Follow-Up on Recommendations from Report No. 13-02, Audit of the Real Property Assessment Division

From Honolulu City Auditor, December 31, 2019 

The (2013) audit objective was to evaluate the RPAD processes related to the classification, reclassification, valuation, and assessment of real property for taxation purposes. At the time, we found that real properties were inconsistently classified because tax assessment staff were not following best practices such as performing physical inspections, focusing on quality assurance, maintaining and updating databases, or complying with existing administrative policies and procedures. As a result, tax assessments were inconsistent and inequitable, exemption and dedication property requirements were violated, and taxes assessed did not reflect the highest and best use of the properties. The audit also identified deficiencies including potential illegal or unpermitted commercial use of residential historic properties, inaccurate and unreliable data, tax assessment errors, and data management shortcomings. The original audit made 17 recommendations.

In this follow-up audit, we found that five recommendations were completed, seven were in process, four were not started, and one was dropped.

In response to a draft of this follow-up audit, the managing director expressed general agreement with 11 of the audit recommendation status assessments and disagreed with 6 status updates. We reviewed management's comments and in one instance agreed with their evaluation regarding the department's increased utilization of iasWorld software.

In its response, the department also disagreed with our recommendation to properly classify, value, prorate, and assess real properties used as adult residential care homes, skilled nursing or intermediate care facilities, and related properties. The department also stated that it completed the recommendation to cancel historic property dedication exemptions for properties with commercial activities without a residential use permit because the residential dedication ordinance does not preclude commercial activities and owners from conducting commercial activities. In both of these instances, we acknowledge that land use review and permitting are functions of the Department of Planning and Permitting. What we  recommend is that the Real Property Assessment Division include timely and accurate land use and permitting information to justify classifications or exemptions, and record legally permitted uses when appropriate. By recording accurate information, the division can ensure that properties are accurately classified for taxation. In all other instances, we stand by our audit recommendation status assessments….

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