A Tale of Two AuditsDepartment of Revenue Audits

Larry Clark, Clover ParkSabra Sand, Clark College

Audit Timeline for Clark College

• 8-5-14 DoR contacted Clark informing us we were selected for a ‘random’ audit

• 8-6-14 In person meeting with DoR Auditor• 8-7-14 Auditor reviewed working papers for Sales and Use tax

remits• 8-20-14 Auditor emailed sampling items list• 9-8-14 Auditor returned to review consumables items• 9-9-14 Auditor emailed questions or exceptions• 9-15-14 Auditor provided her final report

Initial Audit Meeting• Scope – January 2011 thru June 2014, Retail Sales and Use Tax

• We can only easily provide data for the last 25 months• Bookstore is on a separate system

• List of all consumables• Showed her the list of sub-objects and she selected the following:

• EA EE EH ES EY JA JB KA• Ran Datax reports to pull all items charged to the above sub-objects for the previous 25 months

• We did not take out transfers, but I would consider it if we had to do it again• We deleted all vendor ID’s as some may be SSN and we did not feel comfortable emailing those

• All equipment from our inventory database purchased within scope• We also provided a datax for the same time period pulling all transactions to the sales tax

accrual account• Emailed all downloads in Excel format to the auditor

• Sales and Use tax remit Working Papers for the most recent 24 months of audit scope

Initial Audit Meeting, con’t

• Sales and Use tax remit Working Papers for the most recent 24 months of audit scope• DoR Auditor wanted to review all revenue sources to determine

taxability• We shared the usual areas, bookstore, culinary, auto• She wanted proof those were the only items• We shared the GA1335 so she could review the accounts

• Items she questioned:• Lab Printing Charges• Library Book Replacement Account• Vending Revenue

Auditor review of working papers

• Requested daily detail from Bookstore POS system to match sales tax for 6 random months• Dates are off slightly since it is a separate system• Had to determine correct dates to pull before providing the reports

• Only one minor concern for the bookstore• Use of zip codes rather than address for tax rates on internet orders

Request for consumable backup

• Auditor emailed with her sampling request using the transaction detail I had previously emailed• All capital assets purchased within the last 25 months (236 items)• Items with purchase dollar amounts of $150 to $2,199 (150 items)• Items with purchase dollar amounts of $2,200 to $19,999 (150 items)• High dollar consumables, or over $20,000 (79 items)

• She wanted the paper backup pulled and numbered in her specific sequence• She did not want to use our imaging program, luckily we do both still (paper

and image)

Auditor Review of consumables

• The auditor returned to the college and spent an entire day going through the 4 boxes of checks and their backup• She had compiled a list of items where sales tax wasn’t charged• She wanted proof we paid use tax• Directed her to the sales tax file we emailed her • She returned to her office and used that file to determine use tax

Auditor Exceptions – preliminary

• Auditor emailed her exceptions allowing us to respond as to why sales or use tax was not paid (6 items)• Invoice paid to SBCTC-IT for services

• Contacted Cheryl Bivens and provided backup to auditor• Two invoices for online coursework access for students

• Provided auditor with RCW 82.12.02084 - Exemption for digital goods for use by students

• The remaining items were our error and simply missed so I acknowledged that

Final Report

• We had three exceptions listed in our final report• 2 in 2013• 1 in 2014

• DoR policy is that there must be 3 or more in a year in order to project it across the population• Ours did not meet that requirement• Clark’s fine with interest was $936.00

What we learned

• Research all assertions the auditors have• DoR Website• RCWs

• Be careful about digital goods• RCW only applies to student use

• Reseller’s Permit• Provides exemption for items to be resold• Need to ensure those items don’t get used for other purposes• Our Auditor perferred paper, not images

Final Report – Clover Park Technical College• Two auditors reviewed all purchases from FY13 over 5 partial days• 83 exceptions were noted in our single year sample, which was

imputed to the other three years. The total of our exceptions was $25,208 or an error ratio of 0.643334% .• 34 -- automotive• 27 -- catering bills• 6 – were either credits or partial errors• 6 – dental supplies• 10 -- various

• Clover Park’s imputed penalty plus interest was $7,120 for the 4 years