Financial Audit:

District of Columbia Highway Trust Fund's Fiscal Year 1997 Financial Statements

AIMD-98-254: Published: Sep 30, 1998. Publicly Released: Sep 30, 1998.

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Pursuant to a legislative requirement, GAO reviewed the results of its audit of the financial statements of the District of Columbia Highway Trust Fund for the fiscal year (FY) ended September 30, 1997, and its examination of the forecasted statements of the Fund's expected conditions and operations for the next 5 years, focusing on: (1) GAO's opinion on District management's assertion regarding the effectiveness of the Fund's internal controls as of September 30, 1997; and (2) the results of GAO's evaluation of the District's compliance with laws and regulations during FY 1997 as they relate to the Fund.

GAO noted that: (1) the financial statements were reliable in all material respects; (2) management's assertion about the effectiveness of internal controls was not fairly stated; (3) management asserted that internal controls in place at September 30, 1997, were effective in: (a) safeguarding assets from material loss; (b) assuring that there were no material misstatements in amounts reported in the financial statements; and (c) assuring material compliance with laws and regulations; (4) management's assertion on the effectiveness of internal controls was not fairly stated because of material weaknesses identified in accounting for revenue and capital appropriated expenditures and in computer system general controls; (5) there was a reportable noncompliance with one of the laws GAO tested; and (6) the underlying assumptions made and methodology used to develop the Fund's forecasted statements provided a reasonable basis for such statements, and the statements were presented in conformity with guidelines established by the American Institute of Certified Public Accountants.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: During the fiscal year 1998 audit, GAO reaffirmed that the District is unable to determine the completeness of motor vehicle tax receipts. GAO's review of the 66 wholesalers in the Office if Tax and Revenue's tracking records showed that no follow-up was performed on 1 wholesaler who did not submit the required returns. GAO also noted that 13 of the wholesalers filed returns but were not licensed to conduct business in the District (six of these wholesalers subsequently obtained a license). Sometimes wholesalers submit an application for a license prior to filing any returns; however, there are delays in processing due to incomplete information provided by the taxpayer. In addition, no followup was performed on another five wholesalers who were licensed during the audit period but never filed returns. The District lacked controls to alert it of the licensed wholesalers who did not submit returns or unlicensed wholesalers who submitted returns. During its fiscal year 1999 audit, GAO reviewed 79 licensed wholesalers. Of the 79, three wholesalers did not file three required returns. OTR properly tracked two of these, but one remained open until GAO brought it to their attention. Follow-up was performed.

    Recommendation: To address the newly reported revenue-related weaknesses discussed in this report, the Director, Office of Tax and Revenue, should establish control procedures to investigate instances in which unlicensed wholesalers submit tax returns or licensed wholesalers do not submit monthly returns.

    Agency Affected: District of Columbia: Office of Tax and Revenue

  2. Status: Closed - Implemented

    Comments: During the fiscal year 1998 audit, GAO discovered that District officials continue to accept tax returns that lack supporting schedules. OTR officials informed us that these investigations took place; however, there was no documentation verifying that followup was performed. The audit revealed that District officials are still accepting supporting documentation that does not trace to the schedules. Four of the 67 statistically selected tax returns GAO reviewed lacked the required supporting documentation, and there was no followup that OTR investigated these instances. During fiscal year 1999, GAO reviewed 112 tax returns and found that one return lacked the supporting schedules and another return contained an error. The District's CAFR auditors cited similar problems during 1999. However, GAO did find that follow-up had been performed throughout the year in other instances identified by OTR. GAO will close this recommendation.

    Recommendation: To address the newly reported revenue-related weaknesses identified in this report, the Director, Office of Tax and Revenue, should establish control procedures to: (1) review each monthly tax return for completeness and accuracy; (2) reject incomplete and erroneous monthly tax returns; and (3) contact wholesalers if returns are rejected and follow up to ensure complete, accurate, and adequately documented monthly tax returns.

    Agency Affected: District of Columbia: Office of Tax and Revenue

  3. Status: Closed - Implemented

    Comments: During FY1998, the District refunded wholesalers who were previously overcharged on the license fee during the past three years. OTR enforced the $5 annual license fee for motor vehicle fuel licenses during fiscal year 1998.

    Recommendation: To address the newly reported-revenue related weaknesses identified in this report, the Director, Office of Tax and Revenue, should enforce implementation of the D.C. Code Ann. section 47-2303 requirement of a $5 annual license fee for a motor vehicle fuel license and implement procedures to repay licensed wholesalers who overpaid during the past 3 years.

    Agency Affected: District of Columbia: Office of Tax and Revenue

 

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