Tension comes from state financial audits

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As foreign tensions between America and the Middle East escalated on the anniversary of 9/11, local political tensions in Utah escalated over the results of three state audits released earlier that Tuesday.

The audits, conducted for the Utah Legislature by the Office of the Legislative Auditor General of the state, investigated one department, one division and one tax: the Department of Alcoholic Beverage Control (DABC), the Division of Radiation Control (DRC) and Utah’s Radioactive Waste Facility tax, respectively.

[pullquote]”Republicans in the Utah government have created a system of incoherent regulations that hurt our Utah businesses.”
Jim Dabakis, Utah Democratic Party Chair[/pullquote]

Authorized by Auditor General John M. Schaff, CIA, the published audits revealed serious concerns for Utah legislatures, exposing miscalculations in judgment, ethics and state finances.

In the performance audit for the DABC, state auditors found significant discrepancies in the department’s inventory, as well as the computer programs that track that inventory. The auditors stated in their report that, “significant errors were found in two DABC computer programs: the shipment management program and the licensee sales program. Both of these programs are used to generate the Monthly Inventory Adjustment Summary, which is used by the accounting department to compute the physical inventory adjustment.”

What compounded the gravity of these discrepancies was the DABC’s efforts to force “its account into balance each month with an artificial closing number which,” as auditors noted, “DABC officials have been unable to adequately explain.”

The audit also exposed abuse of unappropriated expenses, since the department’s “operating expenditures should have come from DABC’s budget appropriation overseen by the Legislature; instead the department has been using the Liquor Control Fund as a means to cover significant operating expenditures.” In 2011, these unappropriated funds exceeded $6.6 million, leading auditors to demand improvements in ethical training among employees.

In a separate audit conducted for the DRC, auditors announced that “Prohibited Radioactive Waste Has Come to Utah.” Despite the state’s efforts to prohibit “greater than Class A low-level radioactive waste…, there are recorded instances where waste generators and brokers have shipped inappropriate waste classes to Utah.” The audit continues to explain, “The waste was received and disposed of by EnergySolutions at its Clive facility.”

Since many of the Class A violations were “self-reported by EnergySolutions to the DRC,” the auditors are concerned “the DRC is not sufficiently exercising its authority to independently review the classification of waste shipments received,” and therefore “the DRC bears the responsibility to independently ensure that EnergySolutions can effectively identify and reject banned waste shipments.”

In a related audit, state auditors discovered how EnergySolutions employed a technique called “vertical integration” to reduce the amount of tax it must pay. As outlined in the report, “Vertical integration allows EnergySolutions to earn revenue outside of Utah for waste disposal in Utah. This occurs when EnergySolutions earns revenue by accepting waste destined for Utah in a company-owned facility outside of Utah. The company can then decide what amount of revenue it wants to recognize in the state.”

Similarly, “EnergySolutions receives waste and earns revenue…through direct shipment from generators to the Clive site.” Auditors found that the company’s “internal price is significantly less than the price it charges its outside customers. This price disparity can reduce the revenue recognized in Utah, and, thereby, reduce the tax collections received by the state.”

Reacting to these reports, state Democrats cited Republican mismanagement as the underlying problem. Jim Dabakis, the Utah Democratic Party Chair, said in a press statement, “Republicans in the Utah government have created a system of incoherent regulations that hurt our Utah businesses. Regulations need to be clearly laid out and consistently implemented. This mucky-muck ‘try and guess what we mean’ regulation style has no place in Utah government.”

These audit reports are not just limited to state politicians and members of the Utah Legislature — they are public records. To view these audits, go to http://le.utah.gov/audit/newaudit.htm.

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