N.H. tax-collection agency making changes after critical state performance audit
The new leader of the state Department of Revenue Administration said the agency will change over the next 10 months in response to an audit that identified problems hampering New Hampshire’s tax-collection efforts – problems that likely helped leave $29 million uncollected at the end of fiscal 2012.
“You should have policies and procedures. You should have rules. You should follow them, and the law. You should explore new ways to do your job, which is collect money. We endeavor to do all of those things, and do them better than we have been,” said Commissioner John Beardmore in an interview yesterday. “Will it result in more dollars being collected for the state? Hopefully. We’d like to collect all of those dollars.”
The performance audit, which was conducted in fiscal years 2011 and 2012 by the legislative budget assistant’s office, was released last month.
“While demonstrating greater efficiency in its operations during the audit period, particularly as its employees and budgets decreased significantly, the Division (of Collections)’s effectiveness was negatively affected by weaknesses in its internal controls,” the audit report concluded.
Improving and formalizing rules, policies and procedures, it said, will “help ensure the equitable treatment of taxpayers and the collection of delinquent taxes at the least cost to the state.”
The audit covered the two years that ended June 30, 2012, while Kevin Clougherty was commissioner. Clougherty left at the end of February and Beardmore, who used to work in the legislative budget assistant’s office, was confirmed by the Executive Council as his successor in June.
The audit report was presented July 10 to the Legislature’s Fiscal Committee. At that meeting, Beardmore told lawmakers the audit “is critical in nature, and I understand that very well, and it’s designed to find our flaws, and it has done that.”
He said the agency took it “very seriously” and would address “every one” of its observations.
Beardmore said yesterday that the department has started to make changes. A new website is in the works, employee training sessions are being held and preparations to draft new administrative rules are under way.
He said his goal is to report back to the Legislature by the end of the current fiscal year, which ends June 30, 2014.
“Legislators like to know that you take this stuff seriously,” Beardmore said. “We do.”
The Department of Revenue Administration is responsible for collecting most state taxes, including business taxes, the rooms-and-meals tax and the tobacco tax. Its staff shrank from 167 in June 2011 to 121 a year later as the budget was cut, and the Division of Collections went from 16 staffers to eight filled positions.
The agency collected about $1.2 billion a year in taxes in 2011 and 2012. At the end of June 2011, $32 million in unpaid taxes remained uncollected, and at the end of June 2012, some $29 million was outstanding. Beardmore said the preliminary figure for fiscal 2013 is “somewhat below $25 million.”
Those may be relatively small numbers compared with the total state budget, but are hardly insignificant given the fights during this year’s budget negotiations over items like a proposed $20 million cut to general-fund personnel costs and a $7 million cut to the Department of Health and Human Services.
The department can place liens on taxpayer property and take other steps to collect unpaid taxes. But the performance audit identified a number of shortcomings that could contribute to the department’s problems collecting taxes.
∎ A lack of rules for placing liens. In 25 randomly selected cases that reportedly involved placing a lien, the audit found 22 where no lien had been placed within a 90-day guideline.
∎ Incomplete records, and some records not being retained as necessary.
∎ A lack of internal controls over information technology systems, with some employees enjoying computer access privileges greater than necessary or proper.
∎ A lack of information on the agency’s website for taxpayers seeking abatements or payment agreements.
∎ The practice, unauthorized by law and since discontinued, of requiring delinquent rooms-and-meals taxpayers to provide the department with their bank account information, including passwords.
The report made 13 “observations” with recommendations for improvement. The department concurred, in whole or in part, with all of them.
“We’re basically through the planning phase right now, and starting to implement some of the changes,” Beardmore said yesterday. “Overall, we’re not disagreeing with much that was contained in the audit report, and hopefully, at the end of the year, we have a stronger, better-functioning Collections Division.”
Gov. Maggie Hassan’s office yesterday pointed to the staff cuts at DRA as a problem partially addressed by the new state budget, which adds back some positions at the agency.
“Our office has discussed the report with Commissioner Beardmore and we understand that he is working to address issues identified in the audit in order to improve the agency’s effectiveness,” said spokesman Marc Goldberg in a statement.
(Ben Leubsdorf can be reached at 369-3307 or
email@example.com or on Twitter @BenLeubsdorf.)