Overview
Pursuant to Chapter 62F of the Massachusetts General Laws (inserted by St. 1986, C, 555, S. 2), the State Auditor is required to (1) review and ensure the completeness and accuracy of the Commissioner of Revenue’s Report of the Net State Tax Revenues and Allowable State Tax Revenues for the fiscal year ended June 30, 2020 and (2) independently determine whether net state tax revenues exceeded allowable state tax revenues and report the determination and amount of any excess state tax revenues for the fiscal year ended June 30, 2020, which were the objectives of this audit.
We conducted this performance audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.
We performed the following procedures to obtain sufficient, appropriate audit evidence to address our audit objectives.
- We assessed the Department of Revenue’s (DOR’s) compliance with the Official Year-End Closing Instructions issued by the Comptroller of the Commonwealth (CTR) to ensure that state tax revenue on hand as of June 30, 2020 was deposited, recorded, and reported in fiscal year 2020. In addition, we assessed compliance with Section 3 of Chapter 78 of the Acts of 2020, which required income tax payments that would normally have been due on April 15, 2020, but were received from July 1, 2020 through August 31, 2020, to be recorded as fiscal year 2020 revenue. Net collections during the period July 1, 2020 through August 31, 2020 pertaining to fiscal year 2020 totaled $2,340,924,202.
- We reconciled tax revenues received by DOR and other state agencies identified as receiving tax revenues to CTR records. To this end, we reviewed DOR’s GeniSys accounting and reporting system and determined that GeniSys transactions were accurately reported in the Massachusetts Management Accounting and Reporting System (MMARS) (see Exhibits II and VI).
- We performed testing of various tax data and the related tax collecting, depositing, recording, and reporting systems within the state’s accounting system in order to determine the degree of reliance we would place thereon to ultimately render conclusions on the Report of the Net State Tax Revenues and Allowable State Tax Revenues submitted by the Commissioner of Revenue, including the related calculations and methodology.
- We reviewed and analyzed applicable state statutes to determine state tax revenue sources.
- We performed internal control reviews, fraud risk assessments, and other procedures we considered applicable and feasible under the circumstances.
- We obtained the most recent Massachusetts wage and salary data paid to the citizens of the Commonwealth for calendar year 2019 from the United States Department of Commerce’s Bureau of Economic Analysis.
Our audit work focused on DOR, the primary source of tax revenue for the Commonwealth, and other agencies identified as sources of state tax revenue (i.e., the Massachusetts Gaming Commission, the Massachusetts State Lottery Commission, the State Athletic Commission, the Division of Insurance, the Office of the Secretary of the Commonwealth, and the Department of Unemployment Assistance) as we considered it practicable and feasible under the circumstances.
Data Reliability
To accomplish our objectives, we reviewed and reconciled state tax revenues in MMARS to DOR’s revenue as recorded in GeniSys and to the financial information recorded at other state agencies and identified as sources of state tax revenue. The financial data obtained from MMARS and used for the analysis constitute the official accounting records of the Commonwealth, are widely accepted as accurate, and form the basis for the Commonwealth’s audited annual financial statements. In addition, in 2018, we conducted a data reliability assessment of MMARS. As part of this assessment, we tested general information technology controls for system design and effectiveness. As part of the data reliability assessment, we also tested for accessibility of programs and data as well as system change management policies and procedures for applications, jobs, and infrastructure. During our current review, we performed analytical procedures, such as comparisons and reconciliations to available revenue summary totals in the applicable agency accounts, to confirm that the Commonwealth database information we used was consistent with other available information. For our audit period, we extracted from MMARS a list of all tax revenues for the Commonwealth and compared it to CTR’s tax revenue spreadsheets to determine the accuracy of the records.
We also conducted a data reliability assessment of GeniSys that included a review of policies and procedures for access controls and security awareness training, as well as a review of supporting documentation of unsuccessful login attempts, session locks, auditable events, audit monitoring, analysis and reporting, account management, and configuration changes.
Based on the above procedures, we concluded that the data obtained from MMARS and GeniSys were sufficiently reliable for the purposes of our audit.