Audit Report on The Tax Classification of The Real Property in The Borough of Queens by The Department of Finance

AUDIT REPORT IN BRIEF

This audit determined whether the Department of Finance has adequate procedures in place to ensure that mixed-use properties in the borough of Queens that are listed as Class 1 on the assessment rolls are correctly classified. The scope of this audit covered tax assessments for Fiscal Year 2005.

Audit Findings and Conclusions

The audit found that Finance does not have adequate procedures in place to ensure that mixed-use properties in the borough of Queens that are listed as Class 1 on the assessment rolls are correctly classified. Although Finance routinely inspects Class 2, 3, and 4 properties to ensure that they are correctly classified on the assessment rolls, it does not conduct such inspections of Class 1 properties. Instead, Finance inspects Class 1 properties only when it is informed by the Department of Buildings that the properties are being altered or renovated.

We identified 107 properties listed as Class 1 on the assessment rolls that appeared to be misclassified. Using Finance guidelines, we determined that these properties should have been classified as Class 4. Had these properties been correctly classified, we calculate that Finance would have billed the owners an additional $884,028 in property taxes for Fiscal Year 2005.

Audit Recommendations

We recommend that Finance should:

• Inspect the properties identified in this report and confirm whether they are misclassified.

• Make the necessary adjustments to the assessment rolls for the properties that are misclassified.

• Seek an opinion from the Law Department as to whether property owners can be billed for additional taxes owed for prior years that were caused by property misclassifications. If it is determined that the additional amounts can be billed, the Department of Finance should bill the owners accordingly.

Conduct annual inspections of all Class 1 mixed-use properties and a sample of all other Class 1 properties to ensure that they are properly classified on the assessment rolls.