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Significant deficiency in internal controls cited by Auditors

A significant deficiency in internal controls was cited by the Auditors in its 91-page audit report for fiscal Year 2022 ending September 30, 2022, prepared by Larson and Company, certified public accountants based in Utah.

The report says Auditors noted several assessments that are significantly past due, and the allowance accounts contain large balances. Receivable accounts increased during the prior period, as did allowance accounts.

Accounts with balances past the statute of limitations should be removed from the receivable accounts and allowance accounts to reflect a more accurate financial picture at any given point during the fiscal year unless there stands a remote chance of collection.

Tax receivable accounts, revenue accounts, liability accounts, and refund accounts should be reconciled every month. Also, the Territory appeared to have been more aggressive at collecting outstanding taxes during the period.

However, there needs to be more communication between the Tax Office and the Treasury, resulting in a need for more monitoring, review, and reconciliation controls.

The Territory is still utilizing the Moana tax system, which needs to integrate with the accounting software, and appropriate reconciliations and monitoring of tax receivables, uncollectible accounts, liabilities, and refunds still need to be done monthly.

While there have been significant improvements in this area, substantial controls could be implemented. The Auditors recommended that a Comptroller and management review and reconcile tax-related accounts every month.

There should be open and frequent communication with the Tax Office. The Auditors recommend that the Territory review accounts close to the statute of limitations be aggressively collected if possible.

If they are past the statute of limitations, Management should write the balances off as uncollectible and remove them from the accounting records.

This will clean up the tax-related accounts and provide more accurate and reliable financial reporting. Management should also review the estimates for uncollectible accounts periodically, as these estimates may change over time.

In response, the ASG agrees with the finding. The Treasury continues searching for a new tax system that can interact with the current finance system, OneSolution.

The Treasury also understands the need for monthly management review and reconciliation of tax-related accounts.

At present, there is no one assigned to oversee this responsibility. Treasury leadership must designate one of its deputy directors to clean up the tax-related accounts and provide more accurate and reliable financial reporting.

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