s 1 352.44 L72DR 1998 i. Legislative Audit Division State ofMontana Report to the Legislature Financial-Compliance Audit April 1999 For the Two Fiscal Years Ended June 30, 1998 STATE DOCUMENTS COLLFCTION f^J 1 1 19- MONTANA STATE LIBk^Rv Department of Revenue 1515 E. 6th AV£ WELENA, MONTANA 5^o20 This report contains six recommendations for improvingthe department's compliancewith state law and policy and a disclosure issue relating to Unemployment Insurance cash transfers. The recommendations relateto: > Coal severance tax and accommodation tax distributions. •• Unemployment Insurance accruals. » Expenditure abatements. » Operating transfers. T * > i i ^j L %Ji \ p'Sr; ;. Direct comments/inquiries to: Legislative Audit Division Room 135, State Capitol PO Box 201705 MT 98-15 Helena 59620-1705 Help eliminate fraud,waste, and abuse in state government. Call the Fraud Hotline at 1-800-222-4446 statewide or 444-4446 in Helena. -Pi^|°,'^T*NASTATELIBRARY III 3 0864 byii 4545'4 FINANCIAL-COMPLIANCE AUDITS Financial-compliance audits are conducted bythe Legislative Audit Division to determine ifan agency's financial operations are properly conducted, the financial reports are presented fairly, and the agency has compliedwith applicable laws and regulations, hi performingthe audit work, the audit staffuses standards set forth by the American Institute ofCertified Public Accoimtants andthe United States General Accounting Office. Financial-compliance audit staffmembers holddegrees with anemphasis in accounting. Most staffmembers hold Certified Public Accountant (CPA) cer- tificates. 0MB Government Auditing Standards, the SingleAuditActAmendments of 1996 and Circular A-133 requirethe auditor to issue certain financial, internal control, andcompliance reports. This individual agency audit report is not mtended to comply with these reporting requirements and is therefore notintended fordistribution to federal grantor agencies. The Legislative Audit Division issues a statewide biennial Single Audit Reportwhich complies with the above reporting requirements. The Single Audit Report for the tvvo fiscal years ended June 30, 1999, will be issued by March 31, 2000. Copies ofthe Single Audit Report, when available, can be obtained by contactmg; Single Audit Coordinator Legislative Audit Division Office ofBudget and Program Plaiming Room 135, State Capitol State Capitol PO Box 201705 Helena MT 59620 Helena MT 59620- 705 1 Phone (406) 444-3616 MEMBERS OF THE LEGISLA IVE AUDIT COMMITTEE 1 LEGISLATIVE AUDIT DIVISION Scott A. Seacat, Legislative Auditor Deputy Legislative Auditors: John W. Northey, Legal Counsel Jim Pellegrini, Performance Audit Tori Hunthausen. IT & Operations Manager James Gillett, Financial-Compliance Audit April 1999 The Legislative Audit Committee ofthe Montana State Legislature: This IS our financial-compliance audit report on the Department ofRe\enue forthe two fiscal years ending June 30, 1998. We issued a qualified opmion on the financial schedules ofthe department, bicluded in this report are six recommendations concerning coal severance tax and accommodation tax distnbutions. unemployment insurance accruals, expendittire abatements, and operating transfers. This report also includes a disclosure issue related to unemployment insurance cash transfers. The department's response is located at the end ofthe report We thank the director and stafffor their assistance and cooperation throughout the audit. Respectfully submitted. ^ Scott A. Seacat Legislative Auditor Room 135. State Capitol Building, PO Box 201705 Helena MT 59620-1705 Phone (406) 444-3122 FAX (406) 444-9784 E-Mail [email protected] Legislative Audit Division Financial-Compliance Audit For the Two Fiscal Years Ended June 30, 1998 Department of Revenue Members ofthe audit staffinvolved in this audit were Laune Barrett, Jeane Carstensen-Garrett. Laune Evans. Wa>Tie Kedish, Jun Manning, Susan S. McEachem, Paul J O'Loughlin, Lorr\ Pamman, and Jennifer Solem. 111 Table of Contents Appointed and Administrative Officials Page iii Report Summary Page v Introduction Introduction Page 1 Department Organization and Functions Page 1 Divisions Page 2 Prior Audit PriorAudit Recommendations Page 5 Recommendations Intangible Propert>' Page 5 Findings and Compliance Page 7 Recommendations Permanent Coal Severance Tax Trust Investment Earnings Page 7 Distribution ofAccommodations Tax Page 8 State Accounting Policy Page 9 Unemployment Insurance Revenue Accruals Page 9 Expenditure Abatement Page 1 Operating Transfers Page 1 UnemplovTnent Insurance Page 1 Coal Severance Tax Transfers Page 1 Disclosure Issue UnemploNinent Insurance Cash Transfers Page 13 Independent Auditor's Independent Auditor's Report Page A-3 Report and Agency Financial Schedules Schedule ofChanges in Fund Balances & Propert> Held in Trust For the Fiscal Year Ended June 30. 1998 Page A-5 Schedule ofChanges in Fund Balances & Property Held m Trust Forthe Fiscal Year Ended June 30, 1997 Page A-6 & Schedule ofTotal Revenues Transfers-In For the Fiscal Year Ended June 30, 1998 Page A-7 & Schedule ofTotal Revenues Transfers-In Forthe Fiscal Year Ended June 30, 1997 Page A-8 & Schedule ofTotal Expenditures Transfers-Out Forthe Fiscal Year Ended June 30, 1998 Page A-9 Page i Table of Contents & Schedule ofTotal Expenditures Transfers-Out Forthe Fiscal Year Ended June 30, 1997 PageA-10 Notes tothe Financial Schedules Page A-1 1 Agency Response Department ofRevenue Page B-3 Page ii Appointed and Administrative Officials Central Management Mar\- Br\son, Director Dave Woodgerd, ChiefLegal Counsel Process Leaders JeffMiller. Policv' and Performance Management Judy Pa>Titer, Tax Policy and Research Mike Boyer, Information Technology Division Lynn Chenoweth, Resource Management Division Neil Peterson. Customer Service and hiformation Processing Division Don Hoffman. Compliance, Valuation and Resolution Divisions Page iii Page iv