Audits and State Budget and State Government and Taxes and Government & Economic Development and Government

Audit of $526M in state tax errors could take months

July 25, 2012

It could be months before there are definitive answers on how Indiana lost track of a total of $526 million in taxes, with questions possibly pending well past the November election.

Representatives of the international account firm Deloitte told members of the state budget committee Wednesday they are still developing a plan for what would be audited, saying it could take through the end of August to complete the task.

Gov. Mitch Daniels announced last December that the state lost track of $320 million in corporate tax collections from 2007-2011. And in April, State Budget Director Adam Horst said Indiana owed $206 million to its counties. Three top Indiana revenue officials resigned following the revelations.

The broad strokes of the problem — in both cases, state workers did not properly enter changes in the state's tax collection system — are well-known following an internal review led by Horst. But specifics, such as why the $320 million mistake was not discovered for four years, are still unanswered.

Bari Faudree and Kathi Schwerdtfeger told lawmakers Wednesday that they have been working with other Deloitte auditors over the last few weeks to determine what should be reviewed. Once the assessment is completed, Schwerdtfeger said Deloitte will deliver a "detailed audit plan."

"This is not simply an audit issue, this is not simply an accounting issue, this is hitting a whole variety of other areas," Faudree said of Deloitte's preliminary work.

Asked by Budget Committee Chairman Jeff Espich if she expected the state to adopt their recommendations, Schwerdtfeger said "absolutely."

She said the audit could take "months" after the plan is approved by the panel, but said it was hard to give a specific timeline.

The timing of the audit has already factored into the governor's race. Democratic candidate John Gregg has asked for an expedited audit, while his running mate, state Senate Democratic Leader Vi Simpson, has said the focus on the revenue department is too narrow.

It's unlikely the audit results will be available before the Nov. 6 general election.

While Democrats called repeatedly for an independent audit after the first mistake was discovered in December, it was not until the second mistake was discovered that Republicans signed off on the idea.

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