March 31, 2011
Thursday

(SitNews) - In a report made public this week, several significant deficiencies were found in the State of Alaska's ability to audit oil company tax returns.  On March 29th, the Legislative Budget and Audit Committee released the results of its “Single Audit for the State of Alaska” for the fiscal year that ended June 30, 2010. In that report the Legislature’s auditor found that the Tax Division was deficient in several areas when it came to overseeing the tax returns of the companies that pay severance taxes under ACES to the state.

The audit found “Insufficient internal controls over the auditing of severance tax revenue may result in the loss of revenue and increase the risk that tax revenue assessments will not hold upon appeal.”  The audit highlighted problems in the Department of Revenue such as incomplete reports, an inadequate system for audit plans and procedures, lack of adequate supervision and high turnover among auditors.

In other hearings this year the Department of Revenue has conceded that it is running years behind in completing audits.  The Department has completed audits of returns filed under the Petroleum Profits Tax, but has not finished an audit of a single return filed under ACES, which has been in effect since 2007.

“This is unacceptable,” said Senator Hollis French (Democrat, Senate District M).  “How can we change the tax rules before we have even audited one return? We should be focusing on beefing up our ability to conduct audits before we make changes that could cost the state billions.”

In response to the audit, the Department of Revenue agreed with most of the findings, saying the problems within the department are a result of understaffing, high turnover and lack of an automated tax processing system.

On the Web:

To read the relevant portion of the audit:
 http://aksenate.org/27thpress/DOR_Section_Legislative_Audit.pdf

Source of News:

Office of Senator Hollis French
http://www.akdemocrats.org

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