Audit Core Team
2014 CSP Contract Compliance Audit
Responsibilities
Procedures
Deadlines
Presented by:
Sandra Hoffman, Mike Chertude,
Mindy Bates, and Steve Krovitz
AD14001
Audit Core Team
What is this??
The Audit Core Team is defined within
Rule 806.3 – Administration of the
Compliance Audit of Streamlined
Sales Tax Rules and Procedures.
Defined Per Rule
Rule 806.3.1(C) – Authority
The Streamlined Sales Tax Governing Board
designates the Audit Core Team to perform
contract compliance audits for member
states and to coordinate the tax compliance
audits of Model 1 seller transactions
processed by the CSP as authorized by the
Governing Board.
Defined Per Rule
Rule 806.3.2(E) – Audit Core Team
The Audit Core Team is a group of
designated representatives from full
member states who are responsible for
coordinating compliance audits,
performing contract compliance audits and
compiling feedback reports for the
Governing Board.
Defined Per Rule
Rule 806.3.4(B) – Audit Core Team Reporting Relationship
The Audit Core Team will report to the
Streamlined Sales Tax Governing Board
Executive Director or its designee for audit
assignments, guidance and support.
Who is the Core Team?
Sandra Hoffman
Kentucky
Department of Revenue
Mike Chertude
Washington
Department of Revenue
Who is the Core Team?
Mindy Bates
Indiana
Department of Revenue
Steve Krovitz
Minnesota
Department of Revenue
Let’s go over the
Core Team
concept?
Simply stated: The Core Team will
1.
Complete audit steps and
procedures to assess whether the
CSP complied with the detailed
requirements of the CSP contract.
2.
Review areas generic to all the
SST Member and Associate
Member States (e.g., whether
compensation is calculated in
accordance with the contract).
3.
Coordinate a tax compliance audit
of the CSP transactions with the
State Auditors.
Simply stated: The State Auditors will
1.
Complete the tax
compliance audit steps as
part of the CSP contract
audit that are specifically
related to their state (e.g.,
whether the transactions
were taxed correctly).
2.
Complete a Sales Tax
Audit using their specific
state’s policies and
procedures.
The SST Rules Define the
Compliance Audit Process
Rule 806.3.5 – Compliance Audit of a
CSP
A. The Compliance Audit of a CSP and its Model
1 sellers will include a contract compliance audit
of the CSP and tax compliance audits of Model 1
seller transactions processed through the CSP’s
system.
B. The contract compliance audit of the CSP will
be performed by the Audit Core Team. The tax
compliance audits of the Model 1 seller
transactions will be performed by the member
states under the coordination of the Audit Core
Team.
Clear as Day!
(Right!!!!)
The Audit Core Team:
• Will evaluate all pertinent elements of the current
contract between the CSPs and the Streamlined
Sales Tax Governing Board and assess each CSP’s
compliance with the terms of the contract.
• As part of this contract compliance audit, the core
team will audit areas where they are in a unique
position to review.
• Will advise the Member and Associate Member
State Auditors if problems exist that would impact
the tax compliance audits.
The Member and Associate Member
State Auditors:
• Will perform tax compliance audits on sales
transactions of Model 1 sellers processed by
the CSPs.
• As part of the CSP compliance audit process,
they will report audit exceptions to the Audit
Core Team (e.g., tax returns not filed timely).
When the
rubber hits the
road, it could
still be a little
bumpy from
time to time.
Why….?
Because
• Although this is the fourth audit cycle, there
have been several CSP contract changes
that impact the tax compliance audit (e.g.,
changes to Appendix F regarding quarterly
downloads).
• Theory does not always equal practice.
• Sometimes the road to knowledge can be full
of potholes (large and small).
Solution
The SST Audit Committee has:
• listened to the concerns of the Core Team, the
CSPs, and the states
• diligently attempted to address areas of concern
learned during previous audit cycles
The Core Team will:
• work hard
• attempt to communicate effectively with everyone
• be flexible in its approach
• keep the goal in focus
• strive to hold to the audit timeline
Goal
To complete a timely,
accurate, and professional
audit that meets the needs
and expectations of the
Streamlined Sales Tax
Governing Board.
The Core Team will provide the State
Auditors with two reports.
• A preliminary report of findings will be issued
to the state auditors by the end of May 2014.
This report will include any audit results
discovered by the Core Team that could be
relevant to the tax compliance audits.
• The final contract compliance report will be
distributed by the Governing Board
Executive Director to each Member and
Associate Member State.
Audit Core Team Responsibilities
Rule 806.3.4(D)(1)
The Audit Core Team is responsible for
performing contract compliance audits
and coordinating tax compliance audits
with member states.
Rule 806.3.4(D)(2)
Outlines eleven (11) specific tasks the
Audit Core Team is responsible for
completing.
Rule 806.3.4(D)(2)(i)
The Audit Core Team will: Create a
uniform audit plan with a timeline to
establish the projected dates that various
audit steps are to be completed by the
state audit representatives and the Audit
Core Team.
The audit timeline has been established and will be reviewed
in the following slides.
Important Dates for Member and Associate
Member State Auditors
Monday
January 13,
2014
Audit Core team submitted questionnaires
to member/associate member states.
Monday
February 10,
2014
All questionnaires must be returned to
Audit Core Team by end of business today.
Monday
February 17,
2014
The CSPs will have completed the delivery
of the quarterly download files for quarter 4
per Appendix F.
Important Dates for Member and Associate
Member State Auditors
February 17, 2014
through
February 28, 2014
March 15, 2014
to
June 15, 2014
Follow-up with Member/Associate Member
States to ensure that they have received all
CSP download files and that they have
thoroughly completed their questionnaires.
Member/associate member states will review
the sales transaction records provided by the
CSP and prepare reports that notify the Audit
Core Team of their findings.
The member/associate member state auditors
should immediately advise the Core Team if
they discover any reporting problems not
previously reported on their state
questionnaires.
Important Dates for Member and Associate
Member State Auditors
Friday
Monday
May 30, 2014
June 16, 2014
The Audit Core team will forward to
member/associate member states
preliminary reports detailing work
completed to date and outlining any
potential audit adjustment areas that
are discovered.
The member and associate member
states’ Preliminary State Tax
Compliance Feedback Audit Reports
must be forwarded to the Audit Core
Team by the end of business on
June 16th.
Important Dates for Member and Associate
Member State Auditors
Friday
June 15, 2014
to
July 10, 2014
The Audit Core Team will work with the
CSPs and the states to resolve any
issues that are a result of
communication problems or
misunderstandings.
July 10, 2014
to
August 11, 2014
The CSP will review and comment on
the preliminary findings of the
compliance audit. Comments will be
sent to the Audit Core Team and
member/associate member states.
August 15, 2014
The member and associate member
states’ Final State Tax Compliance
Feedback Audit Reports must be
forwarded to the Audit Core Team by
the end of business on August 15th.
Important Dates for Member and Associate
Member State Auditors
The Audit Core Team and
August 11, 2014
member/associate member states
to
will amend their findings, if
September 14, 2014
necessary.
Monday
The final contract compliance audit
September 15, 2014 report on each CSP will be
forwarded to the Executive Director.
Audit Core Team Responsibilities (Continued)
Rule 806.3.4(D)(2)(g)
The Audit Core Team will: Acquire a
list of sellers represented by each CSP
and provide this information to the
Streamlined Sales Tax Governing
Board member states.
This information will be requested and forwarded to the
various states.
Rule 806.3.4(D)(2)(h)
The Audit Core Team will: Coordinate
with state auditors to ensure they have
received a download of the audit work
files from the CSP.
The states should have already received the quarterly
downloads from the CSPs except for Quarter 4 of 2013
which isn’t due until February 15. By no later than March
15 all the data will be summarized and placed in your
state’s ShareFile folder.
Rule 806.3.4(D)(2)(e)
The Audit Core Team will: Verify tax
collected was remitted to the appropriate
tax authority.
1.) The Core Team will verify that all tax collected is remitted
to a state.
2.) The Core Team will rely on information received from the
states that the tax was appropriately and timely remitted.
Rule 806.3.4(D)(2)(f)
The Audit Core Team will: Verify sales
were accurately reported by the
CSP/Seller on simplified electronic returns
(SERs).
1.) The Core Team will verify that simplified electronic returns
are being filed by the CSP for all sellers.
2.)The Core Team will review the CSP’s procedures for
extracting the SER data.
3.)The Core Team will rely on information from the states that
the SERs are accurate.
Rule 806.3.4(D)(2)(d)
The Audit Core Team will: Verify appropriate
entity use exemption data elements are
captured by the CSP system.
1.) The Core Team will evaluate the CSP’s system to be assured
it has the ability to capture exemption data elements.
2.) The Core Team will verify that exemption elements are being
captured.
(The Core Team cannot be responsible for auditing whether a
purchaser is claiming a proper exemption; it can only be
responsible to document that the CSP is capturing the correct
elements.)
ATTENTION !!!
The next two areas to be discussed
could result in audit findings relevant
to the tax compliance audits.
Rule 806.3.4(D)(2)(b)
The Audit Core Team will: Evaluate the
CSP’s system and processes to verify
compensation is calculated in accordance
with the contract.
1.) The Core Team will evaluate the CSP’s system and
processes to be assured it is calculating compensation as
dictated in the contract.
2.) Gross compensation figures will be reviewed and verified.
3.) The Core Team will review and verify that compensation is
being properly allocated to the states.
Compensation
The method in which compensation is calculated
is addressed in Section D of the current contract
between the CSPs and SST Governing Board.
The compensation formula can be reviewed in
section “D.5”, the rate adjustment process is
outlined in section “D.6”, and resetting rates
annually is addressed in section “D.7”.
It should be pointed out that effective January 1, 2011, rates of
compensation shall reset on January 1 of each year. Prior to
calendar 2011, the reset dates occurred twelve months from the
month in which the seller first remitted tax as a volunteer seller.
Rule 806.3.4(D)(2)(c)
The Audit Core Team will: Verify appropriate
procedures for mapping exist, are in
conformance with the mapping requirements,
and are followed in the initial mapping setup,
as well as during updates and corrections to
mapping.
1.) The Core Team will evaluate the CSP’s procedures for
implementing Mapping.
2.) The Core Team will complete audit steps to document
whether product descriptions in the data downloads accurately
depict the seller’s invoice level description.
Rule 806.3.4(D)(2)(a)
The Audit Core Team will: Determine the
CSP’s level of compliance with the terms of
the CSP contract. (Questionnaires and
specific tests will be used to assess the
CSP’s contract compliance.)
The Audit Core Team will issue questionnaires to the CSPs,
each Member/Associate Member State, and the Office of
Executive Director addressing various elements of the
contract. The completed questionnaires will be analyzed and
used as the starting point of the contract compliance audit.
(continued)
Rule 806.3.4(D)(2)(a) - continued
The SST Audit Committee has isolated areas of definite
audit interest in the CSP contract. The Audit Core Team will
specifically look at these areas and complete various
compliance audit procedures to assess the CSP’s
compliance with the contract.
Rule 806.3.4(D)(2)(j)
The Audit Core Team will: Compile the
feedback (findings) reports from the member
states, summarize the findings and report to
the Executive Director of the Streamlined
Sales Tax Governing Board. The summaries
must comply with confidentiality restrictions
that apply to the SST Governing Board
regarding disclosure.
Continued – next slide
Rule 806.3.4(D)(2)(j) - continued
For each CSP, the Audit Core Team will incorporate its findings
from the contract compliance audit with the (finding) feedback
reports from the Member and Associate Member States into a
final compliance audit report to be issued to the Executive
Director of the Streamlined Sales Tax Governing Board.
The Executive Director and the Governing Board will use these
audits to evaluate the CSPs for contract renewal.
Final Audit Report
Rule 806.3.5.3(C)
The report on the audit findings to the
Executive Director will contain general
information on errors found and will not
contain specific taxpayer information to
ensure the confidentiality of taxpayer
information.
TIME WILL BE PROVIDED AT
THE END OF THE WEBINAR
FOR QUESTIONS
???
Thank You
&
Good Luck
Audit Core Team
Sandra Hoffman
sandra.hoffman@ky.gov
859-371-9049 x70113
Mike Chertude
michaelc@dor.wa.gov
360-256-2081
Mindy Bates
mbates@dor.in.gov
765-457-0525 x80036
Steve Krovitz
steve.krovitz@state.mn.us 651-556-6017