Results in Brief

The Administrative Services Division (ASD) lacks adequate controls to ensure transactions are processed accurately and in accordance with laws and regulations. Because ASD did not periodically review its internal controls, serious deficiencies went undetected resulting in significant errors. These errors included inaccurate calculations affecting the distribution of millions of tax dollars to the state and local governments. Although in some instances ASD became aware of and corrected individual errors, weaknesses in the overall system of controls continue, increasing the risk errors will occur again.

Principal Findings

· ASD’s computer spreadsheet used to distribute sales tax revenue to the state’s General Fund contained a formula error. Consequently, from October 1999 through May 2001, approximately $9.5 million in sales tax revenue was not distributed to the General Fund. (page 8)

· During the period of April 2000 to October 2000, over $3.9 million in governmental services tax collections were not properly distributed to counties. This occurred when the Department added payment options to help improve customer service and reduce wait times. These options included accepting pay-ments at emission control stations, and over the Internet and telephone. However, ASD did not adjust computer spreadsheet formulas to include these additional collection points, and the revenues were not distributed. (page 8)

· ASD does not use consistent methods when allocating the governmental services tax to counties and school districts. In some instances, ASD used allocation percentages provided by counties, while other allocations were based on percentages provided by the Department of Taxation. This inconsistency increases the risk of allocations not complying with statutes. (page 9)

· Inadequate controls for processing Motor Carrier Section refunds resulted in undetected errors and incorrect refund checks. Errors occurred in three of the seven special fuel tax refunds we examined that originated from the Motor Carrier Section. One of the miscalculated refunds resulted in an overpayment of approximately $172,000. The other two refund errors resulted in underpayments totaling approximately $48,000. Although millions of dollars in refunds were processed, ASD did not review supporting documents to verify the refund amounts. (page 11)

· ASD does not have an adequate process to verify that deposits from credit card transactions, as recorded on the Department’s computer system, agree to the amount deposited with the bank. This reconciliation is important because the Department receives over $3.6 million in credit card receipts monthly. Any discrepancy between accounting records and the bank deposit should be investigated and resolved timely. (page 13)

Department of Motor Vehicles and Public Safety

Administrative Services Division

Agency Response

to Audit Recommendations

Recommendation Number		Accepted	Rejected

1	Develop written procedures to carry out a system of internal accounting and administrative controls as required by NRS 353A.020. In addition, ensure periodic reviews of the internal control system occur as required by NRS 353A.025.	X

2	Implement controls over the distribution of tax and fee revenue, including:

	a. Reconciliation of revenue collected to revenue distributed.

	b. Review of distributions to ensure calculations are accurate.

	c. Development of policies and procedures for the revenue distribution process.	X

3	Establish controls over computer spreadsheet develop-ment, testing, modification, protection, and storage.	X

4	Develop policies and procedures clarifying the per-centages used for allocating the governmental services tax to counties pursuant to NRS 360.	X

5	Perform review and verification procedures to ensure refunds are calculated correctly.	X

6	Reconcile credit card receipts as recorded on the Genesis system to bank deposits.	X

	TOTALS	6	0