Minnesota Office of the Legislative Auditor
Financial Audit Division

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Report Summary
Department of Revenue

Financial Audit

For the Period July 1, 1994, through June 30, 1995

 

Public Release Date: May 3, 1996 No. 96-21

Background Information

The Department of Revenue is responsible for providing administrative and enforcement services in the areas of tax collection and assessment. The department serves individuals and organizations required to pay taxes to the state and local governments. The department is undergoing a re-engineering process that started in fiscal year 1990. It placed a renewed emphasis on educating taxpayers on the tax requirements through various methods of taxpayer services and communications.

Audit Objectives

The primary objective of our audit was to render an opinion on the State of Minnesota's financial statements. These financial statements are included in the State of Minnesota's Comprehensive Annual Financial Reports for fiscal year 1995. Our objective included determining whether the Department of Revenue's financial activity was presented fairly in the State of Minnesota's financial statements including its financial position, results of operations, and changes in cash flows in conformity with generally accepted accounting principles.

As part of our work, we were required to gain an understanding of the internal control structure and ascertain whether the Department of Revenue complied with laws and regulations that may have a material effect on its financial statements. During our audit, we gained an understanding of the controls over the revenue and expenditure areas addressed in Table 1-1.

Conclusions

The Department of Revenue's financial activity for fiscal year 1995 was fairly presented in the State of Minnesota's Comprehensive Annual Financial Report for the year ended June 30, 1995, which includes our audit opinion dated December 1, 1995. The department continues to work towards improving the verification of withholding taxes through its participation in an ongoing federal project. We found the department in compliance with most financial related statutes addressed in the scope of our audit. However, the department does not enforce the requirements of Minn. Stat. Section 289A.09, Subd. 2 (d) and (e), requiring employers to submit wage detail with their annual withholding summary. The department did not comply with Minn. Stat. Section 138.17 pertaining to record retention. Additionally, the department did not resolve system weaknesses affecting data integrity and adequate audit trails. The department did not assess late payment charges on all tax types as required in Minn. Stat. Section 289A.60, Subd. 1 and Section 270.75. The department also did not assess penalties against taxpayers that submit paper returns when the statutes require filing under the EFT method (Minn. Stat. Section 270.78).

 

Office of the Legislative Auditor ♦ Room 140, 658 Cedar St., St. Paul, MN 55155