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, 2019 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, 2019, 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, 2019 was deposited, recorded, and reported in fiscal year 2019.
- 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 2018 from the United States Department of Commerce’s Bureau of Economic Analysis.
We conducted fieldwork at DOR, the primary source of tax revenue for the Commonwealth, and at 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.
To accomplish our objectives, we reviewed and reconciled state tax revenue information at DOR and other state agencies identified as sources of state tax revenue and state accounting records in MMARS to identify Commonwealth state tax revenues for the purposes of Section 2 of Chapter 62F of the General Laws. The electronic data sources used for this 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 conducted information security tests through interviews and observations to determine the reliability of the data.
We also conducted a data reliability assessment of the GeniSys system that included a review of policies and procedures for access controls and security awareness training, as well as observations 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.
As a result of our audit, we have determined that the net state tax revenues of $30,202,588,989 for the fiscal year ended June 30, 2019 were below the allowable state tax revenues of $33,977,241,799 (as defined in Chapter 62F of the General Laws) by the amount of $3,774,652,810 (see Exhibit I).
|Date published:||September 16, 2019|