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Mass. Auditor: Review of tax expenditure program necessary


State Auditor Suzanne Bump recently testified on behalf of legislation she filed granting state auditors the ability to review the state’s tax expenditure program. The Office of the State Auditor first began researching Massachusetts’ tax expenditure program in 2011, but was unable to complete the work because state statute restricted access to the documents needed to verify if this multi-billion program is working effectively.

“As the State Auditor, it is my job to root out waste, fraud, and abuse in state government programs. I follow the dollars to make sure that taxpayer money is being spent effectively. But there is another type of expenditure that is similarly subject to waste, fraud, and abuse, and currently, it is beyond the reach of the state auditor – that is, a tax expenditure,” said Bump during the Joint Committee on Revenue hearing this morning. “The goal of this bill is to bring that same standard of accountability to the tax expenditure program.”

Massachusetts’ corporate tax expenditure budget accounts for $3.2 billion in foregone tax revenue for FY16. The access granted by this bill would allow the Auditor’s Office to work with the Department of Revenue to determine whether these tax credits and incentives are an effective policy for the state. The bill would not allow OSA to audit corporations doing business in the Commonwealth.

During her testimony, Bump explained that of the 43 states that require the filing of tax returns, 37 grant access to tax return information to their state audit function. Currently in Massachusetts, there are 26 exceptions to this law, including fraud examiners in the Office of the State Auditor’s Bureau of Special Investigations, which have access to tax returns but the exemption does not include state auditor.

Citing questions about how the bill will affect the business climate in Massachusetts, Bump pointed to the fact that seven of the top-ten friendliest states for business and careers, according to Forbes, allow their state audit function access to corporate tax returns.

“Until this bill is passed, we are unable to determine if the more than $3 billion worth of foregone revenue is actually a benefit to the Commonwealth and its citizens,” said Bump.

The Office of the State Auditor conducts technical assessments and performance audits of state government’s programs, departments, agencies, authorities, contracts, and vendors. With its reports, the OSA issues recommendations to improve accountability, efficiency, and transparency. The Office of the State Auditor has identified $1 billion in savings and potential recoveries for the Commonwealth since 2011 and auditees have implemented 95 percent of the OSA’s recommendations.

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