Manual on the Conduct of Evaluation/Examination and Monitoring of Real Property Assessment Operations in Local Government Units

January 9, 2012 BLGF MEMORANDUM CIRCULAR NO. 001-12 TO : All Regional Directors, Bureau of Local Government Finance, City and Municipal Assessors within Metro Manila Area, Provincial, City and Municipal Assessors and Others Concerned SUBJECT : Manual on the Conduct of Evaluation/Examination and Monitoring of Real Property Assessment Operations in Local Government Units WHEREAS, Sections 33 (1) and (2) of Executive Order No. 292, Series of 1987, otherwise known as the "Administrative Code of 1987" provides that the Bureau of Local Government Finance (BLGF) shall "(a)ssist in the formulation and implementation of policies on local government revenue administration and fund management" and "(e)xercise administrative and technical supervision and coordination over the treasury and assessment operations of local governments;" WHEREAS, Article 291, Rule XXXI of the Implementing Rules and Regulations (IRR) of the Local Government Code of 1991 (R.A. 7160), implementing Sec. 200 of the said Code, mandates the Department of Finance, provinces and cities including the municipality within the MMA to exercise authority to review and examine on a continuing basis, property assessments and real property tax records to ensure proper implementation of law, rules and regulations governing real property taxation; WHEREAS, pursuant to the aforementioned law, the Bureau of Local Government Finance (BLGF), shall conduct on a continuing basis, an evaluation/examination of the assessment operations of local government units to determine compliance with applicable laws, rules and regulations; WHEREAS, DOF issued Department Order No. 37-09 on October 19, 2009, prescribing the Philippine Valuation Standards (PVS), (1st Edition), Adoption of the IVSC Valuation Standards under Philippine Setting; and Department Order No. 10-2010 issued on April 28, 2010, prescribing the "Mass Appraisal Guidebook; A supplement to the Manual on Real Property Appraisal and Assessment Operations (with Expanded Discussions on Valuation of Special Purpose Properties and Plant, Machinery & Equipment)"; WHEREAS, pursuant to the same above-cited law, the Office of the Provincial/City Assessor shall conduct on a continuing basis, evaluation/examination of assessment operations of component city(ies) and municipalities to determine compliance with applicable laws, assessment rules and regulations; and submit on or before January 1st of the ensuing year to the BLGF Regional Office concerned, on the part of provincial Assessor's Office its annual plans/programs on the conduct of evaluation/examination of assessment operations of component city(ies) and municipalities within their respective jurisdiction; NOW THEREFORE, this Manual is hereby issued as basic reference and guidelines for the BLGF Central and its Regional Offices in the conduct of evaluation/examination and monitoring of assessment operations in local government units within their respective jurisdiction: SECTION 1. Coverage. a. Real Property Identification b. Real Property Appraisal c. Real Property Assessment d. Records Management e. Data Bank SECTION 2. Definition of Terms. a. Actual Use refers to the purpose for which the property is principally or predominantly utilized by the person in possession thereof; b. Appraisal is the act or process of determining the value of a property as of a specific date for a specific purpose. It may also be defined as the act of estimating the value of property. It is an estimate or opinion of value, usually market value as defined by the appraiser. It is made as of a specific date and is a conclusion which results from a logical and orderly analysis of facts. c. Assessment is the act or process of determining the value of a property or proportion thereof subject to tax, including the discovery, listing classification and appraisal of properties. d. Assessment Level is the percentage applied to the market value to determine the taxable value of the property. e. Assessed Value is the market value of the property multiplied by the assessment level. It is synonymous to the taxable value. f. Assessment Operations is a means of assigning on every parcel of land and upon all taxable improvements on such lands, a current and fair market value, an assessment level to be able to arrive at an assessed value for each land and each improvement. g. Classification the uniform grouping of real properties based on actual use such as Residential, Agricultural, Commercial, Industrial, Mineral, Special and Timberland (RACIMST). h. Highest and Best Use (HABU) the most probable use of a property which is physically possible, appropriately justified, legally permissible, financially feasible, and which results in the highest value of the property being valued. i. Fair Market Value/Market Value is the price at which a property may be sold by a seller who is not compelled to sell and bought by a buyer who is not compelled to buy; Market Value is the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in arm's length transaction (a transaction between independent, unrelated parties involving no irregularity) after proper marketing wherein the parties had each acted knowledgeably, prudently, and without compulsion. (PVS) j. Real Property includes all the rights, interests, and benefits related to the ownership of real estate. k. Property Identification System the accounting of every parcel of land with the aid of a tax map wherein property identification numbers (PIN) are assigned for every parcel drawn thereon followed by the identification and assigning of permanent PIN for every building and other improvements and machinery located within each respective parcel of land. EScHDA l. Tax Map is a graphic representation of a portion of the earth's surface drawn to scale on standard size drawing material, having property lines and jurisdictional boundaries delineated showing all parcels of real property and identifying each separate real property ownership by a unique number. A tax map is also referred to as Property Identification Map. SECTION 3. Scope and Limitation. 1. Scope of the Evaluation/Examination a. BLGF Central Office Cities and Municipalities within Metro Manila Area (MMA). It may, however, conduct evaluation/examination in the provinces, cities and municipalities outside MMA in aid of promulgating guidelines, policies, opinions and rules and regulations governing real property taxation and local revenue generation, or as requested by local government units (LGUs). b. BLGF Regional Office Provinces, Cities and Municipalities within their respective jurisdiction. c. Office of the Provincial Assessor Component City and Municipality within their respective jurisdiction. 2. Limitation Evaluation/examination shall be conducted in every local government unit once every three (3) years or as need arises. 3. Systems covered 1. Real Property Identification Systems a. Existence and conformity with the following prescribed tax maps: Province, City and Metro Manila Municipality Index Municipality, District Index Barangay Index Section Index Property Identification b. Real Property numbering system c. Updating of tax maps involving change in the physical characteristics of the land. d. Appropriateness of parcels drawn to scales e. Appropriateness of orientation of drawn parcels f. Signatures of persons responsible in the operation and approval of tax maps 2. Existence and completeness of data/information reflected in the Tax Map Control Roll (TMCR) a. The format should be in accordance with the prescribed form at the time of appraisal and assessment. b. Consistency of Section and Property Index Number vis-a-vis the property identification/section map. c. Approved and cancelled transactions should be updated in all assessment forms. 3. Appraisal a. An enabling Ordinance adopting the Schedule of Market Values (SMV) for lands, buildings, machinery and other improvements, should have been approved. b. An Ordinance adopting the Assessment Levels pursuant to the LGC should be enacted; c. Conformity of appraisal with the Schedule of Market Values (SMV) enforced at the time of appraisal and the kind and classification of real property. d. Propriety of adjustment factor(s) applied e. Machinery and equipment should be in conformity with existing laws, rules and regulations at the time of appraisal and assessment. f. Accuracy of computation. SEDaAH 4. Assessment a. Application of SMV as basis of assessment b. Propriety in the application of assessment levels vis--vis the enforced assessment levels per approved ordinance at the time of assessment. c. Propriety of the application of actual use as basis of assessment. d. Accuracy of computation. 5. Records Management a. Existence and conformity of assessment forms prescribed under existing laws, rules and regulations promulgated by the Department of Finance. b. Updating of every prescribed assessment form involving approval and cancellation of tax declarations. c. Consistency of data entries from one assessment record to another. d. Accuracy of filing system of assessment records. SECTION 4. Methodology and Procedure. The assessment, evaluation/examination and monitoring shall be conducted by observing and applying the following methodologies and procedures: 1. Procedural guidelines before the conduct of the evaluation/examination: a. Courtesy call with the Local Chief Executive (LCE) Presentation of Office Order to the LCE or his authorized representative citing the purpose and objectives of the evaluation/examination activity to be conducted. b. Pre-Evaluation/Examination conference with the Assessor Concerned Briefing with the assessor concerned on the purpose & objectives of the assessment evaluation/examination and monitoring; and request access to assessment records and the assistance of the assessor's staff in the evaluation/examination process. c. Interview For clarification, interviews shall be made with the assessor concerned and/or key personnel of the assessor's office to obtain information/data for the guidance and clarification of the team and verify doubtful information, which may be discovered during the evaluations/examinations. d. Record Verification Shall be made to determine the total number of existing real property units (RPUs) to establish the appropriate number of sample real properties subject of evaluation/examination. Review of assessment records of selected real property to ascertain whether data entries of one property are accurately and consistently transferred from one assessment record form to another. Recording of the fill-in information of the assessment records using the AEE Form No. 2 Assessment Data and Records Verification Worksheet, for every reference sample drawn. CHDaAE e. Sample determination The determination of the appropriate number of sample real properties shall be based from the last Tax Declaration Number (TDN)/Assessment of Real Property Number (ARPN) or the Property Index Number (PIN) using the formula provided hereunder: N Q = S where: Q = Sample selection interval N = Total number of real properties (Taxable or Exempt) of the LGU subject of evaluation/examination S = desired sample size To Illustrate: N = 9,540 (Total No. of TDs) S = 45 (desired sample) 9,540 Q = = 212 215 45 Q = 215 (interval) The interval "Q" shall be applied by choosing a starting point or initial number from any of the numbers ranging from numbers 1 to 50. To illustrate: The evaluator/examiner chooses number 30 assigned as "R". Therefore, the 1st sample is TD No. 00030: Subsequent samples shall be determined using the formula: 2nd Sample = (Parcel Count + 30) + Q To illustrate: Given: Q = 215 R = 30 Parcel Count = 00000 Therefore: 2nd sample = (00000+30) + 215 = 00030 + 215 = 00245 3rd sample = 00245 + 215 = 00460 Repeat the process to obtain the desired sample size f. Number of samples by classification. A minimum of 45 real property units (RPUs) shall be subject to evaluation/examination. The 45 RPUs must be represented by at least two (2) samples for land, building, and machinery drawn from each of the existing classification in the local government unit. Residential, Agricultural, Commercial, Industrial, Mineral, Timberland and Special (RACIMTS). In case some classifications are not represented or are not available during the selection process, the team shall be free to select samples from other classifications. In case other classifications are still not available, the team shall select samples from available classifications in addition to the number of samples already shown in order to meet the required forty-five (45) samples. g. Recording the Samples After determining the TD Numbers of sample RPUs, files of the TD/FAAS (reference record) will be sought and the written information therein shall be transcribed in AEE Form No. 2. The matter of using TD or FAAS as reference record will be the discretion of the team leader; but preference shall be the use of FAAS as the source document. h. Examination of Samples Every sample drawn and recorded in AEE Form No. 1 must be reviewed and analyzed as to: o the information on ownership and administrator/occupant/beneficial user of the real property involved o Highest and Best Use (HABU) or Actual Use o the unit base market values used o the adjustment factors used and the assessment level applied Resulting market and assessed values should be in order to determine the accuracy and correctness of computations for RPT purposes. EDaHAT Compliance with the provisions embodied in the approved Schedule of Market Values (SMVs), and the applicable laws, rules and regulations as well as the assessment record forms. i. Counter-checking with other assessment records After the samples have been recorded, the data transcribed in AEE Form No. 2 shall then be verified and counterchecked against other assessment records available such as TD, TMCR, AR, ORC, ROA and file copy of the Notice of Assessment (NA). A check mark ( ) shall be indicated in the appropriate column if found consistent and correct, or by a cross mark (X) if found to be inconsistent and erroneous. In case of a cross mark, the specifics of the inconsistency or erroneous entries should be indicated in the Remarks Column. The following shall be checked using the AEE Form "2". 1. PIN; 2. OCT/TCT/CLOA NO.; etc. 3. Survey No./Lot No./Blk. No.; 4. Name and Address of Owner; 5. Name and Address of Administrator/Beneficial User; 6. Property Location; 7. Property Boundaries; 8. Kind of Property (land, building, machinery; other improvements); 9. Classification/Sub-Classification; 10. Area; 11. Unit Value; 12. Market Value; 13. Adjustment/Depreciation; 14. Actual Use; 15. Assessment level; 16. Assessed Value (recheck the computation); 17. Taxable/Exempt; 18. Effectivity; 19. Cancelled TDN/ARP No.; 20. Previous Assessed Value. j. Ocular Inspection Thereafter an ocular inspection shall be conducted wherein sample real property/ies shall be selected to verify whether the indicated information in the assessment records, particularly in the FAASs, are consistent with the actual location, physical condition and other characteristics of the subject real property; Copies of the FAASs and section maps covering the real property/ies subject of evaluation/examination shall be utilized as basis of field verification/validation. The team or personnel conducting the evaluation/examination may be accompanied by a representative(s) from the Assessors Office of the local government unit concerned. Evaluation of Existing Appraisal and Assessment Records o Actual assessment evaluation/examination is done by examining existing assessment records to determine the propriety and accuracy of real property appraisal and assessments made by the assessor. For this purpose, a copy of the approved Schedule of Market Values (SMV) enacted into an ordinance of said LGU must be at hand to verify whether the unit base values, adjustment factors and assessment levels have been correctly applied. Exit Conference o An initial feedback on the assessment evaluation/examination result shall be conducted thru exit conference with the Assessor or the Local Chief Executive (LCE) or in his absence, his designated representative. Assessment Evaluation/Examination Report o A written report shall be prepared and submitted within ten (10) days from return to work station. The report should include basic information about the LGU such as but not limited to the following: Name of Provincial, City and Municipal Assessors, Assistant Provincial/City and Assistant Municipal Assessors, or person/officer in-charge; The Number of RPUs and total area of the municipality; Total Market Value and Assessed Value Copy of the latest Report of Assessment and/or data by property classifications. Findings, comments and recommendation of the evaluation team including the accomplished Assessment Evaluation/Examination checklist (AEE Form Nos. 1, 2 & 3). Background information which contains the activities, latest developments or policies which have affected or created on impact on the assessment operations of the LGU. Findings/Observations on the following assessment records: - Tax Map (TM) - Tax Mapping Control Roll (TMCR) - Field Appraisal and Assessment Sheet (FAAS)/Field Sheet (FS) - Ownership Record Card (ORC) - Assessment Roll (AR) - Records of Assessment (ROA) - Notice of Assessment (NA) Recommendations, advice or suggestions to the Assessor as a result of the findings/observations made and the initial findings by the evaluation team. Impact of assessment against real property tax collection. Extent of compliance by the Assessor with existing laws, rules and regulations on real property appraisal and assessment operations. k. Computerized LGUs The Procedures/Guidelines on all computerized LGUs shall likewise be issued by BLGF. SECTION 5. Administrative Provisions. 1. The procedures contained herein shall be used exclusively in the conduct of assessment evaluation/examination and monitoring by the Central Office of the Bureau of Local Government Finance (BLGF), and its Regional Offices; 2. The Regional Offices concerned shall conduct assessment evaluation/examination and monitoring activities within its jurisdiction in coordination with the Provincial/City Assessor's Office concerned; 3. A written report by the Regional Office shall likewise be submitted to the BLGF Central Office embodying its findings, comments and recommendations on the LGUs evaluated and examined; and 4. The Central Office and the Regional Offices in turn shall prepare an official communication to the Local Chief Executives (LCEs) and the Provincial/City Assessor concerned regarding the findings/observations and recommendations, if needed. (SGD.) SALVADOR M. DEL CASTILLO OIC-Executive Director AEE FORM NO. 1 General Questionaire AEE FORM NO. 2 Assessment Data and Records Verification Worksheet AEE FORM NO. 3 Assessment Evaluation/Examination Checklist