Office of the Chief Financial Officer
Executive Summary for Closed Reports
Report No. IA: OTR: 2803-01 Tax Sale Program, dated October 16, 2008
Chief Risk Officer’s Risk Assessment
Legal and regulatory risks associated with the tax sale has been assessed as High. The Office of the Chief Financial Officer takes seriously the laws and regulations that apply to its many missions, including tax sales. Consideration given to both existing controls and control improvements made as a result of this audit, the residual risk is classified as Medium. Though continuous improvements via self-assessment and continued partnership with auditors are on-going, no immediate additional work is being considered.
Of the sixteen OIO recommendations given, fourteen were fully implemented, one was partially implemented and one was not implemented. Work was done to strengthen existing internal controls included the following:
- The Tax Sale Unit has policies and procedures to document the steps that must be taken to process tax sale transactions. The policies and procedures were made available to the staff. In addition, the Real Property Assessment Service Division (ASD) and Revenue Accounting Administration (RAA) incorporated the Refund Directive that specifically identifies different types of refunds and detailed documentation that is required for their processing. ASD developed a Policies and Procedures Manual for purposes of training. ASD's systems administrator has implemented controls, along with tracking elements, within the DC Ledger system to limit users' rights based on need. Staff and management have been trained on the changes within the system and new controls.
- RAA performs the reconciliation of deposits, final payments and refunds between SOAR and the Tax Sale Ledger and periodic reconciliations of the payment of subsequent real property taxes and redemption refunds between the DC Ledger and SOAR.
- The void functionality has been restricted. Other users are restricted to read-only. The Technical Support Group (TSG) has developed a guide that outlines the system usages. Reconciliation controls were added.
- Manual and handwritten refund vouchers are prohibited; all vouchers are system-generated. 1099-Int statements have been issued to all tax sale purchasers. Systematic controls within the Tax Sale Ledger preclude any user from modifying the amounts used as the basis for a refund. In addition, RAA will not accept any manual refunds, as is clearly defined in the Refund Directive. The same system has controls in place to prevent a user from processing "bulk" refunds; each refund is processed individually. During processing, the system will identify previously-processed refunds from the same year, square and lot and block the user from processing a duplicate refund. Duplicate Vouchers can only be re-printed by the Division Chief and Deputy Chief, and the document will have "Duplicate" as the header. Refund vouchers can only be voided by the Chief and Deputy Chief of the Division, and only after RAA has removed the date of acceptance, which creates a multi-tiered control system. All activity within the DC Ledger has a permanent audit trail, which outlines the date, time, user and activity. DC Ledger has clear and strict access rights for users and managers. RAA places an acceptance date in DC Ledger which prevents specific managers from voiding refund vouchers, serves as an audit trail, provides a status of the refund and precludes the processing of duplicate refunds. SOAR vouchers are reconciled to DC Ledger by RAA.
- The Refund Directive mandates the documentation requirements that must be met before a refund can be processed. There are tiers of approval required for processing. The documentation required for redemptions refunds includes all of the recommended items. Refund packages are reviewed and approved using a multi-tiered management review process. Subsequent refunds are also subject to the Refund Directive currently in place that is utilized by ASD and RAA. There is a checklist incorporated into the Refund Directive that requires specific documents in order to process a refund. The Refund Directive also requires a tiered review for approval, which requires the signature of the manager/reviewer. The refund will NOT continue onto the next level (if applicable) if the proper signature is not in place.
- Subsequent refunds are subject to the Refund Directive currently in place that is utilized by ASD and RAA. There is a checklist incorporated into the Refund Directive that requires specific documents in order to process a refund. The Refund Directive also requires a tiered review for approval, which requires the signature of the manager/reviewer. The refund will NOT continue onto the next level (if applicable) if the proper signature is not in place.
- DC Ledger is reconciled for accuracy whenever a subsequent payment is tendered to the District of Columbia. All tax sale purchasers are required to complete registrations. All refunds must adhere to the Refund Directive for processing. The Tax Sale manager reviews all documentation that is necessary for making a subsequent payment prior to being entered into DC Ledger.
- The Tax Sale Unit communicates with OAG to ensure that foreclosure timelines are met and processed timely. There are specific laws administered by the Court to ensure compliance for all foreclosure cases. A manager from ASD goes to court on a weekly basis to work with OAG in all tax sale cases that are in court. In addition, weekly meetings with OGC and OAG take place.
- The Tax Sale Unit scans all documents and logs them into a file. All tax sale refunds, COFS, supporting documentation, etc are scanned and filed. All scanned documents are kept on a secure drive, which is readily accessible to staff.
- OTR has designated the Deputy Chief of ASD to work directly with OGC and OAG on foreclosure cases. Representatives from OAG and OTR attend Superior Court weekly to ensure foreclosure compliance. All cases being heard in court are reviewed by OAG and ASD management on a weekly basis, which serves as the template for foreclosure compliance.
- There is frequent communication between OAG and OTR to insure compliance relating to modifications of law and policy.
- Tax Sale policy requires all purchasers to complete a FR-500 form with the Customer Service Administration. In addition, ASD will send the list of registered buyers to the Office of Pay and Retirement Services to validate that no current employees are registered buyers. As part of the Tax Sale Registration Form, participants sign under penalty of perjury that they are eligible to participate in the sale (i.e. not delinquent in payment of taxes). Under existing law, individuals and entities are not liable for the payment of real property taxes. Because SSN's are not required of bidders, matching bidders to ITS cannot be performed.
- The Tax Sale Unit updates and distributes copies of Tax Sale FAQ's, and Redemption Guidelines to all tax sale purchasers who attend the Tax Sale Seminars. The information is also published on the OTR website.
The recommendation to require the Tax Sale Unit management to work with the OTR Information Systems Administration (ISA) in overhauling the DC Ledger system was not implemented. OTR is currently in the process of replacing its system, and significant work on the current system is not an efficient use of resources.
To view the full report, Click on : Final Tax Sale Program Report