Wyoming

Torrence,

First of all, I should clarify that we (The Wyoming Department of Audit) are a separate department from the Wyoming Department of Revenue, Wyoming Department of Transportation and the Secretary of State. This is unusual compared to the other states. In most states, the audit function is in the Department of Revenue. Our Division (Excise Tax) conducts audits for the Department of Revenue, the Department of Transportation and the Secretary of State.

What types of audits does the DOR do? (such as in state, out of state, corporation, individual, large companies, small companies or a mix ofthese)

For the Department of Revenue, we audit in state and out of state companies for sales taxes and cigarette taxes whether they are large or small. We also audit individuals for sales taxes. For the Department of Transportation, we audit fuel taxes, IFTA (International Fuel Tax Agreement) and IRP (International Registration Plan).

What level auditors do you have and typically how many of each?

(managers, senior auditors, staff auditors)

I’m the administrator and along with me I have 3 managers, 1 admin person and 16 auditors broken down as 3 principal auditors, 5 senior auditors and 8 auditor II positions.

Can you please explain the audit assignment process (is it performance based or seniority based, do the auditors have a say in which audit they get, does it differ for in state and out of state audits)?

We do have one out of state auditor in Houston, Texas. He audits many of the large oil companies which are audited cyclically. I doesn’t make a difference whether the audits are in state or out of state when assigning audits. Typically we assign the difficult audits to the most experienced auditors. For the most part, the auditors have a say in the audits they are assigned. Risk assessment plays a big part in what audits are assigned. Also, the auditors may have spin-off audits from audits they have done. When you are conducting an audit on a company, you may find other companies that are either buying or selling to the company you are auditing. If these other companies are in non-compliance with the tax laws, they become a spin-off audit which means they will be added to the audit list.

Are the auditors and managers happy with the current assignment process in place?

I think so for the most part. We are always looking for better ways of doing risk assessment.

Do the auditors specialize in specific areas and types of businesses or do they work all over?

We have 4 auditors that specialize in the IFTA/IRP area, 1 auditor that mainly conducts fuel tax and cigarette audits but also conducts sales/use tax audits and the rest of auditors conduct sales/use tax audits. All of these auditors conduct Secretary of State audits corporate tax audits.

What is the typical in state and out of state travel time per year per agent?

Since we stationed an auditor in Houston our travel out of state is less. We probably travel 60 to 70 percent of the time in state and the rest of the time out of state. Our auditors are out of the office around 50 % of the time.

Can you please explain your performance review system?

If you are talking about personnel appraisals, we do a mid-year review and an annual appraisal where 9 standard are rated along with whatever goals and work activities were established at the beginning of the appraisal year.

Do you feel the performance review system is effective and is it being followed?

I think the personnel, for the most part, do their best to follow the review system. There are always exceptions. I think it could be more effective. I think it’s too generic now. We used to have 22 standards and now we have 9. We have a lot of subjects compressed into 9 standards. It makes it harder, in my opinion, to go into depth on someone’s appraisal.

What types of incentives do you give agents to perform at their highest level?

We try to pay them a competitive wage and promote them when there are opportunities. We are at the legislature mercy when it comes to pay raises. The last few years the legislature has been fair with the raises. There are no bonuses.

What benefits do you offer when recruiting new agents such as a set pay scale or promotion and other benefits to stay competitive with public accounting firms?

One of the benefits is health care and a very good retirement package. We do try to make our salaries competitive with outside firms. Most of the time promotions are available when a person has reach that level.

What type of training do you offer (on the job, in a class room, additional training every year)?

We offer on the job training and class room training. There are times when we can make use of training on a national basis.

Would it be all right if a team member or I contact you in the future?

Yes.

Strategic Plan

Excise Tax Division – Department of Audit

Quality of Life Result:

Wyoming’s voluntary tax and fee collection process is enhanced through fair and impartial compliance audits which protect the public interest and preserve our prosperous economy.

Agency:

Wyoming Department of Audit, Excise Tax Division.

Contribution to Wyoming Quality of Life:

The Excise Tax Division contributes to Wyoming’s prosperous economy through compliance auditing. These audits increase state revenue by exposing unpaid or underpaid taxes and fees. The audit process also increases tax law compliance by providing an onsite educational opportunity for the taxpayers.

Basic Facts:

The Excise Tax Division has 21full time equivalent employees with a total biennial budget of 4 million dollars in general funds.

Our division provides audit support for three state agencies:

  1. The Department of Revenue (DOR): i.e.: Sales/Use Tax (S/U), Lodging and Cigarettes
  2. The Department of Transportation (DOT): i.e.: Fuel Tax, Rental Car Surcharge, International Fuel Tax Agreement (IFTA) and International Registration Plan (IRP)
  3. Secretary of State (SOS): i.e.: Corporate fees

By providing audit support for these state agencies, we help maintain an equal playing field for Wyoming businesses. We are responsible for a licensed audit population of over 251,000 and over 500,000 individuals throughout the State of Wyoming and the international jurisdictions (US States/Canadian Provinces).

Performance Measures:

  1. Compliance Ratio – Audit Assessments vs. Taxes Remitted to DOR with Returns

2. Audit Cost to Audit Assessment Ratios

3. Percentage of Mandated IFTA, IRP Audits Completed

4. Ratio risk-based audits done vs. number of risk based licenses

(Not graphed as the ratio is under 1 % so that a graph will not increase understanding)

Story Behind The Performance:

  1. The Excise Tax Division monitors the taxes assessed through audits and compares the audited taxes to the amount of taxes paid to the administrative agencies by periodic tax returns.

DOR audits have shown a higher compliance ratio for licensed taxpayers versus those who are unlicensed. Audits have shown most large sales companies are compliant when remitting sales tax for their sales but are not nearly as compliant when remitting taxes to their vendors on purchases. Audits have shown non-licensed companies have few sales where taxes are due but the tax remitted on their purchases reveals a rate of compliance below 50%.

DOT IFTA and IRP audits have had a much lower compliance ratio over the last two years. We have been auditing our largest carriers requiring more audit hours with fewer audits completed.

DOT fuel tax audits have shown fuel taxes are generally collected and remitted for sales of fuel purchased and delivered within the State of Wyoming. Loads of fuels purchased outside of Wyoming and brought into Wyoming by truck or rail car have shown a good compliance rate.

SOS audits compare the financial assets reported yearly by a company to the Secretary of State with the assets of the company shown on their balance sheet or similar record. These audits have shown a high compliance rate.

  1. The division compares the cost of performing audits (auditor hours, travel costs, and other expenses) to the corresponding audit assessments. This comparison reveals a positive assessment to cost ratio. This comparison has consistently validated an average recovery ratio exceeding $4 assessed to every $1 spent.
  1. The division consistently monitors and attempts to stay within the mandated 3% audit requirement of both the IFTA and IRP audit programs. The baseline of 3% is based on an overall average using a total of four years for IFTA and five years for IRP. The actual number of audits often exceeds the mandated rate to insure the minimum 3% average for the peer review period required in the IFTA agreement and the IRP plan.
  1. The division compares the number of risk-based audits performed to the number of licensed applicants. These risk-based audits are performed based upon probabilities of errors occurring. The risk is determined utilizing a risk analysis model identifying high-risk industries. Currently the division audits less than 1% of the licensed vendors within the state each year.

What Do You Propose To Do To Improve Performance In The Next 2 Years?

1.  Increase audit focus on high-risk business sectors with low compliance percentages. The division needs to increase the audit coverage of non-licensed and non-compliant taxpayers in order to assure the compliant taxpayers of a fair and equal business atmosphere. Keeping a flexible approach will allow us to change our audit focus quickly in response to changing business trends and circumstances.

2.  Maintain the division’s focus on technology to keep pace with changes in the business community. To accomplish this, the division will continue to provide technical training, improve sampling techniques and update computer hardware and software. The increased use of sampling techniques will allow the division to engage more audits while reducing audit costs.

3.  Our movement to a paperless file system, combined with SharePoint web based file management, will allow 24/7 remote access to our audit data by our auditors. This allows “real time” updates and supervisory reviews to audit data.

4.  With the switch to SharePoint, by DOR and DOA, we will be able to process audit information faster and more efficiently.

5.  A current IFTA ballot (to be voted on in 2009) will increase the cyclical audit compliance review period from four years to five. If passed by the membership, this would allow the IFTA and IRP programs to mirror each other’s peer review requirements and do joint reviews saving the division time and money.

Appendix A: Link to budget:

Provide detail on priorities identified above showing the current or proposed budget.

Seventy-six percent (76%) of the total division staff is dedicated to performing audits. Twenty-four percent (24%) of the total staff is administrative. Auditors are expected to spend at least eighty percent (80%) of their time performing audits.

Twenty-five percent (25%) of the division’s audit staff is dedicated to mandated audits, with $554,969 of the total annual division budget of $2,219,875 committed to mandated audits.

Seventy-five percent (75%) of the division’s audit staff is dedicated to risk based audits, with $1,664,906 of the total annual division budget of $2,219,875 committed to risk based audits.