Dunleavy administration blocks state auditors from oil tax appeal files

State auditors trying to check on oil tax revenues said the Dunleavy administration failed to provide access to documents needed for independent confirmation of financial details.

“We are unable to obtain sufficient appropriate audit evidence to provide assurance over tax revenues because Department of Revenue management denied auditors sufficient access to Department of Revenue oil and gas production tax-related settlement/appeal files during the audit fieldwork period,” Legislative Auditor Kris Curtis wrote last month in the comprehensive annual financial report.

“The files were needed to verify the proper usage of oil and gas production tax credits in the settlement of oil and gas production taxes. Consequently, we were unable to determine whether adjustments to tax amounts were necessary,” she said in a Feb. 21 letter included in the audit, which covers the fiscal year that ended last July.

“Additionally, we were unable to obtain sufficient appropriate audit evidence due to the Department of Revenue Commissioner’s refusal to provide written representations over the financial statement preparation and fair presentation of the tax revenue accounts and written representations for the completeness of the information provided to auditors.”

Asked about this charge during a confirmation hearing last week, Lucinda Mahoney, nominated to be the revenue commissioner, said she has been told that some documents have been given to the auditors, but others have been withheld, based on claims of attorney-client privilege.

The legislative auditors work for the state. The state is denying access to itself.

Either the law about secret tax documents needs to be changed or the attorney general’s office needs to be changed so that one hand can ascertain what the other is doing.

A second major issue in the audit, also highlighted a year ago, deals with the misclassification of certain revenues, which the auditor asserts is a violation of state law. The money in question should have been placed in other funds, but the attorney general’s office has a different view.

The auditors said the state decision to not deposit certain tax settlements in the Constitutional Budget Reserve led to $1.6 billion going into the wrong accounts.

“Legal analysis does not support the attorney general’s position. The failure to properly deposit monies received during the fiscal years ended June 30, 2018, and June 30, 2019, and the reclassification of prior year monies, violates State law and provides misleading information to users of the financial statements.”