SignOn San Diego - The San Diego Union Tribune
February 6, 2010
Auditors find fault in county tax office
$8 million in overpayments inappropriately withheld
By Jeff McDonald
The county office led by Treasurer-Tax Collector Dan McAllister improperly withheld almost $8 million in overpayments made by taxpayers and persistently failed to address major deficiencies in its operating practices, according to an independent audit.
The findings are part of a 45-page analysis completed in March by the New York forensic auditing firm Kessler International. The county paid $73,000 for the study but did not release the document until yesterday, in response to a California Public Records Act request filed last month by The San Diego Union-Tribune.
At least two other independent reviews dating to 2005 and an internal county audit completed in January 2008 identified similar problems within the Treasurer-Tax Collector's Office - raising questions about how McAllister and his staff have responded to the various findings and recommendations.
McAllister, who is seeking a third four-year term in June and is so far running unopposed, declined to answer questions about the audit.
He did issue a two-page statement saying that transparency and accountability play a key role in his office and that his department has adopted 97 percent of the recommendations made by auditors.
"These are moneys that rightfully belong to the people and we simply want to give it back before the moneys are turned over to the county," McAllister wrote.
Auditors in the latest review also found, among other things, that records in the tax collector's office were altered and deleted without explanation, computer systems were not properly secured and transactions were wrongly recorded or not logged.
The audit cited flawed systems and a lackluster effort to find people who were owed money as reasons for the failure to return the nearly $8 million in overpaid taxes.
Regarding a case from December 2006, more than a year after the county grand jury chided McAllister's office for its shortcomings, auditors said an unidentified assistant manager forged her name on a document in an attempt to claim money that belonged to the county. The case was discovered and the illegal payment was prevented, the audit said, but not for seven months.
Even as of March 25, 2009, the date the Kessler audit was completed, employees were able to delete records from tax office computers without approval, the report stated.
Auditors said the office staff and its information technology contractor, Northrop Grumman, refused to turn over some records and denied that other documents existed, although they were discovered later.
"Kessler uncovered many discrepancies, irregularities and user errors during the audit, including the deletion of data, which is an indication that fraud may have occurred," the report said. "Based on the above, Kessler concludes that data integrity was compromised and the potential for fraud exists."
In McAllister's statement yesterday, he said all four of the recent reviews of his office were conducted at his request. He does not explain why similar problems cited in the past have persisted and were called out again in the latest audit.
McAllister did request that the county auditor conduct a follow-up review.
Donald Steuer, the county's chief financial officer, who according to public records commissioned the Kessler report, declined to discuss the findings or say why the audit from last year was not released until now and only after the Union-Tribune requested it.
"Any questions on the timing of the distribution should be referred to Mr. McAllister's office," Steuer wrote in response to questions e-mailed to his office.
In addition to collecting and recording taxes assessed on nearly 1 million parcels across the county, the Treasurer-Tax Collector's Office oversees a countywide investment pool worth almost $6 billion - assets that are owned by dozens of local school districts, community colleges and other public agencies.
McAllister often calls news conferences to publicize rebates to taxpayers who are owed money by the county. In December, he donned a Santa's cap in front of a bank of television cameras to draw attention to $1.66 million in refunds to property owners.
State law provides that local governments have up to four years to return overpaid taxes. If the taxpayers who are owed money cannot be located, the money goes to the county general fund.
Robert Fellmeth of the Center for Public Interest Law at the University of San Diego said he was concerned that county officials failed to release the document until they were forced to do so under the state public-records law.
"There is a good-government obligation to disclose the results of an audit the taxpayers paid for," Fellmeth said. "Nobody discussed it at a (public) meeting? If the audit is worth paying for, it's certainly worth discussing."
Getting information from McAllister's staff proved difficult for Kessler auditors. According to the final report, analysts made numerous requests for information that were not complied with.
"During the interview process of the audit, Kessler was advised by the Northrop Grumman employee that he was told not to cooperate with the audit and was given instruction not to provide any documents to Kessler," the report stated. "Shortly after our conversation with this individual, he was terminated by Northrop Grumman."
A Northrop Grumman spokesman said it is the company's policy to always cooperate with auditors. When asked about the case cited in the Kessler report, spokesman Dan McClain said, "With regard to your question about a possible employee termination, it is our policy not to comment on matters regarding personnel issues."
McAllister was swept into public office in November 2002 after his predecessor, Bart Hartman, was accused of sexual harassment and other professional transgressions. The county later settled a sexual-harassment claim for $100,000.
In his prepared response, McAllister said he will continue working hard to return all money owed to taxpayers who are due refunds.