An audit of New Hampshire's Department of Revenue Administration revealed that problem's with the state's tax collection efforts may have resulted in an estimated $29 million left uncollected at the end of fiscal 2012.

The revelation will lead to a change in the agency over the next 10 months, according to agency officials.

The performance audit, 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 news about pending changes within the agency was first reported by the Concord (N.H.) Monitor.

Commissioner John Beardmore said the department has started to make changes. A new Web site is under development, employee training sessions are being held and there are preparations to draft new administrative rules.

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 an estimated $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.

The audit identified several shortcomings that could contribute to the department’s problems collecting taxes.

?  A lack of information on the agency’s Web site for taxpayers seeking abatements or payment agreements.
?  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.

The report made 13 “observations” with recommendations for improvement. The department concurred, in whole or in part, with all of them.

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