Year 2000 Audit Program for Revenue District Offices

July 24, 2000 REVENUE MEMORANDUM ORDER NO. 24-00 SUBJECT : Year 2000 Audit Program for Revenue District Offices TO : All Regional Directors, Revenue District Officers (RDOs), Chiefs of the Assessment Divisions of Regional Offices, and all Internal Revenue Officers Concerned I. OBJECTIVES This Order is issued: 1. To prescribe uniform policies, guidelines and procedures in the audit of tax cases by Revenue District Offices; 2. To enhance taxpayers' voluntary compliance by encouraging payment of correct amount of internal revenue taxes thru quality audit of tax returns; and 3. To effectively monitor the accomplishments of the Regional and District Offices regarding the audit function. II. COVERAGE AND AUDIT SELECTION POLICIES This Audit Program covers investigation of 1998 and 1999 internal revenue tax returns by Revenue District Offices including income tax returns of fiscal-period taxpayers whose taxable years ended any day from July 1, 1998 to June 30, 2000. Except for cases involving claims for tax credit/refund, sales/transfers of properties and requests for tax clearance of taxpayers due to retirement of business which have to be acted upon immediately, tax returns for 1997 may be audited/verified subject to prior approval of the Assistant Commissioner, Assessment Service. The issuance of Letters of Authority by the Enforcement Service (ES), Excise Tax Service- (ETS), Large Taxpayers Service (LTS) and Special Investigation Division and Assessment Division of Regional Offices shall be covered by separate revenue issuances. All Letters of Authority (LAs) to be issued pursuant to this Order shall be based on the following selection criteria with their corresponding case codes: A. Mandatory 1. For Revenue District Offices (RDOs) covered by Revenue Region Nos. 5, 6, 7 and 8 (Valenzuela, Manila, Quezon City and Makati), except RDO Nos. 35-Romblon, 36-Puerto Princesa, Palawan and 37-San Jose, Occidental Mindoro: a. Estate/donor's tax returns with a gross estate/gift above Ten Million Pesos (P10,000,000.00) (Selection Code: EST/DON ) b. Taxpayers retiring from business with gross assets above Ten Million Pesos (P10,000,000.00) (Selection Code: RET ) c. Claims for income tax credit/refund of individual taxpayers arising from business income or practice of profession (Selection Code: TCR ) and corporate taxpayers (Selection Code: MCO ) where all the following conditions are present): c.1 the amount of the claim exceeds Ten Thousand Pesos (P10,000.00); and c.2 the gross sales/receipts exceed Ten Million Pesos (P10,000,000.00). 2. For all other RDOs including RDO Nos. 35, 36 and 37: a. Estate/donor's tax returns with a gross estate/gift above Five Million Pesos (P5,000,000.00) (Selection Code: EST/DON ) b. Taxpayers retiring from business with gross assets above Five Million Pesos (P5,000,000.00) (Selection Code: RET ) c. Claims for income tax credit/refund of individual taxpayers arising from business income/income from profession (Selection Code: TCR ) and corporate taxpayers (Selection Code: MCO ) where all of the following conditions are present: c.1 the amount -of the claim exceeds Five Thousand Pesos (P5,000.00); and c.2 the gross sales/receipts exceed Five Million Pesos (P5,000,000.00). In relation to claims for individual and corporate tax credit/refund under Sections II.A.1.c and II.A.2.c hereof, tax returns where the taxpayers opted to carry over the excess tax credit shall not fall under this mandatory category. DHITCc 3. Claims for tax credit/refund other than on income tax including claims for VAT credit/refund exceeding One Hundred Thousand Pesos (P100,000.00) for the period(s) claimed (Selection Code: OTR ); 4. Transfer of property in exchange for shares of stocks and other sale, transfer or exchange of shares of stocks not listed in the stock market where the zonal value of the property or the book value of the stocks exceeds Ten Million Pesos (P10,000,000.00) (Selection Code: TSS ); and 5. Government withholding agents on the withholding tax liabilities of these agencies (Selection Code: GWA ); and 6. Taxpayers selected for tax audit based on third-party information referred by the Assessment Service (Selection Code: TPI ). B. Priority Target Taxpayers If the mandatory audits described above do not provide sufficient workload for the RDO, the Revenue District Officer shall rank and select the taxpayers for audit as follows: Top Priority : 1. Taxpayers in the district who filed break-even returns or with returns showing net loss for at least two (2) consecutive years, where the annual gross sales/receipts exceeds Three Million Pesos (P3,000,000.00) for Revenue Region Nos. 5, 6, 7 & 8 (Valenzuela, Manila, Quezon City and Makati ), except taxpayers in RDO Nos. 35-Romblon, 36-Puerto Princesa and 37-San Jose, Occidental Mindoro, and exceeds One Million Pesos (P1,000,000.00) for all other regions and the aforementioned RDOs. (Selection Code: BEL ). 2. Top 100 taxpayers in the district in terms of gross sales/receipts where there is no VAT or percentage tax payment for the current year and the immediately preceding year (Selection Code: ZVP ). 3. Taxpayers with substantial reduction in gross sales/receipts/tax payments and/or substantial increase in costs of sales and expenses. For this purpose, the phrase " with substantial reduction in gross sales/receipts/tax payments " will mean at least twenty percent (20%) reduction in current year's gross sales/receipts/tax payments from that of the immediately preceding year's while " with substantial increase in costs of sales and expenses " will mean at least twenty percent (20%) increase in claimed cost of sales and expenses over and above the increase in costs and expenses attributable to increase in gross sales/receipts (Selection Code: SRS ). 4. Taxpayers with substantial tax deficiency resulting from short-audit of their tax liabilities pursuant to RMO No. 19-2000. " Substantial tax deficiency " refers to the amount of deficiency tax assessments/collections arising from underdeclaration/nondeclaration of taxable income where such additional basic tax per audit amounts to at least 20 % of the tax due per return. Thus, taxpayers who have been audited under the Short-Term Audit Program with the above deficiency assessments shall automatically become candidates for audit under this Order (Selection Code: SAT ). 5. Taxpayers belonging to the top two industries within the respective area of jurisdiction of the RDO with the lowest percentage of tax compliance subject to the same threshold set in Section II.B.I of this Order for gross sales/receipts, using the following formula (Selection Code: TOP ): Tax due per return/Gross sales or receipts = Percent of tax compliance For the purpose of ranking the tax compliance of these taxpayers, the methodology prescribed in Section II . 2 . 3 of RMO No . 19-2000 shall be followed . TIcAaH Other Priority : If the desired number of taxpayers prescribed in the audit workplan could still not be met after following the preceding guidelines, the Revenue District Officer may select taxpayers to be audited from the following industries provided their gross sales/receipts exceed the threshold in Section II.B.1 hereof (Selection Code: PTL): 1. Restaurants and Food Chains 2. Hotels including Motels and other lodging places 3. Dealers in Securities and Lending Investors 4. Transportation Services 5. Wholesale and Retail Traders The taxpayers to be selected for audit for industries listed above shall be those falling in the lowest ten percent (10%) of the list in terms of tax compliance, as defined in Section II.B.5 hereof. Revenue District Officer's Discretion (Selection Code: RDO) : Since Revenue District Officers are presumed to know the taxpayers who are not complying with their tax obligations in their respective districts, they are given the privilege to select tax returns and taxpayers which do not fall within the guidelines and thresholds established above but the total taxpayers selected under this category should not exceed 10% of the maximum audit workload assigned to the RDO. Taxpayers selected for audit under this category during the immediately preceding taxable year shall not be the subject of audit under this Program, unless there is a compelling reason to audit such taxpayers, in which case, a written justification therefor shall be submitted by the Revenue District Officer concerned to the Regional Director, subject to approval by the ACIR, Assessment Service, prior to the issuance of LA. Top Management 's Policy Cases : From time to time, top management may identify group(s) of taxpayers not yet included in the above guidelines for immediate audit by the RDO. The authority to issue LAs for these cases shall be embodied in written orders from the Commissioner or the Deputy Commissioner for Operations (Selection Code: NOM). The foregoing selection criteria are listed according to order of priority . Lower priority tax returns shall not be audited until all higher priority audits are assigned and distributed to the Revenue Officers . C. Exceptions : The following 1998 and 1999 tax returns shall be excluded from audit and investigation by the RDOs: 1. Taxpayers to be examined by the Assessment Division under the Office Audit Program; 2. Taxpayers selected for audit/investigation by the Special Investigation Divisions of Regional Offices; 3. Taxpayers falling under the jurisdiction of LTS and ETS and other taxpayers/industries covered by the Audit Program of the Enforcement Service; and 4. Taxpayers who availed of the Economic Recovery Assistance Program (ERAP) for taxable year 1998 to the extent of the tax type availed of. III. AUDIT POLICIES AND GUIDELINES 1. The Revenue District Officer shall draw lists of taxpayers selected for audit except Mandatory cases falling under Section II.A of this Order, following the format prescribed under Annex "A" hereof. There shall be one list for each taxable year which shall state in alphabetical order the name of taxpayer selected for audit, the nature of business, the amount of gross sales/receipts declared by the taxpayer for the taxable period, the selection code, the Philippine Standard Industrial Classification (PSIC), and the corresponding amount of income tax paid for the period. The said lists shall be submitted by the Revenue District Officer to the Regional Director on or before August 10, 2000 for preliminary approval. The pre-approved lists shall be submitted by the Regional Director to the Assistant Commissioner, Assessment Service (ACIR, AS) not later than August 15, 2000 for final approval. For returns filed after August 10, 2000 by fiscal-period taxpayers, the RDO may draw an additional list of taxpayers selected for audit for approval by the ACIR, AS not later than December 15, 2000. The lists of 1998 tax returns recommended for audit based on RMO No . 67-99 which were previously approved by the Assessment Service but were not yet issued LAs shall be replaced by new lists in accordance with the selection criteria in this Order . 2. The Regional Director and ACIR, Assessment Service shall ensure that the taxpayers to be audited/investigated by the RDOs under this program are not among those to be audited by other investigating divisions/units of the Regional Offices and National Office. For this purpose, the Assessment Service shall match the lists of taxpayers submitted by the RDOs with the lists of taxpayers to be investigated by the audit divisions in the National Office prior to approval to preclude multiple issuance of LAs to the same taxpayer for the same taxable year. ESAHca 3. Cases to be covered by Letters of Authority (LAs) shall be classified according to gross assets or gross sales/receipts, whichever is higher , as of December 31, 1997, December 31, 1998 and December 31, 1999 using the following categories: Case Classification Gross Sales/Receipts Gross Assets Small Not more than P5,000,000.00 Not more than P10,000,000.00 Medium P5,000,000.01 -P50,000,000.00 P10,000,000.01 - P100,000,000.00 Large P50,000,000.01 - P100,000,000.00 P100,000,000.01 - 400,000,000.00 Very Large Over P100,000,000.00 Over P400,000,000.00 4. All Letters of Authority (LAs) shall be issued and approved by the Regional Director. However, no LAs for the investigation of taxpayers falling under the priority target taxpayers shall be issued by the Regional Director without prior written approval of the ACIR, Assessment Service. 5. For every four (4) LAs to be issued for RDOs covered by the following Revenue Regions under this program, there shall be a corresponding issuance of at least one (1) LA under the Short-Term Audit Program pursuant to RMO No. 19-2000: RR RDOs Excluded No. No. 5 - Valenzuela 6- Manila 35 - Romblon 36 - Puerto Princesa, Palawan 37 - San Jose, Occidental Mindoro 7 - Quezon City 8 - Makati City 9- San Pablo City 61 - Gumaca, Quezon, 62 - Boac, Marinduque 63 - Calapan, Oriental Mindoro 13 - Cebu City 83 - Talisay, Cebu 84 - Tagbilaran, Bohol 19 - Davao City 112 - Tagum, Davao del Norte 114 - Mati, Davao Oriental 115 - Digos, Davao del Sur All other RDOs including the aforementioned excluded districts shall issue LAs under the Short-Term Audit Program without necessarily maintaining the herein prescribed minimum ratio. 6. The policy on the simultaneous investigation of all liabilities of the taxpayer shall be followed. One Letter of Authority (LA) shall be issued for each taxable year to include all internal revenue tax liabilities of the taxpayer. Hence, the LA shall state the specific year under audit. The indication of "unverified prior years" or similar statement in the LA shall not be allowed. However, for purposes of verifying tax liabilities of a decedent, one LA shall be issued to cover the estate tax liability and the income tax liability of the deceased taxpayer for the immediately preceding year up to the time of his death. cIADaC The investigation of tax cases of General Professional Partnerships, including that of the partners, shall be undertaken by the Revenue District Office where the partnership is registered. However, where any of the partners belong to another jurisdiction, the following guidelines shall be observed: 6.1 Where the examination of the partner's return has been previously terminated by another RDO or investigating office, the terminated case shall no longer be re-opened except when fraud has been established; and 6.2 If the examination of the partner's return is still on-going, such audit shall be continued by the RDO who is examining the return of the General Professional Partnership. In this case, the further shall immediately desist from pursuing the examination of the partner's return and shall cause the immediate transmittal to the latter of all the returns and documents gathered in connection therewith upon receipt from the latter of a written request for its transmittal and photo copies of the LAs authorizing such simultaneous investigation. 7. The practice of issuing mission orders, correspondence letters, or any other similar orders for the purpose of audit examination and assessment of internal revenue taxes under this Order is strictly prohibited. 8. The Regional Director shall not issue LAs on tax returns that do not match the selection criteria outlined in this Order unless prior written approval is secured from the ACIR, Assessment Service. 9. Verification and processing of non-LA cases as enumerated in Section III.7.a of RMO No. 67-99 as well as cases below the audit threshold in Section II.1.b, II.1.c, II.2.b and II.2.c hereof shall be in accordance with the provisions of Revenue Memorandum Order (RMO) No. 33-99; as amended by RMO No. 70-99. 10. Verification of claims for tax refund on purely compensation income shall not be covered by LAs or TVNs. Since verification of these returns is limited to the checking of the mathematical accuracy of the figures reflected in the tax return, and/or the reconciliation of income taxes withheld at source under the Tax Reconciliation System for ITS RDOs, processing of claims for refund from purely compensation income earners may be handled by Document Processors or other similar personnel in the district office. 11. The provisions of foregoing Sections II.A.1.a and II.A.2.a notwithstanding, a Letter of Authority shall be issued in the following instances: a. Where after the verification of the estate tax return not covered by a Letter of Authority has commenced, it was determined that there was omission/misdeclaration of the properties of the decedent in the return or where after the verification of the donor's tax return has started, it was ascertained that there was omission of prior donations made during the same calendar year or that there was misdeclaration of the value of the properties declared in the donor's tax return, the Regional Director shall, upon recommendation of the concerned Revenue Officer favorably endorsed by the Revenue District Officer, issue a Letter of Authority for a more in-depth examination of the case. For the purpose of this Order, the terms specified below shall have the following meanings: a.1 Gross estate means the value of all real and personal properties as declared the estate tax return, a.2 Gross gift means the value of all real and personal properties declared the donor's tax return, and a.3 There is omission/misdeclaration when the value of the properties omitted or misdeclared are: (1) For real properties Lower than the zonal value in places where there are zonal values or actual fair market value in places where no zonal values are established. HDacIT (2) For personal properties Lower by more than 50% of the actual fair market value b. Where no return has been filed on properties transmitted by the decedent/donor, the Revenue District Officer shall prepare the corresponding return on the basis of the best evidence obtainable pursuant to Section 6(B) of the National Internal Revenue Code and recommend the issuance of a Letter of Authority/Tax Verification Notice, as the case may be 12. Taxpayers who have been examined for the prior year shall not be investigated for the immediately succeeding period by the same Revenue Officer and/or Group Supervisor except when there is only one Group Supervisor or at most four Revenue Officers in one district. 13. A Revenue Officer and/or Group Supervisor (GS) assigned to audit the returns for taxable year 2000 under the Short-Term Audit Program, shall not be assigned to conduct the package audit under the regular audit program. Likewise, different ROs/GS shall be assigned to audit the tax liabilities of the same taxpayers for taxable years 1998 and 1999. However, the RO/GS assigned in the regular audit/package audit may refer to the docket and report of investigation of the short-term audit to determine possible similar violations of the taxpayer for the year 1999. 14. LAs shall be issued only when the duplicate copy of the tax returns of the taxable year covered by the LA is attached thereto, except in the following cases: 14.1 Where the return of a taxpayer selected for audit cannot be located in the Revenue District Office or National Office, the LA shall be issued only when there is a certification to that effect by the Head, Revenue Data Center, or Head, Document Processing Section for taxpayers covered by ITS RDOs, and the Assistant Commissioner, Information Systems Operations Service for taxpayers covered by non-ITS RDOs; and 14.2 Where the basis for the issuance of the LA or tax case is the result of the Tax Mapping Program and the Third-Party Information Program and the concerned taxpayer was found to have failed to register with the Bureau and/or failed to file the applicable tax returns and pay the corresponding taxes thereon. 15. Only Revenue Officers-Assessment Group shall be authorized to conduct audit and investigation of tax cases, whether in a principal or assisting capacity. 16. The number of cases to be handled by each Revenue Officer involving old pending cases (cases due to prescribe within one year or less), tax refund/credit cases, cases under re-investigation, estate and donor's tax cases, and cases involving taxpayers retiring from business should not exceed twenty-percent (20%) of his total number of cases at any time during the year. This policy must be observed to ensure that these cases are given top priority. 17. No new tax case shall be assigned to a Revenue Officer even though his workload is below the minimum of twenty (20) cases until he has completed the audit and has reported the following cases pending with him within one (1) month from the effectivity of this Order: a. Prescribing cases/dockets b. Cases for re-investigation c. Cases involving claims for tax refund/credit assigned before April 30, 2000 d. Third-party information cases e. Cases of retiring taxpayers assigned before April 30, 2000 f. Cases held for more than twelve (12) months 18. Subject to the provisions of Section III.17 above, the initial workload for every Revenue Officer will be a minimum of twenty (20) cases and maximum of thirty (30) cases. In no case shall the number of cases handled by a Revenue Officer exceed thirty (30) cases at any one time during the year, subject to replenishment after the submission of the report of investigation/closure of each case. Each LA is counted as one case of each and every Revenue Officer assigned to the case, as discussed in detail in Section III.19 of this Order. All pending cases covered by LAs as of the effectivity of this Order shall be counted as part of the initial workload of the Revenue Officer. Cases or tax dockets returned to the Revenue Officer for re-investigation after the taxpayer was found to have filed a valid written protest on the reported deficiency tax assessment(s) shall not be counted as one case for the purpose of computing his pending workload. On the other hand, cases returned after review by the Chief, Assessment Division, the Regional Director and his assistant, or any head of office in the National Office, whenever applicable, for compliance with certain documentary audit requirements or for further conduct of audit to meet some procedural requirements shall be considered as an addition to his existing workload upon receipt of the returned case or docket. In all cases, these returned cases requiring compliance with certain review requirements shall be immediately acted upon and returned to the reviewing office within thirty (30) days from receipt of the docket. This shall be strictly observed in order to ensure the conduct of quality audit and that priority shall be given by the concerned Revenue Officer on these returned cases. In addition, cases returned to the Revenue Officer by the Legal Division for continuation of audit/investigation after rendering the desired resolution/opinion on certain legal issues shall likewise be considered as part of his pending inventory or workload. ACETID Where the Revenue Officer's workload at any given time exceeded the maximum allowable limit of thirty (30) cases upon his receipt of the returned cases after review, the excess thereon shall not be attributed to the Regional Director and/or Revenue District Officer as a violation of this Order. However, no new case shall be assigned to the concerned Revenue Officer until such time that his workload shall fall below the maximum 30-case limit. Likewise, a Revenue Officer shall not be assigned new cases where the number of his returned cases is more than five (5) at any one time, even if he has a pending inventory of less than twenty (30) cases. 19. One tax case shall be assigned to one Revenue Officer. For large and complex tax cases, more than one Revenue Officer in the same RDO may be assigned to conduct the audit. For LAs issued in the name of two or more Revenue Officers, each case shall be considered to have been assigned to all Revenue Officers whose names appear on the issued LA. For the purpose of determining the workload of each Revenue Officer, each case shall be counted as his individual accountability, notwithstanding the number of Revenue Officers stated in the LA. Thus, one case assigned to five (5) Revenue Officers shall be reported in the inventory of each of the five Revenue Officers. 20. Revenue Officers shall strictly follow the applicable audit procedures and techniques provided for under Revenue Audit Memorandum Order (RAMO) Nos. 2-95 as amended by RAMO Nos. 1-99 and 1-2000, and supplemented by RAMO No. 2-2000. They shall comply with the reporting requirements prescribed under Revenue Memorandum Order No. 53-98. The Group Supervisors, Revenue District Officers and Chiefs of the Assessment Divisions shall see to it that substantial compliance with these issuances are observed by all ROs to ensure quality audit of tax returns. All reports of investigation shall satisfy all the requisites of a quality report to meet the approval of any reviewing office, both internal and external on a regular review or performance audit basis. At anytime, a post audit evaluation may be conducted by the Committee on Audit Report Evaluation ( Revalida Committee ) in the National Office pursuant to RMO No. 5-89, as amended by RMO Nos. 34-95 and 42-95. TIaCcD 21. The Revenue Officer shall utilize data obtained from Third Party Information (TPI) sources or any record available in the Bureau that may provide valuable basis for the determination of the taxpayer's true tax liabilities prior to the finalization of the audit. The concerned Revenue District Officer, the Chief Assessment Division and Regional Director shall ensure that this procedure is strictly observed prior to case closure and approval of the corresponding reports of investigation. 22. Audits of all cases covered by LAs shall be completed and the corresponding reports thereon shall be submitted by the Revenue Officer within the following prescribed number of days from the issuance of LAs: Case Classification No. of Days a Very Large 120 b. Large 120 c. Medium 90 d. Small 90 23. In case the report cannot be rendered within the prescribed period due to constraints attributable to the taxpayer, the Revenue Officer may request for the revalidation of the LA by preparing a progress report on the case duly noted by the Group Supervisor and approved by the Revenue District Officer. The Revenue District Officer shall transmit the entire docket of the case to the Regional Director for revalidation of the LA. The previously issued LA shall be stamped "Revalidated on Land __________" shall be signed by the Regional Director. 24. Reports of investigation on closed and terminated cases wherein the deficiency taxes per investigation were paid at the RDO level shall be prepared and submitted to the Chief, Assessment Division for appropriate review within ten (10) days from the date of taxpayers' payment of such deficiency tax assessments. Reports of investigation/verification on cases for assessment shall be submitted to the Assessment Division for review at least six (6) months before the prescription date of the cases. 25. Revenue Officer's Audit Reports (BIR Forms 0500 series as revised for all RDOs) shall be prepared for all reports of verification or audit, whether or not covered by Letters of Authority. 26. The Assessment Division shall review all dockets covered by LAs and TVNs prior to the issuance of a preliminary/final assessment notice, termination letter, confirmation letter, tax credit certificate or refund check. In case the reviewers in the Assessment Division discover certain additional deficiency taxes as a result of their audit review or find that the taxpayers are excessively assessed, the docket of the case shall be returned to the originating investigation office for appropriate action. The reviewing officer shall, in no case, be allowed to make any adjustments to the audit reports submitted by the investigating offices. 27. The RDOs shall transmit to the Assessment Division the duplicate copies of all 1999 tax returns not selected for audit under Section II.B hereof. These transmitted returns shall be the basis for audit selection by the Assessment Division under the Office Audit Program. Likewise, all 1998 and prior years' duplicate tax returns not currently under audit except estate and donor's tax returns and those involving claims for tax credit/refund and which are not part of the Audit Program for 2000 shall be transmitted to the Assessment Division in the Regional Office for safekeeping. All duplicate copies of 1997, 1998 and 1999 tax returns shall be transmitted to the Assessment Division not later than September 15, 2000. In case the RDO cannot audit all the returns previously selected for audit, the unaudited returns shall be transmitted to the Assessment Division provided prior written approval is secured from the Assistant Commissioner, Assessment Service, thru the concerned Regional Director. These transmitted returns may, in turn, be selected for audit by the Assessment Division as long as the guidelines, policies and procedures set forth in the Office Audit Program are observed. 28. The preparation, approval and release of Assessment Notices and Demand Letters as well as the preparation of BIR Form 40.00 shall be in accordance with the provisions of RMO No. 37-94, as amended by RMO No. 36-99. All protests on assessment shall be evaluated and acted upon in accordance with the provisions of Revenue Regulations Nos. 12-85 and 12-99. AcaEDC 29. The Regional Director shall maintain an LA Register for all LAs issued by him. All issuances, revalidations, cancellations, case closures, assessments and other matters in relation to LAs should be entered in the LA Register. Entries in the LA register must be complete and updated at all times. IV. 2000 AUDIT WORK PLAN The 2000 Audit Work Plan shall run from the effectivity date of this Order until such time that a new Audit Program is approved. In order to maximize the capability and full potentials of each Revenue Officer in the district office, the Revenue District Officer shall set the number of audit cases that must be completed by each Revenue Officer within the audit period consistent with the policies and guidelines set in this Order. In estimating his audit plan, the Revenue District Officer must consider his pending inventory as of July 31, 2000, the number of Revenue Officers-Assessment in his district, and the audit capability of each Revenue Officer to ensure quality audit of tax returns. However, before the commencement of audit, each Revenue District Officer, thru the Regional Director shall secure written approval of his audit plan from the ACIR, Assessment Service. Depending on the efficiency of the individual Revenue Officer, the amount of inventory on hand at any time may be equal to or less than the maximum of thirty (30) cases. The Revenue District Officers and the Regional Directors must perform ongoing workload review to ensure that Revenue Officers are effectively managing their inventories and the time spent in the conduct of audit. The 2000 Audit Work Plan counts the accomplishment of cases/dockets with Letters of Authority closed during the audit period. Since there is only one audit plan in effect at any given time, audit closures shall be counted towards the completion of the audit plan for the year in which they are closed and not when the case was created. For example, if a case is started in August 1999 (during the 1999 audit program) and is closed in October 2000 (during the 2000 audit program), the closure is counted for the 2000 audit program and not for 1999. In addition to adherence to the policies and guidelines set forth in this Order, the actual accomplishments of the concerned Revenue Officers, Group Supervisors and Revenue District Officers in relation to the approved audit plan, shall have significant weight in the evaluation of their performance and in determining their place of assignment. DHACES V. DEVIATION FROM POLICY Circumstances may occur during the current audit year that may affect the accomplishment of the approved audit plan. Such circumstances include the increase or decrease of assessment Revenue Officers assigned to the Revenue District Office, existence of special project(s) initiated/prescribed by the National Office which necessitate diversion of assessment Revenue Officers from assessment work, or suspension of audit and investigation to give way for the conduct of other priority activities. Since this Order cannot cover all possible situations in Revenue District Offices throughout the country, deviation from these policies, may be allowed only upon prior written authorization from the ACIR, Assessment Service as recommended by the Regional Director. However, deviations from this Order other than those affecting the work plan shall require written authorization from the Commissioner. In these cases, the Revenue District Officers, thru the Regional Directors, shall submit a written request to the ACIR, Assessment Service for any deviation from the policies and guidelines set in this Order, including the upward or downward revision to the 2000 Audit Work Plan affecting their respective RDOs. No revisions in the RDO's audit work plan shall be effected by the Regional Directors and the Revenue District Officers without first securing prior written approval from the ACIR, Assessment Service. VI. REPORTING REQUIREMENTS In order that uniform information will be submitted by the Regional Directors, Revenue District Officers, Chiefs of Assessment Divisions in the Regional Offices, Group Supervisors and Revenue Officers in the district office, all pertinent reports prescribed under Revenue Memorandum Order No 67-99 shall be accomplished by all concerned. For the Monthly List of Letters of Authority Issued and Monthly Report of Closed Cases/Dockets (BIR Form 0603), the revised format per Annexes "B" and "C", respectively, shall be accomplished. VII. VIOLATIONS Any unauthorized deviation from the foregoing policies and instructions and/or violation of any provision of this Order will result in the imposition of disciplinary action to the concerned revenue officers and officials. For this purpose, any violation and/or unauthorized violation hereof shall be referred by the concerned revenue official, thru the ACIR, Assessment Service, to the Inspection Service for appropriate investigation. In this regard, the ACIR, Assessment Service may recommend to the Commissioner the relief, reassignment, or transfer of any revenue official violating any of the provisions and instructions prescribed in this Order the Regional Director may also recommend to the Commissioner the replacement of Revenue District Officers for non-compliance with this Order. VIII. REPEALING CLAUSE Section III.3 of Revenue Memorandum Order (RMO) No. 19-2000 and RMO Nos. 67-99, 36-99, 33-99, 12-98, 11-98, 12-96, 29-95, 17-95, 34-94, 6-94, 9-90, 12-89, 4-89, 4-82, 3-82, 14-81 as well as all other issuances inconsistent herewith are hereby modified or repealed accordingly. IX. EFFECTIVITY This Order shall take effect immediately. CIDTcH (SGD.) DAKILA B. FONACIER Commissioner of Internal Revenue ANNEX A List of Taxpayers Selected for Audit ANNEX B Monthly List of Letters of Authority Issued ANNEX C Monthly Report of Closed Cases/Dockets