Thursday, April 26, 2012

Allen County Commissioner Calls for Transparency in State Accounting


Editorial By Therese Brown in the Fort Wayne News-Sentinel:


The distribution of local option income taxes has been a historic problem. Sudden changes in economic conditions have usually resulted in dramatic changes to local option income tax distributions. Evidence for these changes was not accompanied with a detailed report on exactly why a county’s distribution increased or decreased dramatically. Reasons from the state varied from less income being earned to less returns being processed in a state fiscal year. However, no matter the cause, little data was produced to verify the distributions.
 
How can we add transparency to the process? The answer is more detailed reporting and a better accounting process.
 
Counties are already receiving quarterly reports on local income tax collections, and this should be expanded to include more information. The state should include in the reports the number of processed income tax returns, attributable to the correct filing year.
 
The most critical change needs to be an end to the co-mingling of income tax revenue and a clearer distinction between each county’s local collections and those collected for the state’s revenue needs. When withholdings and estimated payments are reported to the Department of Revenue, the withholdings for the counties should be deposited into the proper county account. Statute already requires the Department of Revenue to segregate the money and there is no longer any reason for the state to ignore its statutory duty; this should occur immediately. We encourage the state to make each county’s account available to the local units of government and to the public on a real time basis via a posting on the state’s website. County income tax withholdings should never be co-mingled with the state general fund.
 
The only way to have a transparent and accountable system is if the local units of government can track the amount of withholdings and processed returns. This is not to suggest that local units receive estimated amounts because locals should still only receive that which is actually collected and reconciled after taxpayers file their tax returns. Fundamentally, more eyes need to be on this data. If the state would introduce more transparency into the process, local officials would be in a better position to compare their community’s histories and anticipate problems when collections don’t match distributions. This would be a benefit to all: the state, local governments and taxpayers.
 
We urge the audit of the Department of Revenue to include other revenues and accounting processes. The state collects other revenue for local units of government such as food and beverage taxes, lodging taxes, gas taxes and 911 fees. We would prefer the collection and distribution of these revenues to be reviewed as well to reassure taxpayers that due diligence on their behalf has been served. We also ask that county officials be included among the members of the audit review committee when a vendor is selected to conduct the audit.