IBJNews

Auditors: Tech issues, worker rush led to state tax errors

Back to TopCommentsE-mailPrintBookmark and Share

A patchwork system of outdated technology and a work culture that sacrificed accuracy for speed were at the heart of $526 million in tax errors, according to an independent audit of Indiana's Department of Revenue released Monday.

Auditors for the international accounting firm Deloitte also discovered additional errors with 55,000 taxpayer accounts and 2,880 tax refund requests that were never processed, but said the errors were "miniscule" compared to the larger errors which spurred lawmakers to seek an audit in the first place.

The audit results were released at a hearing Monday afternoon as lawmakers prepare to write their next biennial budget next year. State budget forecasters said Indiana is expected to modestly improve its tax collections over the next two years.

Legislative Republicans have already said they would like to restore some service cuts made in the last few years, and they will also weigh a proposal from incoming Gov. Mike Pence to cut the state income tax by 10 percent. Pence said Monday's estimates bolster his case for a tax cut. But Republican leaders, most notably Republican House Speaker Brian Bosma, have expressed doubts about Pence's proposal since October.

The Deloitte audit caps a year of questions about the state's ability to accurately gauge what it's taking in and how much it has to spend. Auditors Kathie Schwerdtfeger and Bari Faudree described Monday a system in which speed trumped accuracy.

"As indicated in the risk assessment, the (revenue department) seemed much more focused on efficiency of tax processing than they were on ensuring a strong system of control and accountability over taxpayer funds," Schwerdtfeger wrote in the report.

Faudree and Schwerdtfeger also pointed out that the state's collage of multiple filing and processing systems led many workers to create workarounds to maintain accuracy and consistency, a problem that could easily be fixed by transferring to a single integrated filing system as other states have.

Workarounds, Schwerdtfeger said, increase "the risk of errors being made and makes processing of transactions less efficient than they otherwise should be."

The auditors consistently praised the revenue department management put in place in May for beginning to implement changes.

"It's a cultural shift more than anything else, so we have begun adding much more focus in terms of the quality and the accuracy," said Revenue Commissioner Mike Alley after the audit hearing Monday afternoon.

Alley said he had considered buying an integrated filing system, but estimated off-the-cuff that it could cost the state $50 million and could be a while before it was in use.

Deloitte's audit results come roughly a year after Gov. Mitch Daniels disclosed the first major error: the misplacement of $320 million in corporate tax collections. The found corporate tax money was used to pad the state's coffers and cover the cost of full-day kindergarten statewide for one year.

Democrats on the budget State Budget Committee first called for an independent audit after the corporate tax collection errors were discovered December 2011, but Republicans the panel voted twice against the idea. But Democrats and Republicans agreed on an independent audit after the second major error was discovered in April — dealing with $206 million owed to Indiana's counties.

A month later, Gov. Mitch Daniels replaced three top officials at the revenue department with a new team, led by Alley. House Ways and Means Chairman Tim Brown was the only lawmaker to ask the auditors a question about the findings, the panel's Democrats had no questions for the pair Monday.

ADVERTISEMENT

  • I don't think so
    Seriously, is this a joke? $526 million misplaced because of outdated technology? Were millions misplaced in the past, before the technology they're using was available? No. And errors with 55,000 taxpayer accounts and 2,880 tax refund requests that were never processed? Because of a "work culture"? I think not, unless you mean a work culture that includes the fact that (most) employees just don't care anymore, all the way to the top dog in government. I think some factors that went into these unacceptable errors are employee ineptness, laziness, inability, indifference, inaccountability, being underqualified, passing the buck, etc. You'd have to be working on the "inside" to really know this.

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
 
Subscribe to IBJ
  1. I am not by any means judging whether this is a good or bad project. It's pretty simple, the developers are not showing a hardship or need for this economic incentive. It is a vacant field, the easiest for development, and the developer already has the money to invest $26 million for construction. If they can afford that, they can afford to pay property taxes just like the rest of the residents do. As well, an average of $15/hour is an absolute joke in terms of economic development. Get in high paying jobs and maybe there's a different story. But that's the problem with this ask, it is speculative and users are just not known.

  2. Shouldn't this be a museum

  3. I don't have a problem with higher taxes, since it is obvious that our city is not adequately funded. And Ballard doesn't want to admit it, but he has increased taxes indirectly by 1) selling assets and spending the money, 2) letting now private entities increase user fees which were previously capped, 3) by spending reserves, and 4) by heavy dependence on TIFs. At the end, these are all indirect tax increases since someone will eventually have to pay for them. It's mathematics. You put property tax caps ("tax cut"), but you don't cut expenditures (justifiably so), so you increase taxes indirectly.

  4. Marijuana is the safest natural drug grown. Addiction is never physical. Marijuana health benefits are far more reaching then synthesized drugs. Abbott, Lilly, and the thousands of others create poisons and label them as medication. There is no current manufactured drug on the market that does not pose immediate and long term threat to the human anatomy. Certainly the potency of marijuana has increased by hybrids and growing techniques. However, Alcohol has been proven to destroy more families, relationships, cause more deaths and injuries in addition to the damage done to the body. Many confrontations such as domestic violence and other crimes can be attributed to alcohol. The criminal activities and injustices that surround marijuana exists because it is illegal in much of the world. If legalized throughout the world you would see a dramatic decrease in such activities and a savings to many countries for legal prosecutions, incarceration etc in regards to marijuana. It indeed can create wealth for the government by collecting taxes, creating jobs, etc.... I personally do not partake. I do hope it is legalized throughout the world.

  5. Build the resevoir. If built this will provide jobs and a reason to visit Anderson. The city needs to do something to differentiate itself from other cities in the area. Kudos to people with vision that are backing this project.

ADVERTISEMENT