Last year, the Joint Management Audit Committee discussed two towns that had failed to produce numerous items for an audit, such as W-2s. At the time, lawmakers bemoaned the Wyoming Department of Audit’s inability to punish those towns. Now looking to address those enforcement issues, lawmakers asked the Legislative Service Office (LSO) to draft a bill giving the Department of Audit the ability to withhold use, sales and lodging taxes from public institutions that have been non-compliant for three years or more.
The Department of Audit has multiple deadlines throughout the year for public institutions to report their finances. While some towns and special districts comply or are behind by a year, lawmakers zeroed in on those that showed consecutive years of non-compliance. According to the Department of Audit, of Wyoming’s nearly 700 special districts, 78% have been non-compliant for multiple years.
Most lawmakers on the committee attributed a failure to complete audits to the Department of Audit’s inability to enforce or punish entities. The department told lawmakers it currently holds use, sales and lodging tax based on failure to submit audits annually, and funds are returned as soon as that year is submitted. The draft bill would give the department the statutory power to restrict sales, use and lodging tax funds based on a longer time-frame of non-compliance.
Sen. Troy McKeown (R-Gillette) pushed for clarification from the Department of Audit Director Justin Chavez.
“So, withholding the sales, use and lodging tax, albeit uncomfortable,” asked McKeown. “Does it really hurt them?”
Chavez replied saying it depends on the institution having its funds withheld.
“When you're talking sales, use and lodging tax,” said Chavez. “That’s not a lot of money. You know, some of the entities, towns for example, where that's being withheld, it's a few hundred bucks.”
“So it’s not a very big stick is it?” Mckeown replied. Chavez agreed, adding that they could ask the state attorney general to consider action, but there was no precedent for such an escalation.
However, auditors with both the Department of Audit and the Wyoming Association of Municipalities repeatedly noted that counties don’t have the resources to submit timely audits to the state. More specifically, knowledgeable personnel like certified public accountants (CPAs).
Charri Lara, the former treasurer of Lander, said she was working as a “one-man show” in charge of a $65,000 audit. She then described the situation for towns smaller than Lander.
“[In] small towns, you're getting a big turnover,” said Lara. “You're getting paid $12 to $17 an hour. That's what these clerks are making because they're not working full-time. And you're asking them to know how to do and understand a financial statement and a balance sheet and then produce a document. And they have absolutely no experience with numbers whatsoever.”
Those testifying told the committee that implementing more training, hiring CPAs and considering a state-wide software for common use between counties and districts could help alleviate large workloads for auditors.
Chavez told the committee that the system used by auditors in Wyoming is built to deal with specific circumstances as opposed to a generalized template. Chavez also said that CPAs have one of the lowest pass rates of any professional exam, making CPAs hard to come by and expensive to pay for.
Updating Wyoming to a single universal audit could streamline the process. But auditors noted that the process is complex because each county, district and town has significant but meaningful differences, like towns that pay for their fire department’s water compared to towns that have fire departments operating under a special district that manages their own water.
In the end, the committee requested the LSO to draft a bill to withhold sales, use, and lodging taxes for entities that have been out of compliance with state audits for three consecutive years or longer. The motion was brought by Rep. Jayme Lien (R-Casper), who said she didn't want to see standards lowered in Wyoming.
“In testimony today, we heard that the books are messy, there's a lack of skill sets, that we hire bodies to just fill seats,” said Lien. “We take pride in our work. We ride for the brand and we are tough but fair.”
Sen. Chris Rothfuss (D-Laramie) argued this would punish the taxpayer by withholding the public’s money for something they did not do.
“It's the people's money. And the idea that if the government is behaving badly, that the state of Wyoming should withhold the people's money that they need for services,” said Rothfuss. “Just isn't the appropriate enforcement mechanism. And I realize we have that on the book[s] elsewhere. And it's probably the reason why it doesn't get used very often because…it's not an appropriate stick, I guess nor is it any type of carrot.”
The committee will meet next on August 8.
This reporting was made possible by a grant from the Corporation For Public Broadcasting, supporting state government coverage in the state. Wyoming Public Media and Jackson Hole Community Radio are partnering to cover state issues both on air and online.
