The City is requesting proposals from qualified consultants with demonstrated experience in auditing Transient Occupancy Tax (TOT) returns and assessing compliance with local municipal code requirements. The City is seeking a vendor with demonstrated expertise and the technical capacity to support compliance efforts and ensure the accurate collection and remittance of transient occupancy taxes in accordance with applicable laws and regulations. The City intends to award a multi-year contract for the performance of annual TOT audits.
Hotels, motels and short-term rental (STR) operators are required to register with the City and file Transient Occupancy Tax (TOT) returns. The City utilizes the GovOS, MUNIRevs application, to register lodging operators, electronically submit TOT returns, and receive automated reminders of tasks. Currently, the City has approximately 31 hotel/motels and 1191 STR properties registered.
The City has one benefit assessment district, Oceanside Tourism and Marketing District (OTMD) which funds collective tourism marketing efforts and is paid by all hotels, motels, and STRs within city limits as a percentage of room rental revenue.
The primary objective of these audits is to verify that hotels/motels and STRs operating within Oceanside are submitting accurate and timely TOT returns and remitting the correct amounts due. These audits will also evaluate compliance with the OTMD assessment, which is included as part of the City's TOT return. TOT is a large source of General Fund revenue. In FY 2023–24, TOT revenue exceeded $16 million, with the approximately 53% of revenue generated from hotel/motels and 47% of revenue from STRs.
The initial term of the agreement will be three years, with the option of two additional one-year extensions.
Scope of Work
The selected consultant will be responsible for conducting annual TOT audits for the most recent three fiscal years. For example, during the first year of engagement, audits will cover Fiscal Years 2022, 2023, and 2024, with each fiscal year ending on June 30. In Year One, the City will identify ten (10) hotels for audit and ten (10) short term rentals. In subsequent years, between eight (8) and twelve (12) hotels, and ten (10) short term rentals will be selected annually for review.
A. Required Services
The audit procedures for each selected lodging operator shall include the following:
- Review Applicable Municipal Code and Resolutions
- Review the Oceanside Municipal Code, specifically:
- Review all relevant City resolutions pertaining to TOT and assessments.
- Assess Internal Control Procedures
Evaluate and report on the hotel/motel’s and STRs internal controls related to the collection and reporting of transient occupancy taxes, including:
- Accounting and reporting of transient rent receipts to the City
- Procedures for identifying transient vs. non-transient guests
- Documentation and reporting of taxable and non-taxable room revenues
- Documentation and reporting of exemptions, including complimentary rooms
- Verify Accuracy and Timeliness of Filed Returns
- Hotel/Motels- confirm the accuracy and submission timeliness of TOT returns for the three-year audit period.
- STRs- confirm the accuracy and submission timeliness of TOT returns for a one-year period. If discrepancies are found then, confirm the accuracy and submission timeliness of the three-year audit period.
- Reconcile Reported Receipts
- Trace reported transient rent receipts from the TOT returns to the accounting records, ensuring compliance with City ordinances.
- Verify Occupancy Reporting
- Match the number of occupied room nights reported on TOT returns to the hotel/motel’s and STRs internal occupancy records and validate compliance with City requirements.
- Sample Rental Transactions
- Select a sample of rental transactions from the audit period and:
- Verify tax computations
- Reconcile rental revenues and TOT collected with the hotel/motel’s and short-term rental’s books and records
- Review Exemption Claims
- Audit, on a sample basis, supporting documentation for TOT exemptions claimed during each of the three fiscal years.
- If discrepancies are found, perform additional procedures to determine the and materiality extent of the issue.
B. Supporting Documents
The selected consultant shall be responsible for directly requesting all necessary documentation from each hotel, motel and STR selected for audit. This includes, but is not limited to, financial records, occupancy reports, tax returns, exemption documentation, and other relevant materials required to perform the audit procedures outlined in Section II.A.
The consultant must:
- Maintain a detailed log of all document requests and their status.
- Track outstanding items and follow up with hotels/motels and short-term rentals to ensure timely receipt of documentation.
- Communicate delays to the City when a hotel/motel or short-term rental fails to respond or provide requested materials in a reasonable timeframe.
If there is an undue delay in obtaining records, the City will assist in facilitating the collection of required documents.
C. Time Requirements
1. Audit Schedule
The planning phase of the audit engagement shall commence no later than 30 calendar days following the execution of a contract between the City and the selected consultant.
At the start of each engagement, the City will:
- Notify selected hotels/motels and short-term rental that they are subject to a Transient Occupancy Tax (TOT) audit, including the applicable audit periods. The notification will include the name and contact information of the consultant performing the audit.
- Provide the consultant with a list of selected hotel/motel’s and short-term rentals, including the name and contact information of a designated representative at each property (e.g., general manager, owner, or proprietor).
- Provide the consultant with copies of TOT returns submitted by the selected hotel/motels and short-term rentals for the applicable audit periods (e.g., for Year One, fiscal years 2022, 2023, and 2024).
At the start of each engagement, the consultant shall provide the City and the selected hotels with the following:
- Primary points of contact for the engagement.
- A proposed audit schedule detailing target dates for audit planning, fieldwork, and report completion.
- A list of requested documentation, including records to be provided by both the hotel/motel or STR and the City, necessary reports or data, and prior TOT filings required to initiate the engagement.
During the fieldwork phase, the consultant shall plan for a minimum of one half-day (4 hours) of fieldwork for each hotel/motel property and two hours of fieldwork for each STR. The purpose of this visit is to:
- Conduct initial introductions
- Review the requested documentation list
- Confirm which records will be accepted for audit purposes
- Establish rapport to support a productive and collaborative engagement
2. Entrance Conference, Progress Reporting, and Exit Conference
- An entrance conference shall be held with the City prior to the start of fieldwork to review the audit plan and expectations.
- Monthly progress reports shall be submitted to the City, or as otherwise agreed upon, to ensure the audit is proceeding according to schedule.
- An exit conference shall be conducted on the final day of fieldwork or shortly thereafter to summarize key findings, communicate preliminary results, and discuss next steps for reporting and resolution.
3. Reports
The consultant shall issue draft audit reports within four (4) weeks following the conclusion of fieldwork. Reporting requirements include:
- A summary audit report detailing the overall results of the annual Transient Occupancy Tax (TOT) audit engagement, including any noteworthy trends or statistics.
- Individual hotel/motel or short-term rental specific reports that include:
- A summary of procedures performed
- Audit findings
- Identified overpayments or underpayments
- Calculations of applicable penalties and interest, consistent with the City’s Municipal Code
For hotel/motels and short-term rentals with audit findings, the consultant shall include a separate schedule that clearly illustrates the calculation of net overpayments or underpayments, as well as associated penalties and interest.
The City will complete its review of the draft reports within two (2) weeks. During this period, the consultant is expected to be available for meetings to address any questions, clarifications, or revisions. If requested, the consultant may also be asked to present findings at a City Council meeting, at the City’s sole discretion. Upon final resolution of all issues, the final signed reports shall be submitted to the City within ten (10) working days.
4. Working Paper Retention and Access to Working Papers
The consultant shall retain all working papers and related documentation at their own expense for a minimum of three (3) years following the issuance of the final audit report.
The City reserves the right to request access to these materials at any time during the retention period. If required by the City, the consultant shall extend the retention period upon written notice.
