Department of Revenue financial-compliance audit for the two fiscal years ended ..

43 Pages·1996·0.73 MB·English

by  Montana.Legislature.Legislative Audit Division

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Financial-Compliance Audits
Legislative Audit
Financial-compliance audits are conducted by the Legislative
Committee
Audit Division to determine whether an agency’s financial
Representatives operations are properly conducted, the financial reports are
Randy Brodehl, chair presented fairly, and the agency has complied with applicable laws
[email protected] and regulations. In performing the audit work, the audit staff uses
Virginia Court standards set forth by the American Institute of Certified Public
[email protected] Accountants and the United States Government Accountability
Mike Cuffe Office. Financial-compliance audit staff members hold degrees
[email protected] with an emphasis in accounting. Most staff members hold
Mary McNally Certified Public Accountant (CPA) licenses.
[email protected]
Ryan Osmundson Government Auditing Standards, the Single Audit Act
[email protected] Amendments of 1996 and OMB Circular A-133 require the
J.P. Pomnichowski auditor to issue certain financial, internal control, and compliance
[email protected]
reports. This individual agency audit report is not intended to
comply with these reporting requirements and is therefore
Senators
not intended for distribution to federal grantor agencies. The
Dee Brown
Legislative Audit Division issues a statewide biennial Single Audit
[email protected]
Report which complies with the above reporting requirements.
Taylor Brown
The Single Audit Report for the two fiscal years ended June 30,
[email protected]
2013, was issued March 28, 2014. The Single Audit Report for the
Greg Jergeson, Vice Chair
two fiscal years ended June 30, 2015, will be issued by March 31,
[email protected]
2016. Copies of the Single Audit Report can be obtained by
Sue Malek
contacting:
[email protected]
Fredrick (Eric) Moore
Single Audit Coordinator Legislative Audit Division
[email protected]
Office of Budget and Program Planning Room 160, State Capitol
Mitch Tropila
Room 277, State Capitol P.O. Box 201705
[email protected]
P.O. Box 200802 Helena, MT 59620-1705
Helena, MT 59620-0802
Members serve until a Audit Staff
member’s legislative term David Brammer Jeane Carstensen-Garrett
of office ends or until a Miki Cestnik Mary Currin
successor is appointed, Jennifer Erdahl Aaron Funk
Brent Layman Katie Majerus
whichever occurs first.
Alexa O’Dell Paul J. O’Loughlin
§5-13-202(2), MCA Karen E. Simpson Shandell VanDonsel
Fraud Hotline
(Statewide) Reports can be found in electronic format at:
1-800-222-4446
http://leg.mt.gov/audit
(in Helena)
444-4446
[email protected]
LEGISLATIVE AUDIT DIVISION

Tori Hunthausen, Legislative Auditor Deputy Legislative Auditors:
Deborah F. Butler, Legal Counsel Cindy Jorgenson
Angus Maciver
October 2014
The Legislative Audit Committee
of the Montana State Legislature:
This is our financial-compliance audit report on the Department of Revenue
(department) for the two fiscal years ended June 30, 2014.
During the course of the audit we analyzed the financial schedules contained in this
report, reviewed the financial records, and tested compliance with selected state laws
and regulations. The work resulted in four recommendations related to compliance
with state laws regarding coal gross proceeds and contractor’s gross receipts taxes,
access to the department’s tax system, and charging fees commensurate with costs in
the department’s internal service fund.
This report also includes the department’s financial schedules. The financial schedule
presentation is intended to provide the legislative body with information necessary
for decision-making purposes; it is not intended to conform to the financial reporting
requirements established in generally accepted accounting principles (GAAP). The
financial schedule presentation has not changed, however audit reporting standards
have changed. Auditing standards require us to clearly communicate that the financial
schedule presentation is not intended to, and does not, conform to GAAP reporting
requirements. The Independent Auditor’s Report on page A-1 contains language to this
effect in the section titled “Adverse Opinions on U.S. Generally Accepted Accounting
Principles.” This section does not imply the amounts presented on the department’s
financial schedules are not fairly stated. Page A-1 also communicates the extent to
which the user can rely on the information contained in the financial schedules in the
section titled “Unmodified Opinions on Regulatory Basis of Accounting.”
The department’s written response to the audit recommendations is included in the
audit report on page B-1. We thank the director and his staff for their cooperation and
assistance throughout the audit.
Respectfully submitted,
/s/ Tori Hunthausen
Tori Hunthausen, CPA
Legislative Auditor
Room 160 • State Capitol Building • PO Box 201705 • Helena, MT • 59620-1705
Phone [phone] • FAX [phone] • E-Mail [email protected]

i
Table of Contents
Figures and Tables .....................................................................................................................ii
Appointed and Administrative Officials ..................................................................................iii
Report Summary ...................................................................................................................S-1
CHAPTER I – INTRODUCTION ��������������������������������������������������������������������������������������������������������������1
Introduction ..............................................................................................................................1
Department Organization and Functions .................................................................................1
Advisory Councils, Boards, and Memberships ..........................................................................4
Prior Audit Recommendations ..................................................................................................4
CHAPTER II – FINDINGS AND RECOMMENDATIONS ��������������������������������������������������������������������5
GenTax Access ..................................................................................................................5
Coal Gross Proceeds Tax ...................................................................................................6
Contractor’s Gross Receipts Tax ........................................................................................7
Internal Service Fund ........................................................................................................8
INDEPENDENT AUDITOR’S REPORT AND DEPARTMENT FINANCIAL SCHEDULES
Independent Auditor’s Report ...............................................................................................A-1
Schedule of Changes in Fund Equity & Property Held in Trust
for the Fiscal Year Ended June 30, 2014 ................................................................................A-3
Schedule of Changes in Fund Equity & Property Held in Trust
for the Fiscal Year Ended June 30, 2013 ................................................................................A-4
Schedule of Total Revenues & Transfers-In
for the Fiscal Year Ended June 30, 2014 ................................................................................A-5
Schedule of Total Revenues & Transfers-In
for the Fiscal Year Ended June 30, 2013 ................................................................................A-6
Schedule of Total Expenditures & Transfers-Out
for the Fiscal Year Ended June 30, 2014 ................................................................................A-7
Schedule of Total Expenditures & Transfers-Out
for the Fiscal Year Ended June 30, 2013 ................................................................................A-8
Notes to the Financial Schedules ..........................................................................................A-9
DEPARTMENT RESPONSE
Department of Revenue ........................................................................................................B-1
14-14
ii Montana Legislative Audit Division
Figures and Tables
Figures
Figure 1 Taxes by Tax Type..................................................................................................................2
Tables
Table 1 Fiscal Years 2013 and 2014 Internal Service Fund Activity ....................................................9
iii
Appointed and Administrative Officials
Appointed and Mike Kadas, Director
Administrative
Officials Alan Peura, Deputy Director
Dan Whyte, Chief Legal Counsel
Rich Bechtel, Director, Taxpayer Assistance and Public Outreach
Charles Geary, Director, Human Resources
Ed Caplis, Director, Tax Policy and Research
Gene Walborn, Administrator, Business and Income Tax Division
Steve Austin, Administrator, Citizen Services and Resource Management
Division
Tim Bottenfield, Director, Information Technology
Shauna Helfert, Administrator, Liquor Control Division
Cynthia Monteau Moore, Administrator, Property Assessment Division
For additional information concerning the Department of Revenue, contact:
Steve Austin
125 North Roberts
P.O. Box 5805
Helena, MT 59604-5805
[phone]
e-mail: [email protected]
14-14

S-1
M L a d
ontana egisLative udit ivision
F -c a
inancial ompliance udit
Department of Revenue
For the Two Fiscal Years Ended June 30, 2014
october 2014 14-14 report Summary
The Montana Department of Revenue administers state tax laws, enforcing
regulations for more than 30 state taxes and fees. During the audit period,
the department collected approximately $1.9 billion in taxes in each fiscal
year. Of this, over $216 million was distributed to local governments in fiscal
year 2013, and $228 million in fiscal year 2014.
Context
In addition to tax administration, the GenTax was not restricted as required by
Department of Revenue (department) oversees department policy.
liquor distribution and licensing operations in
the state and administers the one-stop licensing Finally, the internal service fund used to
program and bad debt collections on behalf of administer the bad debt collection program
state agencies. The department also manages charged fees that generated revenue collections
unclaimed property, returning property to its greater than the program’s expenditures. This
rightful owners. resulted in excess fund equity balance in both
fiscal years 2013 and 2014.
Results
The department administers the coal gross
proceeds and contractor’s gross receipts taxes.
Both of these tax types are prescribed in law.
Recommendation Concurrence
Our audit determined interest and penalties
are not assessed as required by state law on
Concur 4
contractor’s gross receipts. We also noted the
Partially Concur 0
form prescribed to report coal gross proceeds
is not detailed enough to demonstrate the
Do Not Concur 0
state received its required allocation.
Source: Agency audit response included in
final report.
The taxes collected by the department are
primarily administered through the use of a
computer system referred to as GenTax. Our
audit procedures determined that access to
For a complete copy of the report (14-14) or for further information, contact the
Legislative Audit Division at 406-444-3122; e-mail to lad@mt�gov; or check the web site at
http://leg�mt�gov/audit
Report Fraud, Waste, and Abuse to the Legislative Auditor’s FRAUD HOTLINE
Call toll-free 1-800-222-4446, or e-mail ladhotline@mt�gov�