A Tale of Two Audits
Department of Revenue Audits
Larry Clark, Clover Park
Sabra 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