Minnesota Office of the Legislative Auditor
Financial Audit Division

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Report Summary
Department of Revenue

Programs Selected for
Fiscal Year 1996 Statewide Audit

 

Public Release Date: April 18, 1997 No. 97-21

Background Information

The Department of Revenue is responsible for managing the state's tax systems. Minnesota relies on the voluntary compliance of its citizens with those tax laws. The department works to win compliance through a balanced interaction of efforts that focuses on developing sound tax policies, educating citizens, providing expedient customer service, and providing administrative and enforcement services in the areas of tax collection and assessment. The department collected more than $9.6 billion in tax dollars during fiscal year 1996. In fiscal year 1996, the department operated under the direction of acting commissioner Mr. Matt Smith. On July 1, 1996, the governor appointed Mr. James Girard as the commissioner.

Selected Audit Areas and Conclusions

Our audit scope was limited to those areas material to the state of Minnesota's Comprehensive Annual Financial Report for the year ended June 30, 1996. Our primary objective was to render an opinion on the state of Minnesota's financial statements. 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. The Department of Revenue's financial activity for fiscal year 1996 was fairly presented in the state of Minnesota's Comprehensive Annual Financial Report for the year ended June 30, 1996. In addition, the department had recorded its tax revenues, refunds, and local government aids on the Minnesota Accounting and Procurement System (MAPS) with reasonable accuracy. We are concerned that the department has not taken a more aggressive role in verifying the integrity of withholding tax information obtained from employers to the wage detail information on file with the department. In addition, the department needs to improve certain processing controls over estimated corporate income taxes. The department has not resolved certain system weaknesses affecting data integrity and inadequate audit trails in its sales tax system.

We found the department had complied, in all material respects, with most finance related legal provisions addressed in the scope of our audit. However, the department did not assess late payment charges on all tax types as required in Minn. Stat. Section 289A.26, Subd. 4, Section 289A.60, Subd. 1, and Section 270.75. The department also did not assess penalties against taxpayers that paid by check when Minn. Stat. Section 270.78 requires payment under the EFT method. In addition, controls over Electronic Funds Transfers (EFT) in place under a contract for services with a local bank may not prevent the occurrence of an unauthorized withdrawal.

 

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