Hoosier Economy Audit Watch: High risk for state mismanagement

Audit Watch: High risk for state mismanagement


The independent audit is expected to reveal a number of problems in the way the state handles money that lead up to the three recent cases of lost and discovered taxpayer dollars totaling $527M. The audit is being conducted by the private firm Deloitte & Touche LLP. The risk assessment is the first step in the process which is expected to wrap up with a final report by mid-December.

Deloitte presented their risk assessment to the State Budget Committee on Monday, Sept. 10, citing 17 of 18 business processes at Dept. of Revenue (DOR) as high or medium risk.

Read the risk assessment report>>

Deloitte also pointed to an “organizational structure” that may not be designed to properly support DOR strategies and goals, more specifically noting inadequately-defined responsibilities, key positions within the structure left vacant or sporadically filled and employees lacking the proper training or access to training plans to acquire needed skills. What’s more, “inflexible and antiquated” tax-processing applications contributed to the DOR’s inability to meet its obligations or pivot and adapt to “the changing environment in which the organization operates.”

These  report indicating potential insufficient levels of staffing and outdated applications comes on the heels of two consecutive departmental reversions totaling more than $8 million. In FY10-11, the DOR reverted more than $6.9 million or 12.9 percent of the agency budget and nearly $1.5 million in FY11-12.

From the report:  As a result of the risk identification process and ranking procedures performed for DOR specific risks and inherent risks, 18 key business processes were identified to be the Organization’s performance audit universe. Of these 18 processes, 9 have been identified as high risk, 8 have been identified as medium risk, and 1 has been identified as low risk. The audit plan and procedures focus testing efforts on the 17 areas of high risk and medium risk as identified below:

• High Risk (In alphabetical order)
– Manage Financial Accounting and Reporting
– Manage Organizational Design
– Manage Information Technology
– Manage Revenue Accounting and Distributions
– Perform Collection Activities (Past-Due Items)
– Perform Internal Audit
– Perform Tax Administration and Analysis
– Plan for and Manage the Organization
– Report Administration

• Medium Risk (In alphabetical order)
– Issue Refunds or Credits
– Legal
– Perform Billing Activities
– Perform Enforcement Activities
– Perform Front-End Processing
– Process Receipts (Post Payments to Taxpayer Account)
– Process Tax Return Data
– Taxpayer Registration and Education