensure propriety.

   d) Evaluate the controls over the supply of tax reimbursement checks and the procedure
      for generating checks to reimburse taxpayers for overpaid accounts.

   e)   Ensure that refund checks are mailed to taxpayers in accordance with time limitations
        stipulated by law.

   f)   Determine whether the system is capable of generating a report of all refunds to
        taxpayers for overpayments. Recalculate refunds to ensure accuracy and trace to final
        posting in G/L accounts.




                                                                4                                           10/24/03
                      ROUND ROCK INDEPENDENT SCHOOL DISTRICT
                                             TAX OFFICE OPERATIONS
                                                    AUDIT PROGRAM

                                                                                               W/P   AUDITOR
                                  AUDIT PROGRAM                                                REF   INITIALS
9) Tax Software System

   a)   Determine the vendor used to supply the tax software system. Review the service
        contract for reasonableness and determine through interview with tax office
        employees their compliance with the contract.

   b) Obtain and review the desk reference manual for the tax software system. Ascertain
      the types of reports that are capable of being generated from the system and review to
      obtain an understanding. Ensure that the system is being used to its fullest extent.

   c)   Evaluate the current controls over access levels and entry passwords. Ensure that
        passwords are safeguarded and individuals not authorized to make changes to the
        system are unable to gain access.

   d) Determine the back-up procedures that are in place for the system and ascertain that
      procedures are followed consistently to ensure that back-ups are complete.

   e)   Determine how property value changes are made to the systems. Ascertain whether
        the system tracks such changes and others. Perform testing if deemed appropriate.

   f)   Review the department’s reconciliation between total assessed value per the
        Williamson County Appraisal District and the District’s tax system.

   g) Select a sample of tax accounts from the District’s tax roll. Trace payments to the
      account through the accounting records for proper collection, recording, credit to the
      correct general ledger account and deposit to bank. Recalculate the tax levy based on
      appraised values and the adopted tax rate. (It may be necessary to recalculate other
      computations as well.)




                                                               5                                           10/24/03
                         ROUND ROCK INDEPENDENT SCHOOL DISTRICT
                                                TAX OFFICE OPERATIONS
                                                       AUDIT PROGRAM

                                                                                                    W/P   AUDITOR
                                     AUDIT PROGRAM                                                  REF   INITIALS
10) Tax Collections for Other Taxing Authorities

    a)   Obtain contracts/agreements with other entities for whom the District provides tax
         collection services. Review contract for reasonableness.

    b) Evaluate reasonableness of payment arrangements. Consider testing revenue accounts
       to ensure payments are received timely and in accordance with contract stipulations.

    c)   Evaluate the District’s procedures for posting and remitting payments collected for
         other taxing authorities. Ensure that payments are remitted in accordance with the
         contract.

    d) Determine whether the District has experienced any significant problems in working
       with other entities.

    e)   Ascertain whether opportunities exist to provide tax collection services to other taxing
         authorities.

11) Board Reporting

    a)   Determine what information is presented to the Board of Trustees with regard to tax
         collection rates, delinquency percentages, etc.

    b) Select a sample of reports and trace information to reliable sources to ensure
       reporting is accurate.

12) Staffing

    a)   Obtain and review job descriptions of tax office personnel. Comment on accuracy
         of job descriptions and functionality of the Department. Determine whether staffing
         levels are sufficient.

    b) Determine if a program of continuous professional education has been established.
       Ensure that programs attended are sufficient to maintain an adequate level of
       professional competency and an appropriate awareness of advances in tax collection
       activities.

    c)   Determine whether any staff members are involved in local tax collector networks or
         other affiliations.




                                                                   6                                            10/24/03
                        ROUND ROCK INDEPENDENT SCHOOL DISTRICT
                                               TAX OFFICE OPERATIONS
                                                      AUDIT PROGRAM

                                                                                                W/P   AUDITOR
                                    AUDIT PROGRAM                                               REF   INITIALS
13) Budget

    a)   Obtain the Tax Office’s budget reports as of the most recent month-end. Review for
         unusual transactions, significant overdrafts or serious fluctuations from amounts
         initially budgeted.

    b) Test a sample of transactions for accuracy, reasonableness, and adequacy of
       supporting documentation.

    c)   Evaluate overtime expenditures to determine justification. If necessary, evaluate
         possibility of hiring additional employees rather than paying overtime rates.

    d) Select a random sample of purchasing card transactions and test to ensure propriety
       and reasonableness.

14) Miscellaneous

    a)   Observe the Department’s operations.     Evaluate processes for effectiveness and
         efficiency.

    b) Determine whether appropriate measures are taken to continually improve the
       manner in which services are provided.

15) Baldrige Implementation

    a)   Determine whether the Department has developed a mission statement and strategic
         goals.

    b) The Baldrige Approach is based on seven criteria – Leadership, Strategic Planning,
       Student and Stakeholder Focus, Information & Analysis, Human Resource Focus,
       Process Management, and Results. Determine whether the Department has aligned
       its goals with these criteria with consideration given to the core values and concepts
       outlined below.
       i) Learning-centered education
       ii) Visionary leadership
       iii) Organizational and personal learning
       iv) Valuing faculty, staff, and partners
       v) Management for innovation
       vi) Systems perspective
       vii) Management by fact
       viii) Focus on the future
       ix) Public responsibility and citizenship
       x) Agility
       xi) Focus on results and creating value

    c)   Interview department personnel to determine whether they have attended Baldrige
         training and are familiar with Baldrige components.

    d) Determine whether data is collected and shared with District personnel on the
       Department’s pursuit of its goals.




                                                                 7                                          10/24/03

				
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