Department of Revenue management letter 2002 |
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Department of Revenue A REPORT TO THE ARIZONA LEGISLATURE Department of Revenue Year Ended June 30, 2002 Financial Audit Division Debra K. Davenport Auditor General The Auditor General is appointed by the Joint Legislative Audit Committee, a bipartisan committee composed of five senators and five representatives. Her mission is to provide independent and impartial information and specific recommendations to improve the operations of state and local government entities. To this end, she provides financial audits and accounting services to the State and political subdivisions, investigates possible misuse of public monies, and conducts performance audits of school districts, state agencies, and the programs they administer. Copies of the Auditor General’s reports are free. You may request them by contacting us at: Office of the Auditor General 2910 N. 44th Street, Suite 410 • Phoenix, AZ 85018 • (602) 553-0333 Additionally, many of our reports can be found in electronic format at: www.auditorgen.state.az.us 2910 NORTH 44th STREET • SUITE 410 • PHOENIX, ARIZONA 85018 • (602) 553 -0333 • FAX (602) 553-0051 DEBRA K. DAVENPORT, CPA AUDITOR GENERAL STATE OF ARIZONA OFFICE OF THE AUDITOR GENERAL WILLIAM THOMSON DEPUTY AUDITOR GENERAL February 5, 2003 J. Elliott Hibbs, Director State of Arizona Department of Revenue 1600 West Monroe Street Phoenix, AZ 85007 Dear Mr. Hibbs: In planning and conducting our audit of the State of Arizona for the year ended June 30, 2002, we considered the Department of Revenue’s internal controls over financial reporting and tested its compliance with laws and regulations that could have a direct and material effect on the State’s financial statements as required by Government Auditing Standards. Specifically, we performed tests of the receipt and distribution of individual, withholding, corporate, transaction privilege, use, excise, tobacco, and liquor taxes; taxes receivable; tax refunds; tax refunds payable; due to local governments; payroll; transfers; and journal entries. There are no audit findings that are required to be reported by Government Auditing Standards. However, our audit disclosed an internal control weakness that did not meet the reporting criteria. This internal control weakness was reported in prior years. Management should correct this deficiency to ensure that it fulfills its responsibility to establish and maintain adequate internal controls. Our recommendation is described below. The Department should reconcile income tax receipts to income tax revenues recorded on the Arizona Financial Information System (AFIS) Periodic reconciliation of information posted to separate accounting systems allows users to detect and resolve any differences. The reconciling process helps to ensure that potential problems will be detected and corrected. It also allows users to rely on the information in those systems. J. Elliott Hibbs, Director February 5, 2003 Page Two Amounts recorded on the Department’s income tax processing system and amounts recorded as income tax revenues on the AFIS differ because of timing differences and/or input errors. The Department should reconcile total income tax collections recorded on its system to the amount of income tax revenues recorded on AFIS at least quarterly. Any discrepancies should be investigated and resolved immediately. Performing timely reconciliations will also help ensure that accurate and complete financial information is provided to the Department of Administration and reported in the State’s Annual Financial Statements. This letter is intended solely for the information of the Department of Revenue, and is not intended to be and should not be used by anyone other than the specified party. However, this letter is a matter of public record, and its distribution is not limited. Should you have any questions concerning its contents, please let us know. Sincerely, Debbie Davenport Auditor General Janet Napolitano Governor J. Elliott Hibbs Director ARIZONA DEPARTMENT OF REVENUE OFFICE OF THE DIRECTOR 1600 WEST MONROE, ROOM 910 PHOENIX, ARIZONA 85007 Telephone: (602) 542-3572 • Fax: (602)542-4772 January 31, 2003 Ms. Debra Davenport, Auditor General Office of the Auditor General 2910 North 44th Street, Suite 410 Phoenix, AZ 85018-7243 Dear Ms. Davenport: We have reviewed the Management Letter and accompanying audit finding resulting from your test work performed in conjunction with the audit of the State of Arizona for the year ended June 30, 2002. Our general comments about the finding and specific responses to the recommendation are as follows: The Department should reconcile income tax receipts to income tax revenues recorded on the Arizona Financial Information System (AFIS) Department Response: Agree The department understands that a periodic reconciliation of our income tax systems to AFIS is necessary to ensure potential problems are detected and corrected. However, the design of our current systems does not allow for a comprehensive reconciliation. The department performs periodic reviews of different aspects of the income tax systems including: • A daily reconciliation to ensure the accurate transmission of all deposit batches from our remittance processing and electronic funds transfer systems to the income systems. • A daily reconciliation to ensure the accurate transmission of all receipts taken through our cashier system to the income systems. The department is currently involved in reengineering how it conducts business for the purpose of integrating our tax systems. As part of the project scope, there is a requirement for a comprehensive reconciliation of the integrated tax systems to AFIS. The implementation for the withholding tax system is expected in 2004. The implementation of the corporate and individual income systems is expected in 2006. We are anticipating the successful integration of these tax systems will eliminate this management letter in the future. Sincerely, J. Elliott Hibbs Director JEH:TM:dbl cc: Tom MacConnell, Comptroller File
Object Description
TITLE | Department of Revenue management letter |
CREATOR | Office of the Auditor General, Financial Audit Division |
SUBJECT | Arizona--Dept. of Revenue--Finance--Periodicals; |
Browse Topic |
Government and politics |
DESCRIPTION | This title contains one or more publications |
Language | English |
Publisher | Office of the Auditor General |
Material Collection | State Documents |
Source Identifier | LG 6.3:A 82 R 38 |
Location | o237057647 |
REPOSITORY | Arizona State Library, Archives and Public Records--Law and Research Library |
Description
TITLE | Department of Revenue management letter 2002 |
DESCRIPTION | 5 pages (PDF version). File size: 125 KB |
TYPE |
Text |
RIGHTS MANAGEMENT | Copyright to this resource is held by the creating agency and is provided here for educational purposes only. It may not be downloaded, reproduced or distributed in any format without written permission of the creating agency. Any attempt to circumvent the access controls placed on this file is a violation of United States and international copyright laws, and is subject to criminal prosecution. |
DATE ORIGINAL | 2002 |
Time Period |
2000s (2000-2009) |
ORIGINAL FORMAT | Born Digital |
Source Identifier | LG 6.3:A 82 R 38 |
Location | o237057647 |
DIGITAL IDENTIFIER | Department_of_Revenue_June_30_2002_Management Letter .pdf |
DIGITAL FORMAT | PDF (Portable Document Format) |
REPOSITORY | Arizona State Library, Archives and Public Records--Law and Research Library. |
File Size | 127185 Bytes |
Full Text | Department of Revenue A REPORT TO THE ARIZONA LEGISLATURE Department of Revenue Year Ended June 30, 2002 Financial Audit Division Debra K. Davenport Auditor General The Auditor General is appointed by the Joint Legislative Audit Committee, a bipartisan committee composed of five senators and five representatives. Her mission is to provide independent and impartial information and specific recommendations to improve the operations of state and local government entities. To this end, she provides financial audits and accounting services to the State and political subdivisions, investigates possible misuse of public monies, and conducts performance audits of school districts, state agencies, and the programs they administer. Copies of the Auditor General’s reports are free. You may request them by contacting us at: Office of the Auditor General 2910 N. 44th Street, Suite 410 • Phoenix, AZ 85018 • (602) 553-0333 Additionally, many of our reports can be found in electronic format at: www.auditorgen.state.az.us 2910 NORTH 44th STREET • SUITE 410 • PHOENIX, ARIZONA 85018 • (602) 553 -0333 • FAX (602) 553-0051 DEBRA K. DAVENPORT, CPA AUDITOR GENERAL STATE OF ARIZONA OFFICE OF THE AUDITOR GENERAL WILLIAM THOMSON DEPUTY AUDITOR GENERAL February 5, 2003 J. Elliott Hibbs, Director State of Arizona Department of Revenue 1600 West Monroe Street Phoenix, AZ 85007 Dear Mr. Hibbs: In planning and conducting our audit of the State of Arizona for the year ended June 30, 2002, we considered the Department of Revenue’s internal controls over financial reporting and tested its compliance with laws and regulations that could have a direct and material effect on the State’s financial statements as required by Government Auditing Standards. Specifically, we performed tests of the receipt and distribution of individual, withholding, corporate, transaction privilege, use, excise, tobacco, and liquor taxes; taxes receivable; tax refunds; tax refunds payable; due to local governments; payroll; transfers; and journal entries. There are no audit findings that are required to be reported by Government Auditing Standards. However, our audit disclosed an internal control weakness that did not meet the reporting criteria. This internal control weakness was reported in prior years. Management should correct this deficiency to ensure that it fulfills its responsibility to establish and maintain adequate internal controls. Our recommendation is described below. The Department should reconcile income tax receipts to income tax revenues recorded on the Arizona Financial Information System (AFIS) Periodic reconciliation of information posted to separate accounting systems allows users to detect and resolve any differences. The reconciling process helps to ensure that potential problems will be detected and corrected. It also allows users to rely on the information in those systems. J. Elliott Hibbs, Director February 5, 2003 Page Two Amounts recorded on the Department’s income tax processing system and amounts recorded as income tax revenues on the AFIS differ because of timing differences and/or input errors. The Department should reconcile total income tax collections recorded on its system to the amount of income tax revenues recorded on AFIS at least quarterly. Any discrepancies should be investigated and resolved immediately. Performing timely reconciliations will also help ensure that accurate and complete financial information is provided to the Department of Administration and reported in the State’s Annual Financial Statements. This letter is intended solely for the information of the Department of Revenue, and is not intended to be and should not be used by anyone other than the specified party. However, this letter is a matter of public record, and its distribution is not limited. Should you have any questions concerning its contents, please let us know. Sincerely, Debbie Davenport Auditor General Janet Napolitano Governor J. Elliott Hibbs Director ARIZONA DEPARTMENT OF REVENUE OFFICE OF THE DIRECTOR 1600 WEST MONROE, ROOM 910 PHOENIX, ARIZONA 85007 Telephone: (602) 542-3572 • Fax: (602)542-4772 January 31, 2003 Ms. Debra Davenport, Auditor General Office of the Auditor General 2910 North 44th Street, Suite 410 Phoenix, AZ 85018-7243 Dear Ms. Davenport: We have reviewed the Management Letter and accompanying audit finding resulting from your test work performed in conjunction with the audit of the State of Arizona for the year ended June 30, 2002. Our general comments about the finding and specific responses to the recommendation are as follows: The Department should reconcile income tax receipts to income tax revenues recorded on the Arizona Financial Information System (AFIS) Department Response: Agree The department understands that a periodic reconciliation of our income tax systems to AFIS is necessary to ensure potential problems are detected and corrected. However, the design of our current systems does not allow for a comprehensive reconciliation. The department performs periodic reviews of different aspects of the income tax systems including: • A daily reconciliation to ensure the accurate transmission of all deposit batches from our remittance processing and electronic funds transfer systems to the income systems. • A daily reconciliation to ensure the accurate transmission of all receipts taken through our cashier system to the income systems. The department is currently involved in reengineering how it conducts business for the purpose of integrating our tax systems. As part of the project scope, there is a requirement for a comprehensive reconciliation of the integrated tax systems to AFIS. The implementation for the withholding tax system is expected in 2004. The implementation of the corporate and individual income systems is expected in 2006. We are anticipating the successful integration of these tax systems will eliminate this management letter in the future. Sincerely, J. Elliott Hibbs Director JEH:TM:dbl cc: Tom MacConnell, Comptroller File |