Pharos-Tribune

State News

March 11, 2013

Revenue department undergoes overhaul

INDIANAPOLIS — When retired banker Mike Alley became state revenue commissioner last May, he took over a department badly bruised by revelations that it had misplaced a half-billion dollars in taxpayer money.  

The “lost” revenues, discovered as the state was slashing funding for schools and payments to local governments, were blamed on “programming errors.”

It didn’t take long for Alley to figure out the Department of Revenue’s problems went far beyond a computer glitch.  

As later documented in an independent audit report, Alley was walking into an organization burdened with near-obsolete technology and woefully lacking in the internal controls needed collect, track and distribute $16 billion in taxes every year.

Alley sat down with the department’s new chief financial officer, Mike Ashley, an expert in corporate and government finance, to figure out where to get started.

“The first thing we did,” Alley said, “was that we identified that our No. 1 priority was to restore credibility.”

They’ve spent the last 10 months working toward that goal, but both say it will take “multi-year” effort to get there.

The problems they found, along with those with identified in an independent audit by the Deloitte consulting firm, have helped develop what Alley calls a detailed “guidepost” directing their efforts.  

Methodically, they’ve been putting into place the internal controls, accountability mechanisms, and the training and processes that, according to the Deloitte audit, had been ignored or set aside for years before the department’s problems became public.

They’ve yet to solve the department’s biggest and most expensive problem: the 1990s-era, stand-alone technology that has forced employees to take labor-intensive steps to track the 45 different tax categories the department oversees.

But they’re working on it, putting the foundations in place for new technology.

They’ve also enlisted the department’s nearly 700 employees in the effort, seeking out their advice on what needs to get done.

“You can’t run something as complicated as this as a top-down organization,” Ashley said.  

They’ve made more progress than anticipated.

“People have been receptive to the changes and have grasped what our problem is,” Alley said.  “They’ve grasped the fact that our credibility — our greatest risk — has been in question. If we can’t get this right, I think we’re done for.”

Credibility was at low point when Alley and Ashley were both called out of retirement by then-Gov. Mitch Daniels last April.

Daniels had just found out that the DOR had lost track of $260 million in tax revenues owed to local governments. Four months earlier, Daniels had learned $320 million in corporate taxes had gone missing, languishing in an inactive DOR account.  

The timing was awful, having come after Daniels had forced schools to take a $300 million funding cut and cash-strapped local governments had been cutting back on public services.

Daniels had resisted outside scrutiny after the first mistake was found; under pressure from legislators, he agreed to an independent audit after the second error was revealed.

And he brought in Alley, the former CEO of Fifth Third Bank, and Ashley, the former top finance officer at the pharmaceutical giant Eli Lilly, to take over DOR.

One of the key findings of the Deloitte audit was that the DOR had been so focused on speed — rapidly processing the 3.1 million taxpayer returns they get each year so taxpayers could get their refunds quickly — that accuracy and control over taxpayer funds took a back seat.

As Alley describes it, in the department’s “zeal” to speed up refunds, it let go of the critical internal controls to track where the money was going.

“That’s one of the things that got us into trouble,” he said.  

And it’s one of the things that caused other problems: The Deloitte audit also found 55,000 business tax accounts that hadn’t properly reconciled, meaning there were companies that didn’t know if they owed the state money. It also found 12,000 cases where taxpayers were likely owed refunds but had never received them.

For Alley, one of the more disturbing discoveries he made was the deep distrust of local government officials, who’d been given revenue reports about taxes owed to their local governments that the DOR knew were inaccurate.

“We didn’t believe the report was accurate and we didn’t give it the attention it needed,” Ashley said.   No more. “That was one of the changes we’ve brought about,” he said. “It’s been my mantra: If we’re required to report this, then we’re going to get it accurate to the best of our ability. Maybe it’s not perfect ... but we’re not going to deliberately not hold people to a level of accuracy.”

With all the extra work required to overhaul the department, Ashley and Alley said they haven’t abandoned the effort to get Indiana taxpayers back their refunds quickly. For electronic filers, the refunds are coming back in about two weeks. Last year, the average turnaround was five days.

Ashley said that’s impressive, given the massive overhaul of the department. “Crisis,” he said, “brings focus.”

Maureen Hayden covers the CNHI newspapers in Indiana. She can be reached at maureen.hayden@indianamediagroup.com.

 

 

1
Text Only | Photo Reprints
State News
  • NWS-PT040714 Hogsett mug.jpg The job? Guarding public trust INDIANAPOLIS -- Joe Hogsett was being vetted for the job of U.S. Attorney four years ago when he asked a federal judge for advice. That judge observed that there hadn't been a high-profile public corruption case in the southern district of Indiana s

    April 7, 2014 1 Photo

  • Flood Insurance Indiana [Duplicate] Indiana braces for flood insurance subsidy changes INDIANAPOLIS -- Thousands of Indiana homeowners who live in flood-prone neighborhoods are bracing for insurance premium increases, despite Congress' latest fix for the government's debt-saddled flood insurance program. More than 13,300 Indiana homeow

    March 30, 2014 2 Photos

  • NWS-PT031714 Wolkins mug.jpg Zooming through: Rules on mo-peds headed to governor's desk INDIANAPOLIS -- Rep. Dave Wolkins could only oppose mo-ped regulations for so long, as more bikes zipped along the roads and were involved in an increasing number of accidents. So Wolkins -- who spent five years fighting to keep Indiana among the few

    March 17, 2014 2 Photos

  • Prison inmates part of new Legion post TERRE HAUTE -- Wearing khaki-colored matching uniforms, more than 20 veterans inside a maximum-security prison stood tall to salute the flag of the United States at an event that welcomed them as new American Legion members. These men, inmates at the

    March 17, 2014

  • NWS-PT031414 beer alcohol.jpg Old ban on beer booze level may be tapped out INDIANAPOLIS -- Loughmiller's Pub across from the Statehouse is a favorite hangout for legislators and lobbyists who like the tavern's menu of gourmet burgers and craft beers. State police are regular lunch customers, as are state officials who regul

    March 14, 2014 1 Photo

  • Indiana House leader: Tax, preschool deals near INDIANAPOLIS -- Republican leaders working on a series of last-minute compromises on top-tier issues of tax cuts, preschool and road funding announced Tuesday they were close to final agreements. "I say agreement in principle because we still have to

    March 12, 2014

  • Same-sex couples sue state over ban LOUISVILLE -- Erin Brock says she's prepared to fight to have her love legally recognized by the state of Indiana. Brock and her fiancé Melissa Love share a home and children in Jeffersonville and are one of four same-sex couples from Southern Indian

    March 10, 2014

  • Ivy Tech's $83M wish list meets skeptical audience INDIANAPOLIS (AP) -- Ivy Tech Community College says it needs $83 million more from the state so it can double its enrollment and graduation rates and help the state meet its own goal of increasing the number of Indiana residents with post-high-schoo

    March 9, 2014

  • Bill ends automatic license suspensions for many crimes INDIANAPOLIS -- Unpaid parking fines, falling behind on child support, drunken driving: So many offenses trigger a suspended driver's license in Indiana that more than a half-million Hoosiers have lost their driving privileges. In fact, driving on a

    March 7, 2014

  • NWS-PT030314 Zionsville bus.jpg Rolling billboards: Legislation may create pilot program INDIANAPOLIS — Cash hungry schools may start selling ads on the sides of buses to make up millions of dollars lost because of property tax caps. Legislation moving through the General Assembly would create a pilot program allowing a few districts to

    March 3, 2014 1 Photo

Hyperlocal Search
Premier Guide
Find a business

Walking Fingers
Maps, Menus, Store hours, Coupons, and more...
Premier Guide
Poll

Should mushroom hunters be allowed to forage off-trail in Indiana state parks?

Yes
No
Undecided
     View Results
Featured Ads
AP Video
Captain of Sunken SKorean Ferry Arrested Raw: Fire Destroys 3 N.J. Beachfront Homes Raw: Pope Presides Over Good Friday Mass Raw: Space X Launches to Space Station Superheroes Descend on Capitol Mall Man Charged in Kansas City Highway Shootings Obama Awards Navy Football Trophy Anti-semitic Leaflets Posted in Eastern Ukraine Raw: Magnitude-7.2 Earthquake Shakes Mexico City Ceremony at MIT Remembers One of Boston's Finest Raw: Students Hurt in Colo. School Bus Crash Raw: Church Tries for Record With Chalk Jesus Raw: Faithful Celebrate Good Friday Worldwide Deadly Avalanche Sweeps Slopes of Mount Everest Police Arrest Suspect in Highway Shootings Drought Concerns May Hurt Lake Tourism Vermont Goat Meat Gives Refugees Taste of Home Calif. Investigators Re-construct Fatal Bus Cras Mayor Rob Ford Launches Re-election Campaign Appellate Court Hears Okla. Gay Marriage Case
Parade
Magazine

Click HERE to read all your Parade favorites including Hollywood Wire, Celebrity interviews and photo galleries, Food recipes and cooking tips, Games and lots more.